UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
 (Mark One)
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2016
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 
EXCHANGE ACT OF 1934
 
For the transition period from ________ to ________

Commission file number 001-36728
 
ADMA BIOLOGICS, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
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)
 
(201) 478-5552
(Registrant’s Telephone Number, Including Area Code)
 
___________________________________________________
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
 
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 ý    No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 ý    No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
 
Large accelerated filer    ¨
Accelerated filer    ¨
 
Non-accelerated filer    ¨
Smaller reporting company    ý
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ¨    No ý
 
The number of shares outstanding of the issuer’s common stock as of November 10, 2016 was 12,886,741.
 
 
 

 
 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
 
INDEX
 
1
   
1
   
 
1
   
 
2
   
 
3
   
 
4
 
5
 
 
17
36
36
37
37
37
37
37
37
37
37
 
38
 
 
i

 
PART I
 
FINANCIAL INFORMATION
 
Financial Statements.
 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

   
September 30,
   
December 31,
 
   
2016
   
2015
 
   
(Unaudited)
   
(Note 2)
 
ASSETS
           
Current Assets:
           
Cash and Cash Equivalents
  $ 7,905,975     $ 10,440,959  
Short-Term Investments
    11,026,691       6,368,177  
Accounts Receivable
    1,327,531       924,468  
Inventories
    4,617,734       3,445,773  
Prepaid Expenses
    481,658       111,027  
Total Current Assets
    25,359,589       21,290,404  
Property and Equipment at Cost, Net
    2,108,634       2,396,950  
Other Assets:
               
Deposits
    27,163       27,163  
Total Other Assets
    27,163       27,163  
TOTAL ASSETS
  $ 27,495,386     $ 23,714,517  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
               
Current Liabilities:
               
Accounts Payable
  $ 2,777,221     $ 2,087,855  
Accrued Expenses
    1,824,798       1,968,384  
Current Portion of Note Payable
    4,444,440       -  
Current Portion of Deferred Revenue
    145,154       145,154  
Current Portion of Leasehold Improvement Loan
    16,192       15,139  
Total Current Liabilities
    9,207,805       4,216,532  
Notes Payable, Net of Debt Discount
    13,794,246       14,247,212  
End of Term Liability, Notes Payable
    1,790,000       1,432,000  
Deferred Revenue
    2,725,742       2,832,867  
Deferred Rent Liability
    105,756       128,676  
Leasehold Improvement Loan
    23,977       36,256  
TOTAL LIABILITIES
    27,647,526       22,893,543  
COMMITMENTS AND CONTINGENCIES
               
STOCKHOLDERS' (DEFICIENCY) EQUITY
               
Common Stock $0.0001 par value 75,000,000 shares
               
authorized, and 12,886,741 and 10,713,087 shares issued
               
and outstanding as of September 30, 2016 and December 31, 2015,
               
respectively
    1,289       1,072  
Additional Paid-In Capital
    102,222,281       88,239,569  
Accumulated Deficit
    (102,375,710 )     (87,419,667 )
TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY
    (152,140 )     820,974  
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY
  $ 27,495,386     $ 23,714,517  
 
See Notes to Unaudited Condensed Consolidated Financial Statements.
 
 
1

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2016
   
2015
   
2016
   
2015
 
                         
REVENUES:
                       
Product revenue
  $ 2,902,155     $ 1,821,229     $ 7,226,368     $ 4,596,490  
License and other revenue
    35,708       31,184       107,125       68,962  
Total Revenues
    2,937,863       1,852,413       7,333,493       4,665,452  
                                 
OPERATING EXPENSES:
                               
Cost of product revenue
    1,735,771       1,112,782       4,346,433       2,808,726  
Research and development
    1,677,263       2,111,505       7,104,864       5,019,138  
Plasma centers
    1,482,586       1,214,158       4,057,306       3,359,130  
General and administrative
    1,779,115       2,078,166       5,211,148       4,861,598  
                                 
TOTAL OPERATING EXPENSES
    6,674,735       6,516,611       20,719,751       16,048,592  
                                 
LOSS FROM OPERATIONS
    (3,736,872 )     (4,664,198 )     (13,386,258 )     (11,383,140 )
                                 
OTHER INCOME (EXPENSE):
                               
Interest income
    11,605       11,102       37,130       25,878  
Interest expense
    (605,972 )     (449,328 )     (1,611,411 )     (1,378,778 )
Other income
    -       -       4,496       -  
Change in fair value of stock warrants
    -       -       -       67,860  
Loss on extinguishment of debt
    -       -       -       (719,097 )
OTHER EXPENSE, NET
    (594,367 )     (438,226 )     (1,569,785 )     (2,004,137 )
                                 
NET LOSS
  $ (4,331,239 )   $ (5,102,424 )   $ (14,956,043 )   $ (13,387,277 )
                                 
NET LOSS PER COMMON SHARE,
                               
Basic and Diluted
  $ (0.34 )   $ (0.48 )   $ (1.26 )   $ (1.28 )
                                 
WEIGHTED AVERAGE SHARES
                               
OUTSTANDING, Basic and Diluted
    12,886,741       10,707,728       11,906,276       10,425,310  
 
See Notes to Unaudited Condensed Consolidated Financial Statements.
 
 
2

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS’ (DEFICIENCY) EQUITY
 (Unaudited)
 
For the Nine Months Ended September 30, 2016
 
   
Common Stock
   
Additional
   
Accumulated
       
   
Shares
   
Amount
   
Paid-in Capital
   
Deficit
   
Total
 
                               
Balance - January 1, 2016
    10,713,087     $ 1,072     $ 88,239,569     $ (87,419,667 )   $ 820,974  
                                         
Stock-based compensation
    -       -       996,088       -       996,088  
Restricted shares
    (2,500 )     -       -       -       -  
Issuance of common stock, net
    2,176,154       217       12,900,324       -       12,900,541  
Warrants issued in connection
                                       
with note payable
    -       -       86,300       -       86,300  
Net loss
    -       -       -       (14,956,043 )     (14,956,043 )
Balance - September 30, 2016
    12,886,741     $ 1,289     $ 102,222,281     $ (102,375,710 )   $ (152,140 )
 
See Notes to Unaudited Condensed Consolidated Financial Statements.
 
 
3

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
   
Nine Months Ended September 30,
 
   
2016
   
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (14,956,043 )   $ (13,387,277 )
Adjustments to reconcile net loss to net
               
cash used in operating activities:
               
Depreciation and amortization
    351,702       352,629  
Stock-based compensation
    996,088       1,221,662  
Warrant liability
    -       (67,860 )
Amortization of debt discount
    482,878       222,409  
Amortization of deferred financing costs
    -       39,717  
Payment-in-kind interest
    -       124,536  
Amortization of license revenue
    (107,125 )     (68,962 )
Loss on extinguishment of debt
    -       719,097  
Changes in operating assets and liabilities:
               
Accounts receivable
    (403,063 )     (816,654 )
Inventories
    (1,171,961 )     (1,122,051 )
Prepaid expenses
    (370,631 )     (123,198 )
Accounts payable
    689,366       311,899  
Accrued expenses
    (143,586 )     (218,580 )
Accrued interest
    -       (105,664 )
Deferred revenue
    -       1,525,000  
Deferred rent liability
    (22,920 )     53,102  
Net cash used in operating activities
    (14,655,295 )     (11,340,195 )
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchase of short-term investments
    (4,658,514 )     (7,111,686 )
Purchase of property and equipment
    (63,386 )     (30,569 )
Net cash used in investing activities
    (4,721,900 )     (7,142,255 )
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from Oxford note payable
    4,000,000       16,000,000  
Proceeds from issuance of common stock
    14,145,000       10,257,380  
Proceeds from stock options exercised
    -       49,226  
Repayment of Hercules note payable
    -       (15,300,781 )
Prepayment penalty of early extinguishment of note payable
    -       (229,512 )
Debt issuance costs
    (47,104 )     (172,363 )
Payment of Hercules end of term fee
    -       (132,500 )
Equity issuance costs
    (1,244,459 )     -  
Payments of leasehold improvement loan
    (11,226 )     (10,263 )
Net cash provided by financing activities
    16,842,211       10,461,187  
NET DECREASE IN CASH AND CASH EQUIVALENTS
    (2,534,984 )     (8,021,263 )
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
    10,440,959       17,199,030  
CASH AND CASH EQUIVALENTS - END OF PERIOD
  $ 7,905,975     $ 9,177,767  
SUPPLEMENTAL INFORMATION:
               
Cash paid for interest
  $ 1,104,417     $ 1,007,581  
Supplemental Disclosure of Noncash Financing Activities:
               
Elimination of warrant liability
  $ -     $ 408,900  
Reclassification of equity issuance costs
  $ -     $ 12,000  
Accrued equity issuance costs
  $ -     $ 37,888  
Non-cash deferred financing fees
  $ -     $ 55,702  
End of term liability in connection with note payable
  $ 358,000     $ 1,432,000  
Warrants issued in connection with note payable
  $ 86,300     $ 367,700  
 
See Notes to Unaudited Condensed Consolidated Financial Statements.
 
 
4

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
1.
ORGANIZATION AND BUSINESS

ADMA Biologics, Inc. (“ADMA” or the “Company”) is a late stage biopharmaceutical company that develops, manufactures, and intends to commercialize specialty plasma-based biologics for the proposed treatment of immune deficiencies and prevention of certain infectious diseases. The Company’s targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disease or who may be immune-suppressed for medical reasons. ADMA also operates through its wholly-owned subsidiary, ADMA BioCenters Georgia, Inc., (“ADMA BioCenters”), a source plasma collection business with U.S. Food and Drug Administration (“FDA”) approved facilities in Norcross, Georgia and Marietta, Georgia.  Each facility holds certifications from the German Health Authority (“GHA”) and the Korean Ministry of Food and Drug Safety (“MFDS”).  ADMA BioCenters supplies ADMA with a portion of its raw material plasma for the manufacture of RI-002, ADMA’s lead product candidate, which the Company is currently developing for the treatment of Primary Immune Deficiency Disease (“PIDD”). A Biologics License Application (“BLA”) for RI-002 was submitted to the FDA and accepted for review during the third quarter of 2015.  In July 2016, the FDA issued a Complete Response Letter (“CRL”) to the Company for its BLA for RI-002.  The CRL did not cite any concerns with the clinical safety and efficacy data for RI-002, nor has the FDA requested any additional clinical studies be conducted prior to FDA approval of RI-002 for PIDD.  In its letter, among other things, the FDA focused on outstanding inspection issues and deficiencies at ADMA’s third-party vendors, including the Company’s contract drug substance and product manufacturer and its contract fill and finish provider and compliance issues with a third-party contract testing laboratory, and requested documentation of corrections for a number of those issues.  The FDA indicated that it cannot grant final approval of the BLA until, among other things, these deficiencies are resolved.  The Company continues to collaborate with its third-party vendors to identify solutions to the issues identified in the CRL and is preparing documentation for submission to the FDA to address the CRL. The Company and its vendors are awaiting certain feedback from the agency on submissions already made and the Company intends to provide a timeline for resubmission of the BLA for RI-002 as soon as practicable.

