0001023024-20-000008 | 10-Q | XBRL Viewer

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REVENUE RECOGNITION AND RELATED ALLOWANCES - Timing (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Revenue Recognition	$ 52,979	$ 51,337	$ 151,223	$ 158,581
Performance obligations satisfied in prior periods			8,700	6,500
Contract with Customer, Asset, Net	100		100		$ 100
Deferred revenue	112		112		$ 451
Revenue recognized			300
Performance obligations transferred at a point in time [Member]
Revenue Recognition	52,690	51,262	149,472	157,775
Performance obligations transferred over time [Member]
Revenue Recognition	$ 289	$ 75	$ 1,751	$ 806

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

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+ Details

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current Assets
Cash and cash equivalents	$ 17,900	$ 62,332
Accounts receivable, net of $86,418 and $59,946 of adjustments for chargebacks and other allowances at September 30, 2020 and 2019, respectively	83,745	72,129
Inventories, net	59,195	48,163
Prepaid income taxes	1,621	1,076
Prepaid expenses and other current assets	3,358	3,995
Total Current Assets	165,819	187,695
Property and equipment, net	40,444	40,551
Restricted cash	5,003	5,029
Deferred tax assets, net of deferred tax liabilities and valuation allowance	48,130	38,326
Intangible assets, net	198,620	180,388
Goodwill	3,580	3,580
Other non-current assets	985	1,220
Total Assets	462,581	456,789
Current Liabilities
Current debt, net of deferred financing costs	12,785	9,941
Accounts payable	13,460	14,606
Accrued expenses and other	2,534	2,362
Accrued royalties	6,088	5,084
Accrued compensation and related expenses	5,993	3,736
Accrued government rebates	11,678	8,901
Returned goods reserve	23,250	16,595
Deferred revenue	112	451
Total Current Liabilities	75,900	61,676
Non-current Liabilities
Non-current debt, net of deferred financing costs and current component	175,161	175,808
Derivatives and other non-current liabilities	16,420	6,514
Total Liabilities	267,481	243,998
Commitments and Contingencies (Note 11)
Stockholders' Equity
Common Stock, $0.0001 par value, 33,333,334 shares authorized; 12,423,061 shares issued and 12,347,543 outstanding at September 30, 2020; 12,104,875 shares issued and 12,089,565 shares outstanding at December 31, 2019	1	1
Class C Special Stock, $0.0001 par value, 781,281 shares authorized; 10,864 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	0	0
Preferred Stock, $0.0001 par value, 1,666,667 shares authorized; 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	0	0
Treasury stock, 75,518 shares of common stock, at cost, at September 30, 2020 and 15,310 shares of common stock, at cost, at December 31, 2019	(2,246)	(723)
Additional paid-in capital	211,792	200,800
(Accumulated deficit)/retained earnings	(1,337)	17,584
Accumulated other comprehensive loss, net of tax	(13,110)	(4,871)
Total Stockholders' Equity	195,100	212,791
Total Liabilities and Stockholders' Equity	$ 462,581	$ 456,789

Condensed Consolidated Statements of Comprehensive (Loss)/Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Condensed Consolidated Statements of Comprehensive (Loss)/Income
Net income/(loss)	$ 434	$ 3,895	$ (18,913)	$ 10,929
Other comprehensive income/(loss), net of tax:
Change in fair value of interest rate swap, net of tax	939	(1,024)	(8,239)	(5,658)
Total other comprehensive income/(loss), net of tax	939	(1,024)	(8,239)	(5,658)
Total comprehensive income/(loss), net of tax	$ 1,373	$ 2,871	$ (27,152)	$ 5,271

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

- Definition

Amount after tax and reclassification adjustments of other comprehensive income (loss).

+ References

+ Details

GOODWILL AND INTANGIBLE ASSETS - Components (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
INTANGIBLE ASSETS
Gross Carrying Amount	$ 355,670		$ 355,670		$ 307,225
Accumulated Amortization	(157,050)		(157,050)		(126,837)
Amortization of Intangible Assets	10,100	$ 8,400	30,200	$ 31,800
Impairment of Intangible Assets, Finite-lived	0	$ 0	0	$ 0
Acquired ANDA intangible assets
INTANGIBLE ASSETS
Gross Carrying Amount	106,415		106,415		64,704
Accumulated Amortization	(39,261)		$ (39,261)		(30,169)
Weighted Average Amortization Period			8 years 9 months 18 days
NDAs and product rights
INTANGIBLE ASSETS
Gross Carrying Amount	230,974		$ 230,974		230,974
Accumulated Amortization	(106,201)		$ (106,201)		(87,352)
Weighted Average Amortization Period			10 years
Marketing and distribution rights
INTANGIBLE ASSETS
Gross Carrying Amount	17,657		$ 17,657		10,923
Accumulated Amortization	(11,187)		$ (11,187)		(8,982)
Weighted Average Amortization Period			5 years 8 months 12 days
Non-compete agreement
INTANGIBLE ASSETS
Gross Carrying Amount	624		$ 624		624
Accumulated Amortization	$ (401)		$ (401)		$ (334)
Weighted Average Amortization Period			7 years

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2020

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

1. BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

Overview

ANI Pharmaceuticals, Inc. and its consolidated subsidiaries, ANIP Acquisition Company and ANI Pharmaceuticals Canada Inc. (together, “ANI,” the “Company,” “we,” “us,” or “our”) is an integrated specialty pharmaceutical company focused on delivering value to our customers by developing, manufacturing, and marketing high quality branded and generic prescription pharmaceuticals. We focus on niche and high barrier to entry opportunities including controlled substances, anti-cancer (oncolytics), hormones and steroids, and complex formulations. Our three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota and one is located in Oakville, Ontario, are together capable of producing oral solid dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products that must be manufactured in a fully-contained environment. Our strategy is to use our assets to develop, acquire, manufacture, and market branded and generic specialty prescription pharmaceuticals. By executing this strategy, we believe we will be able to continue to grow our business, expand and diversify our product portfolio, and create long-term value for our investors.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations, comprehensive income, and cash flows. The consolidated balance sheet at December 31, 2019, has been derived from audited financial statements as of that date. The unaudited interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the United States Securities and Exchange Commission. We believe that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Principles of Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of ANI Pharmaceuticals, Inc. and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Foreign Currency

We have a subsidiary located in Canada. The subsidiary conducts its transactions in U.S. dollars and Canadian dollars, but its functional currency is the U.S. dollar. The results of any non-U.S. dollar transactions are remeasured in U.S. dollars at the applicable exchange rates during the period and resulting foreign currency transaction gains and losses are included in the determination of net income/(loss). Our gain or loss on transactions denominated in foreign currencies was immaterial for the three and nine months ended September 30, 2020 and 2019. Unless otherwise noted, all references to “$” or “dollar” refer to the U.S. dollar.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us 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 amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, revenue recognition, allowance for credit losses, variable consideration determined based on accruals for chargebacks, administrative fees and rebates, government rebates, returns and other allowances, allowance for inventory obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, fair value of long-lived assets, income tax provision, deferred taxes and valuation allowance, determination of right-of-use assets and lease liabilities, purchase price allocations, and the depreciable lives of long-lived assets. Because of the uncertainties inherent in such estimates, actual results may differ from those estimates. Management periodically evaluates estimates used in the preparation of the financial statements for reasonableness.

We are subject to risks and uncertainties as a result of the novel coronavirus (“COVID-19”) pandemic. We are unable to predict the impact that the COVID-19 pandemic will have on our future business, financial condition and results of operations due to numerous uncertainties. These uncertainties include the occurrence of recurring outbreaks and their severity and the duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. While we experienced a negative impact to our net revenues during the nine months ended September 30, 2020 in part due to the COVID-19 pandemic, we remain unable to predict the future impact on our estimates and assumptions. There was not a material impact to these estimates or assumptions in our condensed consolidated financial statements as of and for the three and nine months ended September 30, 2020. Actual results could differ from those estimates, which may change our estimates in future periods. We continue to closely monitor the impact of the COVID-19 pandemic on our business.

Accounts Receivable

We extend credit to customers on an unsecured basis. We measure expected credit losses on our financial assets measured at amortized cost, including trade and unbilled receivables, on a collective basis, based on their similar risk characteristics. Expected credits losses are based on historical credit loss experience, review of the current aging or status of accounts receivable and current and forward-looking views from an economic and industry perspective. We determine trade receivables to be delinquent when greater than 30 days past due. Receivables are written off when it is determined that amounts are uncollectible. Our allowance for credit losses was immaterial as of September 30, 2020. Our allowance for doubtful accounts as of December 31, 2019, as accounted for and reported under previously applicable U.S. GAAP, was also immaterial.

Geographic Information

Based on the distinct nature of our operations, our internal management structure, and the financial information that is evaluated regularly by our Chief Operating Decision Maker, we determined that we operate in one reportable segment. Our operations are located in the United States and Canada.

The following table depicts the Company’s revenue by geographic operations during the following periods:


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
Location of Operations	2020		2019		2020		2019
United States	$	52,094	$	50,026	$	146,602	$	153,088
Canada		885		1,311		4,621		5,493
Total Revenue	$	52,979	$	51,337	$	151,223	$	158,581

The following table depicts the Company’s property and equipment, net according to geographic location as of:


(in thousands)	September 30, 2020		December 31, 2019
United States	$	26,560	$	26,708
Canada		13,884		13,843
Total property and equipment, net	$	40,444	$	40,551

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In November 2019, the Financial Accounting Standards Board (“FASB”) issued guidance simplifying the accounting for income taxes by removing the following exceptions: 1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, 2) exception requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and 4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss the year. The amendments also simplify accounting for income taxes by doing the following: 1) requiring that an entity recognize a franchise tax or similar tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date, and 5) making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method. The guidance is effective for reporting periods beginning after December 15, 2020, including interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact, if any, that the adoption of this guidance will have on our consolidated financial statements.

We have evaluated all issued and unadopted Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our condensed consolidated statements of operations, comprehensive income, balance sheets, or cash flows.

Recently Adopted Accounting Pronouncements

In November 2018, the FASB issued guidance clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Accounting Standards Codification Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. The guidance was effective for reporting periods beginning after December 15, 2019, including interim periods within that fiscal year. We adopted this guidance as of January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued guidance amending the disclosure requirements on fair value measurements. The amendments add, modify, and eliminate certain disclosure requirements on fair value measurements. The guidance was effective for reporting periods beginning after December 15, 2019, including interim periods within that fiscal year. We adopted this guidance as of January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued guidance under with respect to measuring credit losses on financial instruments, including trade receivables. The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments. The credit loss estimate now reflects an entity's current estimate of all future expected credit losses. Under the previous guidance, an entity only considered past events and current conditions. In April 2019, the FASB further clarified the scope of the credit losses standard and addressed issues related to accrued interest receivable balances, recoveries, variable interest rates, and prepayment. In May 2019, the FASB issued further guidance to provide entities with an option to irrevocably elect the fair value option applied on an instrument-by-instrument basis for eligible financial instruments. We adopted this guidance as of January 1, 2020 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2020 are presented under the new guidance while prior period amounts continue to be reported in accordance with previously applicable GAAP. We recognized an $8 thousand decrease to retained earnings as of January 1, 2020 for the cumulative effect of adopting the new guidance.

PROPERTY, PLANT, AND EQUIPMENT (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment, Gross, Total	$ 56,737	$ 53,321
Less: accumulated depreciation	(16,293)	(12,770)
Property and equipment, net	40,444	40,551
Land [Member]
Property, Plant and Equipment, Gross, Total	4,667	4,566
Buildings [Member]
Property, Plant and Equipment, Gross, Total	11,142	10,275
Machinery, furniture and equipment [Member]
Property, Plant and Equipment, Gross, Total	38,257	34,984
Construction in progress [Member]
Property, Plant and Equipment, Gross, Total	$ 2,671	$ 3,496

GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2020

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

As a result of our 2013 merger with BioSante Pharmaceuticals, Inc. (“BioSante”), we recorded goodwill of $1.8 million. As a result of our acquisition of WellSpring, we recorded additional goodwill of $1.7 million in 2018. We assess the recoverability of the carrying value of goodwill as of October 31^st of each year, and whenever events occur or circumstances change that would, more likely than not, reduce the fair value of our reporting unit below its carrying value. There have been no events or changes in circumstances that would have reduced the fair value of our reporting unit below its carrying value during the nine months ended September 30, 2020. No impairment losses were recognized during the three and nine months ended September 30, 2020 and 2019.

Definite-lived Intangible Assets

The components of net definite-lived intangible assets are as follows:


	September 30, 2020				December 31, 2019				Weighted Average
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Amortization
(in thousands)	Amount		Amortization		Amount		Amortization		Period
Acquired ANDA intangible assets	$	106,415	$	(39,261)	$	64,704	$	(30,169)	8.8	years
NDAs and product rights		230,974		(106,201)		230,974		(87,352)	10.0	years
Marketing and distribution rights		17,657		(11,187)		10,923		(8,982)	5.7	years
Non-compete agreement		624		(401)		624		(334)	7.0	years
	$	355,670	$	(157,050)	$	307,225	$	(126,837)

Definite-lived intangible assets are stated at cost, net of amortization, generally using the straight-line method over the expected useful lives of the intangible assets. In the case of certain New Drug Application ("NDA") and product rights assets, we use an accelerated amortization method to better match the anticipated economic benefits expected to be provided. Amortization expense was $10.1 million and $8.4 million for the three months ended September 30, 2020 and 2019, respectively. Amortization expense was $30.2 million and $31.8 million for the nine months ended September 30, 2020 and 2019, respectively. Refer to Note 12 for more details on acquired definite-lived intangible assets.

We test for impairment of definite-lived intangible assets when events or circumstances indicate that the carrying value of the assets may not be recoverable. No such triggering events were identified during the three and nine months ended September 30, 2020 and 2019 and therefore no impairment loss was recognized in the three and nine months ended September 30, 2020 and 2019.

