SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States
of America (“U.S. GAAP”) for interim financial information. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”)
of the Financial Accounting Standards Board (the “FASB”).
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto as of and
for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2024. The accompanying consolidated balance sheet as of December 31,
2023 was derived from the audited financial statements as of and for the year ended December 31, 2023. These condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 3
of Regulation S-X, and therefore omit or condense certain footnotes and other information normally included in complete consolidated financial statements prepared in accordance with U.S. GAAP. All intercompany balances and transactions have
been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and
assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of March 31, 2024 and its results of operations, changes in stockholders’ equity and cash flows for the three months
ended March 31, 2024 and 2023.
During the three months ended March 31, 2024 and 2023, comprehensive income/loss was equal to the net
income/loss amounts presented for the respective periods in the accompanying condensed consolidated statements of operations. Operating results for interim periods are not necessarily indicative of the results that may be expected for the
full fiscal year.
Use of Estimates
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include
rebates and chargebacks deducted from gross revenues, valuation of inventory, assumptions used in projecting future liquidity and capital requirements, assumptions used in the fair value of awards granted under the Company’s equity incentive
plans and warrants issued in connection with the issuance of notes payable and estimates related to the valuation allowance for the Company’s deferred tax assets and its effective tax rate.
Fair Value of Financial Instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, are shown at
cost which approximates fair value due to the short-term nature of these instruments. The debt outstanding under the Company’s senior credit facility (see Note 7) approximates fair value due to the variable interest rate on this debt.
Accounts Receivable
Accounts receivable is reported at realizable value, net of allowances for contractual credits and credit losses in the
amount of $0.2 million and $0.1
million at March 31, 2024 and December 31, 2023, respectively, which are recognized in the period the related revenue is recorded. The Company extends credit to its customers based upon an evaluation of
each customer’s financial condition and credit history. Evaluations of the financial condition, payment history and associated credit risk of customers are performed on an ongoing basis. Based on these evaluations, the Company has
concluded that its credit risk is minimal. At March 31, 2024, three customers accounted for an aggregate of approximately 87% of the Company’s total accounts receivable, and at December 31, 2023, five customers accounted
for approximately 98% of the Company’s total accounts receivable.
Inventories
Raw materials inventory consists of various materials purchased from suppliers, including
normal source plasma and Respiratory Syncytial Virus (“RSV”) high titer plasma, used in the production of the Company’s products. Work-in-process and finished goods inventories (see Note 3) reflect the cost of raw materials as well as costs
for direct and indirect labor, primarily salaries, wages and benefits for applicable employees, as well as an allocation of overhead costs related to the Boca Facility including utilities, property taxes, general repairs and maintenance,
consumable supplies and depreciation. The Boca Facility overhead allocation to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s FDA-approved products relative
to the total square footage of the facility.
Inventories, including plasma intended for resale and plasma intended for internal use in the
Company’s manufacturing, commercialization or research and development activities, are carried at the lower of cost or net realizable value determined by the first-in, first-out method. Net realizable value is generally determined based upon
the consideration the Company expects to receive when the inventory is sold, less costs to deliver the inventory to the recipient. The estimates for net realizable value of inventory are based on contractual terms or upon historical
experience and certain other assumptions, and the Company believes that such assumptions are reasonable. Inventory is periodically reviewed to ensure that its carrying value does not exceed its net realizable value, and adjustments are
recorded to write down such inventory, with a corresponding charge to cost of product revenue, when the carrying value or historical cost exceeds its estimated net realizable value. In addition, costs associated with the production of
conformance or engineering lots that would not qualify as immediately available for commercial sale are charged to cost of product revenue and not capitalized into inventory.
Goodwill
Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill at
March 31, 2024 and December 31, 2023 was $3.5 million. All of the Company’s goodwill is attributable to its ADMA BioManufacturing business segment.
Goodwill is not amortized but is assessed for impairment on an annual basis or more frequently if impairment indicators
exist. The Company has the option to perform a qualitative assessment of goodwill to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill and other
intangible assets. If the Company concludes that this is the case, then it must perform a goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is recorded to the extent the
reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit. The Company performs its annual goodwill impairment test as of October 1 of each year. The Company did not record any impairment charges related to goodwill for the three months ended March 31, 2024 and 2023.
Impairment of Long-Lived Assets
The Company assesses the recoverability of its long-lived assets, which include property and equipment and finite-lived
intangible assets, whenever significant events or changes in circumstances indicate impairment may have occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its
carrying amount to determine whether the asset’s carrying value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the
three months ended March 31, 2024 and 2023, the Company did not
identify any impairment indicators for its long-lived assets, and as a result no impairment charges were recorded.