In May 2016, the Company completed an underwritten public offering of its common stock, raising gross proceeds of approximately $14.1 million, and subsequently borrowed an additional $4.0 million under its Loan and Security Agreement (“LSA”) with Oxford Finance LLC (“Oxford”), which brought the total principal borrowed to $20.0 million.  See Footnote 3.

As of September 30, 2016, the Company had working capital of $20.6 million, consisting primarily of $7.9 million of cash and cash equivalents, $11.0 million of short-term investments, $4.6 million of inventories, $1.3 million of accounts receivable and $0.5 million of prepaid expenses, offset primarily by $2.8 million of accounts payable, $1.8 million of accrued expenses and $0.1 million of deferred revenue.  Based upon the Company’s projected revenue and expenditures for 2016 and 2017, including regulatory and consulting fees for RI-002 associated with third-party manufacturers and ongoing discussions with the FDA, continuing implementation of the Company’s commercialization and expansion activities and certain other assumptions, management currently believes that its cash, cash equivalents, short-term investments, projected revenue and accounts receivable are sufficient to fund ADMA’s operations, as currently conducted, into the second half of 2017.  These estimates may change based upon whether or when the FDA approves RI-002, the timing of any required commercial manufacturing scale up activities or if any other assumptions of the Company change.  The Company has the option to borrow an additional $5.0 million through its current LSA, if RI-002 is approved by the FDA prior to January 31, 2017, which funding would also extend its interest only period for an additional six months pursuant to the May 2016 amendment to the LSA.  Other than this additional $5.0 million, the Company does not have any existing commitments for future funding.  In addition to traditional debt financing, the Company may also sell additional equity or convertible debt securities, each of which could result in dilution to the Company’s stockholders.  The incurrence of additional indebtedness would result in increased fixed obligations and if issued outside the LSA, could also result in additional covenants that would restrict the Company’s operations or other financing alternatives.  Additional equity or debt financing, grants, or corporate collaboration and potential licensing arrangements may not be available on acceptable terms, if at all.  If adequate funds are not available, the Company may be required to delay, reduce the scope of or eliminate the Company’s research and development programs, and delay or abandon potential commercialization efforts of the Company’s lead or other product candidates.  The Company has experienced net losses and negative cash flows from operations since inception in 2004 and expects these conditions to continue for the foreseeable future.  Since inception, the Company has raised capital from the sales of its equity securities and debt financings to sustain operations. The Company has reported cumulative losses since inception in June 2004 through September 30, 2016 of $102.4 million.  ADMA’s long-term liquidity will be dependent upon on its ability to obtain FDA approval for RI-002, to generate sales of RI-002 and potentially raise additional capital, to fund its research and development and commercial programs and to meet its obligations on a timely basis, if at all.
 
 
5

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
There can be no assurance that the Company’s research and development and commercial programs will be successfully completed or that any product will be approved or, if approved, be commercially viable.  The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, dependence on collaborative arrangements and third-party manufacturers, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements.
 
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The accompanying condensed consolidated financial statements include the accounts of ADMA and its wholly-owned subsidiaries, ADMA Plasma Biologics, Inc. and ADMA BioCenters.  All significant intercompany transactions and balances have been eliminated in consolidation.

The condensed consolidated financial statements for the interim periods included herein are unaudited; however, they contain all adjustments (consisting of only normal recurring adjustments) which in the opinion of management are necessary to present fairly the condensed consolidated financial position of the Company and its wholly-owned subsidiaries as of September 30, 2016 and their results of operations for the three and nine months ended September 30, 2016 and 2015, changes in stockholders’ (deficiency) equity for the nine months ended September 30, 2016 and cash flows for the nine months ended September 30, 2016 and 2015.  The results of operations for the interim periods are not necessarily indicative of results that may be expected for any other interim periods or for the full year.  These interim financial statements should be read in conjunction with the audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report for the year ended December 31, 2015 on Form 10-K, filed with the U.S. Securities and Exchange Commission (the SEC”) on March 23, 2016.  The accompanying condensed consolidated balance sheet as of December 31, 2015, was derived from the 2015 audited consolidated financial statements.

The condensed consolidated financial statements have been prepared in accordance with Accounting Principles Generally Accepted in the United States of America (“GAAP”) in accordance with the rules and regulations of the SEC for interim reporting.  Pursuant to such rules and regulations, certain information and footnote disclosures normally included in complete annual financial statements have been condensed or omitted.
 
 
6

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
Inventories

Plasma inventories (both plasma intended for resale and plasma intended for internal use in the Company's research and development and future anticipated commercialization activities of which certain quantities are labeled as normal source and Respiratory Syncytial Virus, (“RSV”)  high titer) are carried at the lower of cost or market value determined by the first-in, first-out method.  Research and development plasma used in clinical trials was processed to a finished product and subsequently expensed to research and development.  Inventory at September 30, 2016 and December 31, 2015 consists of high titer RSV plasma and normal source plasma.

Revenue recognition

Depending on the agreement with the customer, product revenues from the sale of human plasma collected at the Company’s FDA-licensed plasma collection centers are recognized at the time of transfer of title and risk of loss to the customer, which occurs at the time of shipment.  Product revenues are recognized at the time of delivery if the Company retains the risk of loss during shipment.  The Company’s product revenues are substantially attributable to two customers.  One customer accounts for greater than eighty percent and another customer accounts for greater than ten percent of the Company’s product revenues for the nine months ended September 30, 2016.  Revenue from license fees and research and development services rendered are recognized as revenue when the performance obligations under the terms of the license agreement have been completed.

Revenues for the nine months ended September 30, 2016 are comprised of product revenues from the sale of normal source human plasma collected from the Company’s plasma collection centers segment and license and other revenues are primarily attributable to the out-licensing of RI-002 to Biotest Aktiengesellschaft (“Biotest AG”) to market and sell in Europe and selected countries in North Africa and the Middle East.  Biotest AG and Biotest Pharmaceuticals Corporation (“Biotest”), a subsidiary of Biotest AG, have provided the Company with certain services and financial payments in accordance with the related Biotest AG license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved.  During the third quarter of 2015, the Company recorded deferred revenue of $1.5 million for a milestone payment provided to the Company after the BLA for RI-002 was filed with the FDA, in accordance with the terms of the Biotest AG license agreement. Deferred revenue is recognized over the term of the Biotest AG license.  Deferred revenue is amortized into income for a period of approximately 20 years, the term of the Biotest AG license agreement.

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 valuation of inventory, assumptions used in the fair value determination of stock-based compensation, warrants and the allowance for the valuation of future tax benefits.

Loss per common share

Basic net 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 net 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 common stock and dilutive common stock outstanding during the period.  Potential common stock includes the shares of common stock issuable upon the exercise of outstanding stock options and warrants (using the treasury stock method).  Potential 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.  The aggregate number of potentially dilutive securities upon the exercise of outstanding warrants and stock options was 1.8 million and 1.6 million as of September 30, 2016 and 2015, respectively.
 
 
7

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015

Stock-based compensation

The Company follows recognized accounting guidance which requires all stock-based payments, including grants of stock options, to be recognized in the statement of operations as compensation expense, based on their fair values on the grant date. The estimated fair value of stock options granted under the Company’s 2007 Employee Stock Option Plan (the “2007 Plan”) and the Company’s 2014 Omnibus Incentive Compensation Plan (the “2014 Plan”) is recognized as compensation expense over the option-vesting period.

During the three months ended September 30, 2016, the Company did not grant stock options and during the nine months ended September 30, 2016, the Company granted stock options to purchase 100,984 shares of common stock to its directors and employees.  During the three and nine months ended September 30, 2015, the Company granted stock options to purchase 81,500 and 312,500 shares of common stock, respectively, to its directors and employees.

Recent Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which provides for simplification of certain aspects of employee share-based payment accounting including income taxes, classification of awards as either equity or liabilities, accounting for forfeitures and classification on the statement of cash flows. ASU 2016-09 will be effective for the Company in the first quarter of 2017 and will be applied either prospectively, retrospectively or using a modified retrospective transition approach depending on the area covered in this update. The Company is currently in the process of assessing the impact of ASU 2016-09 on the Company’s financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact the standard may have on its condensed consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes, which includes amendments that require deferred tax liabilities and assets be classified as non-current in a classified statement of financial position.  The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  Earlier application is permitted as of the beginning of an interim or annual reporting period.  The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  The adoption of this ASU is not expected to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
 
 
8

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments, which includes amendments that require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.  The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of the ASU with earlier application permitted for financial statements that have not yet been made available for issuance.  The Company is currently evaluating the impact the standard may have on its condensed consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The standard requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures, one of which is net realizable value). The standard is effective for the Company prospectively beginning January 1, 2017. The adoption of ASU 2015-11 is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, InterestImputation of Interest, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset.  Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years beginning after December 15, 2015.  The Company adopted ASU 2015-03 in its second quarter 2015 condensed consolidated financial statements and recast the prior period balances to conform to the current period presentation.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” The FASB believes that requiring management to perform the assessment will enhance the timeliness, clarity, and consistency of related disclosures and improve convergence with International Financial Reporting Standards (“IFRS”) (which emphasize management’s responsibility for performing the going-concern assessment). However, the time horizon for the assessment (look-forward period) and the disclosure thresholds under GAAP and IFRSs will continue to differ. This guidance is effective for annual reporting periods ending after December 15, 2016, and for annual periods and interim periods thereafter, with early adoption permitted. The Company does not anticipate that the adoption of this standard will have a material impact on its financial statements.
 
 
9

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires that an entity recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to its customers.  In order to achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This update will replace existing revenue recognition guidance under GAAP, when it becomes effective for us beginning January 1, 2018, with early adoption permitted in the first quarter of 2017. The updated standard will permit the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the impact of this update on its condensed consolidated financial statements.

3.
DEBT

Loan and Security Agreement

On June 19, 2015, the Company entered into an LSA with Oxford for up to $21.0 million of debt financing in two term loan tranches. The first term loan tranche of $16.0 million from the LSA (the “Term A Loan”) was primarily used to repay the Company’s previous debt facility and the remaining $5.0 million term loan tranche is available at ADMA’s option if RI-002’s BLA is approved by the FDA on or before January 31, 2017, which funding would also extend the interest only period for an additional six months pursuant to the May 2016 amendment to the LSA described below.