Expected future amortization expense is as follows:


(in thousands)
2020	$	9,664
2021		38,655
2022		35,249
2023		34,501
2024		31,524
2025 and thereafter		49,027
Total	$	198,620

GOODWILL AND INTANGIBLE ASSETS - Amortization (Details) $ in Thousands	Sep. 30, 2020 USD ($)
GOODWILL AND INTANGIBLE ASSETS
2020	$ 9,664
2021	38,655
2022	35,249
2023	34,501
2024	31,524
2025 and thereafter	49,027
Total	$ 198,620

INDEBTEDNESS (Tables)

9 Months Ended

Sep. 30, 2020

INDEBTEDNESS

Schedule of carrying value of the current and non-current components of the term loan

The carrying value of the current and non-current components of the Term Loan and DDTL as of September 30, 2020 and December 31, 2019 are:


	Current
	September 30,		December 31,
(in thousands)	2020		2019
Current borrowing on debt	$	13,240	$	10,412
Deferred financing costs		(455)		(471)
Current debt, net of deferred financing costs	$	12,785	$	9,941


	Non-Current
	September 30,		December 31,
(in thousands)	2020		2019
Non-current borrowing on debt	$	168,583	$	177,069
Deferred financing costs		(922)		(1,261)
Non-current debt, net of deferred financing costs and current component	$	167,661	$	175,808

Schedule of contractual maturity of term loan and DDTL

The contractual maturity of our Term Loan, DDTL, and Revolver is as follows for the years ending December 31:


(in thousands)	Term Loan		DDTL		Revolver
2020	$	1,805	$	2,950	$	—
2021		5,414		5,900		—
2022		5,414		8,850		—
2023		54,140		97,350		7,500
Total	$	66,773	$	115,050	$	7,500

Schedule of components of total interest expense related to the notes and term loan

The following table sets forth the components of total interest expense related to the Term Loan, DDTL, and Revolver recognized in the accompanying unaudited interim condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2020		2019		2020		2019
Contractual coupon	$	2,351	$	1,628	$	6,450	$	4,903
Amortization of debt discount		—		1,553		—		4,600
Amortization of finance fees		180		358		542		1,078
Capitalized interest		(18)		(41)		(67)		(152)
	$	2,513	$	3,498	$	6,925	$	10,429

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
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-Paragraph 1
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-Name Accounting Standards Codification
-Topic 835
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-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=119993939&loc=d3e28541-108399

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-Topic 505
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Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
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-SubTopic 10
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-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
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-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
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-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

EARNINGS (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
EARNINGS (LOSS) PER SHARE
Net (loss)/income	$ 434	$ 3,895	$ (18,913)	$ 10,929
Net income allocated to restricted stock, Basic	(12)	(63)		(176)
Net income allocated to restricted stock, Diluted	(13)	(63)		(176)
Net income/(loss) allocated to common shares, Basic	422	3,832	(18,913)	10,753
Net income/(loss) allocated to common shares, Diluted	$ 421	$ 3,832	$ (18,913)	$ 10,753
Basic Weighted-Average Shares Outstanding	11,991	11,879	11,953	11,826
Dilutive effect of stock options and ESPP	12	128		106
Dilutive effect of Notes		78		128
Diluted Weighted-Average Shares Outstanding	12,003	12,085	11,953	12,060
Earnings/(Loss) Per Share, Basic	$ 0.04	$ 0.32	$ (1.58)	$ 0.91
Earnings/(Loss) Per Share, Diluted	$ 0.04	$ 0.32	$ (1.58)	$ 0.89

REVENUE RECOGNITION AND RELATED ALLOWANCES (Tables)

9 Months Ended

Sep. 30, 2020

REVENUE RECOGNITION AND RELATED ALLOWANCES

Schedule of disaggregation of revenue and revenue recognized


	Three Months Ended				Nine Months Ended
Products and Services	September 30,		September 30,		September 30,		September 30,
(in thousands)	2020		2019		2020		2019
Sales of generic pharmaceutical products	$	37,712	$	31,753	$	108,607	$	99,452
Sales of branded pharmaceutical products		12,411		16,605		32,201		48,300
Sales of contract manufactured products		2,152		2,376		7,026		8,499
Royalties from licensing agreements		339		268		1,120		594
Product development services		289		75		1,751		806
Other⁽¹⁾		76		260		518		930
Total net revenues	$	52,979	$	51,337	$	151,223	$	158,581

⁽¹⁾	Primarily includes laboratory services and royalties on sales of contract manufactured products.

The following table depicts revenue recognized during the following periods:


	Three Months Ended				Nine Months Ended
Timing of Revenue Recognition	September 30,		September 30,		September 30,		September 30,
(in thousands)	2020		2019		2020		2019
Performance obligations transferred at a point in time	$	52,690	$	51,262	$	149,472	$	157,775
Performance obligations transferred over time		289		75		1,751		806
Total	$	52,979	$	51,337	$	151,223	$	158,581

Schedule of accruals and allowances

The following table summarizes activity in the consolidated balance sheets for accruals and allowances for the nine months ended September 30, 2020 and 2019, respectively:


	Accruals for Chargebacks, Returns, and Other Allowances
							Administrative		Prompt
			Government				Fees and Other		Payment
(in thousands)	Chargebacks		Rebates		Returns		Rebates		Discounts
Balance at December 31, 2018 (1)	$	39,007	$	8,974	$	12,552	$	7,353	$	2,009
Accruals/Adjustments		187,843		12,723		13,392		27,476		7,962
Credits Taken Against Reserve		(188,504)		(12,513)		(9,999)		(26,927)		(7,714)
Balance at September 30, 2019 (1)	$	38,346	$	9,184	$	15,945	$	7,902	$	2,257

Balance at December 31, 2019 (1)	$	49,882	$	8,901	$	16,595	$	8,281	$	2,549
Accruals/Adjustments		288,538		14,288		22,744		27,383		10,248
Credits Taken Against Reserve		(262,531)		(11,511)		(16,089)		(27,287)		(9,442)
Balance at September 30, 2020 (1)	$	75,889	$	11,678	$	23,250	$	8,377	$	3,355

(1)

Chargebacks are included as an offset to accounts receivable, net of chargebacks and other allowances in the unaudited condensed consolidated balance sheets. Administrative Fees and Other Rebates and Prompt Payment Discounts are included as an offset to accounts receivable, net of chargebacks and other allowances or accrued expenses and other in the unaudited condensed consolidated balance sheets. Returns are included in returned goods reserve in the unaudited condensed consolidated balance sheets. Government Rebates are included in accrued government rebates in the unaudited condensed consolidated balance sheets.

Schedule of customer concentration


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019
Customer 1	30	%	34	%	31	%	33	%
Customer 2	25	%	24	%	24	%	24	%
Customer 3	19	%	23	%	19	%	24	%

PROPERTY, PLANT, AND EQUIPMENT - Additional information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Depreciation	$ 1.2	$ 1.1	$ 3.5	$ 3.2
Interest Costs Capitalized			$ 0.1	$ 0.2
Maximum
Interest Costs Capitalized	$ 0.1	$ 0.1

STOCK-BASED COMPENSATION - Stock option activity (Details) - shares		9 Months Ended
	Sep. 08, 2020	Sep. 30, 2020	Sep. 30, 2019
Nikhil Lalwani [Member]
Option Shares
Granted (in shares)	179,643
Options [Member]
Option Shares
Outstanding at the beginning of the period (in shares)		757,000	759,000
Granted (in shares)		42,000	160,000
Exercised (in shares)		(8,000)	(117,000)
Forfeited (in shares)		(44,000)	(24,000)
Expired (in shares)			(1,000)
Outstanding at the end of the period (in shares)		747,000	777,000
Inducement Grants [Member]
Option Shares
Granted (in shares)		180,000
Outstanding at the end of the period (in shares)		180,000

STOCK-BASED COMPENSATION - RSA activity (Details) - Restricted Stock [Member] - shares shares in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Unvested, Shares, Outstanding, Beginning of period	192	117
Unvested Shares, Granted	305	122
Unvested Shares, Vested	(128)	(42)
Unvested Shares, Forfeited	(17)	(3)
Unvested Shares, Outstanding, End of period	352	194

INVENTORIES (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
INVENTORIES
Raw materials	$ 43,010	$ 34,881
Packaging materials	3,144	2,902
Work-in-progress	1,086	361
Finished goods	18,110	16,750
Inventory, Gross, Total	65,350	54,894
Reserve for excess/obsolete inventories	(6,155)	(6,731)
Inventories, net	$ 59,195	$ 48,163

FAIR VALUE DISCLOSURES (Details) $ in Thousands	3 Months Ended	9 Months Ended
FAIR VALUE DISCLOSURES (Details) $ in Thousands	Sep. 30, 2020 USD ($) derivative	Sep. 30, 2020 USD ($) derivative	Sep. 30, 2019 USD ($)	Apr. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Interest Rate Derivative Liabilities, at Fair Value	$ 15,971	$ 15,971			$ 6,215
Asset impairment charge	100	104	$ 0
Fair Value, Inputs, Level 2 [Member]
Interest Rate Derivative Liabilities, at Fair Value	15,971	15,971			$ 6,215
Senior Secured Credit Facility [Member] \| Term Loan [Member]
Long-term Debt, Gross	66,800	66,800
Senior Secured Credit Facility [Member] \| Delayed Draw Term Loan [Member]
Long-term Debt, Gross	$ 115,100	$ 115,100
Contingent Value Rights [Member] \| Discount rate
Fair Values Inputs Discount Rate		15.00%
Interest rate swap [Member]
Number of Interest Rate Swaps Terminated \| derivative		2
Number of derivative instruments held \| derivative	1	1
Interest Rate Derivative Liabilities, at Fair Value	$ 16,000	$ 16,000
Derivative liability, notional amount	$ 181,800	$ 181,800		$ 184,200

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2020

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

Operating Leases

All our existing leases as of September 30, 2020 are classified as operating leases. As of September 30, 2020, we have thirteen material operating leases for facilities and office equipment with remaining terms expiring from 2021 through 2025 and a weighted average remaining lease term of 1.9 years Many of our existing leases have fair value renewal options, none of which are considered certain of being exercised or included in the minimum lease term. Discount rates used in the calculation of our lease liability ranged between 3.99% and 8.95%.

Rent expense for the nine months ended September 30, 2020 and 2019 consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Operating lease costs	$	57	$	57	$	166	$	138
Variable lease costs		15		3		44		44
Total lease costs	$	72	$	60	$	210	$	182

A maturity analysis of our operating leases follows:


(in thousands)
Future payments:
2020	$	59
2021		172
2022		132
2023		61
2024 and thereafter		31
Total	$	455

Discount		(25)
Lease liability		430
Current lease liability		(181)
Non-current lease liability	$	249

Government Regulation

Our products and facilities are subject to regulation by a number of federal and state governmental agencies. The Food and Drug Administration ("FDA”), in particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of our products. The Drug Enforcement Administration (“DEA”) maintains oversight over our products that are controlled substances.

Unapproved Products

Two of our products, Esterified Estrogen with Methyltestosterone (“EEMT”) and Opium Tincture, are marketed without approved NDAs or Abbreviated New Drug Applications (“ANDAs”). During the three months ended September 30, 2020 and 2019, net revenues for these products totaled $4.3 million and $4.7 million, respectively. During the nine months ended September 30, 2020 and 2019, net revenues for these products totaled $12.4 million and $15.5 million, respectively.

The FDA’s policy with respect to the continued marketing of unapproved products is stated in the FDA’s September 2011 Compliance Policy Guide Sec. 440.100 titled “Marketed New Drugs without Approved NDAs or ANDAs.” Under this policy, the FDA has stated that it will follow a risk-based approach with regard to enforcement against such unapproved products. The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement action against products in certain categories, such as those marketed as unapproved drugs with potential safety risks or that lack evidence of effectiveness. We believe that, so long as we comply with applicable manufacturing standards, the FDA will not take action against us under the current enforcement policy. There can be no assurance, however, that the FDA will continue this policy or not take a contrary position with any individual product or group of products. If the FDA were to take a contrary position, we may be required to seek FDA approval for these products or withdraw such products from the market. If we decide to withdraw the products from the market, our net revenues for generic pharmaceutical products would decline materially, and if we decide to seek FDA approval, we would face increased expenses and might need to suspend sales of the products until such approval was obtained, and there are no assurances that we would receive such approval.

In addition, one group of products that we manufacture on behalf of a contract customer is marketed by that customer without an approved NDA. If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market. Our contract manufacturing revenues for these unapproved products for the three months ended September 30, 2020 and 2019 were $0.7 million and $0.5 million, respectively.

Our contract manufacturing revenues for these unapproved products for the nine months ended September 30, 2020 and 2019 were $2.3 million and $2.0 million, respectively.

Legal Proceedings

We are involved, and from time to time may become involved, in various disputes, governmental and/or regulatory inquiries, investigations, government reimbursement related actions and litigation. These matters are complex and subject to significant uncertainties. As such, we cannot accurately predict the outcome, or the effects of the legal proceedings described below. While we believe that we have valid claims and/or defenses in the litigation and other matters described below, litigation is inherently unpredictable, and the outcome of the proceedings could result in losses, including substantial damages, fines, civil or criminal penalties and injunctive or administrative remedies. We intend to vigorously prosecute and/or defend these matters, as appropriate, however, from time to time, we may settle or otherwise resolve these matters on terms and conditions that we believe are in our best interests. Resolution of any or all claims, investigations, and legal proceedings, individually or in the aggregate, could have a material adverse effect on our results of operations and/or cash flows in any given accounting period or on our overall financial condition.

Some of these matters with which we are involved are described below, and unless otherwise disclosed, we are unable to predict the outcome of the matter or to provide an estimate of the range of reasonably possible material losses. We record accruals for loss contingencies to the extent we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

From time to time, we are also involved in other pending proceedings for which, in our opinion based upon facts and circumstances known at the time, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to our results, and therefore remain undisclosed. If and when any reasonably possible losses associated with the resolution of such other pending proceedings, in our opinion, become material, we will disclose such matters.

Furthermore, like all pharmaceutical manufacturers, we are periodically exposed to product liability claims. The prevalence of these claims could limit our coverage under future insurance policies or cause those policies to become more expensive, which could harm our business, financial condition, and operating results. Recent trends in the product liability and director and officer insurance markets is to exclude matters related to certain classes of drugs, such as opioids. Our policies have been subject to such exclusions which place further potential risk of financial loss on us.

Commercial Litigation – Arbor Pharmaceuticals, LLC

In November of 2017, we were served with a complaint filed by Arbor Pharmaceuticals, LLC, in the United States District Court, District of Minnesota. The complaint alleges false advertising and unfair competition in violation of Section 43(a) of the Lanham Act, Section 1125(a) of Title 15 of the United States Code, and Minnesota State law, under the premise that we sold an unapproved Erythromycin Ethylsuccinate (“EES”) product during the period between September 27, 2016 and November 2, 2018. The complaint seeks a trial by jury and monetary damages (inclusive of actual and consequential damages, treble damages, disgorgement of ANI profit, and legal fees) of an unspecified amount. Discovery in this action closed on March 31, 2019. Trial has been postponed due to COVID-19 and is currently expected to be re-scheduled sometime in 2021. We continue to defend this lawsuit vigorously.

