ADMA BIOLOGICS, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements as of and for the nine and three months ended September 30, 2012 and 2011 and with our Forms 8-K/A and S-1/A filed with the Securities and Exchange Commission, or the SEC, on June 22, 2012 and August 10, 2012, respectively, as they may be amended.

Forward-Looking Statements This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or achievements, and may contain the words "estimate," "project," "intend," "forecast," "anticipate," "plan," "planning," "expect," "believe," "will," "will likely," "should," "could," "would," "may" or, in each case, their negative, or words or expressions of similar meaning. These forward-looking statements include, but are not limited to, statements concerning the timin/g, progress and results of the clinical development, regulatory processes, potential clinical trial initiations, potential investigational new product applications, biologics license applications, and commercialization efforts relating to the Company's product candidate(s). The forward-looking statements contained in this report represent the Company's estimates and assumptions only as of the date of this report and the Company undertakes no duty or obligation to update or revise publicly any forward-looking statements contained in this report as a result of new information, future events or changes in the Company's expectations, except as required by applicable law or rules. Forward-looking statements are subject to many risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" in Amendment No. 3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 22, 2012 and Amendment No. 4 to our Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 10, 2012, as they may be amended.

In addition to the risks identified under the heading "Risk Factors" in the filings referenced above, many important factors affect the Company's ability to achieve its plans and objectives and to successfully develop and commercialize any product candidates. Among other things, the projected commencement and completion of the Company's clinical trials may be affected by difficulties or delays. In addition, the Company's results may be affected by its ability to manage its financial resources, difficulties or delays in developing manufacturing processes for its product candidates, preclinical and toxicology testing and regulatory developments. Delays in clinical programs, whether caused by competitive developments, adverse events, patient enrollment rates, regulatory issues or other factors, could adversely affect the Company's financial position and prospects. Prior clinical trial program designs and results are not necessarily predictive of future clinical trial designs or results. If the Company's product candidates do not meet safety or efficacy endpoints in clinical evaluations, they will not receive regulatory approval and the Company will not be able to market them. The Company may not be able to enter into any strategic partnership agreements. Operating expense and cash flow projections involve a high degree of uncertainty, including variances in future spending rates due to changes in corporate priorities, the timing and outcomes of clinical trials, competitive developments and the impact on expenditures and available capital from licensing and strategic collaboration opportunities. If the Company is unable to raise additional capital when required or on acceptable terms, it may have to significantly delay, scale back or discontinue one or more of its drug development or discovery research programs. The Company is at an early stage of development and may not ever have any products that generate significant revenue.

15 -------------------------------------------------------------------------------- Index Therefore, current and prospective security holders are cautioned that there can be no assurance that the forward-looking statements included in this document will prove to be accurate.

Overview Our mission is to develop and commercialize plasma-derived, human immune globulins targeted at niche patient populations, some with unmet medical needs. These patient populations include those who may be naturally or medically immunocompromised, the elderly and prematurely born infants. Human immune globulin is comprised of antibodies - Y-shaped proteins produced by B-cells that are used by the body's immune system to identify and neutralize foreign objects such as bacteria and viruses. Intravenous immune globulin (Human), or IGIV, is a plasma-derived product administered intravenously, which contains immune globulins extracted from source plasma in a manufacturing process called Fractionation.

