ADMA BIOLOGICS INC

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

ADMA Biologics, Inc.

Opinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of ADMA Biologics, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023 and the related notes and financial statement schedule II – valuation and qualifying accounts (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinion

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the entity’s consolidated financial statements and on the entity’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

An entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. An entity’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Inventory

Description of the matter

As of December 31, 2023, the Company’s inventory totaled $172.9 million. As described in the notes to the consolidated financial statements, the valuation of inventory involves significant estimates relating to the capitalization of labor and overhead costs to the work in process and finished goods inventories as well as lower of cost or net realizable value considerations. Given the significance of the inventory value, the importance of inventory to the Company’s operations, the various components and the multiple locations and the complexity of the computations, auditing the inventory was challenging and involved a relatively high degree of auditor judgment and subjectivity, extensive testing, and the involvement of more senior members of the engagement team to design the appropriate responsive audit procedures and to supervise, execute and review the test results.

How we addressed the matter in our audit

We obtained an understanding of, and tested controls related to the Company’s process to estimate labor and overhead in the inventory as well as controls over estimating the lower of cost or net realizable value. We performed substantive procedures relating to the inventory valuation, which included verifying significant components of the valuation to supporting records, assessing the application of direct labor costs included in the valuation and assessing the appropriateness of the components of the indirect overhead pools as well as the application of such pool to the valuation. We tested the completeness and accuracy of the data used in management’s valuation and the mathematical accuracy of the direct labor and overhead applications. To assess management’s assertion that inventory is carried at the lower of cost or net realizable value, we tested subsequent sales transactions and net sales proceeds.

Variable Consideration Estimates - Rebates

Description of the matter

As disclosed in Note 2 to the consolidated financial statements, revenue from the sale of the Company’s products is recorded net of estimated rebates, price protection arrangements and customer incentives, including prompt pay discounts, wholesaler chargebacks and other wholesaler fees. Estimated rebates are also attributable to government programs that mandate various reductions from list price, which are reflected as liabilities and settled through cash payments.

Auditing the variable consideration estimates, more specifically rebates related to U.S. Medicaid, Medicare Part D, and managed care is complex because of the subjectivity of certain assumptions and judgements required to develop estimates. These significant assumptions and judgments include consideration of legal interpretations of applicable laws and regulations, historical claims experience, payer channel mix, current contract prices, unbilled claims and claims submission time lags. Additionally, auditing this matter is challenging given the Company’s limited history in selling certain of its products.

How we addressed the matter in our audit

We obtained an understanding of, and tested controls related to the Company’s process to estimate variable consideration as it relates to rebates, specifically U.S. Medicaid, Medicare Part D and managed care. We performed a combination of substantive procedures including recalculations of the percentages of rebates processed against related rebate eligible revenue for certain products, confirmations of underlying data used in the calculations and an evaluation of actual rebates processed against historical estimates. Our testing focused on the appropriateness of significant assumptions and mathematical accuracy used in the calculation and the completeness and accuracy of the data used in the estimates. To address the completeness of the reserves, we also assessed the historical accuracy of management’s estimates by comparing actual activity to previous estimates (lookback). Finally, we considered subsequent events and any new information after the financial statement date that would require an adjustment to the accruals.

/s/ CohnReznick LLP

We have served as the Company’s auditor since 2008.

Parsippany, New Jersey

February 28, 2024