The outstanding term loans bear interest at a rate per annum equal to the greater of (i) 7.80% and (ii) the sum of (a) the three month U.S. LIBOR rate (as reported in The Wall Street Journal) on the date occurring on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 7.54% on the outstanding principal balance.  The Company is obligated to begin to repay the principal over 36 months beginning on February 1, 2017, unless accelerated as a result of certain events of default.  A final payment equal to 8.95% of the funded loan amount is due at the earlier of loan maturity or prepayment.  In the event of the six-month interest only extension, the final payment will be 9.95% of the funded loan, which shall also be due at the earlier of loan maturity or prepayment.  All term loans mature no later than January 1, 2020.  The loans are secured by the Company’s assets, except for its intellectual property (which is subject to a negative pledge). The LSA contains customary representations, warranties and covenants, including limitations on incurring indebtedness, engaging in mergers or acquisitions and making investments, distributions or transfers.  

In connection with the entry into the LSA, on June 19, 2015, the Company issued to Oxford a seven-year warrant, expiring on June 19, 2022, to purchase 74,309 shares of common stock at an exercise price of $8.51 per share. The Company recorded $367,700 as the fair value of the warrant to additional paid-in capital and as a debt discount to the carrying value of the loan.  The key assumptions used to value the warrants included: volatility of 57% on the Company’s common stock based upon a pro rata percentage of the Company’s common stock’s volatility and similar public companies’ volatilities for comparison, an expected dividend yield of 0.0%, a risk-free interest rate of 1.99% and a term of seven years.  As a result of prepaying the Company’sprior loan before maturity, the Company incurred a loss on extinguishment of debt of $0.7 million comprised of unamortized debt issuance costs and unamortized debt discount related to the warrants issued to the Company’s prior lender, along with a prepayment penalty.
 
 
10

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015

In May 2016, the Company amended the LSA with Oxford (“the Amended LSA”) which provided ADMA with an additional $4.0 million term loan (the “Term B Loan”), the availability of which was conditioned on completing an equity financing of its common stock of at least $10.0 million in gross proceeds no later than May 31, 2016.  On May 3, 2016, the Company completed an underwritten public offering of its common stock, raising gross proceeds of approximately $14.1 million and subsequently borrowed the additional $4.0 million from Oxford under the Amended LSA, which brings the total principal amount borrowed to $20.0 million.  Under the Amended LSA, the Company may borrow an additional aggregate amount up to $5.0 million (the “Term C Loan”), at its option during the period commencing on the date the Company’s BLA for RI-002 is approved by the FDA and ending on the earlier of (i) January 31, 2017, (ii) 30 days after the occurrence of such FDA approval and (iii) the occurrence of an event of default under the Amended LSA, in which case the additional loan amount would not be available while the event of default continues.  Upon the Company accessing the additional $5.0 million, the interest only period will be extended from February 1, 2017 to August 1, 2017.

In the event the Company prepays a term loan for any reason, the Company is obligated to pay a prepayment charge corresponding to a percentage of the principal amount of the applicable term loan prepaid.  The Amended LSA further modified the fees payable by the Company on mandatory or voluntary prepayment of a term loan prior to its maturity date as follows:  (i) for a prepayment made on or after the funding date of the applicable term loan through and including the first anniversary of its funding date, an amount equal to 3.00% of the principal amount of the term loan prepaid; (ii) for a prepayment made after the first anniversary of the funding date of the applicable term loan through and including the second anniversary of such funding date, an amount equal to 2.00% of the principal amount of such term loan prepaid; and (iii) for a prepayment of a term loan made after the second anniversary of its funding date and prior to its maturity date, an amount equal to 1.00% of the principal amount of the term loan prepaid.

Pursuant to the Amended LSA, (i) the Company paid a total facility fee of $125,000, consisting of $105,000 previously paid and an additional $20,000 paid on the date the Term B Loan was funded; (ii) certain adjustments were made to the time periods for any applicable prepayment fees; and (iii) certain defined terms were adjusted, including a new Amortization Date that is defined as (a) February 17, 2017, if the Term C Loan is not made and (b) August 1, 2017 if the Term C Loan is made.  The Amended LSA further provides for customary representations, warranties and covenants for the Company.  Except as otherwise amended, the Amended LSA does not alter the terms of the LSA.

In addition, on May 13, 2016, pursuant to the terms and conditions of the LSA as modified by the Amended LSA, the Company agreed to issue to the lenders warrants to purchase shares of its common stock, upon its draw of each term loan tranche. The aggregate number of shares of common stock issuable upon exercise of the warrants is equal to 3.95% of the amount drawn of such tranche, divided by the average reported closing price per share of common stock for the consecutive 10 trading days prior to the applicable draw.  

In connection with the Amended LSA, on May 13, 2016, the Company issued to Oxford a seven- year warrant, expiring on May 23, 2023, to purchase 24,800 shares of common stock at an exercise price of $6.37 per share, in accordance with the Company’s drawdown of the Term B Loan. The Company recorded $86,300 as the fair value of the warrant to additional paid-in capital and as a debt discount to the carrying value of the loan.  The key assumptions used to value the warrants included: volatility of 53.5% on the Company’s common stock based upon a pro rata percentage of the Company’s common stock’s volatility and similar public companies’ volatilities for comparison, an expected dividend yield of 0.0%, a risk-free interest rate of 1.51% and a term of seven years.
 
 
11

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
A summary of the Oxford loan balance as of September 30, 2016 and December 31, 2015 is as follows:

   
September 30, 2016
   
December 31, 2015
 
Gross proceeds
  $ 20,000,000     $ 16,000,000  
Less: debt discount, net
               
End of term fee
    (1,285,702 )     (1,250,194 )
Warrants
    (296,846 )     (310,196 )
Financing fees
    (178,766 )     (192,398 )
Note payable
  $ 18,238,686     $ 14,247,212  

4.
STOCKHOLDERS’ EQUITY

On May 3, 2016, the Company completed an underwritten public offering of 2,176,154 shares of its common stock, for gross proceeds of approximately $14.1 million.  Net proceeds from this offering were approximately $13.0 million, after payment of underwriting discounts and offering expenses of approximately $1.1 million.  The shares were sold under a shelf registration statement on Form S-3 (File No. 333-200638) that was declared effective by the SEC on December 23, 2014.

On March 18, 2015, the Company announced the closing of an underwritten sale of 1,225,000 shares of its common stock, as well as 183,750 additional shares of its common stock pursuant to the full exercise of the over-allotment option granted to the underwriters thereof, for gross proceeds of approximately $11.3 million. Net proceeds from this offering were approximately $10.2 million, net of underwriting discounts and offering expenses of approximately $1.1 million. The shares were sold under a shelf registration statement on Form S-3 (File No. 333-200638) that was declared effective by the SEC on December 23, 2014.

Oxford Debt Financing Warrant Issuance

In May 2016, the Company issued to Oxford warrants to purchase an aggregate of up to 24,800 shares of the Company’s common stock at an exercise price equal to $6.37 per share. The warrants became exercisable on May 13, 2016 for cash or by net exercise and will expire seven years after their issuance on May 13, 2023.

Equity incentive plan

The fair value of employee options granted 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 highly subjective assumptions including the expected stock price volatility.  The Company's employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.  Because there has been minimal data for the Company's stock and very little historical experience with the Company's stock options, similar public companies and a pro rata percentage of the Company’s  common stock were used for calculating ADMA’s volatility for comparison and expectations as to the assumptions required for fair value computation using the Black-Scholes methodology.
 
 
12

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015

   
Nine Months Ended
   
Nine Months Ended
 
   
September 30, 2016
   
September 30, 2015
 
Expected term
 
5.8-6.3 years
   
6.3 years
 
Volatility
    51-52%       51-57%  
Dividend yield
    0.0       0.0  
Risk-free interest rate
    1.54-1.79%       1.49-2.14%  
 
Guidance for stock-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.   The Company has not experienced any material forfeitures of stock options and, as such, has not established a forfeiture rate since the stock options currently outstanding are primarily held by its senior management and directors.  The Company will continue to evaluate the effects of such future potential forfeitures, as they may arise, to evaluate its estimated forfeiture rate.

The weighted average remaining contractual life of stock options outstanding and expected to vest at September 30, 2016 is 6.6 years.  The weighted average remaining contractual life of stock options exercisable at September 30, 2016 is 5.8 years.
 
A summary of the Company’s option activity under the 2007 Plan and 2014 Plan and related information is as follows:
 
   
Nine Months Ended
 
   
September 30, 2016
 
         
Weighted
 
         
Average
 
         
Exercise
 
   
Shares
   
Price
 
             
Outstanding at beginning of period
    1,464,203     $ 8.02  
Forfeited
    (21,334 )   $ 8.02  
Expired
    (8,666 )   $ 7.88  
Granted
    100,984     $ 6.20  
Outstanding at end of period and expected to vest
    1,535,187     $ 7.90  
Options exercisable
    1,102,900     $ 7.54  
 
Stock-based compensation expense for the three and nine months ended September 30, 2016 and 2015 is as follows:
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2016
   
2015
   
2016
   
2015
 
                         
Research and development
  $ 95,076     $ 184,302     $ 383,909     $ 514,107  
Plasma centers
    15,289       12,457       40,044       35,813  
General and administrative
    152,598       251,173       572,135       671,742  
                                 
Total stock-based compensation expense
  $ 262,963     $ 447,932     $ 996,088     $ 1,221,662  
 
As of September 30, 2016, the total compensation expense related to unvested options not yet recognized totaled $1,870,323. The weighted average vesting period over which the total compensation expense will be recorded related to unvested options not yet recognized at September 30, 2016 was approximately 2.3 years.
 
 
13

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
5.
RELATED PARTY TRANSACTIONS

The Company leases an office building and equipment from an entity owned by related parties on a month-to-month basis of which terms were amended by the Company’s Board of Directors in June 2016.  Rent expense amounted to $48,000 and $24,112 for the three months ended September 30, 2016 and 2015, respectively, and $144,000 and $72,336 for the nine months ended September 30, 2016 and 2015, respectively.  The Company also reimburses its landlord for office and building related (common area) expenses, equipment and certain other operational expenses, which have been insignificant to the condensed consolidated financial statements for the nine months ended September 30, 2016 and 2015.  The Company maintains deposits and other accounts at a bank which was less than 5%-owned by related parties through January 2016, and where a stockholder and Company director was previously a member of the bank’s board of directors through January 2016, and is now a member of its Corporate Advisory Council.