Industry Related Litigation

In July 2020, we were served with a complaint brought by the Office of the Attorney General of the State of New Mexico against manufacturers and sellers of ranitidine products. The complaint asserts a public nuisance claim and a negligence claim against the generic ranitidine manufacturer defendants, including the Company. The public

nuisance claim asserts that the widespread sale of ranitidine products in the state created a public nuisance that requires a state-wide medical monitoring program of New Mexico residents for the development of colorectal cancer, stomach cancer, gastrointestinal disorders and liver disease. As damages, New Mexico asks that the defendants fund this medical monitoring program. The negligence claims assert that the defendants were negligent in selling the product, essentially alleging that it was unreasonable to have the product on the market. With respect to that claim, New Mexico asserts that it paid for ranitidine products through state-funded insurance and health-care programs. We dispute any liability in this matter and intend to vigorously defend ourselves in the litigation.

Product Liability Related Litigation

All manufacturers of the drug Reglan and its generic equivalent metoclopramide, including ANI, have faced allegations from plaintiffs in various states claiming bodily injuries as a result of ingestion of metoclopramide or its brand name, Reglan, prior to the FDA’s February 2009 Black Box warning requirement (“legacy claims”). All these original legacy claims were settled or closed out, including a series of claims in California that were resolved by coordinated proceeding and settlement. Our insurance company assumed the defense of the legacy claims and paid all losses in settlement of the California legacy claims. In March 2019, we were served with a lawsuit in the Superior Court of California, County of Riverside, adding us as a defendant in a complaint filed in July 2017 that is alleged not to have been part of the original settled legacy claims. This new claim, as well as the impact of the prior settlements on this claim, is currently being evaluated by the Company, its insurers, and its legal counsel.

In June 2020, we were served with a personal injury complaint in the case of Koepsel v. Boehringer Ingelheim Pharmaceuticals, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-80882-RLR, filed in the Southern District of Florida, in which the plaintiff alleges that he developed kidney cancer in 2018 as a result of taking over the counter medication containing ranitidine. The Koepsel action was filed within an existing multidistrict litigation concerning ranitidine-containing drugs pending in the Southern District of Florida before Judge Robin L. Rosenberg, In re Zantac MDL, 20 MDL 2924. A Master Personal Injury Complaint (“MPIC”) in that MDL that was filed on June 22, 2020 also named the Company as a defendant. The Company was dismissed from the Koepsel case on August 21, 2020 and was dismissed from the MPIC on September 8, 2020. The Company has been named in other personal injury complaints filed in MDL 20 MD 2924 in which plaintiffs allege that they developed cancer after taking prescription and over the counter medication containing ranitidine. The Company has been served with complaints in three of those cases: Cooper v. Boehringer Ingelheim Pharmaceuticals, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-81130-RLR, Lineberry v. Amneal Pharmaceuticals, LLC, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-81079-RLR, and Lovette v. Amneal Pharmaceuticals, LLC, et al., MDL No. 20-MD-2924, Case No. 9:20-cv-81040-RLR. We have informed counsel for the plaintiffs that we did not sell an over the counter ranitidine product and sold a generic prescription ranitidine product for a limited two-month period of time, from July 2019 to September 2019. Our product was voluntarily recalled in January 2020. Each of the plaintiffs in the three pending cases alleges a cancer diagnosis prior to the time that ANI sold ranitidine, and we have informally sought dismissal from these cases on that basis. We dispute any liability in these MDL matters and intend to vigorously defend ourselves in the litigation.

Other Industry Related Matters

On or about September 20, 2017, the Company and certain of its employees were served with search warrants and/or grand jury subpoenas to produce documents and possibly testify relating to a federal investigation of the generic pharmaceutical industry. We have been cooperating and intend to continue cooperating with the investigation. However, no assurance can be given as to the timing or outcome of the investigation.

INVENTORIES - Additional information (Details) - Supplier concentration $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($) item	Sep. 30, 2019 item	Sep. 30, 2020 USD ($) item	Sep. 30, 2019 item
Cost of goods sold
Concentration Risk, Percentage	14.00%	10.00%	12.00%	13.00%
Number of major suppliers \| item	1	1	1	1
Accounts payable
Amount payable to supplier \| $	$ 1.6		$ 1.6

INVENTORIES

9 Months Ended

Sep. 30, 2020

INVENTORIES

INVENTORIES

6. INVENTORIES

Inventories consist of the following as of:


	September 30,		December 31,
(in thousands)	2020		2019
Raw materials	$	43,010	$	34,881
Packaging materials		3,144		2,902
Work-in-progress		1,086		361
Finished goods		18,110		16,750
		65,350		54,894
Reserve for excess/obsolete inventories		(6,155)		(6,731)
Inventories, net	$	59,195	$	48,163

Vendor Concentration

We source the raw materials for our products, including active pharmaceutical ingredients (“API”), from both domestic and international suppliers. Generally, only a single source of API is qualified for use in each product due to the cost and time required to validate a second source of supply. As a result, we are dependent upon our current vendors to reliably supply the API required for on-going product manufacturing. During the three months ended September 30, 2020, we purchased approximately 14% of our inventory from one supplier. As of September 30, 2020, our accounts payable to this supplier was $1.6 million. During the three months ended September 30, 2019, we purchased approximately 10% of our inventory from one supplier. During the nine months ended September 30, 2020, we purchased approximately 12% of our inventory from one supplier. During the nine months ended September 30, 2019, we purchased approximately 13% of our inventory from one supplier.

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS (Policies)

9 Months Ended

Sep. 30, 2020

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

Overview

Basis of Presentation

Principles of Consolidation

Foreign Currency

Use of Estimates

Accounts Receivable

Geographic Information

The following table depicts the Company’s revenue by geographic operations during the following periods:


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
Location of Operations	2020		2019		2020		2019
United States	$	52,094	$	50,026	$	146,602	$	153,088
Canada		885		1,311		4,621		5,493
Total Revenue	$	52,979	$	51,337	$	151,223	$	158,581

The following table depicts the Company’s property and equipment, net according to geographic location as of:


(in thousands)	September 30, 2020		December 31, 2019
United States	$	26,560	$	26,708
Canada		13,884		13,843
Total property and equipment, net	$	40,444	$	40,551

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Recently Adopted Accounting Pronouncements

- Definition

Disclosure of accounting policy for segment reporting.

+ References + Details

PROPERTY, PLANT, AND EQUIPMENT

9 Months Ended

Sep. 30, 2020

PROPERTY, PLANT, AND EQUIPMENT

PROPERTY, PLANT, AND EQUIPMENT

7. PROPERTY, PLANT, AND EQUIPMENT

Property and equipment consist of the following as of:


	September 30,		December 31,
(in thousands)	2020		2019
Land	$	4,667	$	4,566
Buildings		11,142		10,275
Machinery, furniture, and equipment		38,257		34,984
Construction in progress		2,671		3,496
		56,737		53,321
Less: accumulated depreciation		(16,293)		(12,770)
Property and equipment, net	$	40,444	$	40,551

Depreciation expense was $1.2 million and $1.1 million for the three months ended September 30, 2020 and 2019, respectively. Depreciation expense was $3.5 million and $3.2 million for the nine months ended September 30, 2020 and 2019, respectively. During the three months ended September 30, 2020 and 2019, there was less than $0.1 million of interest capitalized into construction in progress. During the nine months ended September 30, 2020 and 2019, there was $0.1 and $0.2 million of interest capitalized into construction in progress, respectively. Construction in progress consists of multiple projects, primarily related to new equipment to expand our manufacturing capability as our product lines continue to grow.

STOCK-BASED COMPENSATION - Compensation expense (Details) - USD ($) $ in Thousands, shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Employee Stock Purchase Plan 2016 [Member]
Discount from market price (as a percent)			15.00%
Allocated Share-based Compensation Expense	$ 32	$ 30	$ 118	$ 90
Stock-based compensation shares available	0.2		0.2
Stock Incentive Plan 2008 [Member]
Allocated Share-based Compensation Expense	$ 2,351	2,440	$ 10,425	6,683
Stock-based compensation shares available	1.1		1.1
Cost of sales [Member] \| Employee Stock Purchase Plan 2016 [Member]
Allocated Share-based Compensation Expense	$ 3	4	$ 14	10
Cost of sales [Member] \| Stock Incentive Plan 2008 [Member]
Allocated Share-based Compensation Expense	34	26	93	75
Research and development Expense [Member] \| Employee Stock Purchase Plan 2016 [Member]
Allocated Share-based Compensation Expense	6	7	25	16
Research and development Expense [Member] \| Stock Incentive Plan 2008 [Member]
Allocated Share-based Compensation Expense	117	213	450	545
Selling, general and administrative Expenses [Member] \| Employee Stock Purchase Plan 2016 [Member]
Allocated Share-based Compensation Expense	23	19	79	64
Selling, general and administrative Expenses [Member] \| Stock Incentive Plan 2008 [Member]
Allocated Share-based Compensation Expense	$ 2,200	$ 2,201	$ 9,882	$ 6,063

INDEBTEDNESS - Facility components (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current debt, net of deferred financing costs	$ 12,785	$ 9,941
Non-current debt, net of deferred financing costs and current component	175,161	175,808
Term Loan and DDTL [Member]
Current borrowing on debt	13,240	10,412
Deferred financing costs	(455)	(471)
Current debt, net of deferred financing costs	12,785	9,941
Non-current borrowing on debt	168,583	177,069
Deferred financing costs	(922)	(1,261)
Non-current debt, net of deferred financing costs and current component	$ 167,661	$ 175,808

REVENUE RECOGNITION AND RELATED ALLOWANCES - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue Recognition	$ 52,979	$ 51,337	$ 151,223	$ 158,581
Sales of generic pharmaceutical products [Member]
Revenue Recognition	37,712	31,753	108,607	99,452
Sales of branded pharmaceutical products [Member]
Revenue Recognition	12,411	16,605	32,201	48,300
Sales of contract manufactured products [Member]
Revenue Recognition	2,152	2,376	7,026	8,499
Royalties from licensing agreements [Member]
Revenue Recognition	339	268	1,120	594
Product development services [Member]
Revenue Recognition	289	75	1,751	806
Other [Member]
Revenue Recognition	$ 76	$ 260	$ 518	$ 930

- Definition

+ References

+ Details

INDEBTEDNESS - Credit facility - Contractual maturity (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Term Loan [Member]
2020	$ 1,805
2021	5,414
2022	5,414
2023	54,140
Total	66,773
Delayed Draw Term Loan [Member]
2020	2,950
2021	5,900
2022	8,850
2023	97,350
Total	115,050
Revolver [Member]
2023	7,500
Total	$ 7,500

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2020	Oct. 29, 2020
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	001-31812
Entity Registrant Name	ANI PHARMACEUTICALS, INC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	58-2301143
Entity Address, Address Line One	210 Main Street West
Entity Address, City or Town	Baudette
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	56623
City Area Code	218
Local Phone Number	634-3500
Title of 12(b) Security	Common Stock
Trading Symbol	ANIP
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001023024
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false
Common Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		12,347,554
Class C Special Stock [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		10,864

FAIR VALUE DISCLOSURES (Tables)

9 Months Ended

Sep. 30, 2020

FAIR VALUE DISCLOSURES

Schedule of financial assets and liabilities accounted for at fair value on a recurring basis

The following table presents our financial assets and liabilities accounted for at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, by level within the fair value hierarchy:


(in thousands)	Fair Value at
Description	September 30, 2020		Level 1		Level 2		Level 3
Liabilities
Interest rate swaps	$	15,971	$	—	$	15,971	$	—


	Fair Value at
Description	December 31, 2019		Level 1		Level 2		Level 3
Liabilities
Interest rate swaps	$	6,215	$	—	$	6,215	$	—

CORTROPHIN PRE-LAUNCH CHARGES

9 Months Ended

Sep. 30, 2020

CORTROPHIN PRE-LAUNCH CHARGES

CORTROPHIN PRE-LAUNCH CHARGES

13. CORTROPHIN PRE-LAUNCH CHARGES

In January 2016, we acquired the right, title and interest in the NDAs for Cortrophin Gel and Cortrophin-Zinc. Subsequently, we have assembled a Cortrophin re-commercialization team of scientists, executed a long-term supply agreement with a supplier of pig pituitary glands, our primary raw material for corticotrophin API, executed a long-term supply agreement with an API manufacturer, with whom we have advanced the manufacture of corticotropin API via manufacture of commercial-scale batches, and executed a long-term commercial supply agreement with a current good manufacturing practice (“cGMP”) aseptic fill contract manufacturer.

Prior to the third quarter 2019, all purchases of material, including pig pituitary glands and API, related to the re-commercialization efforts have been consumed in research and development activities and recognized as research and development expense in the period in which they were incurred. In the third quarter of 2019, we began purchasing materials that are intended to be used commercially in anticipation of FDA approval of Cortrophin Gel and the resultant product launch. Under U.S. GAAP, we cannot capitalize these pre-launch purchases of materials as inventory prior to FDA approval, and accordingly, they are charged to expense in the period in which they are incurred. We expect these pre-launch purchases of material to increase significantly in the future as we build raw materials, API and finished goods for the expected launch of this product. During the three and nine months ended September 30, 2020, we incurred related charges for the purchase of materials of less than $0.1 million and $8.3 million, respectively. During the three months ended September 30, 2019, we incurred related charges for the purchase of materials of $0.2 million. Due to the inherent uncertainty of the timing of FDA approval for this product, we cannot reasonably predict whether these materials will ultimately be eligible for use in commercial finished goods inventory. In the future, we also expect to incur other charges directly related to the Cortrophin pre-

launch commercialization efforts, including, but not limited to, sales and marketing and consulting expenses, which will vary in frequency and impact on our results of operations.