Our lead product candidate, RI-002, an improved formulation of RI-001, is a plasma-derived, polyclonal, IGIV which also contains standardized high levels of antibodies against respiratory syncytial virus, or RSV, and we are pursuing an indication for the use of this IGIV product for treatment of patients who are diagnosed with primary immunodeficiency disease, or PIDD. RI-002 is manufactured using the same contract manufacturing facility as RI-001. RI-002 is a polyclonal human IGIV product candidate which means that the IGIV contains a wide array of antibodies that are obtained from different B-cell resources. Polyclonal antibodies are the primary component of IGIV products. PIDD is a disorder that causes a person's immune system not to function properly. PIDD is caused by hereditary or genetic defects and can affect anyone regardless of age or gender. There are varying types of PIDD ranging from mild to severe cases and there are approximately 250,000 patients living with PIDD in the United States.1 Our current development plan for RI-002 is to file an Investigational New Drug application or IND, during the fourth quarter of 2012. Once the IND is accepted by the Food and Drug Administration, or FDA, we plan on conducting a pivotal Phase III clinical trial for RI-002 in order to progress toward FDA approval for the treatment of patients with PIDD. Our planned Phase III clinical study is a single arm, open label study, of which 60-70 patients are expected to be recruited with 12 months of treatment and a 30 day follow up. The Phase III study's primary endpoint will be a serious infection rate per person of less than 1 and the secondary endpoint will be safety. The FDA may require additional Phase III trials and Phase IV trials after this planned Phase III trial, and it is possible that the FDA may never grant approval of RI-002 for this or any other indication.

______________________ 1. Journal of Clinical Immunology 2007 Sep; 27(5):497-502. Epub 2007 Jun 19.

16 -------------------------------------------------------------------------------- Index RI-001 was the subject of a Phase II randomized, double-blind, placebo-controlled human clinical trial in RSV-infected, immunocompromised patients. RI-001 demonstrated it could produce a statistically significant rise in patient RSV titers as compared to placebo, however, because our clinical trials to date have involved a relatively small patient population, these results may not be indicative of future results.

We have been developing RI-001 internally since 2004. As part of the development process, we have established, qualified and validated its proprietary microneutralization assay, which is the basis for the manufacturing of our newly formulated RI-002, an improved formulation of RI-001. Our functional assay provides us with the ability to select and screen a wide array of source plasma donors to identify those donors who have an appropriately elevated level of neutralizing RSV antibodies for inclusion in the manufacturing process for RI-002. We have performed internal analysis on the appropriate titer, or anti-RSV antibody level, that a source plasma donor must have.

Our Product Candidate RI-002 RI-002 is a plasma-derived, polyclonal human IGIV product candidate, which also has standardized high levels of antibodies against RSV. RI-002 is an improved formulation of RI-001. RI-002 is manufactured using the same contract manufacturing facility as RI-001. By using our proprietary assay, we are able to identify plasma donors with elevated amounts of RSV antibodies, measure these donors' plasma RSV levels and formulate RI-002 with standardized high levels of RSV antibodies. In addition, by using our proprietary assay to monitor RI-002 during manufacturing and stability studies, we were able to demonstrate consistent lot-to-lot RSV potency. To our knowledge, at the present time there is no other IGIV product on the market with respect to which the label or manufacturer discloses that it contains standardized high levels of RSV antibodies and that is produced with reported consistent lot-to-lot potency. We, therefore, believe that RI-002 will be differentiated from currently marketed IGIV products because of our proprietary methods of selecting and screening plasma donors and the monitoring and testing procedures it employs during manufacturing.

Background on Primary Immunodeficiency Disease and Respiratory Syncytial Virus PIDD is a class of inherited disorders characterized by defects in the immune system, due to either a lack of necessary antibodies or a failure of these antibodies to function properly. According to the World Health Organization, there are over 150 different presentations of PIDD. Because patients suffering from PIDD lack a properly functioning immune system, they typically receive monthly, outpatient infusions of IGIV therapy. Without this exogenous antibody immune support, these patients would be susceptible to a wide variety of infectious diseases. PIDD has an estimated prevalence of 1:1,200 in the United States, or approximately 250,000 people.2 RSV is a common respiratory virus that often presents during the winter months of temperate climates. Nearly all children will have been infected with RSV by 3 years of age, however, the immune systems of most healthy children prevent significant morbidity and mortality from the disease. Conversely, in patients that are immunocompromised, such as those with PIDD or who have undergone a transplant and may be on immunosuppressive drugs, RSV infection can cause significant morbidity and mortality.