6.
COMMITMENTS AND CONTINGENCIES

General Legal Matters

The Company is and may become subject to certain legal proceedings and claims arising in connection with the normal course of its business.  In the opinion of management, there are currently no claims that would have a material adverse effect on its consolidated financial position, results of operations or cash flows.

7.
SEGMENTS

The Company is engaged in the development and commercialization of human plasma and plasma-derived therapeutics. The Company also operates ADMA BioCenters, consisting of two FDA-licensed source plasma collection facilities located in Georgia .  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.
 
The plasma collection centers segment includes the Company’s operations in Georgia.  The research and development segment includes the Company’s plasma development operations in New Jersey.
 
 
14

 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
Summarized financial information concerning reportable segments is shown in the following tables:
 
   
Plasma
                   
Three Months Ended
 
Collection
   
Research and
             
September 30, 2016
 
Centers
   
Development
   
Corporate
   
Consolidated
 
                         
Revenues
  $ 2,902,155     $ -     $ 35,708     $ 2,937,863  
Cost of product revenue
    1,735,771       -       -       1,735,771  
Gross profit
    1,166,384       -       35,708       1,202,092  
Loss from operations
    (316,202 )     (1,677,263 )     (1,743,407 )     (3,736,872 )
Other expense, net
    -       -       (594,367 )     (594,367 )
Net loss
    (316,202 )     (1,677,263 )     (2,337,774 )     (4,331,239 )
Total assets
    2,707,636       -       24,787,750       27,495,386  
Depreciation and
                               
amortization expense
    103,493       -       13,815       117,308  
 
   
Plasma
                   
Three Months Ended
 
Collection
   
Research and
             
September 30, 2015
 
Centers
   
Development
   
Corporate
   
Consolidated
 
                         
Revenues
  $ 1,821,229     $ -     $ 31,184     $ 1,852,413  
Cost of product revenue
    1,112,782       -       -       1,112,782  
Gross profit
    708,447       -       31,184       739,631  
Loss from operations
    (505,711 )     (2,111,505 )     (2,046,982 )     (4,664,198 )
Other expense, net
    -       -       (438,226 )     (438,226 )
Net loss
    (505,711 )     (2,111,505 )     (2,485,208 )     (5,102,424 )
Total assets
    3,074,076       -       24,749,954       27,824,030  
Depreciation and
                               
amortization expense
    105,192       -       12,738       117,930  
 
 
ADMA BIOLOGICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 AND 2015
 
   
Plasma
                   
Nine Months Ended
 
Collection
   
Research and
             
September 30, 2016
 
Centers
   
Development
   
Corporate
   
Consolidated
 
                         
Revenues
  $ 7,226,368     $ -     $ 107,125     $ 7,333,493  
Cost of product revenue
    4,346,433       -       -       4,346,433  
Gross profit
    2,879,935       -       107,125       2,987,060  
Loss from operations
    (1,177,371 )     (7,104,864 )     (5,104,023 )     (13,386,258 )
Other expense, net
    -       -       (1,569,785 )     (1,569,785 )
Net loss
    (1,177,371 )     (7,104,864 )     (6,673,808 )     (14,956,043 )
Total assets
    2,707,636       -       24,787,750       27,495,386  
Depreciation and
                               
amortization expense
    311,012       -       40,690       351,702  

   
Plasma
                   
Nine Months Ended
 
Collection
   
Research and
             
September 30, 2015
 
Centers
   
Development
   
Corporate
   
Consolidated
 
                         
Revenues
  $ 4,596,490     $ -     $ 68,962     $ 4,665,452  
Cost of product revenue
    2,808,726       -       -       2,808,726  
Gross profit
    1,787,764       -       68,962       1,856,726  
Loss from operations
    (1,571,366 )     (5,019,138 )     (4,792,636 )     (11,383,140 )
Other expense, net
    -       -       (2,004,137 )     (2,004,137 )
Net loss
    (1,571,366 )     (5,019,138 )     (6,796,773 )     (13,387,277 )
Total assets
    3,074,076       -       24,749,954       27,824,030  
Depreciation and
                               
amortization expense
    315,209       -       37,420       352,629  
 
The “Corporate” column above includes general and administrative overhead expenses.  Total assets included in the “Corporate” column above includes assets related to corporate and support functions.
 
 
16

 
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2016 and 2015 and our Annual Report for the year ended December 31, 2015 on Form 10-K, filed with the U.S. Securities and Exchange Commission, or the SEC, on March 23, 2016.
 
Forward-Looking Statements
 
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.  The forward-looking statements are only predictions and provide our current expectations or forecasts of future events and financial performance and may be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “will” or “should” or, in each case, their negative, or other variations or comparable terminology, though the absence of these words does not necessarily mean that a statement is not forward-looking.  Forward-looking statements include all matters that are not historical facts and include, without limitation, statements concerning our business strategy, outlook, objectives, future milestones, plans, intentions, goals, and future financial condition, including the period of time for which our existing resources will enable us to fund our operations.  Forward-looking statements also include our financial, clinical, manufacturing and distribution plans and our expectations and timing related to the U.S. Food and Drug Administration, or FDA, review and approval process and commercialization of RI-002.

We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ materially from any future results expressed or implied by the forward-looking statements.  We caution you therefore against relying on any of these forward-looking statements.  They are neither statements of historical fact nor guarantees or assurances of future performance.  Examples of the risks and uncertainties include, but are not limited to:

 
·
our ability to successfully resubmit to the FDA, our Biologics License Application, or BLA, for RI-002 once the deficiencies identified in the July 2016 Complete Response Letter, or CRL, have been resolved by us and/or our third party vendors to the satisfaction of the FDA, and other requests for information included therein have been provided by us,
 
 
·
our plans to develop, market, launch and build our own commercial infrastructure and commercialize RI-002 and the success of such efforts,
 
 
·
the expected timing of and our ability to obtain and maintain regulatory approvals for our product candidates, including the timeframe within which we may receive approval from the FDA, if at all, of our BLA for RI-002 and the labeling or nature of any such approvals,
 
 
·
the achievement of or expected timing, progress and results of clinical development, clinical trials and potential regulatory approvals,
 
 
17

 
 
·
our dependence upon one manufacturer for RI-002 and the effect any adverse events on such manufacturer could have on us or our business,
 
 
·
our dependence upon our third-party contract manufacturers and vendors,
 
 
·
our ability to obtain adequate quantities of FDA-approved normal source plasma and Respiratory Syncytical Virus, or RSV, high-titer plasma with proper specifications,
 
 
·
our plans to increase our supplies of plasma,
 
 
·
the potential indications for our product candidates,
 
 
·
potential investigational new product applications,
 
 
·
the acceptability of RI-002 for any purpose by physicians, patients or payers,
 
 
·
concurrence by FDA with our conclusions and the satisfaction by us of its guidance,
 
 
·
the comparability of results of RI-002 to other comparably run injectable immune globulin clinical trials,
 
 
·
the potential of RI-002 to provide meaningful clinical improvement for patients living with Primary Immune Deficiency Disease, or PIDD,
 
 
·
our intellectual property position, including our expectations of the scope of patent protection with respect to RI-002, or other future pipeline product candidates,
 
 
·
our manufacturing capabilities, third-party contractor capabilities and strategy,
 
 
·
our plans relating to manufacturing, supply and other collaborative agreements,
 
 
·
our estimates regarding expenses, capital requirements and needs for additional financing,
 
 
·
possible or likely reimbursement levels, if any, if and when RI-002 is approved for marketing,
 
 
·
estimates regarding market size, projected growth and sales as well as our expectations of market acceptance of RI-002; and
 
 
·
expectations for future capital requirements.
 
Pharmaceutical, biotechnology and medical device technology companies have suffered significant setbacks in advanced clinical trials, even after obtaining promising earlier trial results.  Data obtained from such clinical trials are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.  After gaining approval of a drug product, pharmaceutical and biotechnology companies face considerable challenges in marketing and distributing their products, and may never become profitable.  You should read carefully the factors described in the “Risk Factors” in our Annual Report for the year ended December 31, 2015 on Form 10-K as filed with the SEC on March 23, 2016, our Quarterly Report for the  quarter ended June 30, 2016 on Form 10-Q, as filed with the SEC on August 12, 2016, our Current Report on Form 8-K, as filed with the SEC on April 27, 2016 and in other filings with the SEC to better understand significant risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this report and you should not place undue reliance on any forward-looking statements.
 
 
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Any forward-looking statements that we make in this quarterly report on Form 10-Q speak only as of the date of such statements and we do not undertake any obligation to publicly update any forward-looking statements or to publicly announce revisions to any of the forward-looking statements, whether as a result of new information, future events or otherwise.
 
In addition to the risks identified under the heading “Risk Factors” in the SEC filings referenced previously, many important factors affect our ability to achieve our plans and objectives and to successfully develop and commercialize our product candidates.  In addition, our results may be affected by our ability to manage our financial resources, difficulties or delays in developing manufacturing processes for our product candidates, preclinical and toxicology testing and regulatory developments.  Delays in clinical programs, whether caused by competitive developments, adverse events, patient enrollment rates, regulatory issues or other factors, could adversely affect our financial position and prospects.  Prior clinical trial program designs and results are not necessarily indicative of future clinical trial designs or results. If our product candidates do not meet safety or efficacy endpoints in clinical evaluations, they will not receive regulatory approval and we will not be able to market them. The FDA may not approve our BLA for RI-002, our data, our results, or permit us to proceed.  We may not be able to enter into any strategic partnership agreements. Operating expenses and cash flow projections involve a high degree of uncertainty, including variances in future spending rates due to changes in corporate priorities, the timing and outcomes of clinical trials, competitive developments and the impact on expenditures and available capital from licensing and strategic collaboration opportunities.  If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue one or more of our drug development or discovery research programs and delay or abandon potential commercialization efforts.  We may not ever have any products that generate significant revenue. Therefore, current and prospective security holders are cautioned that there can be no assurance that the forward-looking statements included in this document will prove to be accurate.
 
Overview
 
We are a late-stage biopharmaceutical company that develops, manufactures, and intends to commercialize specialty plasma-based biologics for the proposed treatment of immune deficiencies and prevention of certain infectious diseases. Our targeted patient populations include immune-compromised individuals who suffer from an underlying immune deficiency disorder or who may be immune-suppressed for medical reasons. Our 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.