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Adjustments for chargebacks and other allowances	$ 86,418	$ 59,946
Preferred Stock, Par or Stated Value Per Share (in dollars per share)	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	1,666,667	1,666,667
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Treasury Stock, Common, Shares	75,518	15,310
Common Stock [Member]
Common Stock, Par Value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Authorized Shares	33,333,334	33,333,334
Common Stock, Issued Shares	12,423,061	12,104,875
Common Stock, Outstanding Shares	12,347,543	12,089,565
Class C Special Stock [Member]
Common Stock, Par Value (in dollars per share)	$ 0.0001	$ 0.0001
Common Stock, Authorized Shares	781,281	781,281
Common Stock, Issued Shares	10,864	10,864
Common Stock, Outstanding Shares	10,864	10,864

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash Flows From Operating Activities
Net (loss)/income	$ (18,913)	$ 10,929
Adjustments to reconcile net income/(loss) to net cash and cash equivalents provided by operating activities:
Stock-based compensation	10,543	6,773
Deferred taxes	(9,032)	(6,433)
Depreciation and amortization	33,739	35,048
Acquired in-process research and development ("IPR&D")	3,753	2,653
Non-cash interest	1,288	5,679
Asset impairment charge	104	0
Changes in operating assets and liabilities:
Accounts receivable, net	(11,616)	(5,858)
Inventories, net	(1,151)	(5,671)
Prepaid expenses and other current assets	637	(510)
Accounts payable	(146)	2,130
Accrued royalties	1,004	(2,929)
Current income taxes, net	(545)	(5,836)
Accrued government rebates	2,777	210
Returned goods reserve	6,456	3,393
Accrued expenses, accrued compensation, and other	2,078	1,250
Net Cash and Cash Equivalents Provided by Operating Activities	20,976	40,828
Cash Flows From Investing Activities
Acquisition of product rights, IPR&D, and other related assets	(62,178)	(21,243)
Acquisition of property and equipment, net	(4,025)	(4,932)
Net Cash and Cash Equivalents Used in Investing Activities	(66,203)	(26,175)
Cash Flows From Financing Activities
Payments on Term Loan and Delayed Draw Term Loan agreements	(5,657)	(1,805)
Borrowings under Revolver agreement	15,000	0
Payments on Revolver agreement	(7,500)	0
Proceeds from stock option exercises and ESPP purchases	449	4,852
Treasury stock purchases for restricted stock vests	(1,523)	(1,031)
Net Cash and Cash Equivalents Provided by Financing Activities	769	2,016
Net Change in Cash and Cash Equivalents	(44,458)	16,669
Cash and cash equivalents, beginning of period	67,361	48,029
Cash and cash equivalents, end of period	22,903	64,698
Reconciliation of cash, cash equivalents, and restricted cash, beginning of period
Cash and cash equivalents	62,332	43,008
Restricted cash	5,029	5,021
Cash and cash equivalents, beginning of period	67,361	48,029
Reconciliation of cash, cash equivalents, and restricted cash, end of period
Cash and cash equivalents	17,900	59,673
Restricted cash	5,003	5,025
Cash and cash equivalents, end of period	22,903	64,698
Supplemental disclosure for cash flow information:
Cash paid for interest, net of amounts capitalized	5,080	3,627
Cash paid for income taxes	4,878	9,893
Supplemental non-cash investing and financing activities:
Acquisition of product rights, IPR&D, and other related assets included in returned goods reserve and derivatives and other non-current liabilities	399	0
Property and equipment purchased and included in accounts payable	$ 223	$ 479

INDEBTEDNESS - Credit facility (Details) $ in Thousands	1 Months Ended		9 Months Ended
INDEBTEDNESS - Credit facility (Details) $ in Thousands	Mar. 31, 2020 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Long-term Debt, Current Maturities			$ 12,785		$ 9,941
Borrowing repayment			$ 7,500	$ 0
Credit Agreement [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 125,000
Senior Secured Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 265,200
Debt Instrument, Term		5 years
Leverage Ratio			3.50
Fixed charge coverage ratio			1.25
Senior Secured Credit Facility [Member] \| LIBOR [Member] \| Minimum
Debt Instrument, Basis Spread on Variable Rate		1.50%
Senior Secured Credit Facility [Member] \| LIBOR [Member] \| Maximum
Debt Instrument, Basis Spread on Variable Rate		2.75%
Senior Secured Credit Facility [Member] \| Alternative Base Rate [Member] \| Minimum
Debt Instrument, Basis Spread on Variable Rate		0.50%
Senior Secured Credit Facility [Member] \| Alternative Base Rate [Member] \| Maximum
Debt Instrument, Basis Spread on Variable Rate		1.75%
Senior Secured Credit Facility [Member] \| Term Loan [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 72,200
Quarterly payment		5,900
Long-term Debt, Current Maturities			$ 5,900
Senior Secured Credit Facility [Member] \| Delayed Draw Term Loan [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 118,000
Debt Instrument, Term		5 years
Quarterly payment		$ 7,400
Long-term Debt, Current Maturities			7,400
Senior Secured Credit Facility [Member] \| Revolver [Member]
Line of Credit Facility, Maximum Borrowing Capacity		$ 75,000
Proceeds from borrowing	$ 15,000
Borrowing repayment			7,500
Line of Credit Facility, Remaining Borrowing Capacity			$ 67,500
Senior Secured Credit Facility [Member] \| Revolver [Member] \| Minimum
Line of Credit Facility, Commitment Fee Percentage		0.25%
Senior Secured Credit Facility [Member] \| Revolver [Member] \| Maximum
Line of Credit Facility, Commitment Fee Percentage		0.50%

EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2020

EARNINGS (LOSS) PER SHARE

Schedule of Earnings per share, basic and diluted

Earnings (loss) per share for the three and nine months ended September 30, 2020 and 2019 are calculated for basic and diluted earnings (loss) per share as follows:


	Basic				Diluted				Basic				Diluted
(in thousands, except per share amounts)	Three Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
Net income/(loss)	$	434	$	3,895	$	434	$	3,895	$	(18,913)	$	10,929	$	(18,913)	$	10,929
Net income allocated to restricted stock		(12)		(63)		(13)		(63)		—		(176)		—		(176)
Net income/(loss) allocated to common shares	$	422	$	3,832	$	421	$	3,832	$	(18,913)	$	10,753	$	(18,913)	$	10,753
Basic Weighted-Average Shares Outstanding		11,991		11,879		11,991		11,879		11,953		11,826		11,953		11,826
Dilutive effect of stock options and ESPP						12		128						—		106
Dilutive effect of Notes						—		78						—		128
Diluted Weighted-Average Shares Outstanding						12,003		12,085						11,953		12,060

Earnings/(Loss) per share	$	0.04	$	0.32	$	0.04	$	0.32	$	(1.58)	$	0.91	$	(1.58)	$	0.89

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Jan. 01, 2020	Dec. 31, 2019
(Accumulated deficit)/retained earnings	$ (1,337)		$ 17,584
ASU 2016-13 [Member] \| Cumulative Effect, Period of Adoption, Adjustment [Member]
(Accumulated deficit)/retained earnings		$ (8)

INCOME TAXES

9 Months Ended

Sep. 30, 2020

INCOME TAXES

INCOME TAXES

10. INCOME TAXES

We use the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.

The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. As of September 30, 2020, we have provided a valuation allowance against consolidated net deferred tax assets of $0.4 million, related solely to deferred tax assets for net operating loss carryforwards in certain U.S. state jurisdictions.

We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. We have not identified any uncertain income tax positions that could have a material impact on the consolidated financial statements. We recognize interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense; we did not have any such amounts accrued as of September 30, 2020 and December 31, 2019. We are subject to taxation in various U.S. jurisdictions and all of our income tax returns remain subject to examination by tax authorities due to the availability of NOL carryforwards.

For interim periods, we recognize an income tax provision/(benefit) based on our estimated annual effective tax rate, calculated on a worldwide consolidated basis, expected for the entire year. If we project taxable losses in any specific taxing jurisdiction, those losses are excluded from the calculation of the worldwide estimated annual effective tax rate and a resulting tax benefit is not recognized. The interim annual estimated effective tax rate is based on the statutory tax rates then in effect, as adjusted for estimated changes in temporary and estimated permanent differences, and excludes certain discrete items whose tax effect, when material, is recognized in the interim period in which they occur. These changes in temporary differences, permanent differences, and discrete items result in variances to the effective tax rate from period to period. We also have elected to exclude the impacts from significant pre-tax non-recognized subsequent events from our interim estimated annual effective rate until the period in which they occur. During periods when we incur net losses before income taxes, our annual estimated effective tax rate may be adjusted based on the "loss limitation" requirements applicable to interim tax provisions, resulting in a limited income tax benefit recognized in that period. Our estimated annual effective tax rate changes throughout the year as our on-going estimates of pre-tax income, changes in temporary differences, and permanent differences are revised, and as discrete items occur. Global Intangible Low-Taxed Income (“GILTI”), as defined in the Tax Cuts and Jobs Act of 2017, generated from our Canadian operations is subject to U.S. taxes, with certain defined exemptions, thresholds and credits. For financial reporting purposes we have elected to treat GILTI inclusions as a period cost.

For the three months ended September 30, 2020, we recognized an income tax benefit of $0.4 million. The income tax benefit for this period is the incremental benefit generated from applying the estimated annual worldwide effective tax benefit rate of 19.8% to consolidated pre-tax losses for the nine months ended September 30, 2020 as compared to the consolidated income tax benefit as of June 30, 2020. The estimated annual effective rate varies from the statutory rate as a result of permanent differences as well as the net effects of certain discrete items

occurring which impact our income tax provision in the period in which they occur. There were no material discrete items during the three months ended September 30, 2020.

For the three months ended September 30, 2019, we recognized an income tax expense of $0.1 million. The income tax expense resulted from applying an estimated annual worldwide effective tax rate of 8.4% to pre-tax consolidated income of $4.0 million reported during the period, reduced by the net effects of certain discrete items occurring in 2019 which impact our income tax provision in the period in which they occur. Discrete items occurring during the three months ended September 30, 2019 include the impact of stock option exercises, disqualifying dispositions of incentive stock options, and return to provision adjustments.

For the nine months ended September 30, 2020, we recognized an income tax benefit of $4.7 million. The income tax benefit resulted from applying an estimated annual worldwide effective tax benefit rate of 19.8% to pre-tax consolidated loss of $23.6 million reported during the period, reduced by the net effects of certain discrete items occurring which impact our income tax provision in the period in which they occur. There were no material discrete items during the nine months ended September 30, 2020.

For the nine months ended September 30, 2019, we recognized an income tax benefit of $0.1 million. The income tax benefit resulted from applying an estimated annual worldwide effective tax rate of 16.6% to pre-tax consolidated income of $10.8 million reported during the period, reduced by the net effects of certain discrete items occurring in 2019 which impact our income tax provision in the period in which they occur. Discrete items occurring during the nine months ended September 30, 2019 include the impact of the release of ANI Canada’s net valuation allowance, retroactive application of our newly adopted transfer pricing policy to 2018, and the impact of current period awards of stock-based compensation, stock option exercises, disqualifying dispositions of incentive stock options, and return to provision adjustments.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2020

INVENTORIES

Schedule of Inventories

Inventories consist of the following as of:


	September 30,		December 31,
(in thousands)	2020		2019
Raw materials	$	43,010	$	34,881
Packaging materials		3,144		2,902
Work-in-progress		1,086		361
Finished goods		18,110		16,750
		65,350		54,894
Reserve for excess/obsolete inventories		(6,155)		(6,731)
Inventories, net	$	59,195	$	48,163

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2020

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

9. STOCK-BASED COMPENSATION

Employee Stock Purchase Plan

In July 2016, we commenced administration of the ANI Pharmaceuticals, Inc. 2016 Employee Stock Purchase Plan. As of September 30, 2020, we had 0.2 million shares of common stock available under the ESPP. Under the ESPP, participants can purchase shares of our stock at a 15% discount.

The following table summarizes ESPP expense incurred under the 2016 Employee Stock Purchase Plan and included in our accompanying unaudited interim condensed consolidated statements of operations:


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cost of sales	$	3	$	4	$	14	$	10
Research and development		6		7		25		16
Selling, general, and administrative		23		19		79		64
	$	32	$	30	$	118	$	90

Stock Incentive Plan

All equity-based service awards are granted under the ANI Pharmaceuticals, Inc. Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”). As of September 30, 2020, 1.1 million shares of our common stock were available for issuance under the 2008 Plan.

On September 8, 2020, we granted 179,643 stock options to Nikhil Lalwani, President and Chief Executive Officer, through an inducement grant outside of our 2008 Plan to induce Mr. Lalwani to accept employment with us (the “Inducement Grant”). The options were granted at an exercise price equal to the fair market value of a share of our common stock on the respective grant date and will be exercisable in four equal annual installments beginning on the first anniversary of the respective grant date. The grant was made pursuant to inducement grants outside of our shareholder approved equity plan as permitted under the Nasdaq Stock Market listing rules.

The following table summarizes stock-based compensation expense incurred under the 2008 Plan and Inducement Grant included in our accompanying unaudited interim condensed consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Cost of sales	$	34	$	26	$	93	$	75
Research and development		117		213		450		545
Selling, general, and administrative		2,200		2,201		9,882		6,063
	$	2,351	$	2,440	$	10,425	$	6,683

A summary of stock option and restricted stock activity under the 2008 Plan and Inducement Grant during the nine months ended September 30, 2020 and 2019 is presented below:


(in thousands)	Options	Inducement Grants	RSAs
Outstanding at December 31, 2018	759	—	117
Granted	160	—	122
Options Exercised/RSAs Vested	(117)	—	(42)	⁽¹⁾
Forfeited	(24)	—	(3)
Expired	(1)	—	—
Outstanding at September 30, 2019	777	—	194

Outstanding at December 31, 2019	757	—	192
Granted	42	180	305
Options Exercised/RSAs Vested	(8)	—	(128)	⁽²⁾
Forfeited	(44)	—	(17)
Expired	—	—	—
Outstanding at September 30, 2020	747	180	352

(1)

Includes 15 thousand shares purchased from employees to cover employee income taxes related to income earned upon vesting of restricted stock. The shares purchased are held in treasury and the $1.0 million total purchase price for the shares is included in Treasury stock in our accompanying unaudited interim condensed consolidated balance sheets.

(2)

Includes 43 thousand shares purchased from employees to cover employee income taxes related to income earned upon vesting of restricted stock. The shares purchased are held in treasury and the $1.5 million total purchase price for the shares is included in Treasury stock in our accompanying unaudited interim condensed consolidated balance sheets.