______________________ 2. Journal of Clinical Immunology 2007 Sep; 27(5):497-502. Epub 2007 Jun 19.

17 -------------------------------------------------------------------------------- Index As noted in the medical literature, immunocompromised patients historically have had a 5% to 15% rate of RSV infection and, if left untreated, lower respiratory tract RSV infections in immunocompromised patients can result in a mortality rate of up to 40%.3 Financial Operations Overview Revenue As of September 30, 2012, we have generated $1,360,276 of revenue since inception from the sale of normal source human plasma collected at our plasma collection center and plasma-derived medicinal products. Revenue is recognized at the time of transfer of title and risk of loss to the customer, which usually occurs at the time of shipment; however, revenue is recognized at the time of delivery if the Company retains the risk of loss during shipment.

Research and Development Expense Research and development, or R&D, expense consists of: clinical research organization and clinical trial costs related to our clinical trial, consulting expenses relating to regulatory affairs, quality control and manufacturing, assay development and ongoing testing costs, drug product manufacturing including the cost of plasma, plasma storage and transportation costs, as well as wages and benefits for employees directly related to the R&D of RI-002. All R&D is expensed as incurred.

The process of conducting pre-clinical studies and clinical trials necessary to obtain FDA approval is costly and time consuming. The probability of success for each product candidate and clinical trial may be affected by a variety of factors, including, among others, the quality of the product candidate's early clinical data, investment in the program, competition, manufacturing capabilities and commercial viability. As a result of the uncertainties discussed above, the uncertainty associated with clinical trial enrollments and the risks inherent in the development process, we are unable to determine the duration and completion costs of current or future clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of any of our product candidates. Development timelines, probability of success and development costs vary widely. We expect that our R&D expenses will increase for the remainder of 2012 as a result of our hiring of a Chief Scientific Officer/Chief Medical Officer and additional clinical operations staff, consultants and vendor requirements attributed to the development of RI-002 and our related clinical Phase III program.

General and Administrative Expense General and administrative, or G&A expenses, consists of rent, maintenance and utilities, insurance, wages, stock-based compensation and benefits for senior management and staff unrelated to R&D, legal fees, accounting and auditing fees, information technology, travel and other expenses related to the general operations of the business. We expect that our G&A expenses will increase for the remainder of 2012 as a result of our hiring of a Chief Financial Officer, or CFO and additional staff after becoming a publicly reporting company in February 2012.

______________________ 3. Sources include: Small et al., 2002; Whimbey et al., 1996; Roghmann et al., 2003; Raboni et al., 2003; Ghosh et al., 2001. Full citations and publications are available upon request.

18 -------------------------------------------------------------------------------- Index Interest Income and Interest Expense Interest income consists of interest earned on our cash and cash equivalents. Interest expense consists of interest incurred on our convertible notes up to their automatic conversion into our common stock upon the completion of our private placement in February 2012, as well as the amortization and write-off of deferred financing costs and debt discounts and a charge for the beneficial conversion feature relating to our convertible notes.

