Quarterly report pursuant to Section 13 or 15(d)

8. RELATED PARTY TRANSACTIONS

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8. RELATED PARTY TRANSACTIONS
3 Months Ended
Mar. 31, 2019
Related Party Transactions [Abstract]  
8. RELATED PARTY TRANSACTIONS

The Company leases an office building and equipment from Areth, LLC (“Areth”) pursuant to an agreement for services effective as of January 1, 2016, as amended from time to time. Effective October 1, 2017, monthly rent on this facility was reduced to $10,000. On September 27, 2018, the agreement was amended to extend the term of the agreement through September 30, 2019. Rent expense amounted to $30,000 for the three months ended March 31, 2019 and 2018, and includes fees for the use of such office space and for other information technology, general warehousing and administrative services. 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. The Company also reimburses Areth for office and building related (common area) expenses, equipment and certain other operational expenses, which were not material to the consolidated financial statements for the three months ended March 31, 2019 and 2018. 

 

As part of the Biotest Transaction, the Company issued a $15.0 million subordinated note payable to Biotest (see Note 6), and recognized interest expense on this note for the three months ended March 31, 2019 and 2018 in the amount of $0.2.

 

For the three months ended March 31, 2019 and 2018, the Company recognized revenues under its out-licensing agreements with Biotest of approximately $36,000. Deferred revenue of $2.5 million as of March 31, 2019 and 2018 is related to these agreements.

 

Biotest was historically the Company’s largest customer for the sale of normal source plasma. Plasma sales to Biotest for the three months ended March 31, 2018 were $2.3 million. The agreement under which the Company supplied normal source plasma to Biotest expired by its terms on December 31, 2018 and was not renewed. Accounts receivable includes $0 and $1.0 million due from Biotest as of March 31, 2019 and December 31, 2018, respectively. Additionally, Biotest is a supplier of plasma to ADMA. For the three months ended March 31, 2019 and 2018, the Company purchased $0.2 million of plasma from Biotest. Included in accounts payable is $0.3 million and $2.0 million due to Biotest as of March 31, 2019 and December 31, 2018, respectively. The following table summarizes the related party balances with Biotest: 

 

    Three Months Ended March 31,
    2019   2018
         
Sale and purchase of plasma                
Product revenue   $ —       $ 2,328,291  
Purchases     160,489       195,018  
                 
License revenue     35,708       35,708  
                 
Interest expense     225,000       225,000  

 

    March 31,   December 31,
    2019   2018
Accounts receivable   $ —       $ 961,145  
Accounts payable     296,362       2,010,774  
Accrued expenses     24,049       10,659  
Note payable, net of discount     14,882,337       14,874,184  
Accrued interest     290,000       65,000  
Deferred revenue     2,511,491       2,547,199  

 

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 March 31, 2019 and December 31, 2018, approximately $24,000 and $11,000, respectively, 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 sheets. 

 

Under the terms of the acquisition of the Biotest Assets, the Company transferred ownership of two plasma collection centers to BPC on January 1, 2019 (see Note 11). The Company and BPC entered into an additional transition services agreement effective as of January 1, 2019 under which the Company agreed to provide certain transition services to BPC related to the plasma collection centers that were transferred. Amounts billed to BPC by the Company under this agreement for the three months ended March 31, 2019 were not material to the consolidated financial statements.

 

See Notes 6 and 14 for a discussion of the Company’s credit facility and related transactions with Perceptive, a holder of greater than 10% of the Company’s common stock.