Our Lead Product Candidate – RI-002

We are currently developing our lead product candidate, RI-002, for the treatment of PIDD, and have completed a pivotal Phase III clinical study.  RI-002 is derived from human plasma blended from normal donors and donors tested to have high levels of neutralizing titers to RSV.  RI-002 is manufactured using a process called fractionation, which purifies immune globulins, or IgG, from this blended plasma pool resulting in a final IVIG product enriched with naturally occurring polyclonal anti-pathogen antibodies (e.g., streptococcus pneumonia, H. influenza type B, Cytomegalovirus or CMV, measles, tetanus, etc.).  We use our proprietary RSV microneutralization assay to test for standardized levels of neutralizing antibodies to RSV in the final drug product.
 
 
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In the third quarter of 2015, the FDA accepted for review a BLA for RI-002 for the treatment of PIDD.  In July 2016, the FDA issued a CRL.  The CRL did not cite any concerns with the clinical safety or efficacy data for RI-002 submitted in the BLA, nor did the FDA request any additional clinical studies be completed prior to FDA approval of RI-002.  The FDA identified in the CRL, among other things, certain outstanding inspection issues and deficiencies at our third-party contract manufacturers and vendors and requested documentation of corrections for a number of those issues.  The FDA indicated in the CRL that it cannot grant final approval of the BLA until, among other things, these deficiencies are resolved.

We continue to collaborate with our third-party manufacturers and vendors to identify solutions to outstanding issues identified in the CRL.  We are currently preparing documentation for an additional submission to the FDA to address the CRL.  We, along with our vendors, are awaiting certain feedback from the FDA regarding previous submissions and we intend to provide a timeline for resubmission of our BLA for RI-002 as soon as practicable.  If RI-002 is approved by the FDA, we intend to commercialize RI-002 for the treatment of PIDD and explore alternative processes to evaluate and seek approval for RI-002 for additional indications, patient populations and uses.

Evaluation of PIDD Patients

PIDD, a genetic disorder that causes a deficient or absent immune system, is caused by hereditary or genetic defects and can affect anyone regardless of age or gender.  PIDD patients are more vulnerable to infections and more likely to suffer complications from these infections.  IVIG is a plasma derived product that is used to prevent serious infections in patients with PIDD.  It is comprised of polyclonal antibodies, which are proteins produced by B-cells that are used by the body’s immune system to neutralize foreign objects such as bacteria and viruses.  It is estimated that there are about 250,000 diagnosed PIDD patients in the United States, approximately half of whom are treated with IVIG regularly.  In the United States, sales of immune globulin products for all its uses were reported to be approximately $4.8 billion in 2014.

The RI-002 pivotal Phase III clinical trial was conducted as a single arm study in which patients were treated approximately once per month for a period of 12 months plus 90 days for follow up.  Fifty-nine patients were enrolled in nine treatment centers in the United States.  The pivotal Phase III primary endpoint followed published FDA industry guidance, which provides for a reduction in the incidence of serious infections to less than one per year in each subject receiving IVIG.  The secondary outcome was safety and included other pharmacokinetic, or PK, data collection points including antibody titers for certain agents, including RSV antibody levels at various time points after infusion.

RI-002 demonstrated positive results in the Phase III study in patients with PIDD, meeting its primary endpoint, of no Serious Bacterial Infections, or SBI, reported.  RI-002 was administered a total of 793 infusions with zero serious adverse events to 59 patients in nine treatment centers throughout the United States.  These results, included in the BLA, more than meet the requirement specified by FDA guidance of ≤ 1 SBI per patient-year.
 
 
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On February 22, 2015, at the 2015 American Academy of Allergy, Asthma & Immunology Annual Meeting, scientific investigators reported on the secondary outcomes that included: a total of 93 days, or 1.66 days per patient per year lost from work or school due to infection; one hospitalization due to an infection of only five days duration in the entire study and IgG trough levels above those required by the FDA for IVIG products.  Additionally, there was a marked increase in all of the measured specific anti-pathogen antibodies in PK subjects (n=31). The mean of maximum fold increases in specific antibody levels after infusion of RI-002 ranged from 1.9 fold (S. pneumonia type 19A) to 5.3 fold (RSV), which were statistically significant fold increases from the pathogen's specific measured baselines.  The safety profile of RI-002 is comparable to that of other immunoglobulins.

Rationale for the Potential Evaluation in RSV Infected Patients

RSV is a common virus that ordinarily leads to mild, cold-like symptoms in healthy adults and children.  In high-risk groups, such as the PIDD population and the other immune-compromised populations, RSV can lead to a more serious infection and may even cause death. The polyclonal antibodies which are present in RI-002 are expected to prevent infections in immune-compromised patients.

We previously conducted a randomized, double-blind, placebo-controlled Phase II clinical trial to evaluate RI-001, RI-002’s predecessor product candidate, in immune-compromised, RSV-infected patients. This trial was conducted with 21 patients in the United States, Canada, Australia, and New Zealand. The Phase II dose-ranging trial demonstrated a statistically significant improvement in the change from baseline RSV titers to day 18 in the high dose and low dose treatment groups when compared with placebo (p=0.0043 and p=0.0268, respectively). The mean fold increase for high dose was 9.24 (95% CI 4.07, 21.02) and the observed mean fold increase for low dose was 4.85 (95% CI 2.22, 10.59). The mean fold change for placebo treated patients was 1.42 (95% CI 0.64, 3.17). In addition, more patients in the high dose (85.7%) and low dose (42.9%) groups experienced greater than a four-fold increase from baseline to day 18 in RSV titer levels compared to placebo (0%). There were no serious drug-related adverse events reported during the trial.

From April 2009 through February 2011, RI-001 was also administered to 15 compassionate use patients where physicians requested access to the product for treating their patients with documented lower respiratory tract RSV infections due to the fact that these patients had failed conventional therapeutic interventions.  Serum samples were obtained from 13 patients.  Samples showed that patients demonstrated a four-fold or greater rise in RSV antibody titers from baseline.  Serum samples were not obtained from two patients that received Palivizumab.  All 11 patients who received RI-001 within 4.2 days after the onset of the diagnosis of RSV survived.  The drug was well-tolerated in all 15 patients and there were no reports of serious adverse events attributable to RI-001.  Data from our Phase II clinical trial, compassionate use experience and data obtained from the evaluation of RI-002 in the infected cotton rat animal model has been presented at various conferences during 2014, 2015 and 2016.

Based on these results, we intend to evaluate RI-002 for the treatment of RSV patients following FDA approval, if received, for treatment of PIDD.
 
 
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Commercialization

As part of our current ongoing commercialization efforts, we plan to hire a small, specialty sales force to market RI-002 to hospitals, physician offices/clinics, and other specialty treatment organizations.  We anticipate staffing additional personnel for patient support, medical affairs, quality assurance, regulatory affairs, scientific affairs, reimbursement, inventory and logistics, human resources, financial and operational management.  If and when we receive FDA approval, we may also use a network of national distributors to fulfill orders for RI-002 for use by healthcare professionals and hospitals.

Intellectual Property

During the second quarter of 2015, we received a notice of allowance from the United States Patent Office, or USPTO, for our RI-002 patent filed under U.S. patent application 14/592,721 entitled ‘Compositions and Methods for the Treatment of Immunodeficiency,’ which extends through January 2035.  During the third quarter of 2015 our U.S. Patent 9,107,906 was issued by the USPTO.  This patent describes methods by which the blending of plasma obtained from normal donors with plasma obtained from donors selected to have high levels of neutralizing titers to RSV form a unique antibody enriched plasma pool and provide for the standardization of the levels of anti-RSV antibodies in the RI-002 final product.  Our proprietary microneutralization assay allows us to effectively identify and isolate donor plasma with high-titer RSV antibodies and to standardize RI-002’s antibody profile, which we believe may enable us to garner a premium price.

Plasma Collection Facilities

 Our wholly-owned subsidiary, ADMA BioCenters, operates two FDA-licensed, German Health Authority, or GHA, and Korean Ministry of Food and Drug Safety, or MFDS, certified source plasma collection facilities located in Norcross, Georgia and Marietta, Georgia, which provide us with a portion of our blood plasma for the manufacture of RI-002.  Our plasma collection center in Marietta, Georgia, received FDA approval in the third quarter of 2015.  A typical plasma collection center, such as those operated by ADMA BioCenters, can collect approximately 30,000 to 50,000 liters of source plasma annually, which may be sold for different prices depending upon the type of plasma, quantity of purchase, and market conditions at the time of sale.  Plasma collected from ADMA BioCenters' two Georgia facilities that is not used for making RI-002 is sold to third-party customers in the United States, and other locations where we are approved globally under supply agreements or in the open "spot" market.  We have entered into long-term manufacturing and licensing agreements with Biotest Aktiengesellschaft, or Biotest AG and their United States subsidiary, Biotest Pharmaceuticals Corporation, or Biotest, that provide for the exclusive manufacture of RI-002.  At the same time, we granted Biotest AG an exclusive, royalty-bearing license to market and sell RSV antibody-enriched IVIG in Europe and in other selected territories in North Africa and the Middle East.

Financial Operations Overview
 
Revenues
 
Revenues for the three and nine months ended September 30, 2016 are comprised of product revenues from the sale of normal source human plasma collected from our plasma collection centers segment and license revenues attributable to the out-licensing of RI-002 to Biotest AG to market and sell in Europe and selected countries in North Africa and the Middle East.  In exchange for the out-licensing of RI-002, Biotest AG and Biotest, a subsidiary of Biotest AG, have provided us with certain financial payment and services in accordance with the related Biotest AG license agreement and is obligated to pay us certain amounts in the future if certain milestones are achieved.
 
 
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Our product revenues are primarily attributable to two customers.  One customer accounts for greater than eighty percent and another customer accounts for greater than ten percent of our product revenues for the nine months ended September 30, 2016.  Product revenues  from the sale of human plasma collected at our FDA-licensed plasma collection centers are recognized at the time of transfer of title and risk of loss to the customer, which occurs, depending on the agreement with the customer, at the time of shipment or  at the time of delivery if we retain the risk of loss during shipment.  Revenue from license fees and research and development services rendered are recognized as revenue when the performance obligations under the terms of the license agreement have been completed.

Research and Development Expenses
 
Research and development, or R&D expenses, attributable to our R&D segment, consists of clinical research organization costs, clinical trial costs related to our clinical trial, consulting expenses relating to regulatory and medical affairs, quality assurance and control, manufacturing, assay development, ongoing testing costs, drug product manufacturing including the cost of plasma, plasma storage and transportation costs, as well as wages and benefits for employees including stock-based compensation directly related to the R&D of RI-002.  All R&D costs are expensed as incurred.
 
