UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

(Formerly IGI Laboratories, Inc.)

 

 

Securities registered pursuant to Section 12(g) of the Exchange Act: None

 

 

 

The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was $394.8$10.6 million.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

 

PART I

 

Teligent, Inc., (the “Company”) is a specialty generic pharmaceutical company. All references to "Teligent," the "Company," "we," "us," and "our" refer to Teligent, Inc. and its subsidiaries. Our mission is to become a leader in high-barrier to entry generic pharmaceuticals. Our platform for growth is centered around the specialtydevelopment, manufacturing and marketing of a portfolio of generic pharmaceutical market. Underproducts under our own label weand private labeled for other pharmaceutical companies in topical, injectable and other high-barrier dosage forms. We believe that expanding our development and commercial base beyond topical generics, historically the cornerstone of our expertise, to include injectable generics and other high-barrier generics, will leverage our existing expertise and capabilities, and broaden our platform for more diversified strategic growth.

We currently market and sell generic topical and branded generic and branded generic injectable pharmaceutical products in the United States and Canada. In the United States, we are currently marketing 25market 37 generic topical pharmaceutical products and fourtwo branded genericinjectable pharmaceutical products. We have received FDA approvals for 36 topical generic products from our internally developed pipeline and we have seven Abbreviated New Drug Applications, ("ANDAs") and three New Drug Application ("NDA") Prior Approval Supplements ("PASs") submitted to the FDA that are awaiting approval. In Canada, we sell over 30 generic and brandedmarket 25 generic injectable, productsthree generic topical, and medical devices. Generic pharmaceutical productsthree generic ophthalmic products. We have one Abbreviated New Drug Submission (“ANDS”) pending at Health Canada. In the United States, approved ANDA generic drugs are bioequivalent to their brand name counterparts.usually interchangeable with the innovator drug. This means that the generic version may generally be substituted for the branded product by either a physician or pharmacist when dispensing a prescription. We also provide contract development and manufacturing services to the pharmaceutical,prescription and over-the-counter ("OTC"), pharmaceutical and cosmetic markets. We operate our business under one operating segment.

In the United States, the three large wholesale drug distributors are AmerisourceBergen Corporation ("ABC"); Cardinal Health, Inc. ("Cardinal"); and McKesson Drug Company, ("McKesson"). ABC, Cardinal and McKesson are key distributors of our products, as well as a broad range of health care products for many other companies. None of these distributors is an end user of our products. Generally, if sales to any one of these distributors were to diminish or cease, we believe that the end users of our products would likely find little difficulty obtaining our products either directly from us or from another distributor. However, the loss of one or more of these distributors, together with a delay or inability to secure an alternative distribution source for end users, could have a material negative impact on our revenue, business, financial condition and results of operations. There are generally three major negotiating entities in the US market. Walgreens Boots Alliance Development (WBAD) consists of Walgreens and AmerisourceBergen's PRxO Generics program. Red Oak Sourcing consists of CVS and Cardinal’s source programs. Finally, ClarusOne consists of Walmart, RiteAid and McKesson’s OneStop program. A loss of any of these major entities could result in a significant reduction in revenue.

We have been inSince 2010, the contract manufacturing and developmentprimary focus of topical products business since the early 1990s, but our strategy since 2010 has been focused on the growth of our own generic prescription pharmaceutical business. Since 2010, we have focused on transitioning our business to include more customers inparticularly within the generic topical pharmaceutical industry.product market, while moderating our contract development and manufacturing to the prescription and OTC pharmaceutical and cosmetic markets. In 2014, we broadened our primary target product focus from topical pharmaceuticals to include a wider specialtyapproach focused on high-barrier generic prescription pharmaceutical approach.products and generic and branded generic injectable pharmaceutical products. We believebelieved that expanding our development and commercial base beyond topical generics, historically the cornerstone of our expertise, to include injectable generics complex generics and ophthalmic generics (what we call our “TICO strategy”), willother high-barrier dosage forms would leverage our existing expertise and capabilities, and broaden our platform for more diversified strategic growth.

Following five approvals from our internally developed pipeline of topical generic products in 2017.2019, there were no approvals from our internally developed pipeline of topical generic products in 2020. We intend to continue to submit further ANDAs to the FDA and ANDSs to Health Canadabe opportunistic in 2018. We will also seekefforts to license or acquire further products, intellectual property, or pending applications to expand our portfolio.

