Quarterly report pursuant to sections 13 or 15(d)

4. STOCKHOLDERS' EQUITY

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4. STOCKHOLDERS' EQUITY
 3 Months Ended
Mar. 31, 2013
Equity [Abstract]  
4. STOCKHOLDERS' EQUITY
4.   STOCKHOLDERS’ EQUITY

 

Common stock

 

The 2012 Financing resulted in Former ADMA raising gross proceeds of $17.3 million in cash in connection with and immediately prior to the closing of the Merger. In the 2012 Financing, Former ADMA issued 1,828,128 shares of Former ADMA’s common stock at a price per share of $9.60 to accredited investors pursuant to a Securities Purchase Agreement. In lieu of repayment of senior secured promissory notes in the aggregate principal amount of $250,000 (plus $12,740 in accrued interest), the aggregate amount of unpaid principal and interest on the notes was invested by the holders of such notes in the 2012 Financing in exchange for shares of Former ADMA’s common stock.  The net cash proceeds from the 2012 Financing, after the payment of all expenses related to the 2012 Financing, approximated $15.3 million.

 

On February 13, 2012, ParentCo, entered into a Merger Agreement by and among ParentCo, Former ADMA, and an acquisition subsidiary of ParentCo (“Acquisition Sub”).  Upon the closing of the Merger, Acquisition Sub was merged with and into Former ADMA, and Former ADMA, as the surviving corporation in the Merger, became a wholly-owned subsidiary of ParentCo.  ParentCo’s corporate name was changed to ADMA Biologics, Inc. and the name of Former ADMA was changed to ADMA Plasma Biologics, Inc.  Prior to the transactions contemplated by the Merger Agreement with Former ADMA, there were no material relationships between ParentCo and Former ADMA, or any of their respective affiliates, directors or officers, or any associates of their respective directors or officers.  For accounting purposes, the Merger was accounted for as a reverse acquisition, with Former ADMA as the accounting acquiror (legal acquiree) and ParentCo as the accounting acquiree (legal acquiror).  Consequently, the historical financial information of Former ADMA became the historical financial information of ParentCo.

 

Common stock options and warrants

 

The fair value of employee options granted 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 highly subjective assumptions including the expected stock price volatility. The Company's employee stock options 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 is no public market for the Company's stock and very little historical experience with the Company's stock options, similar public companies were used for comparison and expectations as to assumptions required for fair value computation using the Black-Scholes methodology.

 

The Company records compensation expense associated with stock options and other forms of equity compensation using the Black-Scholes option-pricing model and the following assumptions:

 

  Three Months Ended
  March 31, 2013
   
Expected term 6.25 years
Volatility 63-82%
Dividend yield 0.0%
Risk-free interest rate 1.24%

 

Guidance for stock-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company currently estimates there will be no forfeitures of options.

 

The weighted average remaining contractual life of stock options outstanding and expected to vest at March 31, 2013 is 8.4 years.  The weighted average remaining contractual life of stock options exercisable at March 31, 2013 is 7.2 years.

 

A summary of the Company’s option and warrant activity under the Plan and related information is as follows:

 

    Three Months Ended  
    March 31, 2013  
    Shares     Weighted Average Exercise Price  
             
Outstanding at beginning of period     749,211     $ 6.86  
                 
Granted     25,587     $ 7.56  
                 
Outstanding at end of period and expected to vest     774,798     $ 6.88  
                 
Options exercisable     263,963     $ 5.61  
                 
Weighted average fair value of options granted during period   $ 7.56     $ 4.42  

 

Stock-based compensation expenses for the three months ended March 31, 2013 and 2012 was:

 

    Three Months Ended  
    March 31,  
    2013     2012  
             
Research and development   $ 53,107     $ 413  
General and administrative     165,437       45,841  
                 
Total stock based compensation expense   $ 218,544     $ 46,254  

 

As of March 31, 2013, the total compensation expense related to unvested options not yet recognized totaled $2,946,509. The weighted-average vesting period over which the total compensation expense will be recorded related to unvested options not yet recognized at March 31, 2013 was approximately 2.9 years.