Results of Operations Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011 Summary table The following table presents a summary of the changes in our results of operations for the quarter ended September 30, 2012 compared to the quarter ended September 30, 2011: Quarter Quarter Percentage Ended Ended increase/ September September (decrease) 30, 2012 30, 2011 Revenues $360,338 $- 100% Cost of sales $144,691 $- 100% Gross profit $215,647 $- 100% Research and development expenses $1,940,637 $56,607 >100% Loss on sale of research and development inventory $- $- - Plasma center operating expenses $489,300 $450,527 8.6% General and administrative expenses $1,034,530 $261,030 >100% Total operating expenses $3,464,467 $768,164 >100% Other Income (Expense), Net $3,073 ($212,913) >100% Loss before income taxes ($3,245,747) ($981,077) >100% Income tax benefit $- $- - Loss before income taxes in plasma collection segment ($275,748) ($452,852) (39.1%) Loss before income taxes attributable to research and development ($1,940,637) ($56,607) >100% Net loss ($3,245,747) ($981,077) >100% Revenue We recorded revenue of $360,338 during the quarter ended September 30, 2012 from the sale of blood plasma collected in our FDA licensed Georgia-based blood plasma collection center compared to no revenue for the quarter ended September 30, 2011. The revenue for the quarter ended September 30, 2012 was primarily attributed to sales made pursuant to a plasma supply agreement entered into with Biotest Pharmaceuticals Corporation, or Biotest, during June 2012, under which Biotest purchases normal source plasma from our Georgia facility to be used in their manufacturing. The Company has not generated any revenue from its therapeutics/research and development business.

19 -------------------------------------------------------------------------------- Index Cost of Sales Cost of sales were $144,691 for the three months ended September 30, 2012, with no cost of sales for the comparable prior-year period. The cost of sales for the quarter ended September 30, 2012 was related to the costs associated with the sale of normal source plasma.

Research and Development Expenses R&D expenses were $1,940,637 for the three months ended September 30, 2012, an increase of $1,884,030 from $56,607 for the three months ended September 30, 2011. R&D expenses increased compared to the quarter ended September 30, 2011, primarily as a result of higher manufacturing, testing, and regulatory costs in preparation for our upcoming Phase III clinical study as well as the recent appointment of our Chief Scientific Officer/Chief Medical Officer and related wages and stock-based compensation expense during the quarter ended September 30, 2012.

Plasma Center Operating Expenses Plasma center operating expenses were $489,300 for the three months ended September 30, 2012, an increase of $38,773 from $450,527 for the three months ended September 30, 2011. Plasma center operating expenses consist of general and administrative overhead including rent, maintenance and utilities, wages and benefits for center staff, plasma collection supplies, plasma transportation and storage (off-site) and computer software fees directly related to donor collections. The increase in plasma center expenses was a result of increased donor collections during the quarter ended September 30, 2012, which was attributed to the FDA licensing of our plasma center in August 2011. We expect that as plasma collection increases, our plasma center operating expenses will also increase accordingly.

General and Administrative Expenses G&A expenses were $1,034,530 for the three months ended September 30, 2012, an increase of $773,500 from $261,030 for the three months ended September 30, 2011. G&A expenses increased as a result of increases in compensation and stock-based compensation costs resulting from 2012 option grants to our President and CEO, Board members, our CFO who was recently appointed in May 2012, and other new hires during 2012 in addition to higher professional services fees and SEC filing fees as a result of becoming a public reporting company during the first quarter of 2012.

Total Operating Expenses Total operating expenses were $3,464,467 for the three months ended September 30, 2012, an increase of $2,696,303 from $768,164 for the three months ended September 30, 2011, for the reasons stated above.

Other Income (Expense); Interest Income/ Expense Interest income was $3,073 for the three months ended September 30, 2012, compared to interest (expense) of $212,913 for the three months ended September 30, 2011. The increase in interest income was attributed to having higher cash balances during the third quarter 2012 compared to the third quarter 2011 as a result of the private placement of 1,800,000 shares of our common stock with gross proceeds in cash of $17,287,288 in February 2012. The decrease of interest (expense) was a result of the conversion of our notes in December 2011 and February 2012.

20 -------------------------------------------------------------------------------- Index Loss Before Income Taxes Loss before income taxes was $3,245,747 for the three months ended September 30, 2012, an increase of $2,264,670 from $981,077 for the three months ended September 30, 2011, for the reasons stated above.

