Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2017
Equity [Abstract]  

In connection with the acquisition of the Biotest Assets (see Note 3), the Company issued 4,295,580 shares of its voting common stock and 8,591,160 shares of its non-voting common stock.  The rights and preferences of the non-voting common stock are substantially similar to those of the common stock. BPC is prohibited, without the prior written consent of the Company’s Board of Directors, from selling or otherwise “Transferring” (as defined in that certain Stockholders Agreement, dated as of June 6, 2017, by and between the Company and BPC (the “Stockholders Agreement”)) such shares of voting common stock and non-voting common stock for six months following the acquisition of BTBU (the “Lock-Up Period”) and is thereafter, for a period of three years from and after the expiration of the Lock-Up Period (the “Standstill Period”), prohibited from selling, or otherwise Transferring, shares of the Company in excess of 15% of the issued and outstanding shares of voting common stock in a 12-month period (calculated on an as-converted basis), subject to certain exceptions set forth in the Stockholders Agreement. The non-voting common stock will (A) automatically convert into voting common stock upon the earliest to occur of the following: (i) the expiration or earlier termination of the Standstill Period, (ii) immediately prior to the consummation of any a Liquidation Event (as defined in the Stockholders Agreement), (iii) immediately prior to a Company Insolvency Matter (as defined in the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”)); (B) automatically convert upon the consummation of a Permitted Sale (as defined in the Certificate of Incorporation); and (C) be convertible, at the option of BPC, upon (i) a Market Sale (as defined in the Certificate of Incorporation), and (ii) upon certain Dilutive Issuances (as defined in the Certificate of Incorporation).


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 $12.9 million, after payment of underwriting discounts and offering expenses of approximately $1.2 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.


Equity incentive plan


The fair value of stock options granted under the Company’s 2007 Employee Stock Option Plan (the “2007 Plan”) and the ADMA Biologics, Inc. 2014 Omnibus Incentive Compensation Plan, as amended and restated (the “2014 Plan”), 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 certain subjective assumptions including the expected stock price volatility. The stock options granted to employees and directors 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 limited data related to the Company's common 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 volatility were used for calculating ADMA’s volatility for use in the fair value computation of stock option grants under the Black-Scholes methodology. The following assumptions were used to determine the fair value of options granted during the nine months ended September 30, 2017 and 2016:


    Nine Months Ended   Nine Months Ended
    September 30, 2017   September 30, 2016
Expected term     5.8 - 6.3 years       5.8 - 6.3 years  
Volatility     58-64%       51-52%  
Dividend yield     0.0       0.0  
Risk-free interest rate     1.60-2.29%       1.54-1.79%  


The weighted average remaining contractual life of stock options outstanding and expected to vest at September 30, 2017 is 8.0 years. The weighted average remaining contractual life of stock options exercisable at September 30, 2017 is 5.7 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, 2017
    Shares   Weighted Average Exercise Price
Outstanding at beginning of period     1,535,187     $ 7.90  
Forfeited     (87,324 )   $ 8.03  
Expired     (13,727 )   $ 8.60  
Granted     1,942,595     $ 3.76  
Exercised     (93,939 )   $ 2.68  
Outstanding at end of period and expected to vest     3,282,792     $ 5.59  
Options exercisable     1,275,001     $ 7.88  


During the nine months ended September 30, 2017, an aggregate of 91,139 option shares were exercised in cashless exercise transactions resulting in the issuance of an aggregate of 17,123 shares of common stock, and an aggregate of 2,800 option shares were exercised for cash. Stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016 is as follows:


    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2017   2016   2017   2016
Research and development   $ 141,405     $ 95,076     $ 262,822     $ 383,909  
Plasma centers     10,341       15,289       36,288       40,044  
Selling, general and administrative     331,946       152,598       726,062       572,135  
Cost of goods sold     22,038       —         27,798       —    
Total stock-based compensation expense   $ 505,730     $ 262,963     $ 1,052,970     $ 996,088  


As of September 30, 2017, the Company had $4.5 million of unrecognized compensation expense related to options granted under the Company’s equity incentive plans, which is expected to be recognized over a weighted-average period of 2.9 years.