We continuecontinued with the significant expansion and utilities upgrade of our manufacturing facility at 105 Lincoln Avenue in Buena, New Jersey. In December 2017,October 2018, we received the Temporary Certificate of Occupancy (TCO) to begin using the first phase of completed work in our manufacturing facility, which includes a state-of-the-art quality control and microbiology lab for the testing of our pharmaceutical products. The expanded facility will increasehas increased our manufacturing capability for topical products and, upon FDA approval, will also enable the production of sterile injectable products in both vial and ampule presentations. We are usinghave utilized this facility expansion as an opportunity to upgrade and improve the degree of automation and capacity in our existing topical production suite. The sterile production area is designed around isolator-based technology. The facility will includeincludes a versatile vial and ampule filling line capable of between four and eight million units per year, with space and critical utilities included in the build-out for a potential future higher-speed filling line. The current plans consider a total capital outlayThrough December 31, 2020 the Company has incurred approximately $91.5 million for 105 Lincoln Avenue of approximately $60 million.this project and is currently substantially complete with construction. We have been partnering with contract manufacturing organizations, or CMOs, for the development, registration and manufacture of some of our sterile injectable and ophthalmic products. Upon completion of the site expansion, we may transfer the manufacture of some of these injectable products to this facility. We will also use the new sterile production capability to support our internal R&D pipeline of sterile injectable products in vial and ampule presentations. These upgrades and expansion secure our long-term growth in manufacturing and marketing topical and injectable pharmaceutical products for sale in the U.S. and to expand our private label and contract manufacturing service opportunities.

On December 22, 2014,January 27, 2021, we consummatedcompleted a recapitalization and equitization transaction pursuant to an Exchange Agreement, dated January 27, 2021, among the saleCompany, the Series C Noteholders (as defined below) and Ares (as defined below) (the “Exchange Agreement”). Under the Exchange Agreement, the holders (the “Series C Noteholders”) of all of our 9.5% Series C Senior Secured Convertible Notes due 2023 (the “Series C Notes”) exchanged an aggregate of $143.75approximately $50.3 million inof outstanding principal under the Series C Notes, representing 100% of the outstanding principal under the Series C Notes, together with accrued interest thereon, for an aggregate of 29,862,641 shares (the “Series C Exchange Shares”) of our notes, orcommon stock (the “Series C Equitization”). The Series C Equitization resulted in the Notes, to Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, as the initial purchasers, including the initial purchasers’ exerciseextinguishment of their option to purchase an $18.75 million in principalall of Notes. The Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144Aour obligations under the Securities ActIndenture, dated as of 1933, as amended. In connection with the sale of the Notes, we entered into an indenture withJuly 20, 2020, between us and Wilmington Trust, National Association, as trustee. The Notes bear interest at a ratetrustee and collateral agent (the “Series C Indenture”).

Additionally, under the Exchange Agreement, certain credit funds and accounts managed by affiliates of 3.75% per year, payable semi-annually in arrears on June 15Ares Management Corporation (such funds and accounts, collectively, “Ares” and, together with the Series C Noteholders, the “Participating Parties”) that are lenders under our Second Lien Credit Agreement, dated December 1513, 2018, by and among the Company, certain of each year, commencing June 15, 2015. The Notes will mature on December 15, 2019, unless earlier repurchased or redeemedits subsidiaries, the lenders from time to time party thereto, and Ares Capital Corporation as Administrative Agent (as amended, including by the Company orSecond Lien Amendment (as defined below), the “Second Lien Credit Agreement”) converted bya portion of the outstanding term loans under the Second Lien Credit Agreement constituting 100% of the approximately $24.5 million in accrued PIK interest under the Second Lien Credit Agreement into an aggregate of

approximately 85,412 shares of our newly created Series D Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”, and such transaction, the “PIK Interest Exchange” and, together with the Series C Equitization, the “January 2021 Debt Exchange Transactions”). Each share of Series D Preferred Stock is non-voting and, subject to an increase in the number of shares of our common stock available for issuance under our amended and restated certificate of incorporation, is convertible into 200 shares of our common stock. The shares of Series D Preferred Stock issued in connection with the PIK Interest Exchange are currently convertible into an aggregate of 17,082,285 shares of our common stock. The holders of shares of Series D Preferred Stock may not convert such shares of Series D Preferred Stock into shares of our common stock to the extent such a conversion would result in a holder thereof, together with its affiliates, collectively owning more than 15% of the number of shares of our common stock then outstanding.

As a condition to entering into the Exchange Agreement, we entered into a Stockholders’ Agreement with the Participating Parties and B. Riley Securities (the “Stockholders’ Agreement”), pursuant to which, among other matters, the Company granted (i) the Participating Parties registration rights for the shares of our common stock issuable upon conversion of the Series D Preferred Stock and for the Series C Exchange Shares, and (ii) B. Riley Securities registration rights for the shares of common stock issued to B. Riley Securities as a commitment fee in connection with an At Market Issuance Sales Agreement (the “ATM Sales Agreement”), dated January 27, 2021, with B. Riley Securities, pursuant to which we conducted an at-the-market equity offering (the “ATM Offering”). In addition to the voting restrictions discussed further below, the Stockholders’ Agreement also contains terms restricting the transfer of shares of our common stock and Series D Preferred Stock held by the Participating Parties, including, subject to certain conditions,exceptions, a restriction on all sales or other transfers or dispositions of such shares (i) in respect of our recently completed at-the-market common stock offering, (ii) in any period during which we are conducting a follow-on public offering of our common stock within 11 months after the ATM Offering and ending on the earlier of 60 days after commencement of such offering or five trading days following its completion, (iii) in violation of certain volume restrictions set forth in the Stockholders’ Agreement (including the Rule 144 Volume Limitation (as defined in the Stockholders’ Agreement)) at any time when such Participating Party holds at least 9.9% of the outstanding shares of our common stock (including shares issuable upon conversion of the Series D Preferred Stock) and (iv) to any person or entity that is required to file a statement on Schedule 13D or Schedule 13G with respect to our securities. The Stockholders’ Agreement also (x) subjects each Participating Party to certain standstill provisions for a period of 18 months following the date of the Stockholders’ Agreement, (y) requires each Participating Party to include, in any Schedule 13D or Schedule 13G that such Participating Party may redeem for cashbe required to file in respect of our securities, an acknowledgment that such Participating Party has no intent to directly or indirectly control us or to take any actions contemplated by Section 5 of the Stockholders’ Agreement and (z) provides that the rights of each of Nantahala