Net Loss Net loss increased to $3,245,747 for the quarter ended September 30, 2012 from $981,077 for the quarter ended September 30, 2012, for the reasons stated above.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011 Summary table: The following table presents a summary of the changes in the Company's results of operations for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011: Nine Nine Months Percentage Months Ended Ended increase/ September 30, September 30, (decrease) 2012 2011 Revenues $594,834 $- 100% Cost of sales $288,761 $- 100% Gross profit $306,073 $- 100% Research and development expenses $2,201,131 $443,188 >100% Loss on sale of research and development inventory $- $1,934,630 >(100%) Plasma center operating expenses $1,327,761 $1,191,243 11.5% General and administrative expenses $2,446,043 $932,248 >100% Total operating expenses $5,974,935 $4,501,309 32.7% Other Income (Expense), Net $1,471 ($768,130) >(100%) Loss before income taxes ($5,667,391) ($5,269,439) 7.6% Income tax benefit $617,615 $320,765 92.5% Loss before income taxes in plasma collection segment ($1,028,153) ($1,198,398) (14.2%) Loss before income taxes attributable to research and development ($2,201,131) ($443,188) >100% Net loss ($5,049,776) ($4,948,674) (2.0%) 21-------------------------------------------------------------------------------- Index Revenue We recorded revenue of $594,834 during the nine months ended September 30, 2012 from the sale of normal source human plasma collected in our FDA licensed Georgia-based plasma collection center, compared to no revenues for the nine months ended September 30, 2011. The revenue for the nine months ended September 30, 2012 was primarily attributed to sales made pursuant to a plasma supply agreement entered into with Biotest during June 2012, under which Biotest purchases normal source plasma from our Georgia facility to be used in their manufacturing. We have not generated any revenue from its therapeutics/research and development business.

Cost of Sales Cost of sales was $288,761 for the nine months ended September 30, 2012, with no cost of sales for the comparable prior-year period of 2011. The cost of sales for the nine months ended September 30, 2012 related to the costs associated with the sales of normal source plasma.

Research and Development Expenses R&D expenses were $2,201,131 for the nine months ended September 30, 2012, an increase of $1,757,943 from $443,188 for the nine months ended September 30, 2011. R&D expenses increased compared to the quarter ended September 30, 2011, primarily as a result of higher manufacturing, testing and regulatory costs in preparation for our upcoming Phase III clinical study along with the recent appointment of our Chief Scientific Officer/Chief Medical Officer and related wages and stock-based compensation expense during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, there was no loss on the sale of R&D inventory as compared to a loss of $1,934,630 during the nine months ended September 30, 2011, as a result of disposal of our inventory of high priced, high titer plasma that we previously acquired to conduct research and development for a different product. The total amount of inventory sold at book value was $2,439,487, of which we received $504,857 in total net proceeds from the inventory sales, thus resulting in a loss on the sale of research and development inventory of $1,934,630 for the nine months ended September 30, 2011. We subsequently abandoned this research program and sold the high titer plasma to generate additional funds for operations. This plasma, which was sold on a non-recurring basis, had not been collected at our plasma collection facility, but had been purchased from third parties.

Plasma Center Operating Expenses Plasma center operating expenses were $1,327,761 for the nine months ended September 30, 2012, an increase of $136,518 from $1,191,243 for the nine months ended September 30, 2011. Plasma center operating expenses consist of general and administrative overhead, including rent, maintenance and utilities, wages and benefits for center staff, plasma collection supplies, plasma transportation and storage (off-site) and computer software fees directly related to donor collections. The increase in plasma center expenses was a result of increased donor collections during the nine months ended September 30, 2012, which was attributed to the FDA licensing of our plasma center in August 2011. We expect that as plasma collection increases, our plasma center operating expenses will also increase accordingly.

22 -------------------------------------------------------------------------------- Index General and Administrative Expenses G&A expenses were $2,446,043 for the nine months ended September 30, 2012, an increase of $1,513,795 from $932,248 for the nine months ended September 30, 2011. G&A expenses increased as a result of higher compensation and stock-based compensation costs resulting from option grants to our President and CEO, Board members, our CFO who was recently appointed in May 2012, and other employees during 2012 in addition to increased professional services fees and SEC filing fees attributable to becoming a reporting company since February 2012.