On January 17, 2020, we entered into employment agreements with our Named Executive Officers (“NEOs”), (i) former President and Chief Executive Officer, Arthur S. Przybyl, (ii) Vice President of Finance and Chief Financial Officer, Stephen P. Carey, (iii) Senior Vice President of Business Development and Specialty Sales, Robert Schrepfer and (iv) Senior Vice President of Operations and Product Development, James G. Marken. As part of the employment agreements, the NEOs’ Non-Statutory Stock Option, Incentive Option and Restricted Stock Grant agreements (“NEO Stock Agreements”) were modified to provide for accelerated vesting of unvested non-statutory stock options and restricted stock awards in the event of a termination for any reason other than "cause" as defined in the employment agreements or by the NEOs for “good reason” as defined in the employment agreements. Additionally, any vested incentive or non-statutory stock options and unvested non-statutory stock options subject to acceleration and held unexercised by the NEOs at the time of such termination at the time will retain their contractual term, which is generally 10 years from grant date. At this time, we did not recognize any incremental stock-based compensation expense associated with these modifications, as no assumptions regarding the assumed probability of these awards' future vests were changed on this modification date.

In May 2020, our former President and Chief Executive Officer, Arthur S. Przybyl, departed the Company. The departure constituted a Termination Without Good Cause as defined in his employment agreement, and he received separation payments and benefits under his employment agreement in respect of a termination without good cause, including those related to his non-statutory stock options and restricted stock awards as discussed above. This action was accounted for as a modification of the underlying awards and the full expense related to the modified awards was recognized in the second quarter 2020. As part of the benefits, 48,448 previously unvested restricted stock awards and 63,305 previously unvested non-statutory stock options vested upon the termination. Additionally, these 63,305 previously unvested non-statutory stock options that vested upon termination and 101,376 previously vested and unexercised non-statutory stock options held by Mr. Przybyl retained their original contractual term. During the

three months ended June 30, 2020, we recognized $3.4 million of stock-based compensation expense associated with this termination and modification of awards.

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS (Tables)

9 Months Ended

Sep. 30, 2020

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

Schedule of revenue from company's revenue by geographic operations

The following table depicts the Company’s revenue by geographic operations during the following periods:


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
Location of Operations	2020		2019		2020		2019
United States	$	52,094	$	50,026	$	146,602	$	153,088
Canada		885		1,311		4,621		5,493
Total Revenue	$	52,979	$	51,337	$	151,223	$	158,581

Schedule of company's property and equipment, net according to geographic location

The following table depicts the Company’s property and equipment, net according to geographic location as of:


(in thousands)	September 30, 2020		December 31, 2019
United States	$	26,560	$	26,708
Canada		13,884		13,843
Total property and equipment, net	$	40,444	$	40,551

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Condensed Consolidated Statements of Operations
Net Revenues	$ 52,979	$ 51,337	$ 151,223	$ 158,581
Operating Expenses
Cost of sales (excluding depreciation and amortization)	20,118	15,002	62,617	45,359
Research and development	2,939	4,982	12,318	15,128
Selling, general, and administrative	15,725	14,357	50,621	41,829
Depreciation and amortization	11,358	9,473	33,739	35,048
Cortrophin pre-launch charges	37	195	8,275	195
Total Operating Expenses	50,177	44,009	167,570	137,559
Operating Income/(Loss)	2,802	7,328	(16,347)	21,022
Other Expense, net
Interest expense, net	(2,510)	(3,336)	(6,898)	(10,096)
Other expense, net	(229)	(33)	(335)	(117)
Income/(Loss) Before Benefit/(Provision) for Income Taxes	63	3,959	(23,580)	10,809
Benefit/(provision) for income taxes	371	(64)	4,667	120
Net Income/(Loss)	$ 434	$ 3,895	$ (18,913)	$ 10,929
Basic and Diluted Earnings/(Loss) Per Share:
Basic Earnings/(Loss) Per Share	$ 0.04	$ 0.32	$ (1.58)	$ 0.91
Diluted Earnings/(Loss) Per Share	$ 0.04	$ 0.32	$ (1.58)	$ 0.89
Basic Weighted-Average Shares Outstanding	11,991	11,879	11,953	11,826
Diluted Weighted-Average Shares Outstanding	12,003	12,085	11,953	12,060

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
INCOME TAXES (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
INCOME TAXES
Deferred Tax Assets, Valuation Allowance	$ 400		$ 400
Benefit/(provision) for income taxes	$ 371	$ (64)	$ 4,667	$ 120
Effective income tax rate continuing operations	19.80%	8.40%	19.80%	16.60%
Pre-tax consolidated income	$ 63	$ 3,959	$ (23,580)	$ 10,809

- Definition

Amount of income (loss) from continuing operations, including income (loss) from equity method investments, before deduction of income tax expense (benefit), and income (loss) attributable to noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8906-108599

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-Section 50
-Paragraph 32
-Subparagraph (f)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 940
-SubTopic 20
-Section 25
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-URI http://asc.fasb.org/extlink&oid=68072869&loc=d3e41242-110953

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

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-Publisher FASB
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-SubTopic 10
-Section S99
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-Subparagraph (SX 210.5-03(10))
-URI http://asc.fasb.org/extlink&oid=120395209&loc=SL114868664-224227

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
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-Topic 944
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-Section S99
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-Subparagraph (SX 210.7-04(8))
-URI http://asc.fasb.org/extlink&oid=120400993&loc=SL114874131-224263

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 235
-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-05(b)(2))
-URI http://asc.fasb.org/extlink&oid=120399901&loc=d3e537907-122884

Reference 9: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8924-108599

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
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-Section S99
-Paragraph 1
-Subparagraph (SX 210.9-04(15))
-URI http://asc.fasb.org/extlink&oid=120399700&loc=SL114874048-224260

+ Details

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

FAIR VALUE DISCLOSURES

9 Months Ended

Sep. 30, 2020

FAIR VALUE DISCLOSURES

FAIR VALUE DISCLOSURES

12. FAIR VALUE DISCLOSURES

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

The inputs used in measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy. The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of our funds. The fair value of short-term financial instruments (primarily accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities) approximate their carrying values because of their short-term nature. The Term Loan, DDTL, and Revolver bear an interest rate that fluctuates with the changes in LIBOR and, because the variable interest rates approximate market borrowing rates available to us, we believe the carrying values of these borrowings approximated their fair values at September 30, 2020.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our contingent value rights (“CVRs”), which were granted coincident with our merger with BioSante and expire in June 2023, are considered contingent consideration and are classified as liabilities. As such, the CVRs were recorded as purchase consideration at their estimated fair value, using level 3 inputs, and are marked to market each reporting period until settlement. The fair value of CVRs is estimated using the present value of our projection of the expected payments pursuant to the terms of the CVR agreement, which is the primary unobservable input. If our projection or expected payments were to increase substantially, the value of the CVRs could increase as a result. The present value of the liability was calculated using a discount rate of 15%. We determined that the fair value of the CVRs was immaterial as of September 30, 2020 and December 31, 2019. We also determined that the changes in such fair value were immaterial in the three and nine months ended September 30, 2020 and 2019.

In April 2020, we terminated two interest rate swaps used to manage interest rate exposure on underlying interest payments for our Term Loan and DDTL and entered into one new interest rate swap agreement to manage our total exposure under these borrowings (Note 4). The fair value of our interest rate swap is estimated based on the present value of projected future cash flows using the LIBOR forward rate curve. The model used to value the interest rate swap includes inputs of readily observable market data, a Level 2 input. As described in detail in Note 4, the fair value of the interest rate swap was a $16.0 million liability at September 30, 2020.


(in thousands)	Fair Value at
Description	September 30, 2020		Level 1		Level 2		Level 3
Liabilities
Interest rate swaps	$	15,971	$	—	$	15,971	$	—


	Fair Value at
Description	December 31, 2019		Level 1		Level 2		Level 3
Liabilities
Interest rate swaps	$	6,215	$	—	$	6,215	$	—

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We do not have any financial assets and liabilities that are measured at fair value on a non-recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

We do not have any non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure our long-lived assets, including property, plant, and equipment, ROU assets, intangible assets, and goodwill, at fair value on a non-recurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the three months ended September 30, 2020, we recognized a $0.1 million impairment of a fixed asset. No other fair value impairment was recognized in the three and nine months ended September 30, 2020 and 2019.

Acquired Non-Financial Assets Measured at Fair Value

In July 2020, we acquired an ANDA and certain related inventories from a private company for total consideration of $4.3 million. We also incurred and paid $0.1 million in transaction costs directly related to the acquisition. We accounted for this transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition. We recognized $3.0 million as an acquired ANDA intangible asset and $1.4 million in inventory at fair value. The fair value of the inventory was determined based on the estimated selling price to be generated from the finished goods, less costs to sell, including a reasonable margin, which are level 3 unobservable inputs. The ANDA will be amortized in full over its useful life of seven years and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to September 30, 2020 and therefore no impairment loss was recognized for the nine months ended September 30, 2020.

In May 2020, we entered into an agreement with a private company to purchase an ANDA and API for one currently marketed generic drug product and certain API for $0.2 million using cash on hand. We also incurred and paid $7 thousand in transaction costs directly related to the acquisition. We accounted for this transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition. The API inventory was recognized at fair value. The ANDA will be amortized in full over its useful life of seven years and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to September 30, 2020 and therefore no impairment loss was recognized for the nine months ended September 30, 2020.

In January 2020, we completed the acquisition of the U.S. portfolio of 23 generic products and API and finished goods related to certain of those products from Amerigen Pharmaceuticals, Ltd. ("Amerigen") for a purchase consideration of $56.8 million and up to $25.0 million in contingent payments over the next four years. The product portfolio included ten commercial products, three approved products with launches pending, four filed products and four in-development products as well as a license to commercialize two approved products. Payments were made using cash on hand. We also incurred and paid $0.7 million in transaction costs directly related to the acquisition. We accounted for the transaction as an asset acquisition and capitalized the transactions costs directly related to the acquisition. We recognized $38.5 million as acquired ANDA intangible assets and $6.7 million as acquired marketing and distribution rights related to the licensed products, which will be amortized over their useful lives of seven years. We also recognized $3.8 million of the purchase price as research and development expense because certain of the generic products have significant remaining work required in order to be commercialized and the products do not have an alternative future use. The payment was allocated to the two asset categories and in-process research and development based on relative fair value, which was determined using Level 3 unobservable inputs. To determine the fair value of the acquired intangible assets and in-process research and development, we used the present value of the estimated cash flows related to the products, using a discount rate of 8%. We also recognized $8.4 million in inventory at fair value, including $1.7 million of API and $6.7 million of finished goods. The fair value of the inventory was determined based on the estimated selling price to be generated from the finished goods, less costs to sell, including a reasonable margin, which are level 3 unobservable inputs. Contingent liabilities are accrued when they are both estimable and probable. The intangible assets will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to September 30, 2020 and therefore no impairment loss was recognized for the nine months ended September 30, 2020.

In June 2019, we acquired from Coeptis Pharmaceuticals, Inc. seven development stage generic products, as well as API and reference-listed drug inventory related to certain of the products for a payment of $2.3 million. The entire payment, and $24 thousand of transaction costs directly related to the acquisition, was recorded as research and development expense because the potential generic products have significant remaining work required in order to commercialize the products and do not have an alternative future use. In addition, we could make up to $12.0 million in payments for certain development and commercial milestones. These milestones were determined to be contingent liabilities and will be accrued when they are both estimable and probable.

In April 2019, we entered into an agreement with PII and BAS, under which a previously-commercialized product would be developed and marketed. Per the agreement, we paid PII a series of licensing fees in conjunction with the achievement of certain development and commercial milestones. In the fourth quarter of 2019, the product was launched, triggering a $0.5 million payment due to PII. The payment was capitalized as an intangible asset and is being amortized in full over its useful life of 10 years and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified and therefore no impairment loss was recognized for the nine months ended September 30, 2020.

In March 2019, we entered into an agreement with Teva Pharmaceutical Industries Ltd. to purchase a basket of ANDAs for 35 previously-marketed generic drug products for $2.5 million in cash. We made the $2.5 million cash payment using cash on hand and capitalized $10 thousand of costs directly related to the asset purchase. We accounted for this transaction as an asset purchase. The $2.5 million of ANDAs were recorded at their relative fair value, determined using Level 3 unobservable inputs. In order to determine the fair value of the product rights intangible assets, we used the present value of the estimated cash flows related to the product rights, using a discount rate of 15%. The ANDAs are being amortized in full over their 10 year useful lives and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to September 30, 2020 and therefore no impairment loss was recognized for the nine months ended September 30, 2020.

In January 2019, we entered into an amendment to asset purchase agreements with Teva related to three purchases of baskets of ANDAs. Under the terms of the Asset Purchase Agreement Amendment, all royalty obligations of the Company owed to Teva with respect to products associated with ten ANDAs under the original asset purchase agreements ceased being effective as of December 31, 2018. As consideration for the termination of such future royalty obligations, we paid Teva a sum of $16.0 million in cash. Upon payment of $16.0 million, the purchase price of each basket of ANDAs was increased to reflect the subsequent payment as if that payment had been made on the initial acquisition date. As a result, in addition to increasing the carrying value of the acquired ANDA intangible assets by $9.2 million, we recognized cumulative amortization expense of $6.8 million. The payment was allocated to the three ANDA baskets based on the relative fair value of the ANDA baskets, which were determined using Level 3 unobservable inputs. In order to determine the fair value of the acquired ANDA intangible assets, we used the present value of the estimated cash flows related to the ANDAs, using a discount rate of 12%. The additional carrying value is being amortized over the remaining useful lives of the three ANDA baskets and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to September 30, 2020 and therefore no impairment loss was recognized for the nine months ended September 30, 2020.

