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SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
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Dec. 31, 2024
SIGNIFICANT ACCOUNTING POLICIES [Abstract] |
SIGNIFICANT ACCOUNTING POLICIES |
2. | SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation and basis of presentation The accompanying consolidated financial statements include the accounts of ADMA and its wholly-owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Article 3 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). All intercompany balances have been eliminated in consolidation. 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”). During the years ended December 31, 2024, 2023 and 2022, comprehensive income (loss) was equal to the net income (loss) amounts presented for the respective periods in the accompanying consolidated statements of operations. In addition, certain prior year balances have been reclassified to conform to the current presentation. Specifically, the disaggregation of some of the Company’s accrued expenses and other current liabilities (see Note 6) and deferred tax assets and liabilities, as well as the rate reconciliation for U.S. federal income taxes (see Note 11), as of December 31, 2023 have been adjusted to conform to the presentation as of December 31, 2024. 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, assumptions used in the fair value of awards granted under the Company’s equity incentive plans and the valuation allowance for the Company’s deferred tax assets. The Company engaged a third-party specialist to assist in the evaluation of the Company’s accrual for U.S. Medicaid rebates related to the sale of the Company’s immunoglobulin products. As a result of this evaluation, the Company recognized a reduction in this accrual and a corresponding increase to net revenues of $12.6 million for the year ended December 31, 2024. The Company considered several qualitative factors when evaluating its rebate accrual, such as the absence of a statutory limitation on the rebate amounts drug manufacturers pay to state Medicaid programs and general uncertainty that pharmaceutical manufacturers have historically seen with government payors often submitting lagged claims many periods after the initial dispensing of a product to an end patient. There was additional new information that arose during June 2024 that suggested the Company’s liabilities for certain payor claims were successfully resolved, which resulted in the $12.6 million adjustment to the accrual for U.S. Medicaid rebates in June 2024. Cash and cash equivalents The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company regularly maintains cash and cash equivalents at third-party financial institutions in excess of the Federal Deposit Insurance Corporation insurance limit. Although the Company monitors the daily cash balances in its operating accounts and adjusts the balances as appropriate, these balances could be impacted, and there could be a material adverse effect on the Company’s business, if one or more of the financial institutions with which the Company has deposits fails or is subject to other adverse conditions in the financial or credit markets. To date, the Company has not experienced a loss or lack of access to its deposited cash or cash equivalents; however, the Company cannot provide assurance that access to its cash and cash equivalents will not be impacted by adverse conditions in the financial and credit markets in the future. Accounts receivable Accounts receivable is reported at realizable value, net of allowances for contractual credits and doubtful accounts in the amount of $0.2 million and $0.1 million at December 31, 2024 and 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 and associated credit risk of customers are performed on an ongoing basis. Inventories Raw materials inventory consists of normal source plasma (“NSP”) and Respiratory Syncytial Virus (“RSV”) high titer plasma collected at the Company’s plasma collection facilities or purchased from third parties, along with various materials purchased from suppliers, 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 allocation of Boca Facility overhead to inventory is generally based upon the estimated square footage of the Boca Facility that is used in the production of the Company’s 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. For both the Company’s immune globulin products and plasma intended for resale and internal use, 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 engineering lots that would not qualify as immediately available for commercial sale are charged to cost of product revenue and not capitalized into inventory. Property and equipment Assets comprising property and equipment (see Note 4) are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life. Land is not depreciated. The buildings have been assigned a useful life of 30 years. Property and equipment other than land and buildings have useful lives ranging from 3 to 15 years. Leasehold improvements are amortized over the lesser of the lease term or their estimated useful lives. Goodwill Goodwill represents the excess of purchase price over the fair value of net assets acquired by the Company. Goodwill at December 31, 2024 and 2023 was $3.5 million, all of which is attributable to the Company’s ADMA BioManufacturing business segment. There were no changes to the carrying amount of goodwill during the years ended December 31, 2024, 2023 and 2022. 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 assessment as of October 1 of each year. The Company’s annual goodwill impairment assessments as of October 1, 2024, 2023 and 2022 did not result in any impairment charges related to goodwill for the years ended December 31, 2024, 2023 and 2022. 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 years ended December 31, 2024, 2023 and 2022, the Company determined that there was no impairment of its long-lived assets. Revenue recognition Revenues for the years ended December 31, 2024, 2023 and 2022 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 by the Company’s Plasma Collection Centers business segment, (iii) contract manufacturing and laboratory services revenue, (iv) revenues from the sale of intermediate by-products and (v) license and other revenues primarily attributable to the out-licensing of ASCENIV to Biotest AG (“Biotest”) in 2012 to market and sell this product in Europe and selected countries in North Africa and the Middle East. Biotest has provided the Company with certain services and financial payments in accordance with the related Biotest license agreement and is obligated to pay the Company certain amounts in the future if certain milestones are achieved. Deferred revenue is amortized into income over the term of the Biotest license, representing a period of approximately 22 years. Product revenue is recognized when the customer is deemed to have control over the product and the performance obligation is satisfied. 