Total Operating Expenses Total operating expenses were $5,974,935 for the nine months ended September 30, 2012, an increase of $1,473,626 from $4,501,309 for the nine months ended September 30, 2011, for the reasons stated above. The increase in total operating expenses was offset by a loss on the sale of R&D inventory of $1,934,630 during the nine months ended September 30, 2011, as a result of disposal of our inventory of high priced, high titer plasma that we previously acquired to conduct research and development for a different product. The total amount of inventory sold at book value was $2,439,487, of which we received $504,857 in total net proceeds from the inventory sales, thus resulting in a loss on the sale of research and development inventory of $1,934,630 for the nine months ended September 30, 2011 compared to no loss on the sale of R&D inventory during the nine months ended September 30, 2012. We subsequently abandoned this research program and sold the high titer plasma to generate additional funds for operations. This plasma, which was sold on a non-recurring basis, had not been collected at our plasma collection facility, but had been purchased from third parties.

Other Income (Expense); Interest Income/ Expense Interest income was $1,471 for the nine months ended September 30, 2012, compared to interest (expense) of $768,130 for the nine months ended September 30, 2011. The increase in interest income was attributed to having higher cash reserves during the nine months ended September 30, 2012 compared to the comparable period in 2011 as a result of the private placement of 1,800,000 shares of our common stock with gross proceeds in cash of $17,287,288 in February 2012. The decrease of interest (expense) was a result of the conversion of our notes in December 2011 and February 2012.

Loss Before Income Taxes Loss before income taxes was $5,667,391 for the nine months ended September 30, 2012, an increase of $397,952 from $5,269,439 for the nine months ended September 30, 2011, for the reasons stated above.

State Income Tax Benefit In January 2012 and 2011, we received $617,615 and $320,765, respectively, from the sale of our State of New Jersey net operating losses. These losses were sold through the New Jersey Economic Development Authority Technology Business Tax Certificate Transfer Program. Under the terms of this program, if we do not use the proceeds from these sales for costs incurred with operating our biotechnology business in New Jersey, we have to refund the face value of the proceeds. If we do not maintain our headquarters or a base of operations in New Jersey during the five years following receipt of these proceeds (other than due to liquidation), we have to refund the face value of the proceeds less 20% for each year completed of the five year period. We cannot make assurances that we will qualify under this program in future years or even that the program will exist in future years.

23 -------------------------------------------------------------------------------- Index Net Loss Net loss was $5,049,776 for the nine months ended September 30, 2012 and $4,948,674 for the nine months ended September 30, 2011, for the reasons stated above.

Cash Flows Net Cash Used in Operating Activities Net cash used in operating activities was $5,096,745 for the nine months ended September 30, 2012. The net loss for this period is lower than net cash used in operating activities by $46,969, which was primarily attributable to decreases in accounts payable of $412,652 related to cash disbursements to vendors, a decrease in inventories of $137,658 and prepaid expenses of $130,352, primarily related to the costs of manufacturing of our product candidate RI-002 in preparation for its use in the expected Phase III clinical study and our director's and officer's insurance policy premiums for 2012, respectively, and an increase in accounts receivable of $61,897 related to sales of our normal source plasma during the three months ended September 30, 2012, offset by depreciation and amortization of $140,743 and stock-based compensation of $408,544. Net cash used in operating activities was $1,417,549 for the nine months ended September 30, 2011. The net loss for the nine months ended September 30, 2011 was higher than net cash used in operating activities by $3,531,125, which was primarily attributable to a loss on the sale of research and development inventory of $1,934,630, depreciation and amortization of $166,161, the amortization of debt discount and beneficial conversion charges of $184,185, a decrease in inventories of $481,389, a decrease in other assets of $90,000, and increases in accounts payable of $92,404 and accrued interest of $575,173.