The process of conducting preclinical studies, clinical trials and regulatory activities necessary to obtain FDA approval is costly and time consuming.  The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate’s early clinical data, investment in the program, competition, regulatory, manufacturing capabilities and commercial viability.  As a result of the uncertainties discussed above, the uncertainties associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates.  Development timelines, probability of success and development costs vary widely.  R&D expenses for the three months ended September 30, 2016 decreased as compared to R&D expenses for the three months ended September 30, 2015 as a result of reduced testing and validation services related to RI-002 attributed to us managing costs after we received the CRL to our BLA for RI-002.  For the nine months ended September 30, 2016, R&D expenses increased as compared to R&D expenses for the nine months ended September 30, 2015, due to higher validation, testing and production costs related to RI-002 along with increased regulatory consulting services related to our BLA.  We anticipate that R&D expenses may continue to decrease throughout 2016 as a result of reduced testing and validation services related to RI-002 offset by increased costs related to regulatory activities in connection with the CRL. Once we have clarity for the timing of our expected BLA resubmission and anticipated RI-002 approval, we would then expect our R&D costs to increase.
 
 
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General and Administrative Expenses
 
General and administrative, or G&A expenses, consist of wages, stock-based compensation, benefits for senior management and staff unrelated to R&D, legal fees, accounting and auditing fees, commercialization and marketing activities, information technology, investor relations fees, rent, maintenance and utilities, insurance, travel and other expenses related to the general operations of our business.  The decreased G&A expenses for the three months September 30, 2016 is attributed to us managing costs, primarily related to pre-launch commercialization and related activities, after we received the CRL.  For the nine months ended September 30, 2016, G&A increased as a result of higher marketing, commercial planning, increased headcount, wages and benefits for employees, including stock-based compensation and consulting expenses associated with commercialization activities.  We expect that our G&A expenses may continue to decrease modestly throughout 2016 as we continue to manage our costs through deferring  certain pre-launch, and commercial planning activities, while we focus on addressing the CRL.  Once we have clarity for the timing of our expected BLA resubmission and anticipated RI-002 approval, we would then expect our G&A costs to increase.
 
Other Income and Expense
 
Interest income consists of interest earned on our cash and cash equivalents and short-term investments.  Interest expense consists of interest incurred on our notes payable, as well as the amortization of end of term fees, back end fees, value of warrants issued, facility and financing fees.  We anticipate other income and expense to remain consistent throughout 2016 as a result of our current outstanding debt and interest earned on investments.

Results of Operations
 
Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015
 
Summary table
 
The following table presents a summary of the changes in our results of operations for the three months ended September 30, 2016 compared to the three months ended September 30, 2015:
 
   
Three Months Ended
   
Percentage
 
   
September 30,
   
Increase/
 
   
2016
   
2015
   
(Decrease)
 
Revenues
  $ 2,937,863     $ 1,852,413       59 %
Cost of product revenue
  $ 1,735,771     $ 1,112,782       56 %
Research and development expenses
  $ 1,677,263     $ 2,111,505       -21 %
Plasma center operating expenses
  $ 1,482,586     $ 1,214,158       22 %
General and administrative expenses
  $ 1,779,115     $ 2,078,166       -14 %
Total operating expenses
  $ 6,674,735     $ 6,516,611       2 %
Other expense, net
  $ (594,367 )   $ (438,226 )     36 %
Net loss
  $ (4,331,239 )   $ (5,102,424 )     -15 %
Net loss in plasma collection segment
  $ (316,202 )   $ (505,711 )     -37 %
Net loss attributable to research and
                       
development segment
  $ (1,677,263 )   $ (2,111,505 )     -21 %
 
 
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Revenues
 
We recorded total revenues of $2,937,863 for the three months ended September 30, 2016 and $1,852,413 for the three months ended September 30, 2015.  Product revenue was $2,902,155 for the three months ended September 30, 2016, which is attributable to our plasma collection centers segment, derived from the sale of blood plasma collected at our FDA-licensed, GHA and MFDS certified Georgia-based blood plasma collection centers, compared to product revenue of $1,821,229 for the three months ended September 30, 2015.  Product revenue for the quarter ended September 30, 2016 was primarily attributable to sales made pursuant to our plasma supply agreement with Biotest under which Biotest purchases normal source plasma from ADMA BioCenters for their manufacturing, in addition to selling increased quantities of normal source plasma to a second customer.  The increase in product revenue of $1,080,926 was primarily attributable to increased plasma collections and sales from our Marietta, Georgia plasma center, which received FDA approval to sell human source plasma within the U.S. during the third quarter of 2015.  License and other revenue was $35,708 for the three months ended September 30, 2016 and $31,184 for the three months ended September 30, 2015 which relates to services and financial payments provided by Biotest and Biotest AG, in accordance with our license agreement.  We have not generated any revenue from our therapeutics research and development business.
 
Cost of Product Revenue
 
Cost of product revenue was $1,735,771 for the three months ended September 30, 2016, and $1,112,782 for the three months ended September 30, 2015.  The increase in cost of product revenues of $622,989 for the three months ended September 30, 2016 was directly related to the increase in product revenues for the three months ended September 30, 2016.
 
Research and Development Expenses
 
R&D expenses, which are attributable to our R&D segment, were $1,677,263 for the three months ended September 30, 2016, a decrease of $434,242 from $2,111,505 for the three months ended September 30, 2015.  The decrease in R&D expenses for the three months ended September 30, 2016, compared to the three months ended September 30, 2015, was primarily attributable to managing our expenditures related to reduced validation and testing for RI-002 as a result of our receipt of the CRL.
 
Plasma Center Operating Expenses
 
Operating expenses for our plasma collection centers segment attributed solely to ADMA BioCenters were $1,482,586 for the three months ended September 30, 2016, an increase of $268,428 from $1,214,158 for the three months ended September 30, 2015.  These operating expenses consist of G&A overhead, comprised of: rent, maintenance, utilities, wages and benefits for center staff, plasma collection supplies, plasma transportation and storage (off-site), advertising and promotion expenses, and computer software fees related to donor collections.  The increase in expenses was primarily the result of increased plasma collections at our ADMA BioCenters Marietta collection facility, which received FDA approval during the third quarter of 2015.  The increased expenses include: higher costs in wages, rent, maintenance and plasma collection supplies during the third quarter of 2016 compared to the third quarter of 2015.  We expect that as plasma collection increases, our operating expenses will also increase accordingly.
 
 
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General and Administrative Expenses
 
G&A expenses were $1,779,115 for the three months ended September 30, 2016, a decrease of $299,051 from $2,078,166 for the three months ended September 30, 2015.  The decrease in G&A expenses for the three months ended September 30, 2016, was a result of managing our expenditures through deferring certain commercial planning and market research activities related to the commercial development of RI-002 as a result of our receiving the CRL.
 
Total Operating Expenses
 
Total operating expenses were $6,674,735 for the three months ended September 30, 2016, an increase of $158,124 from $6,516,611 for the three months ended September 30, 2015, for the reasons stated above.
 
Other Income (Expense); Interest Expense
 
Other expense, net, was $594,367 for the three months ended September 30, 2016, compared to $438,226 for the three months ended September 30, 2015.  The increase of $156,141 is primarily related to increased interest expense due to an increase of $4,000,000 to our current debt in the second quarter of 2016, which includes debt discounts amortization for our new lender’s end of term fees, back end fees, value of warrants issued, facility and financing fees.
 
Net Loss
 
Net loss was $4,331,239 for the three months ended September 30, 2016, a decrease of $771,185 from $5,102,424 for the three months ended September 30, 2015 for the reasons stated above.
 
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
 
Summary table
 
The following table presents a summary of the changes in our results of operations for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015:
 
 
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Nine Months Ended
   
Percentage
 
   
September 30,
   
Increase/
 
   
2016
   
2015
   
(Decrease)
 
Revenues
  $ 7,333,493     $ 4,665,452       57 %
Cost of product revenue
  $ 4,346,433     $ 2,808,726       55 %
Research and development expenses
  $ 7,104,864     $ 5,019,138       42 %
Plasma center operating expenses
  $ 4,057,306     $ 3,359,130       21 %
General and administrative expenses
  $ 5,211,148     $ 4,861,598       7 %
Total operating expenses
  $ 20,719,751     $ 16,048,592       29 %
Other expense, net
  $ (1,569,785 )   $ (2,004,137 )     -22 %
Net loss
  $ (14,956,043 )   $ (13,387,277 )     12 %
Net loss in plasma collection segment
  $ (1,177,371 )   $ (1,571,366 )     -25 %
Net loss attributable to research and
                       
development segment
  $ (7,104,864 )   $ (5,019,138 )     42 %
 
Revenues
 
We recorded total revenues of $7,333,493 for the nine months ended September 30, 2016 and $4,665,452 for the nine months ended September 30, 2015.  Product revenue was $7,226,368 for the nine months ended September 30, 2016, which is attributable to our plasma collection centers segment derived from the sale of human source plasma collected from our FDA-licensed, GHA and MFDS certified Georgia-based blood plasma collection centers, compared to product revenue of $4,596,490 for the nine months ended September 30, 2015.  The increase in product revenue of $2,629,878 was primarily attributable to increased plasma collections and sales from our Marietta, Georgia plasma center which received FDA approval to sell human source plasma within the U.S. during the third quarter of 2015.  Product revenue for the nine months ended September 30, 2016 was primarily attributable to sales made pursuant to our plasma supply agreement with Biotest under which Biotest purchases normal source plasma from ADMA BioCenters for their manufacturing, in addition to selling increased quantities of normal source plasma to a second customer.  License and other revenue was $107,125 for the nine months ended September 30, 2016 and $68,962 for the nine months ended September 30, 2015, which relates to services and financial payments provided by Biotest and Biotest AG in accordance with our license agreement.  We have not generated any revenue from our therapeutics research and development business.
 
Cost of Product Revenue
 
Cost of product revenue was $4,346,433 for the nine months ended September 30, 2016, and $2,808,726 for the nine months ended September 30, 2015.  The increased cost of product revenues of $1,537,707 for the nine months ended September 30, 2016 was directly related to the increase in product revenues for the nine months ended September 30, 2016.
 
Research and Development Expenses
 
R&D expenses, which are attributable to our R&D segment, were $7,104,864 for the nine months ended September 30, 2016, an increase of $2,085,726 from $5,019,138 for the nine months ended September 30, 2015.  R&D expenses increased during the nine months ended September 30, 2016, compared to the nine months ended September 30, 2015, primarily attributable to an increase in validation, testing and production costs related to RI-002 and an increase in regulatory consulting fees.
 