In April 2018, we entered into an agreement with Impax Laboratories, Inc. (now Amneal) to purchase the approved ANDAs for three previously-commercialized generic drug products, the approved ANDAs for two generic drug products that had not yet been commercialized at the time of the acquisition, the development package for one generic drug product, a license, supply, and distribution agreement for a generic drug product with an ANDA that was pending approval, and certain manufacturing equipment required to manufacture one of the products, for $2.3 million in cash. At the same time, we entered into a supply agreement with Amneal under which we may elect to purchase the finished goods for one of the products for up to 17 months beginning October 1, 2019, under certain conditions. If we elected to purchase the finished goods from Amneal for this period, we could have been required to pay a milestone payment of up to $10.0 million upon launch, depending on the number of competitors selling the

product at the time of launch. The payment was not triggered. As a result, no payment was made, and this contingent liability has been resolved. The launch of one of the acquired products had the potential to trigger a milestone payment of $25.0 million to Teva, depending on the number of competitors selling the product at the time of launch. We launched this product in 2019 and the payment was not triggered. As a result, no payment was made, and this contingent liability has been resolved. Additionally, depending on the number of competitors selling the product one year after the launch date, we could have been required to pay a second milestone of $15.0 million to Teva. The one-year anniversary of the launch occurred during the nine months ended September 30, 2020 and the payment was not triggered. As a result, no payment was made, and this contingent liability has been resolved. We made the $2.3 million cash payment using cash on hand and capitalized $0.1 million of costs directly related to the asset purchase. We accounted for this transaction as an asset purchase. The $1.0 million acquired ANDA intangible assets were recorded at their relative fair value, determined using Level 3 unobservable inputs. In order to determine the fair value of the acquired ANDA intangible assets, we used the present value of the estimated cash flows related to the approved ANDAs, using discount rates of 10% to 15%. The acquired ANDAs are being amortized in full over their 10 year useful lives and will be tested for impairment when events or circumstances indicate that the carrying value of the assets may not be recoverable. The $58 thousand of manufacturing equipment used to manufacture one of the products was recorded at its relative fair value, based on the estimated net book value of the equipment purchased. The equipment is being amortized in full over its five year useful life and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable. No such triggering events were identified during the period from the date of acquisition to September 30, 2020 and therefore no impairment loss was recognized for the nine months ended September 30, 2020. The $1.3 million of in-process research and development related to products with significant further work required in order to commercialize the products, and for which there is no alternative future use. The in-process research and development was recorded at its relative fair value, determined using Level 3 unobservable inputs. In order to determine the fair value of the in-process research and development, we used the present value of the estimated cash flows related to the products, using a discount rate of 75%, reflective of the higher risk associated with these products. As the transaction was accounted for as an asset purchase, the $1.3 million of in-process research and development was immediately recognized as research and development expense.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

COMMITMENTS AND CONTINGENCIES - Maturity analysis of operating leases (Details) $ in Thousands	Sep. 30, 2020 USD ($)
COMMITMENTS AND CONTINGENCIES
2020	$ 59
2021	172
2022	132
2023	61
2024 and thereafter	31
Total	455
Discount	(25)
Lease liability	430
Current lease liability	(181)
Non-current lease liability	$ 249

GOODWILL AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2020

GOODWILL AND INTANGIBLE ASSETS

Schedule of components of net definite-lived intangible assets

The components of net definite-lived intangible assets are as follows:


	September 30, 2020				December 31, 2019				Weighted Average
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Amortization
(in thousands)	Amount		Amortization		Amount		Amortization		Period
Acquired ANDA intangible assets	$	106,415	$	(39,261)	$	64,704	$	(30,169)	8.8	years
NDAs and product rights		230,974		(106,201)		230,974		(87,352)	10.0	years
Marketing and distribution rights		17,657		(11,187)		10,923		(8,982)	5.7	years
Non-compete agreement		624		(401)		624		(334)	7.0	years
	$	355,670	$	(157,050)	$	307,225	$	(126,837)

Schedule of expected future amortization expense

Expected future amortization expense is as follows:


(in thousands)
2020	$	9,664
2021		38,655
2022		35,249
2023		34,501
2024		31,524
2025 and thereafter		49,027
Total	$	198,620

REVENUE RECOGNITION AND RELATED ALLOWANCES

9 Months Ended

Sep. 30, 2020

REVENUE RECOGNITION AND RELATED ALLOWANCES

REVENUE RECOGNITION AND RELATED ALLOWANCES

2. REVENUE RECOGNITION AND RELATED ALLOWANCES

Revenue Recognition

We recognize revenue using the following steps:

●

Identification of the contract, or contracts, with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price, including the identification and estimation of variable consideration;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when we satisfy a performance obligation.

We derive our revenues primarily from sales of generic and branded pharmaceutical products. Revenue is recognized when our obligations under the terms of our contracts with customers are satisfied, which generally occurs when control of the products we sell is transferred to the customer. We estimate variable consideration after considering applicable information that is reasonably available. We generally do not have incremental costs to obtain contracts that would otherwise not have been incurred. We do not adjust revenue for the promised amount of consideration for the effects of a significant financing component because our customers generally pay us within 100 days.

All revenue recognized in the accompanying unaudited interim condensed consolidated statements of operations is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to contract type:


	Three Months Ended				Nine Months Ended
Products and Services	September 30,		September 30,		September 30,		September 30,
(in thousands)	2020		2019		2020		2019
Sales of generic pharmaceutical products	$	37,712	$	31,753	$	108,607	$	99,452
Sales of branded pharmaceutical products		12,411		16,605		32,201		48,300
Sales of contract manufactured products		2,152		2,376		7,026		8,499
Royalties from licensing agreements		339		268		1,120		594
Product development services		289		75		1,751		806
Other⁽¹⁾		76		260		518		930
Total net revenues	$	52,979	$	51,337	$	151,223	$	158,581

⁽¹⁾	Primarily includes laboratory services and royalties on sales of contract manufactured products.

The following table depicts revenue recognized during the following periods:


	Three Months Ended				Nine Months Ended
Timing of Revenue Recognition	September 30,		September 30,		September 30,		September 30,
(in thousands)	2020		2019		2020		2019
Performance obligations transferred at a point in time	$	52,690	$	51,262	$	149,472	$	157,775
Performance obligations transferred over time		289		75		1,751		806
Total	$	52,979	$	51,337	$	151,223	$	158,581

In the three and nine months ended September 30, 2020 and 2019, we did not incur, and therefore did not defer, any material incremental costs to obtain contracts. We recognized a decrease of $8.7 million to net revenue from performance obligations satisfied in prior periods during the nine months ended September 30, 2020, consisting primarily of revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales. We recognized a decrease of $6.5 million of net revenue from performance obligations satisfied in prior periods during the nine months ended September 30, 2019, consisting primarily of revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales, partially offset by royalties from licensing agreements. We provide technical transfer services to customers, for which services are transferred over time. As a result, we had less than $0.1 million of contract assets related to revenue recognized based on a percentage of completion but not yet billed at both September 30, 2020 and December 31, 2019 and $0.1 million and $0.5 million of deferred revenue at September 30, 2020 and December 31, 2019, respectively. For the nine months ended September 30, 2020, we recognized $0.3 million of revenue that was included in deferred revenue as of December 31, 2019.

Revenue from Sales of Generic and Branded Pharmaceutical Products

Product sales consists of sales of our generic and brand pharmaceutical products. Our sole performance obligation in our contracts is to provide pharmaceutical products to customers. Our products are sold at pre-determined standalone selling prices and our performance obligation is considered to be satisfied when control of the product is transferred to the customer. Control is transferred to the customer upon delivery of the product to the customer, as our pharmaceutical products are sold on an FOB destination basis and because inventory risk and risk of ownership passes to the customer upon delivery. Payment terms for these sales are generally less than 100 days.

Sales of our pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative and other rebates, and cash discounts. Estimates for these elements of variable consideration require significant judgment. A comprehensive discussion of variable consideration is included in Item 8. Consolidated Financial Statements, Note 1, Description of Business and Summary of Significant Accounting Policies, in our Annual Report on Form 10-K for the year ended December 31, 2019.

The following table summarizes activity in the consolidated balance sheets for accruals and allowances for the nine months ended September 30, 2020 and 2019, respectively:


	Accruals for Chargebacks, Returns, and Other Allowances
							Administrative		Prompt
			Government				Fees and Other		Payment
(in thousands)	Chargebacks		Rebates		Returns		Rebates		Discounts
Balance at December 31, 2018 (1)	$	39,007	$	8,974	$	12,552	$	7,353	$	2,009
Accruals/Adjustments		187,843		12,723		13,392		27,476		7,962
Credits Taken Against Reserve		(188,504)		(12,513)		(9,999)		(26,927)		(7,714)
Balance at September 30, 2019 (1)	$	38,346	$	9,184	$	15,945	$	7,902	$	2,257

Balance at December 31, 2019 (1)	$	49,882	$	8,901	$	16,595	$	8,281	$	2,549
Accruals/Adjustments		288,538		14,288		22,744		27,383		10,248
Credits Taken Against Reserve		(262,531)		(11,511)		(16,089)		(27,287)		(9,442)
Balance at September 30, 2020 (1)	$	75,889	$	11,678	$	23,250	$	8,377	$	3,355

(1)

Contract Manufacturing Product Sales Revenue

Contract manufacturing arrangements consists of agreements in which we manufacture a pharmaceutical product on behalf of a third party. Our performance obligation is to manufacture and provide pharmaceutical products to customers, typically pharmaceutical companies. The contract manufactured products are sold at pre-determined standalone selling prices and our performance obligations are considered to be satisfied when control of the product is transferred to the customer. Control is transferred to the customer when the product leaves our dock to be shipped to the customer, as our pharmaceutical products are sold on an FOB shipping point basis and the inventory risk and risk of ownership passes to the customer at that time. Payment terms for these sales are generally less than two months. We estimate returns based on historical experience. Historically, we have not had material returns for contract manufactured products.

As of September 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations for all open contract manufacturing customer contracts was $7.8 million, which consists of firm orders for contract manufactured products. We will recognize revenue for these performance obligations as they are satisfied, which is anticipated within 12 months.

Royalties from Licensing Agreements

From time to time, we enter into transition agreements with the sellers of products we acquire, under which we license to the seller the right to sell the acquired products. Therefore, we recognize the revenue associated with sales of the underlying products as royalties. Because these royalties are sales-based, we recognize the revenue when the underlying sales occur, based on sales and gross profit information received from the sellers. Upon full transition of the products and upon launching the products under our own labels, we recognize revenue for the products as sales of generic or branded pharmaceutical products, as described above.

Pursuant to a 2012 Tripartite Agreement (the “Tripartite Agreement”) between the Company, The Regents of the University of California (“The Regents”), and Cabaret Biotech Ltd., an Israeli corporation (“Cabaret”) (as assignee

of Dr. Zelig Eshhar’s rights under the Tripartite Agreement), and subsequent amendments thereto and assignments thereof, we are entitled to receive a percentage of the milestone and sales royalty payments paid to Cabaret by Kite Pharma, Inc. (“Kite”), a subsidiary of Gilead Sciences, Inc., under a license agreement. Under such license agreement, Kite licensed from Dr. Eshhar and Cabaret the patent rights covered by the Tripartite Agreement and agreed to make certain payments to Cabaret based on, among other things, Kite’s sales of Yescarta®. Under the Tripartite Agreement, portions of these payments are to be distributed to The Regents and to us.

We record royalty income related to Yescarta® on an accrual basis utilizing our best estimate of royalties earned based upon information available in the public domain, our understanding of the various agreements governing the royalty, and other information received from time to time from the relevant parties. Generally, cash is received directly from Cabaret once a year. Currently, the agreements governing this royalty are subject to multiple litigations in multiple jurisdictions, including litigation between Cabaret and Kite, and separately, the Company and Cabaret. In addition, the Israeli Tax Authority has taken the position that any payments from Cabaret to us are subject to mandatory withholding tax. The Company and its tax counsel have disputed this position and are actively seeking to resolve the issue. The ultimate outcome of these matters, either individually or in the aggregate, may impact the amount of cash due to us, and may result in the termination of future payments or further claims that royalties received by us in the past be repaid.

Product Development Services Revenue

We provide product development services to customers, which are performed over time. These services primarily relate to the technical transfer of product development to our facility in Oakville, Ontario. The duration of these technical transfer projects can be up to three years. Deposits received from these customers are recorded as deferred revenue until revenue is recognized. For contracts with no deposits and for the remainder of contracts with deposits, we invoice customers as our performance obligations are satisfied. We recognize revenue on a percentage of completion basis, which results in contract assets on our balance sheet. As of September 30, 2020, the aggregate amount of the transaction price allocated to the remaining performance obligations for all open product development services contracts was $3.1 million. We will recognize revenue for these performance obligations as they are satisfied, which is anticipated within the next 18 months.

Credit Concentration

Our customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and pharmaceutical companies.

During the three and nine months ended September 30, 2020 and 2019 we had three customers that accounted for 10% or more of net revenues. As of September 30, 2020, accounts receivable from these customers totaled 81% of accounts receivable, net.

The three customers represent the total percentage of net revenues as follows:


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019
Customer 1	30	%	34	%	31	%	33	%
Customer 2	25	%	24	%	24	%	24	%
Customer 3	19	%	23	%	19	%	24	%

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
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-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

9 Months Ended

Sep. 30, 2020

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

4. DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

At times we use derivative financial instruments to hedge our exposure to interest rate risks. All derivative financial instruments are recognized as either assets or liabilities at fair value on the consolidated balance sheet and are classified as current or non-current based on the scheduled maturity of the instrument.

When we enter into a hedge arrangement and intend to apply hedge accounting, we formally document the hedge relationship and designate the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge. When we determine that a derivative financial instrument qualifies as a cash flow hedge

and is effective, the changes in fair value of the instrument are recorded in accumulated other comprehensive loss, net of tax in our consolidated balance sheets and will be reclassified to earnings when the hedged item affects earnings.

In December 2018, we refinanced our previous Credit Agreement and, at the same time, entered into an interest rate swap, which was considered a derivative financial instrument, with Citizens Bank, N.A. to manage our exposure to changes in LIBOR-based interest rates underlying our Term Loan. In February 2019, we entered into an interest rate swap, which was considered a derivative financial instrument, with Citizens Bank, N.A. to manage our exposure to changes in LIBOR-based interest rates underlying our DDTL. The hedges had been designated as effective cash flow hedges and qualified for hedge accounting. The interest rate swaps related to the Term Loan and DDTL had a weighted average fixed rate of 2.60% and 2.47%, respectively, with a maturity in December 2023. In April 2020, we terminated the remaining $184.2 million notional value of these interest rate swaps. We discontinued hedge accounting for these instruments and are recognizing the net loss in accumulated other comprehensive loss of $13.2 million to interest expense over the remaining terms through December 2023.

At the same time in April 2020, we entered into an interest rate swap with Citizens Bank, N.A. to manage our exposure to changes in LIBOR-based interest rates underlying total borrowings under our Term Loan and DDTL. The interest rate swap matures in December 2026. As of September 30, 2020, the notional amount of the interest rate swap was $181.8 million and decreases in line with maturities of our Term Loan and DDTL until December 2023, after which it remains static until maturity in 2026. The interest rate swap provides an effective fixed rate of 1.99% and has been designated as an effective cash flow hedge and therefore qualifies for hedge accounting. The interest rate swap effectively provides a fixed rate of interest throughout the life of our Term Loan and DDTL. As of September 30, 2020, the fair value of the interest rate swap liability was valued at $16.0 million and was recorded in derivatives and other non-current liabilities in the accompanying unaudited interim condensed consolidated balance sheets. As of September 30, 2020, $13.1 million was recorded in accumulated other comprehensive loss, net of tax in the accompanying unaudited interim condensed consolidated balance sheets.