Net Cash Used in Investing Activities Net cash used in investing activities of $83,521 for the nine months ended September 30, 2012, was attributable to computer hardware and software purchases, which were related to the expansion and upgrade of our information technology systems.

Net Cash Provided by Financing Activities Net cash provided by financing activities of $15,812,892 for the nine months ended September 30, 2012, was attributable to the proceeds of $17,287,288 received from the private placement of our common stock on February 13, 2012, net of equity issuance costs of $1,266,495 and the repayment of our notes payable of $200,000. Net cash provided by financing activities for the nine months ended September 30, 2011 was $1,192,776, which was primarily related to the proceeds from notes payable.

24 -------------------------------------------------------------------------------- Index Liquidity and Capital Resources Overview We have had limited revenue from operations and we have incurred cumulative losses of $34,857,791 since inception. We have funded our operations to date primarily from equity investments and loans from our primary stockholders. We received net cash proceeds of approximately $15.6 million in the 2012 Financing, after the payment of all related expenses, including legal, printing, and travel expenses, the placement agent's commissions and expense reimbursements, which amount does not include the secured promissory notes that were satisfied in exchange for shares of Former ADMA's common stock in the 2012 Financing.

Based upon our projected revenue and expenditures for 2012 and 2013, management currently believes that the net proceeds of the February 2012 private placement, together with our previously-existing cash, will be sufficient to enable us to fund our operating expenses, research and development expenses and capital expenditures into the third quarter of 2013. Because we do not anticipate receiving FDA approval for RI-002, until at the earliest, the second half of 2015, if at all, and would, therefore, not be able to generate revenues from the commercialization of RI-002 until after that date, we will have to raise additional capital prior to the third quarter of 2013 to continue product development and operations. We are unable to predict with reasonable certainty when, if ever, we will generate revenues from the commercialization of RI-002 and, therefore, how much additional capital we will need to raise prior to the third quarter of 2013. Furthermore, if our assumptions underlying our estimated revenues and expenses prove to be wrong, we may have to raise additional capital sooner than anticipated. There can be no assurance that such funds, if available at all, can be obtained on terms acceptable to us. Because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidate, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities. Our current estimates may be subject to change as circumstances regarding requirements further develop. We may decide to raise capital through public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. We do not have any existing commitments for future external funding. We may seek to sell additional equity or debt securities or obtain a bank credit facility. The sale of additional equity or debt securities, if convertible, could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations or other financing alternatives.

Additional equity or debt financing, grants, or corporate collaboration and potential licensing arrangements may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our planned clinical trials and delay or abandon potential commercialization efforts of our lead product candidate. See also "Future Financing Needs" below.

As of September 30, 2012, we had working capital of $10,578,044, consisting primarily of $10,720,397 of cash and cash equivalents and $1,009,687 of inventories, offset by $1,393,356 in accounts payable and accrued expenses.

During January 2012, we received $617,615 from the sale of our State of New Jersey net operating losses through the New Jersey Economic Development Authority program. We cannot make assurances that funding will be available for us in the future under this program.

25 -------------------------------------------------------------------------------- Index Previous Debt Financings For a description of Former ADMA's notes, please see "Recent Financings - -Note Financings" in Amendment No. 3 to our current report on Form 8-K filed with the SEC on June 22, 2012 and Amendment No. 4 to our Registration Statement on Form S-1 filed with the SEC on August 10, 2012.

Future Financing Needs The net proceeds from the 2012 Financing are expected to be used to test plasma donors for RSV titers, collect and procure plasma, manufacture drug product, conduct clinical trial(s), and the remainder for payment of existing accounts payable, general and administrative expenses as well as other business activities and general corporate purposes, including for the payment of accrued expenses, premiums for directors' and officers' insurance and for the repayment of amounts owed to related parties as described in Note 3 to the unaudited condensed consolidated financial statements.