 
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Plasma Center Operating Expenses
 
Operating expenses for our plasma collection centers segment attributed solely to ADMA BioCenters were $4,057,306 for the nine months ended September 30, 2016, an increase of $698,176 from $3,359,130 for the nine months ended September 30, 2015.  These operating expenses consist of G&A overhead, comprised of: rent, maintenance, utilities, wages and benefits for center staff, plasma collection supplies, plasma transportation and storage (off-site), advertising and promotion expenses, and computer software fees related to donor collections.  The increase in expenses was primarily the result of increased plasma collections at our ADMA BioCenters Marietta collection facility, which received FDA approval during the third quarter of 2015.  The increased expenses include: higher costs in wages, rent, maintenance and plasma collection supplies during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.  We expect that as plasma collection increases, our operating expenses will also increase accordingly.

General and Administrative Expenses
 
G&A expenses were $5,211,148 for the nine months ended September 30, 2016, an increase of $349,550 from $4,861,598 for the nine months ended September 30, 2015.  G&A expenses primarily increased as a result of fees incurred for consulting services provided to us related to pre-launch, commercial planning, market research, along with increased rent expense, higher wages and benefits for employees, including stock-based compensation and consulting fees.
 
Total Operating Expenses
 
Total operating expenses were $20,719,751 for the nine months ended September 30, 2016, an increase of $4,671,159 from $16,048,592 for the nine months ended September 30, 2015, for the reasons stated above.
 
Other Income (Expense); Interest Expense
 
Other expense, net was $1,569,785 for the nine months ended September 30, 2016, compared to $2,004,137 for the nine months ended September 30, 2015.  The decrease of $434,352 is primarily related to a loss on extinguishment of debt of $719,097, which was recorded in the second quarter of 2015 for the refinancing of an existing loan with our new lender, Oxford Finance LLC, or Oxford, of which costs are comprised of a write-off of deferred financing costs, end of term fees and prepayment penalties for the repayment of debt to our prior lender, offset by increased interest expense due to an increase of $4,000,000 to our current debt in the second quarter of 2016, which includes debt discounts amortization for our new lender’s end of term fees, back end fees, value of warrants issued, facility and financing fees.
 
Net Loss
 
Net loss was $14,956,043 for the nine months ended September 30, 2016, an increase of $1,568,766 from $13,387,277 for the nine months ended September 30, 2015 for the reasons stated above.
 
 
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Cash Flows
 
Net Cash Used in Operating Activities
 
Net cash used in operating activities was $14,655,295 for the nine months ended September 30, 2016.  The net loss for this period was higher than net cash used in operating activities by $300,748, which was primarily attributable to increased inventories of $1,171,961 related to collection and purchases of normal source and RSV plasma, an increase in accounts receivable of $403,063 attributable to increased sales from our Marietta, Georgia plasma center which received FDA approval to sell human source plasma within the U.S. during the third quarter of 2015, an increase in prepaid expenses of $370,631 for vendor payments related to insurance premiums, prepayments to third-party manufacturing vendors for commercial manufacturing of RI-002, an increase in accounts payable of $689,366 related to contract manufacturing costs related to commercial lot production, and a decrease in accrued expenses of $143,586, offset by stock-based compensation of $996,088, and depreciation and amortization of $834,580.
 
Net cash used in operating activities was $11,340,195 for the nine months ended September 30, 2015.  The net loss for this period was higher than net cash used in operating activities by $2,047,082, which was primarily attributable to an increase in deferred revenue of $1,500,000 from a milestone payment received from Biotest after the BLA for RI-002 was filed with the FDA, increased inventories of $1,122,051 related to allocating additional plasma to inventory in preparation for commercial manufacturing activities anticipated in 2016, increases in accounts receivable of $816,654, related to sales of our normal source plasma, and decreases in accrued expenses of $218,580 related to payments made to vendors and service providers, offset by stock-based compensation of $1,221,662, a loss on extinguishment of debt of $719,097 attributable to the refinancing of previous debt with a new venture debt lender and depreciation and amortization of $614,755.
 
Net Cash Used in Investing Activities
 
Net cash used in investing activities was $4,721,900 for the nine months ended September 30, 2016, which was related to the purchase of short-term investments of $4,658,514 and $63,386 in purchases of computers and equipment.
 
Net cash used in investing activities was $7,142,255 for the nine months ended September 30, 2015, which was related to the increase in short-term investments of $7,111,686 and $30,569 in purchases of computers and equipment.
 
Net Cash Provided by Financing Activities
 
Net cash provided by financing activities totaled $16,842,211 for the nine months ended September 30, 2016, which primarily consisted of $14,145,000 received from the issuance of common stock during the second quarter of 2016 offset by equity issuance costs of $1,244,459, $4,000,000 received from Oxford during the second quarter of 2016, offset by payment of debt issue costs to Oxford of $47,104 in addition to amortization of our leasehold improvement loan for our ADMA BioCenters subsidiary.
 
 
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Net cash provided by financing activities totaled $10,461,187 for the nine months ended September 30, 2015, which primarily consisted of $16,000,000 received from the loan from Oxford during the second quarter of 2015, and $10,306,606 received from the issuance of common stock during the first quarter of 2015, offset by the $15,300,781 related to the repayment of our debt, a prepayment premium of $229,512, debt issue costs to Oxford of $172,363 and an end of term fee payment of $132,500 in addition to amortization of our leasehold improvement loan for our ADMA BioCenters wholly-owned subsidiary.
 
Liquidity and Capital Resources
 
Overview
 
We have had limited revenue from operations and we have incurred cumulative losses of $102.4 million since inception.  We have funded our operations to date primarily from equity investments, loans from venture debt lenders and loans from our primary stockholders.  During May 2016, we completed an underwritten public offering of our common stock and we received net proceeds of approximately $12.9 million.  In May 2016, we amended our Loan and Security Agreement, or LSA, with Oxford and borrowed an additional $4.0 million.  In March 2015, we received net cash proceeds of approximately $10.2 million from an underwritten public offering from the sale of our common stock.  In October 2013, we received net cash proceeds of approximately $26.6 million from our Initial Public Offering, or IPO.  In various financings since 2012, we received a total of $20.0 million from venture debt lenders.  In February 2012, we received net cash proceeds of approximately $15.3 million from a private placement of our common stock.
 
As of September 30, 2016, we had working capital of $20.6 million, consisting primarily of $7.9 million of cash and cash equivalents, $11.0 million of short-term investments, $4.6 million of inventories, $1.3 million of accounts receivable, and $0.5 million of prepaid expenses, offset by $2.8 million of accounts payable, $1.8 million of accrued expenses and $0.1 million of deferred revenue.  See also “Future Financing Needs” below.
 
 Future Financing Needs
 
We expect to continue to spend substantial amounts of capital on product development, including commercialization activities, procuring raw material plasma, manufacturing, regulatory, consulting fees in connection with our BLA and the potential approval of RI-002, conducting potential future studies and/or clinical trials for our product candidates and purchasing clinical trial materials from our suppliers.  Based upon our projected revenue and expenditures for 2016 and 2017, including the ongoing regulatory activities associated with pursuing the BLA for RI-002, implementation of our planned potential commercialization and expansion activities, we currently believe that our cash, cash equivalents, short-term investments and accounts receivable as of the date of this report are sufficient to fund our operations, as currently conducted, into the second half of 2017.  This time frame may change based upon our interactions with FDA, potential timing of our commercial manufacturing scale up activities, our generation of future revenue, how aggressively we execute on our regulatory strategy and/or commercial initiatives and when the FDA approves our BLA for RI-002, if at all.  

We cannot predict with certainty that we will not need to raise additional funds in the future or when we will reach profitability, if at all.  Furthermore, if our assumptions underlying our estimated expenses, the timing of FDA resubmission or approval for RI-002 and generation of revenues from RI-002 are incorrect, we may have to raise additional capital sooner than anticipated.  Due to numerous risks and uncertainties associated with the research and development and potential future commercialization of our product candidate, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our development activities.  Our current estimates may be subject to change as circumstances regarding our business requirements evolve. We may decide to raise capital through public or private equity offerings, such financings may only be available on unattractive terms, resulting in significant dilution of stockholders’ interests and, in such event, the value and potential future market price of our common stock may decline, or we may decide to obtain debt financings or a bank credit facility or to enter into corporate collaboration and licensing arrangements.  Other than our option to borrow an additional $5.0 million through our current LSA with Oxford, as amended, based upon receiving BLA approval by the FDA for RI-002 no later than January 31, 2017, we do not have any existing commitments for future external funding.  The sale of additional equity or debt securities, if convertible, could result in dilution to our current stockholders.  The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations or other future financing alternatives.  Additional equity or debt financing, grants, or corporate collaboration and potential licensing arrangements may not be available on acceptable terms, if at all.
 
 
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If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our planned clinical trials and delay or abandon potential commercialization efforts of our lead product candidate or other product candidates. 

Financial markets in the United States, Canada, Europe and Asia continue to experience disruption, including, among other things, significant volatility in security prices, declining valuations of certain investments, as well as severely diminished liquidity and credit availability.  Business activity across a wide range of industries and regions continues to be greatly reduced and local governments and many businesses are still suffering from the lack of consumer spending and the lack of liquidity in the credit markets.  Instability in the credit and financial market conditions may negatively impact our ability to access capital and credit markets and our ability to manage our cash balance.  While we are unable to predict the continued duration and severity of the adverse conditions in the United States and other countries, any of the circumstances mentioned above could adversely affect our business, financial condition, operating results and cash flows or cash position.

Recent Accounting Pronouncements
 
In March 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which provides for simplification of certain aspects of employee share-based payment accounting including income taxes, classification of awards as either equity or liabilities, accounting for forfeitures and classification on the statement of cash flows. ASU 2016-09 will be effective for us in the first quarter of 2017 and will be applied either prospectively, retrospectively or using a modified retrospective transition approach depending on the area covered in this update. We are currently in the process of assessing the impact of ASU 2016-09 on our condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the impact the standard may have on our condensed consolidated financial statements and related disclosures.
 
 
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In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes, which includes amendments that require deferred tax liabilities and assets be classified as non-current in a classified statement of financial position.  The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  Earlier application is permitted as of the beginning of an interim or annual reporting period.  The amendments may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  The adoption of this ASU is not expected to have a material impact on our condensed consolidated financial statements and related disclosures.
 
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments, which includes amendments that require an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  The amendments in this ASU require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this ASU require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.  The amendments in this ASU are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.  The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date of the ASU with earlier application permitted for financial statements that have not yet been made available for issuance.  We are currently evaluating the impact the standard may have on our condensed consolidated financial statements and related disclosures.
 
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The standard requires entities to measure most inventory “at the lower of cost and net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market (market in this context is defined as one of three different measures, one of which is net realizable value). The standard is effective for us prospectively beginning January 1, 2017. The adoption of ASU 2015-11 is not expected to have a material impact on our condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, InterestImputation of Interest, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years beginning after December 15, 2015. We adopted ASU 2015-03 in our second quarter 2015 condensed consolidated financial statements and recast the prior period balances to conform to the current period presentation.
 