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 contractual arrangements, historical experience and certain other assumptions, and while the Company believes that such estimates are reasonable, they are subject to change based on future developments 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. 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 and the performance obligation is satisfied, which generally occurs at the time of shipment from one of the Company’s plasma collection facilities or from a third-party warehouse that is utilized by the Company. Product revenues are recognized at the time of delivery if the Company retains control of the product during shipment. For all of the Company’s product revenues, payment from the customer is typically due within 90 days of sale. Cost of product revenue Cost of product revenue includes costs associated with the manufacture of the Company’s FDA approved products and intermediates and for the collection of human source plasma, as well as expenses related to conformance batch production, process development and scientific and technical operations when these operations are attributable to marketed products. When the activities of these operations are attributable to new products in development, the expenses are classified as research and development expenses. Research and development expenses Research and development expenses consist of clinical research organization costs, costs related to clinical trials, post-marketing commitment studies for BIVIGAM and ASCENIV and salaries, benefits and stock-based compensation for employees directly related to research and development activities. All research and development costs are expensed as incurred. Plasma center operating expenses Plasma center operating expenses consist of certain general and administrative plasma center costs, initial opening, marketing and start-up costs, rent expense, maintenance, utilities and compensation and benefits for administrative staff. Advertising and marketing expenses Advertising and marketing expense includes cost for promotional materials and trade show expenses for the marketing of the Company’s products and expenses incurred for attracting donors to the Company’s plasma collection centers. All advertising and marketing expenses are expensed as incurred. Advertising and marketing expenses were $2.7 million, $3.3 million and $2.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. Stock-based compensation The Company follows recognized accounting guidance which requires all equity-based payments, including grants of stock options and restricted stock unit awards (“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 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 to employees under the Company’s equity incentive plans generally have a four-year vesting period and a term of 10 years. RSUs granted to employees also have a four-year vesting period. For milestone-based equity awards, which were awarded to two of the Company’s executive officers in September of 2021 and vested during fiscal 2022, the Company would periodically assess the probability of vesting for each milestone-based award and adjust compensation expense based on its probability assessment. 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 (see Note 11). 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. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is calculated by dividing net income or 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 (using the treasury stock method) and upon the vesting of restricted stock units (“RSUs”). Potentially dilutive common stock in the diluted net earnings (loss) per share computation is excluded to the extent that it would be anti-dilutive. For the year ended December 31, 2024, basic and diluted earnings per share are calculated as follows:
|  | Year Ended |
|  | December 31, 2024 |
Net income available to common stockholders ($000’s) (numerator) |  | $ | 197,673 |
Weighted-average number of common shares (denominator) |  |  | 233,084,236 |
Basic earnings per common shares |  | $ | 0.85 |
Weighted-average number of common shares |  |  | 233,084,236 |
Potential shares of common stock arising from outstanding stock options |  |  | 4,150,584 |
Potential shares of common stock arising from outstanding warrants |  |  | 3,085,640 |
Potential shares of common stock arising from unvested RSUs |  |  | 3,022,006 |
Total shares - diluted (denominator) |  |  | 243,342,466 |
Diluted earnings per common share |  | $ | 0.81 |
For the year ended December 31, 2024, there were no shares with an anti-dilutive effect that needed to be excluded from the earnings per share computation. For the years ended December 31, 2023 and 2022, no potentially dilutive securities are included in the computation of diluted loss per share in the accompanying consolidated financial statements as the Company reported a net loss for these periods. For the years ended December 31, 2023 and 2022, the following securities were excluded from the calculation of diluted loss per common share because of their anti-dilutive effects:
|  | For the Years Ended December 31, |
|  | 2023 |  |  | 2022 |
Stock Options |  |  | 5,906,184 |  |  |  | 8,256,211 |
Restricted Stock Units |  |  | 4,657,297 |  |  |  | 2,866,987 |
Warrants |  |  | 12,502,906 |  |  |  | 13,525,148 |
Total |  |  | 23,066,387 |  |  |  | 24,648,346 |
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 notes payable (see Note 7) also approximates fair value, based on a Level 3 classification under the fair value hierarchy, due to the variable interest rate on this debt. Recent Accounting Pronouncements In November of 2024 the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this Update require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses, including but not limited to, purchases of inventory, employee compensation and selling expense. This Update becomes effective for fiscal years beginning after December 15, 2026. The Company has yet to determine the impact this Update may have on the Company’s consolidated financial statements. In December of 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This Update requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid and becomes effective for public business entities for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact that this Update may have on the Company’s consolidated financial statements. In November of 2023 the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this Update 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 a business segment or the method for determining reportable segments. This update became effective for fiscal years beginning after December 15, 2023 (see Note 13). Adoption of this Update did not have a material impact on the Company’s consolidated financial statements. There were no new accounting pronouncements adopted during the years ended December 31, 2023 and 2022 that had a significant impact on the Company’s consolidated financial statements.

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