Our ability to continue as a going concern will be dependent on our ability to raise additional capital, to fund our research and development and commercial programs and meet our obligations on a timely basis. If we are unable to successfully raise sufficient additional capital we will likely not have sufficient cash flow and liquidity to fund our business operations, forcing us to delay, discontinue or prevent product development and clinical trial activities or the approval of any of our potential products or curtail our activities and, ultimately, potentially cease operations. Even if we are able to raise additional capital, such financings may only be available on unattractive terms, or could result in significant dilution of stockholders' interests and, in such event, the value and potential future market price of our common stock may decline. In addition, the incurrence of indebtedness would result in increased fixed obligations and could result in covenants that would restrict our operations or other financing alternatives.

Financial markets in the United States, Canada, Europe and Asia continue to experience disruption, including, among other things, significant volatility in security prices, declining valuations of certain investments, as well as severely diminished liquidity and credit availability. Business activity across a wide range of industries and regions continues to be greatly reduced and local governments and many businesses are still suffering from the lack of consumer spending and the lack of liquidity in the credit markets. The continued instability in the credit and financial market conditions may negatively impact our ability to access capital and credit markets and our ability to manage our cash balance. While we are unable to predict the continued duration and severity of the adverse conditions in the United States and other countries, any of the circumstances mentioned above could adversely affect our business, financial condition, operating results and cash flow or cash position.

Recent Accounting Pronouncements The Financial Accounting Standards Board has issued certain accounting pronouncements as of September 30, 2012 that will become effective in subsequent periods; however, we do not believe that any of those pronouncements would have significantly affected our financial accounting measurements or disclosures had they been in effect during the quarter ended September 30, 2012 or that they will have a significant impact at the time they become effective.

26 -------------------------------------------------------------------------------- Index Critical Accounting Policies and Estimates On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an "emerging growth company," we may delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.

While our significant accounting policies are more fully described in our Form 8-K/A filed with the SEC, on June 22, 2012, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our financial statements.

Stock-Based Compensation Stock-based compensation cost is measured at grant date, based on the estimated fair value of the award, and is recognized as expense over the employee's requisite service period on a straight-line basis.

We account for stock options granted to non-employees on a fair value basis using the Black-Scholes option pricing method. The non-cash charge to operations for non-employee options with vesting are revalued at the end of each reporting period based upon the change in the fair value of the options and amortized to consulting expense over the related contract service period.

For the purpose of valuing options and warrants granted to our employees, non-employees and directors and officers during the three and nine months ended September 30, 2012, we used the Black-Scholes option pricing model. We granted options to purchase an aggregate of 506,559 shares of common stock during the nine months ended September 30, 2012. Of the 506,559 options granted, 212,134 options were granted to our President and Chief Executive Officer, 106,067 options were granted to our Chief Scientific Officer/Chief Medical Officer, 66,292 options were granted to our Chief Financial Officer, 106,066 options in the aggregate were granted to our Board of Directors and 16,000 options in the aggregate were granted to non-executive employees. To determine the risk-free interest rate, we utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of our awards. The expected term of the options granted is in accordance with Staff Accounting Bulletin 107 which is based the average between vesting terms and contractual terms. The expected dividend yield reflects our current and expected future policy for dividends on our common stock. The expected stock price volatility for our stock options was calculated by examining historical volatilities for similar publicly traded industry peers, since we do not have any trading history for our common stock. We will continue to analyze the expected stock price volatility and expected term assumptions as historical data for our common stock becomes available. The Company has not experienced forfeitures of stock options and as such, has not established a forfeiture rate. Since the stock options currently outstanding are primarily held by our senior management and directors, we will continue to evaluate the effects of such future potential forfeitures, as they may arise, to evaluate our estimated forfeiture rate.

27 -------------------------------------------------------------------------------- Index Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements.

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