 
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In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern.” The FASB believes that requiring management to perform the assessment will enhance the timeliness, clarity, and consistency of related disclosures and improve convergence with International Financial Reporting Standards, or IFRS (which emphasize management’s responsibility for performing the going-concern assessment). However, the time horizon for the assessment (look-forward period) and the disclosure thresholds under Accounting Principles Generally Accepted in the United States of America, or GAAP, and IFRSs will continue to differ. This guidance is effective for annual reporting periods ending after December 15, 2016, and for annual periods and interim periods thereafter, with early adoption permitted. We do not anticipate that the adoption of this standard will have a material impact on our financial statements.
 
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires that an entity recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to its customers.  In order to achieve this core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. This update will replace existing revenue recognition guidance under GAAP, when it becomes effective for us beginning January 1, 2018, with early adoption permitted in the first quarter of 2017. The updated standard will permit the use of either the retrospective or cumulative effect transition method. We are currently evaluating the impact of this update on our condensed consolidated financial statements.

Critical Accounting Policies and Estimates

On April 5, 2012, the Jumpstart Our Business Startups Act, or the JOBS Act, was signed into law.  The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies.  As an “emerging growth company,” we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies.  We may take advantage of this extended transition period until the first to occur of the date that we (i) are no longer an “emerging growth company” or (ii) affirmatively and irrevocably opt out of this extended transition period.  We have elected to take advantage of the benefits of this extended transition period.  Our condensed consolidated financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.  Until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to our condensed consolidated financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
 
 
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This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP.  The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  On an ongoing basis, we evaluate these estimates and assumptions, including those described below.  We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results and experiences may differ materially from these estimates.
 
Some of the estimates and assumptions we have to make under GAAP require difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, actual results could differ from those estimates.  Due to the estimation processes involved, the following summarized accounting policies and their application are considered to be critical to understanding our business operations, financial condition and results of operations.

Stock-Based Compensation
 
Stock-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period on a straight-line basis.
 
We account for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method.  The noncash charge to operations for non-employee options with vesting is revalued at the end of each reporting period based upon the change in the fair value of the options and amortized to consulting expense over the related contract service period.
 
For purposes of valuing stock options granted to our employees, non-employees and directors and officers through the three and nine months ended September 30, 2016, we used the Black-Scholes option pricing model.  We did not grant options during the three months ended September 30, 2016 and we granted options to purchase an aggregate of 100,984 shares of common stock during the nine months ended September 30, 2016.  To determine the risk-free interest rate, we utilized the U.S. Treasury yield curve in effect at the time of the grant with a term consistent with the expected term of our awards.  The expected term of the options granted is in accordance with Staff Accounting Bulletins 107 and 110, which is based on the average between vesting terms and contractual terms.  The expected dividend yield reflects our current and expected future policy for dividends on our common stock.  The expected stock price volatility for our stock options was calculated by examining the pro rata historical volatilities for similar publicly traded industry peers and the trading history for our common stock.  We will continue to analyze the expected stock price volatility and expected term assumptions.  We have not experienced any material forfeitures of stock options and, as such, have not established a forfeiture rate since the stock options currently outstanding are primarily held by our senior management and directors.  We will continue to evaluate the effects of such future potential forfeitures, as they may arise, to evaluate our estimated forfeiture rate.
 
 
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Research and Development Costs

Our expenses include all R&D costs as incurred, of which such expenses include costs associated with planning and conducting clinical trials, regulatory consulting and filing fees, testing, validation and production of RI-002 prior to regulatory approval and the disposition of plasma and equipment for which there is no alternative future use.

Revenue Recognition

Depending on the agreement with the customer, product revenues from the sale of human plasma collected by ADMA BioCenters are recognized at the time of transfer of title and risk of loss to the customer, which usually occurs at the time of shipment. Product revenues are recognized at the time of delivery if we retain the risk of loss during shipment.  Our product revenues are substantially attributable to two customers. One customer accounts for greater than eighty percent and another customer accounts for greater than ten percent of our product revenues for the nine months ended September 30, 2016.  Revenue from license fees and research and development services rendered are recognized as revenue when the performance obligations under the terms of the license agreement with Biotest AG have been completed.  During the third quarter of 2015, we recorded deferred revenue of $1.5 million in accordance with the Biotest AG license agreement for the payment we received from Biotest after our BLA was filed with the FDA.  Deferred revenue of $1.7 million was recorded in 2013 as a result of certain research and development services provided in accordance with the Biotest AG license agreement.  Deferred revenue is recognized over the term of the license.  Deferred revenue is amortized into income for a period of approximately 20 years, the term of the Biotest AG license agreement.
 
Accounting for Loan and Security Agreement

On June 19, 2015, we entered into a  LSA with Oxford for up to $21.0 million and refinanced our then existing debt.  The first tranche of $16.0 million from the Oxford loan was primarily used to repay our existing debt and the remaining $5.0 million is available at our option upon RI-002’s BLA being approved from the FDA no later than January 31, 2017, which funding would also extend our interest only period for an additional six months pursuant to the May 2016 amendment to the LSA.  The LSA bears interest at a rate per annum equal to the greater of (i) 7.80% and (ii) the sum of (a) the three (3) month U.S. LIBOR rate (as reported in The Wall Street Journal) on the date occurring on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (b) 7.54% on the outstanding principal balance.  We are obligated to begin to repay the principal over 36 months beginning February 1, 2017, unless accelerated as a result of certain events of default.  A final payment equal to 8.95% of the funded loan amount is due at the earlier of loan maturity or prepayment.  In the event of the six-month interest only extension, the final payment will be 9.95% of the funded loan, which shall also be due at the earlier of loan maturity or prepayment. In the event we prepay any of the term loans for any reason, we are obligated to pay a prepayment charge corresponding to a percentage of the principal amount of the term loan prepaid, with such percentage being: 3.0% if prepayment occurs through the first anniversary of its funding, 2.0% if prepayment occurs after the first anniversary through the second anniversary of the applicable funding date, and 1.0% if prepayment occurs after the second anniversary of its funding date and prior to its maturity date.  All term loans mature no later than January 1, 2020.  The loans are secured by our assets, except for our intellectual property (which is subject to a negative pledge).  The LSA contains customary representations, warranties and covenants, including limitations on incurring indebtedness, engaging in mergers or acquisitions and making investments, distributions or transfers.
 
 
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In connection with the LSA, on June 19, 2015, we issued to Oxford a seven-year warrant, expiring on June 19, 2022, to purchase 74,309 shares of common stock at an exercise price of $8.51 per share.  We recorded $367,700 as the fair value of the warrant to additional paid-in capital and as a debt discount to the carrying value of the loan.  The key assumptions used to value the warrants included, volatility of 57% on our common stock based upon a pro rata percentage of our common stock’s volatility and similar public companies’ volatilities for comparison, an expected dividend yield of 0.0%, a risk-free interest rate of 1.99% and a term of seven years.  As a result of prepaying our prior loan before maturity, we incurred a loss on extinguishment of debt of $0.7 million comprised of debt issuance costs, debt discount related to the warrants issued to our prior lender, along with a prepayment penalty.
 
In May 2016, we entered into an amendment to our LSA with Oxford, pursuant to which we borrowed an additional $4.0 million, as an extension to the original LSA entered into on June 19, 2015, which brings the total principal borrowed to $20.0 million.  In connection therewith, we issued warrants to purchase an aggregate of up to 24,800 shares of our common stock at an exercise price equal to $6.37, which will expire seven years after their issuance on May 13, 2023.  We paid a total facility fee of $125,000, consisting of $105,000 previously paid and an additional $20,000 paid on the date the $4.0 million loan was funded.


Off-Balance Sheet Arrangements
 
We have entered into leases for our ADMA BioCenters’ facilities in Norcross, Georgia and Marietta, Georgia.  The Norcross, Georgia lease expires on September 30, 2023, and the Marietta, Georgia lease expires on January 31, 2024.  There is a total minimum rent due under these leases of $2.7 million through the end of the lease terms.

Quantitative and Qualitative Disclosures About Market Risk.
 
Not applicable.
 
Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures
 
We designed our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

As of the end of the nine months ended September 30, 2016, our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures.  Based on such evaluation of our disclosure controls and procedures, management, including our principal executive officer and principal financial officer, has concluded that our disclosure controls and procedures were effective as of September 30, 2016.
 
 
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Changes in Internal Control Over Financial Reporting
 
There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met and therefore, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. We do not expect that our disclosure controls and procedures or our internal control over financial reporting are able to prevent with certainty all errors and all fraud.

PART II
 
OTHER INFORMATION
 
Legal Proceedings.
 
We are and may become subject to certain legal proceedings and claims arising in connection with the normal course of our business. In the opinion of management, there are currently no claims that would have a material adverse effect on our consolidated financial position, results of operations or cash flows.
 
Additional Risk Factors.
 
There have been no material changes from the risk factors we previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report for the year ended December 31, 2015 on Form 10-K as filed with the SEC on March 23, 2016, our Current Report on Form 8-K, as filed with the SEC on April 27, 2016 and our Quarterly Report for the quarter ended June 30, 2016 on Form 10-Q, as filed with the SEC on August 12, 2016.
 
Unregistered Sales of Equity Securities and Use of Proceeds.
 
None.
 
Defaults Upon Senior Securities.
 
None.
 
Mine Safety Disclosures.
 
Not applicable.
 

Other Information.
 
Not applicable.
 

Exhibits.

See the Exhibit Index immediately following the Signature Page of this quarterly report on Form 10-Q.
 
 
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ADMA Biologics, Inc.
 
       
Date: November 10, 2016
By:
/s/ Adam S. Grossman
 
    Name: Adam S. Grossman  
    Title:   President and Chief Executive Officer  
       
       
Date: November 10, 2016
By: /s/ Brian Lenz  
    Name: Brian Lenz  
    Title:   Chief Financial Officer  
 
 
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EXHIBIT INDEX
 
 
Exhibit Number
Description
 
       
 
10.1
Amended and Restated Agreement for Shared Services Agreement,
between ADMA Biologics, Inc. and Areth LLC, dated August 12, 2016
(incorporated herein by reference to the Company’s Quarterly Report on
Form 10-Q filed on August 12, 2016 (File No. 001-36728)).
 
 
31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
32.1
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
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The following materials from ADMA Biologics, Inc. Form 10-Q for the quarter ended September 30, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015,  (iii) Condensed Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015, and (v) Notes to Unaudited Condensed Consolidated Financial Statements.