During the three months ended September 30, 2020, the change in the fair value of the interest rate swap of $0.9 million, net of tax, was recorded in accumulated other comprehensive income, net of tax in our unaudited interim condensed consolidated statements of comprehensive (loss)/income. During the nine months ended September 30, 2020, the change in the fair value of the interest rate swap of $8.2 million, net of tax, was recorded in accumulated other comprehensive loss, net of tax in our unaudited interim condensed consolidated statements of comprehensive (loss)/income. Differences between the hedged LIBOR rate and the fixed rate are recorded as interest expense in the same period that the related interest is recorded for the Term Loan and DDTL based on the LIBOR rate. In the three and nine months ended September 30, 2020, $1.2 million and $2.6 million of interest expense was recognized in relation to the interest rate swaps, respectively.

COMMITMENTS AND CONTINGENCIES - Operating Leases Rent expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Operating lease, weighted average remaining lease term	1 year 10 months 25 days		1 year 10 months 25 days
Operating lease costs	$ 57	$ 57	$ 166	$ 138
Variable lease costs	15	3	44	44
Total lease costs	$ 72	$ 60	$ 210	$ 182
Minimum
Operating lease liability (in percent)	3.99%		3.99%
Maximum
Operating lease liability (in percent)	8.95%		8.95%

EARNINGS (LOSS) PER SHARE - Additional information (Details) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
EARNINGS (LOSS) PER SHARE
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1.1	2.2	1.3	2.9

STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2020

Summary of Stock option and restricted stock activity

A summary of stock option and restricted stock activity under the 2008 Plan and Inducement Grant during the nine months ended September 30, 2020 and 2019 is presented below:


(in thousands)	Options	Inducement Grants	RSAs
Outstanding at December 31, 2018	759	—	117
Granted	160	—	122
Options Exercised/RSAs Vested	(117)	—	(42)	⁽¹⁾
Forfeited	(24)	—	(3)
Expired	(1)	—	—
Outstanding at September 30, 2019	777	—	194

Outstanding at December 31, 2019	757	—	192
Granted	42	180	305
Options Exercised/RSAs Vested	(8)	—	(128)	⁽²⁾
Forfeited	(44)	—	(17)
Expired	—	—	—
Outstanding at September 30, 2020	747	180	352

(1)

(2)

Employee Stock Purchase Plan 2016 [Member]

Summary of allocated expense


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Cost of sales	$	3	$	4	$	14	$	10
Research and development		6		7		25		16
Selling, general, and administrative		23		19		79		64
	$	32	$	30	$	118	$	90

Stock Incentive Plan 2008 [Member]

Summary of allocated expense


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Cost of sales	$	34	$	26	$	93	$	75
Research and development		117		213		450		545
Selling, general, and administrative		2,200		2,201		9,882		6,063
	$	2,351	$	2,440	$	10,425	$	6,683

STOCK-BASED COMPENSATION - Additional information (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended	9 Months Ended
	Jan. 17, 2020	May 31, 2020	Jun. 30, 2020	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Treasury Stock, Common, Value				$ 2,246		$ 723
Award expiration period	10 years
Arthur Przybyl [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, nonvested (in shares)		63,305
Options, vested (in shares)		101,376
Allocated Share-based Compensation Expense			$ 3,400
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement , Share-based Payment Award, Number of Shares Re-purchased from Employees				43,000	15,000
Treasury Stock, Common, Value				$ 1,500	$ 1,000
Other than options, nonvested (in shares)				352,000	194,000	192,000	117,000
Restricted Stock [Member] \| Arthur Przybyl [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Other than options, nonvested (in shares)		48,448

PROPERTY, PLANT, AND EQUIPMENT (Tables)

9 Months Ended

Sep. 30, 2020

PROPERTY, PLANT, AND EQUIPMENT

Schedule of Property, plant and equipment

Property and equipment consist of the following as of:


	September 30,		December 31,
(in thousands)	2020		2019
Land	$	4,667	$	4,566
Buildings		11,142		10,275
Machinery, furniture, and equipment		38,257		34,984
Construction in progress		2,671		3,496
		56,737		53,321
Less: accumulated depreciation		(16,293)		(12,770)
Property and equipment, net	$	40,444	$	40,551

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Common Stock [Member]	Class C Special Stock [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Class C Special Stock [Member]	Additional Paid-in Capital [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Loss, Net of Tax [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Accumulated Other Comprehensive Loss, Net of Tax [Member]	Retained Earnings [Member] Cumulative Effect, Period of Adoption, Adjustment [Member]	Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member]	Total
Balance at Dec. 31, 2018	$ 0	$ 1	$ 0	$ 0	$ 0	$ 186,812	$ 0	$ (659)	$ 0	$ (379)	$ 2	$ 11,488	$ 2	$ 197,263
Balance (in shares) at Dec. 31, 2018		11,863						11
Stock-based Compensation Expense		$ 0		0		6,773		$ 0		0		0		6,773
Treasury stock purchases for restricted stock vests		0		0		0		$ (1,031)		0		0		(1,031)
Treasury stock purchases for restricted stock vests (in shares)								17
Issuance of Common Shares upon Stock Option and ESPP Exercise		$ 0		0		4,852		$ 0		0		0		4,852
Issuance of Common Shares upon Stock Option and ESPP Exercise (in shares)		120						(16)
Issuance of Restricted Stock Awards		$ 0		0		(967)		$ 967		0		0		0
Issuance of Restricted Stock Awards (in shares)		106
Change in Fair Value of Interest Rate Swap, Net of Tax		$ 0		0		0		0		(5,658)		0		(5,658)
Net income/(loss)		0		0		0		0		0		10,929		10,929
Balance at Sep. 30, 2019		$ 1		0		197,470		$ (723)		(6,037)		22,419		213,130
Balance (in shares) at Sep. 30, 2019		12,089						12
Balance at Jun. 30, 2019		$ 1				194,867		$ (723)		(5,013)		18,524		207,656
Balance (in shares) at Jun. 30, 2019		12,086						12
Stock-based Compensation Expense						2,470								2,470
Issuance of Common Shares upon Stock Option and ESPP Exercise						133								133
Issuance of Common Shares upon Stock Option and ESPP Exercise (in shares)		3
Change in Fair Value of Interest Rate Swap, Net of Tax										(1,024)				(1,024)
Net income/(loss)												3,895		3,895
Balance at Sep. 30, 2019		$ 1		0		197,470		$ (723)		(6,037)		22,419		213,130
Balance (in shares) at Sep. 30, 2019		12,089						12
Balance at Dec. 31, 2019	$ 0	$ 1	$ 0	0	$ 0	200,800	$ 0	$ (723)	$ 0	(4,871)	$ (8)	17,584	$ (8)	212,791
Balance (in shares) at Dec. 31, 2019		12,105						15
Stock-based Compensation Expense		$ 0		0		10,543		$ 0		0		0		10,543
Treasury stock purchases for restricted stock vests		0		0		0		$ (1,523)		0		0		(1,523)
Treasury stock purchases for restricted stock vests (in shares)								61
Issuance of Common Shares upon Stock Option and ESPP Exercise		$ 0		0		449		$ 0		0		0		449
Issuance of Common Shares upon Stock Option and ESPP Exercise (in shares)		14
Issuance of Restricted Stock Awards		$ 0		0		0		0		0		0		0
Issuance of Restricted Stock Awards (in shares)		304
Change in Fair Value of Interest Rate Swap, Net of Tax		$ 0		0		0		0		(8,239)		0		(8,239)
Net income/(loss)		0		0		0		0		0		(18,913)		(18,913)
Balance at Sep. 30, 2020		$ 1		0		211,792		$ (2,246)		(13,110)		(1,337)		195,100
Balance (in shares) at Sep. 30, 2020		12,423						76
Balance at Jun. 30, 2020		$ 1				209,409		$ (2,246)		(14,049)		(1,771)		191,344
Balance (in shares) at Jun. 30, 2020		12,380						58
Stock-based Compensation Expense						2,383								2,383
Treasury stock purchases for restricted stock vests (in shares)								18
Issuance of Restricted Stock Awards (in shares)		43
Change in Fair Value of Interest Rate Swap, Net of Tax										939				939
Net income/(loss)												434		434
Balance at Sep. 30, 2020		$ 1		$ 0		$ 211,792		$ (2,246)		$ (13,110)		$ (1,337)		$ 195,100
Balance (in shares) at Sep. 30, 2020		12,423						76

INDEBTEDNESS - Outstanding (Details) - Senior Secured Credit Facility [Member] - USD ($) $ in Millions	1 Months Ended
	Dec. 31, 2018	Sep. 30, 2020
Debt Instrument, Term	5 years
Delayed Draw Term Loan [Member]
Debt Instrument, Term	5 years
Long-term Debt, Gross		$ 115.1
Total debt issuance costs, net		0.4
Debt issuance costs, current		0.1
Debt issuance costs, noncurrent		0.3
Term Loan [Member]
Long-term Debt, Gross		66.8
Total debt issuance costs, net		1.0
Debt issuance costs, current		0.3
Debt issuance costs, noncurrent		0.7
Revolver [Member]
Long-term Debt, Gross		7.5
Total debt issuance costs, net		0.8
Debt issuance costs, current		0.2
Debt issuance costs, noncurrent		$ 0.6

BUSINESS, PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS - Geographic Information - Revenue (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($) segment	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
Number of segments \| segment			1
Revenue Recognition	$ 52,979	$ 51,337	$ 151,223	$ 158,581
Property and equipment, net	40,444		40,444		$ 40,551
United States [Member]
Revenue Recognition	52,094	50,026	146,602	153,088
Property and equipment, net	26,560		26,560		26,708
Canada [Member]
Revenue Recognition	885	$ 1,311	4,621	$ 5,493
Property and equipment, net	$ 13,884		$ 13,884		$ 13,843

- Definition

+ References

+ Details

INDEBTEDNESS - Interest (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
INDEBTEDNESS - Interest (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
INDEBTEDNESS
Contractual coupon	$ 2,351	$ 1,628	$ 6,450	$ 4,903
Amortization of debt discount		1,553		4,600
Amortization of finance fees	180	358	542	1,078
Capitalized interest	(18)	(41)	(67)	(152)
Interest Expense, Debt	$ 2,513	$ 3,498	$ 6,925	$ 10,429

CORTROPHIN PRE-LAUNCH CHARGES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Cortrophin Pre Launch Charges	$ 37	$ 195	$ 8,275	$ 195
Maximum
Cortrophin Pre Launch Charges	$ 100

REVENUE RECOGNITION AND RELATED ALLOWANCES - Accruals and Allowances (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Accruals and allowances
Beginning balance	$ 59,946
Ending balance	86,418
Chargebacks
Accruals and allowances
Beginning balance	49,882	$ 39,007
Accruals/Adjustments	288,538	187,843
Credits Taken Against Reserve	(262,531)	(188,504)
Ending balance	75,889	38,346
Government Rebates
Accruals and allowances
Beginning balance	8,901	8,974
Accruals/Adjustments	14,288	12,723
Credits Taken Against Reserve	(11,511)	(12,513)
Ending balance	11,678	9,184
Returns
Accruals and allowances
Beginning balance	16,595	12,552
Accruals/Adjustments	22,744	13,392
Credits Taken Against Reserve	(16,089)	(9,999)
Ending balance	23,250	15,945
Administrative Fees and Other Rebates
Accruals and allowances
Beginning balance	8,281	7,353
Accruals/Adjustments	27,383	27,476
Credits Taken Against Reserve	(27,287)	(26,927)
Ending balance	8,377	7,902
Prompt Payment Discounts
Accruals and allowances
Beginning balance	2,549	2,009
Accruals/Adjustments	10,248	7,962
Credits Taken Against Reserve	(9,442)	(7,714)
Ending balance	$ 3,355	$ 2,257

GOODWILL AND INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2013
Goodwill	$ 3,580		$ 3,580			$ 3,580
Goodwill, Impairment Loss	$ 0	$ 0	$ 0	$ 0
BioSante Pharmaceuticals Inc [Member]
Goodwill							$ 1,800
WellSpring Pharma Services
Acquisition of WellSpring					$ 1,700

COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
COMMITMENTS AND CONTINGENCIES
Revenue Recognition	$ 52,979	$ 51,337	$ 151,223	$ 158,581
Unapproved Products [Member]
COMMITMENTS AND CONTINGENCIES
Revenue Recognition	4,300	4,700	12,400	15,500
Unapproved Products [Member] \| Contract Customer [Member]
COMMITMENTS AND CONTINGENCIES
Revenue Recognition	$ 700	$ 500	$ 2,300	$ 2,000

- Definition

+ References

+ Details

INDEBTEDNESS

9 Months Ended

Sep. 30, 2020

INDEBTEDNESS

INDEBTEDNESS

3. INDEBTEDNESS

Credit Facility

In December 2018, we refinanced our previous $125.0 million Credit Agreement by entering into an amended and restated Senior Secured Credit Facility (the “Credit Facility”) for up to $265.2 million. The five-year Credit Facility is comprised of a $72.2 million Term Loan (the “Term Loan”), a $118.0 million Delayed Draw Term Loan (the “DDTL”) and a $75.0 million revolving credit facility (the “Revolver”), all of which mature in December 2023. The Credit Facility has a subjective acceleration clause in case of a material adverse event. The Term Loan includes a repayment schedule, pursuant to which $5.9 million of the loan will be paid in quarterly installments during the 12 months ended September 30, 2021. As of September 30, 2020, $5.9 million of the loan is recorded as current borrowings in the unaudited condensed consolidated balance sheets. The DDTL includes a repayment schedule, pursuant to which $7.4 million will be paid in quarterly installments during the 12 months ended September 30, 2021. As of September 30, 2020, $7.4 million of the loan is recorded as current borrowings in the unaudited condensed consolidated balance sheets. In March 2020, we drew $15.0 million under the Revolver, of which $7.5 million has been repaid as of September 30, 2020. As of September 30, 2020, $67.5 million remained available for borrowing under the Revolver. Amounts drawn on the Term Loan, DDTL, and Revolver bear an interest rate equal to, at our option, either a LIBOR rate plus 1.50% to 2.75% per annum, depending on our total leverage ratio or an alternative base rate plus an applicable base rate margin, which varies within a range of 0.50% to 1.75%, depending on our total leverage ratio. On the Revolver, we incur a commitment fee at a rate per annum that varies within a range of 0.25% to 0.50%, depending on our leverage ratio.