Revenue Recognition
Revenues for the three months ended March 31, 2024
and 2023 are comprised of (i) revenues from the sale of the Company’s immunoglobulin products, ASCENIV, BIVIGAM and Nabi-HB, (ii) product revenues from the sale of human plasma collected through the Company’s Plasma Collection Centers business
segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate by-products; and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest in 2012 to
market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is
obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years.
Product revenue is recognized when the customer is deemed to have control over the product. Control is determined based
on when the product is shipped or delivered and title passes to the customer. Revenue is recorded in an amount that reflects the consideration the Company expects to receive in exchange. Revenue from the sale of the Company’s immunoglobulin
products is recognized when the product reaches the customer’s destination, and is recorded net of estimated rebates, wholesaler distribution and related fees, customer incentives, including prompt pay discounts, wholesaler chargebacks, group
purchasing organization fees and reimbursements for patient assistance. These estimates are based on historical experience and certain other assumptions, and while the Company believes that such estimates are reasonable, they are subject to
change based on future experience and other factors. For revenues associated with contract manufacturing and the sale of intermediates, control transfers to the customer and the performance obligation is satisfied when the customer takes
possession of the product from the Boca Facility or from a third-party warehouse that is utilized by the Company.
Product revenues from the sale of human plasma collected at the Company’s plasma collection centers are recognized at
the time control of the product has been transferred to the customer, which generally occurs at the time of shipment. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment.
For the three months ended March 31, 2024, two customers represented an aggregate of approximately 70% of the Company’s consolidated revenues. For the three months ended March 31, 2023, three customers represented an
aggregate of 76% of the Company’s consolidated revenues.
Cost of Product Revenue
Cost of product revenue includes costs associated with the manufacture of the Company’s FDA-approved products,
intermediates and the sale of human source plasma, as well as expenses related to conformance batch production, process development and scientific and technical operations when these operations are attributable to marketed products. When the
activities of these operations are attributable to new products or processes in development, the expenses are classified as research and development expenses.
Earnings/loss Per Common Share
Basic earnings/loss per common share is computed by dividing net earnings/loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings/loss per common share is calculated by dividing net earnings/loss attributable to common stockholders, as adjusted for the effect of dilutive securities, if any, by the weighted average number of shares of common stock and dilutive common
stock outstanding during the period. Potentially dilutive common stock includes the shares of common stock issuable upon the exercise of outstanding stock options and warrants, as well as Restricted Stock Units (“RSUs”), using the treasury stock method. Potentially dilutive common stock is excluded from the diluted earnings/loss per common share
computation to the extent that it would be anti-dilutive. For the three months ended March 31, 2024, basic and diluted earnings per share is calculated as follows:
For the three months ended March 31, 2024, there were no shares with an anti-dilutive effect that needed to be excluded from the earnings per share computation. For the three months ended March 31, 2023 no potentially dilutive securities are included in the computation of diluted loss per share in the accompanying condensed consolidated
financial statements as the Company reported a net loss for this period. For the three months ended March 31, 2023,
the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:
Stock-Based Compensation
The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock
options and RSUs, to be recognized in the statement of operations as compensation expense based on their fair values at the date of grant. Compensation expense related to awards to employees and directors with service-based vesting conditions
is generally recognized on a straight-line basis over the associated vesting period of the award based on the grant date fair value of the award. Stock options granted under the Company’s equity incentive plans generally have a four-year vesting period and a term of 10
years. RSUs granted to employees generally have a four-year vesting period. Pursuant to ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), the Company has elected not to establish a forfeiture rate, as stock-based compensation expense related to forfeitures of unvested equity awards is fully
reversed at the time of forfeiture.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or its tax returns. Under this
method, deferred tax assets and liabilities are recognized for the temporary differences between the tax bases of assets and liabilities and their respective financial reporting amounts at enacted tax rates in effect for the years in which
the temporary differences are expected to reverse. The Company records a valuation allowance on its deferred tax assets if it is more likely than not that the Company will not generate sufficient taxable income to utilize its deferred tax
assets. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2020 and for previous periods as it relates to the Company’s net operating loss carryforwards.
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by
the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is
greater than 50% likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company
has determined that it has not incurred any liability for unrecognized tax benefits as of March 31, 2024 and December 31,
2023, and during the three months ended March 31, 2024 and 2023 the Company recognized no
adjustments for uncertain tax positions.
Recent Accounting Pronouncements
In November of 2023 the FASB issued ASU No. 2023-07, Segment Reporting (Topic
280): Improvements to Reportable Segment Disclosures. The amendments in this ASU are intended to provide financial statement users with more disaggregated expense information about a public entity’s reportable segments, however the
update does not change the definition of an operating segment or the method for determining reportable segments. This update becomes effective for fiscal years beginning after December 15, 2023 and for interim periods beginning after
December 15, 2024. The Company does not expect this ASU to have a material impact on the Company’s consolidated financial statements.
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