Quarterly report pursuant to Section 13 or 15(d)

9. RELATED PARTY TRANSACTIONS

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9. RELATED PARTY TRANSACTIONS
6 Months Ended
Jun. 30, 2017
Related Party Transactions [Abstract]  
9. RELATED PARTY TRANSACTIONS

The Company leases an office building and equipment from Areth, LLC (“Areth”) pursuant to a shared services agreement 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 $71,888 for the three months ended June 30, 2017 and 2016 respectively, and $96,000 for the six months ended June 30, 2017 and 2016. Areth is a company controlled by Dr. Jerrold B. Grossman, the Company’s Vice Chairman, and Adam S. Grossman, the Company’s President and Chief Executive Officer, and the Company pays Areth monthly fees for the use of such office space and for other information technology, general warehousing and administrative services. The Company also reimburses Areth for office and building related (common area) expenses, equipment and certain other operational expenses, which have not been material to the condensed consolidated financial statements for the six months ended June 30, 2017 and 2016. The Company maintains deposits and other accounts at Pascack Bankcorp, a bank of which Dr. Grossman served as a director through January 2016, and which was approximately 5%-owned by members of the Grossman family. Pascack Bankcorp was acquired by Lakeland Bancorp, Inc. in January 2016 and Dr. Grossman is currently a member of the Corporate Advisory Council of Lakeland Bancorp Inc.

 

As of June 30, 2017, the Company has a $15.0 million subordinated note payable to BPC (see Note 4), and recognized approximately $60,000 of interest expense on this note for the three and six months ended June 30, 2017.

 

For the three and six months ended June 30, 2017 and 2016, the Company recognized revenues under its out-licensing agreement with Biotest of $35,708 and $71,417, respectively. Deferred revenue of $2,761,450 and $2,832,867 as of June 30, 2017 and December 31, 2016 is related to this agreement.

 

Biotest is the Company’s largest customer for the sale of normal source plasma. Plasma sales to Biotest for the three and six months ended June 30, 2017 were approximately $2.4 million and $4.5 million, respectively. Plasma sales to Biotest for the three and six months ended June 30, 2016 were approximately $1.8 million and $3.8 million, respectively. Accounts receivable includes approximately $1.2 million and $1.0 million due from Biotest as of June 30, 2017 and December 31, 2016, respectively. Additionally, Biotest is a supplier of RSV plasma to ADMA, with the Company purchasing approximately $0.3 million and $0.9 million of RSV plasma in the six months ended June 30, 2017 and 2016, respectively. Included in accounts payable is approximately $48,000 and $82,000 due to Biotest as of June 30, 2017 and December 31, 2016, respectively. The following table summarizes the related party balances with Biotest:

 

    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
                 
Sale and purchase of plasma                                
Product revenue   $ 2,362,059     $ 1,781,428     $ 4,454,274     $ 3,840,190  
Purchases     141,754       382,685       324,140       888,255  
                                 
License revenue     35,708       35,708       71,417       71,417  
                                 
Interest expense     60,000       —         60,000       —    
                                 
                      June 30,       December 31,  
                      2017       2016  
Accounts receivable                   $ 1,209,733     $ 969,675  
Accounts payable                     48,466       82,427  
Accrued expenses                     797,070       —    
Note payable                     15,000,000     —    
Accrued interest                     60,000     —    
Deferred revenue                     2,761,450       2,832,867  

 

In connection with the acquisition of the Biotest Assets, the Company entered into a Transition Services Agreement with BPC pursuant to which each of the Company and BPC agreed to provide transition services to the other party, including services related to finance, human resources, information technologies, leasing of equipment and clinical and regulatory services for a period of up to 24 months after the June 6, 2017 closing date, as well as agreements to lease certain laboratory space within the Boca Facility to BPC for a period of up to 24 months after the closing date of the acquisition transaction. As of June 30, 2017, $797,010 was payable by the Company to BPC for services rendered and expenses incurred on behalf of the Company related to these agreements. This amount is reflected in accrued expenses in the accompanying consolidated balance sheet. 

 

Under the terms of the acquisition of the Biotest Assets, the Company will transfer two plasma collection centers to BPC on January 1, 2019. The purchase price payable of $12.6 million as of June 6, 2017 represents the fair value of this obligation.