The Credit Facility is secured by a lien on substantially all of ANI Pharmaceuticals, Inc.’s and its principal domestic subsidiary’s assets and any future domestic subsidiary guarantors’ assets. The Credit Facility imposes financial covenants consisting of a maximum total leverage ratio, which was, as of September 30, 2020, no greater than 3.50 to 1.00 and a minimum fixed charge coverage ratio, which shall be greater than or equal to 1.25 to 1.00. The primary non-financial covenants under the Credit Facility limit, subject to various exceptions, our ability to incur future indebtedness, to place liens on assets, to pay dividends or make other distributions on our capital stock, to repurchase our capital stock, to conduct acquisitions, to alter our capital structure, and to dispose of assets.

The carrying value of the current and non-current components of the Term Loan and DDTL as of September 30, 2020 and December 31, 2019 are:


	Current
	September 30,		December 31,
(in thousands)	2020		2019
Current borrowing on debt	$	13,240	$	10,412
Deferred financing costs		(455)		(471)
Current debt, net of deferred financing costs	$	12,785	$	9,941


	Non-Current
	September 30,		December 31,
(in thousands)	2020		2019
Non-current borrowing on debt	$	168,583	$	177,069
Deferred financing costs		(922)		(1,261)
Non-current debt, net of deferred financing costs and current component	$	167,661	$	175,808

The refinancing of the Term Loan was accounted for as a modification of our previous term loan and consequently, the remaining balance of the deferred issuance costs related to the previous term loan are included with the lenders fees associated with the refinance of the Term Loan and amortized as interest expense over the life of the Term Loan using the effective interest method. Fees to third parties associated with the refinance of the Term Loan were

recognized as other (expense)/income, net in the accompanying consolidated statements of operations. The refinancing of the Revolver was accounted for as a modification of our previous revolving credit facility and consequently, the remaining balance of the deferred issuance costs related to the previous revolving credit facility are included with the lenders fees and fees to third parties associated with the refinance of the Revolver and amortized as interest expense on a straight-line basis over the life of the Revolver. All issuance costs allocated to the DDTL were deferred and are being amortized as interest expense on a straight-line basis over the five-year term of the DDTL.

As of September 30, 2020, we had a $66.8 million outstanding balance on the Term Loan, a $115.1 million balance on the DDTL, and a $7.5 million balance on the Revolver. Of the remaining $0.8 million of deferred debt issuance costs allocated to the Revolving Credit Facility, $0.6 million is included in other non-current assets in the unaudited interim condensed consolidated balance sheets and $0.2 million is included in prepaid expenses and other current assets in the unaudited interim condensed consolidated balance sheets. Of the remaining $0.4 million of deferred debt issuance costs allocated to the DDTL, $0.1 million is classified as a direct deduction to the current portion of the DDTL in the unaudited condensed consolidated balance sheets and $0.3 million is classified as a direct reduction to the non-current portion of the DDTL in the unaudited condensed consolidated balance sheets. Of the remaining $1.0 million of deferred debt issuance costs allocated to the Term Loan, $0.3 million is classified as a direct deduction to the current portion of the Term Loan in the unaudited condensed consolidated balance sheets and $0.7 million is classified as a direct deduction to the non-current portion of the Term Loan in the unaudited condensed consolidated balance sheets.

The contractual maturity of our Term Loan, DDTL, and Revolver is as follows for the years ending December 31:


(in thousands)	Term Loan		DDTL		Revolver
2020	$	1,805	$	2,950	$	—
2021		5,414		5,900		—
2022		5,414		8,850		—
2023		54,140		97,350		7,500
Total	$	66,773	$	115,050	$	7,500


	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2020		2019		2020		2019
Contractual coupon	$	2,351	$	1,628	$	6,450	$	4,903
Amortization of debt discount		—		1,553		—		4,600
Amortization of finance fees		180		358		542		1,078
Capitalized interest		(18)		(41)		(67)		(152)
	$	2,513	$	3,498	$	6,925	$	10,429

REVENUE RECOGNITION AND RELATED ALLOWANCES - Additional Information (Details) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019	Sep. 30, 2020 USD ($) customer	Sep. 30, 2019
Sales of contract manufactured products [Member]
Revenue, Remaining Performance Obligation, Amount	$ 7.8		$ 7.8
Product Development Services [Member]
Revenue, Remaining Performance Obligation, Amount	$ 3.1		$ 3.1
Product Development Services [Member] \| Maximum
Revenue, Remaining Performance Obligation, Remaining Period	18 months		18 months
Customer concentration \| Revenue
Number of major customers \| customer			3
Concentration Risk, Percentage			81.00%
Customer concentration \| Revenue \| Customer One [Member]
Concentration Risk, Percentage	30.00%	34.00%	31.00%	33.00%
Customer concentration \| Revenue \| Customer Two [Member]
Concentration Risk, Percentage	25.00%	24.00%	24.00%	24.00%
Customer concentration \| Revenue \| Customer Three [Member]
Concentration Risk, Percentage	19.00%	23.00%	19.00%	24.00%

FAIR VALUE DISCLOSURES - Acquired (Details) $ in Thousands	1 Months Ended							3 Months Ended			9 Months Ended
FAIR VALUE DISCLOSURES - Acquired (Details) $ in Thousands	Jul. 31, 2020 USD ($)	May 31, 2020 USD ($) product	Jan. 31, 2020 USD ($) product	Jun. 30, 2019 USD ($) product	Mar. 31, 2019 USD ($) product	Jan. 31, 2019 USD ($)	Apr. 30, 2018 USD ($) product	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Payments to Acquire Intangible Assets											$ 62,178	$ 21,243
Finite-Lived Intangible Assets, Gross								$ 355,670	$ 307,225		355,670
Research and development								2,939		$ 4,982	12,318	15,128
Intangible asset impairment charge								0		0	0	0
Amortization of Intangible Assets								10,100		$ 8,400	30,200	31,800
Inventories, net								59,195	48,163		59,195
Raw materials								43,010	34,881		43,010
Finished goods								18,110	16,750		18,110
Research and Development in Process											3,753	$ 2,653
Acquired ANDA intangible assets
Finite-Lived Intangible Assets, Gross								106,415	64,704		$ 106,415
Finite-Lived Intangible Asset, Useful Life											8 years 9 months 18 days
Marketing and distribution rights
Finite-Lived Intangible Assets, Gross								$ 17,657	10,923		$ 17,657
Finite-Lived Intangible Asset, Useful Life											5 years 8 months 12 days
Private Company [Member]
Number of generic products \| product		1
Total asset purchase	$ 4,300	$ 200
Transaction costs	100	$ 7
Finite-Lived Intangible Assets, Gross	$ 3,000
Finite-Lived Intangible Asset, Useful Life	7 years	7 years
Intangible asset impairment charge											$ 0
Inventories, net	$ 1,400
Amerigen Pharmaceuticals, Ltd.
Number of generic products \| product			23
Total asset purchase			$ 56,800
Transaction costs			700
Contingent liability not recognized			$ 25,000
Period of contingent payments			4 years
Number of commercial products under product portfolio			10
Number of approved products with launches pending under product portfolio			3
Number of filed products under product portfolio			4
Number of in-development products under product portfolio			4
Number of approved products under product portfolio			2
Finite-Lived Intangible Asset, Useful Life			7 years
Research and development			$ 3,800
Intangible asset impairment charge											0
Inventories, net			8,400
Raw materials			1,700
Finished goods			$ 6,700
Amerigen Pharmaceuticals, Ltd. \| Discount rate
Fair Values Inputs Discount Rate			8.00%
Amerigen Pharmaceuticals, Ltd. \| Acquired ANDA intangible assets
Finite-Lived Intangible Assets, Gross			$ 38,500
Amerigen Pharmaceuticals, Ltd. \| Marketing and distribution rights
Finite-Lived Intangible Assets, Gross			$ 6,700
Coeptis Pharmaceuticals, Inc. [Member]
Number of generic products \| product				7
Total asset purchase				$ 2,300
Transaction costs				24
Contingent liability not recognized				$ 12,000
Pharmaceutics International, Inc and BAS ANDA LLC [Member]
Payments to Acquire Intangible Assets									$ 500
Finite-Lived Intangible Asset, Useful Life									10 years
Intangible asset impairment charge											0
Teva Pharmaceuticals [Member]
Number of generic products \| product					35
Transaction costs					$ 10
Payments to Acquire Intangible Assets					2,500	$ 16,000
Finite-Lived Intangible Assets, Gross					$ 2,500	9,200
Finite-Lived Intangible Asset, Useful Life					10 years
Intangible asset impairment charge											0
Cumulative Amortization Expense						$ 6,800
Teva Pharmaceuticals [Member] \| Discount rate
Fair Values Inputs Discount Rate					15.00%	12.00%
Impax Laboratories, Inc. [Member]
Number of generic products \| product							2
Transaction costs							$ 100
Payments to Acquire Intangible Assets							2,300
Finite-Lived Intangible Assets, Gross							$ 1,000
Finite-Lived Intangible Asset, Useful Life							10 years
Intangible asset impairment charge											$ 0
Purchase commitment period							17 months
Equipment fair value							$ 58
Property useful life							5 years
Research and Development in Process							$ 1,300
Impax Laboratories, Inc. [Member] \| Discount rate
Fair Values Inputs Discount Rate							75.00%
Impax Laboratories, Inc. [Member] \| Discount rate \| Minimum
Fair Values Inputs Discount Rate							10.00%
Impax Laboratories, Inc. [Member] \| Discount rate \| Maximum
Fair Values Inputs Discount Rate							15.00%
Impax Laboratories, Inc. [Member] \| Milestone One [Member]
Contingent liability not recognized							$ 25,000
Impax Laboratories, Inc. [Member] \| Milestone Two [Member]
Contingent liability not recognized							15,000
Impax Laboratories, Inc. [Member] \| Milestone Three [Member]
Contingent liability not recognized							$ 10,000

COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Sep. 30, 2020

COMMITMENTS AND CONTINGENCIES

Schedule of rent expense

Rent expense for the nine months ended September 30, 2020 and 2019 consisted of the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020		2019
Operating lease costs	$	57	$	57	$	166	$	138
Variable lease costs		15		3		44		44
Total lease costs	$	72	$	60	$	210	$	182

Schedule of maturity analysis of operating leases

A maturity analysis of our operating leases follows:


(in thousands)
Future payments:
2020	$	59
2021		172
2022		132
2023		61
2024 and thereafter		31
Total	$	455

Discount		(25)
Lease liability		430
Current lease liability		(181)
Non-current lease liability	$	249

EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2020

EARNINGS (LOSS) PER SHARE

EARNINGS (LOSS) PER SHARE

5. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.

For periods of net income, and when the effects are not anti-dilutive, we calculate diluted earnings (loss) per share by dividing net income available to common shareholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options, shares to be purchased under our Employee Stock Purchase Plan (“ESPP”), unvested restricted stock awards, and stock purchase warrants, using the treasury stock method. For periods of net loss, diluted loss per share is calculated similarly to basic loss per share.

Our unvested restricted shares contain non-forfeitable rights to dividends, and therefore are considered to be participating securities; in periods of net income, the calculation of basic and diluted earnings (loss) per share

excludes from the numerator net income (but not net loss) attributable to the unvested restricted shares, and excludes the impact of those shares from the denominator.

For purposes of determining diluted earnings (loss) per share in 2019, we elected a policy to settle the principal portion of our 3% Convertible Senior Notes (the “Notes”), which matured and were settled in December 2019, in cash. As such, the principal portion of the Notes had no effect on either the numerator or denominator when determining diluted earnings (loss) per share. Any conversion gain was assumed to be settled in shares and was incorporated in diluted earnings per share using the treasury method. The warrants issued in conjunction with the issuance of the Notes were considered to be dilutive if they were in-the-money relative to our average stock price during the period; the bond hedge purchased in conjunction with the issuance of the Notes was always considered to be anti-dilutive.

Earnings (loss) per share for the three and nine months ended September 30, 2020 and 2019 are calculated for basic and diluted earnings (loss) per share as follows:


	Basic				Diluted				Basic				Diluted
(in thousands, except per share amounts)	Three Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019		2020		2019		2020		2019
Net income/(loss)	$	434	$	3,895	$	434	$	3,895	$	(18,913)	$	10,929	$	(18,913)	$	10,929
Net income allocated to restricted stock		(12)		(63)		(13)		(63)		—		(176)		—		(176)
Net income/(loss) allocated to common shares	$	422	$	3,832	$	421	$	3,832	$	(18,913)	$	10,753	$	(18,913)	$	10,753
Basic Weighted-Average Shares Outstanding		11,991		11,879		11,991		11,879		11,953		11,826		11,953		11,826
Dilutive effect of stock options and ESPP						12		128						—		106
Dilutive effect of Notes						—		78						—		128
Diluted Weighted-Average Shares Outstanding						12,003		12,085						11,953		12,060

Earnings/(Loss) per share	$	0.04	$	0.32	$	0.04	$	0.32	$	(1.58)	$	0.91	$	(1.58)	$	0.89

The number of anti-dilutive shares, which have been excluded from the computation of diluted earnings (loss) per share was 1.1 million and 2.2 million for the three months ended September 30, 2020 and 2019, respectively, and was 1.3 million and 2.9 million for the nine months ended September 30, 2020 and 2019, respectively. Anti-dilutive shares consist of out-of-the-money Class C Special stock, out-of-the-money common stock options, common stock options that are anti-dilutive when calculating the impact of the potential dilutive common shares using the treasury stock method, underlying shares related to out-of-the-money bonds issued as convertible debt (for 2019 only) and out-of-the-money warrants exercisable for common stock.

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Apr. 30, 2020	Dec. 31, 2019	Feb. 28, 2019
Accumulated other comprehensive loss, net of tax	$ 13,110	$ 13,110		$ 4,871
Fair value interest rate derivative liabilities	15,971	15,971		$ 6,215
Interest rate swap [Member]
Derivative liability, notional amount	181,800	181,800	$ 184,200
Accumulated other comprehensive loss, net of tax	13,100	13,100	$ 13,200
Fair value interest rate derivative liabilities	16,000	16,000
Unrealized gain (loss)	(900)	(8,200)
Interest expense	$ 1,200	$ 2,600
Interest rate swap [Member] \| Term Loan [Member]
Weighted average fixed rate (as a percent)					2.60%
Interest rate swap [Member] \| Delayed Draw Term Loan [Member]
Weighted average fixed rate (as a percent)					2.47%
Interest rate swap [Member] \| Senior Secured Credit Facility [Member]
Debt effective interest rate (as a percent)	1.99%	1.99%