The Stockholders’ Agreement also contains certain voting restrictions as follows: (a) each Series C Noteholder and each of such Series C Noteholder’s affiliates will not vote any shares of our common stock held by such Series C Noteholder or all outstanding Notes on or after December 19, 2017 in an amount equalsuch affiliates to the extent such vote would result in such Series C Noteholder and such affiliates, collectively, voting in excess of 4.9% of the outstanding principalshares of our common stock as of the record date for such vote, and (b) Ares will not vote any shares of our common stock held by it to the extent such vote would result in Ares and its affiliates, collectively, voting in excess of 15% of the outstanding shares of our common stock as of the record date for such vote. In addition, pursuant to Voting Trust Agreements among Wilmington Savings Fund Society, FSB (“WSFS Bank”), us and each of Nantahala and Silverback (the “Voting Trust Agreements”), we and each of Nantahala and Silverback established voting trusts with WSFS Bank to hold all Series C Exchange Shares issued to Nantahala or Silverback, respectively, in excess of 4.9% of the outstanding shares of our common stock, and WSFS Bank has agreed to vote all such Series C Exchange Shares on all matters presented to the vote of our stockholders in the same proportions as all shares of our common stock other than (x) the Series C Exchange Shares held in trust by WSFS Bank; (y) any other shares of our common stock held by Nantahala or Silverback, as applicable and (z) other shares of our common stock held by the other Participating Parties.

The First Lien Amendment amended the First Lien Credit Agreement to, among other things, (i) permit borrowings under the revolving credit facility under the First Lien Credit Agreement, subject to availability (which is $0 as of the date of this Form 10-K filing) and the other terms and conditions of the First Lien Credit Agreement, provided, that such borrowings are only available until the commitments of the lenders under the Second Lien Credit Agreement under the Second Lien Delayed Draw Term Loan C Facility (as defined below) have been reduced to $0, (ii) reduce from $10.0 million to $3.0 million (from and after the first draw of the Second Lien Delayed Drawn Term Loan C Facility described below) the maximum amount of such Notes, plus accruedcash that we and unpaid interest. No sinking fund is provided forour subsidiaries that are credit parties under the Notes. The NotesFirst Lien Credit Agreement are permitted to maintain prior to triggering a mandatory prepayment of the Company’s senior unsecured obligationsrevolving credit facility (without a permanent reduction of the revolving credit commitments), which $3.0 million threshold automatically increased by the net proceeds received from the January 28, 2021 ATM Offering and will notany other equity offering, (iii) reduce from $3.0 million to $1.0 million the minimum liquidity (as defined in the First Lien Credit Agreement) required to be guaranteedmaintained by anyus and our subsidiaries that are credit parties under the First Lien Credit Agreement on a consolidated basis until the earlier of our existing or future subsidiaries. Aggregate(a) the date on which the net proceeds from the transactionJanuary 28, 2021 offering exceed $15.0 million in the aggregate and (b) February 15, 2021, at which time the liquidity covenant increases to $3.0 million on a consolidated basis, (iv) from and after March 31, 2022, further increase the minimum liquidity covenant from $3.0 million to $4.0 million on a consolidated basis and (v) suspend testing of the minimum consolidated adjusted EBITDA covenant until March 31, 2022, at which time such minimum consolidated adjusted EBITDA covenant levels will resume to the levels in effect prior to the closing of the First Lien Amendment.

We have incurred significant losses and generated negative cash flows from operations in recent years, and we expect to continue to incur losses and generate negative cash flows from operations for the foreseeable future. We are not currently generating revenues from operations that are sufficient to cover our operating expenses, and our available capital resources are not sufficient for us to continue to meet our obligations as they become due, presenting substantial doubt as to our ability to continue as a going concern. Our cash and cash equivalents at December 31, 2020 were approximately $139$6.7 million, compared to approximately $16.2 million at December 31, 2019. We have engaged business, financial and legal advisors to assist us in, among other matters, further analyzing all available strategic alternatives to address our liquidity and capital structure.

As part of our efforts to remediate the issues identified in the FDA’s warning letter issued in November 2019 (the “FDA Warning Letter”) and to strengthen our quality systems, we undertook a comprehensive review of all of our products. This review was completed in December 2020. While the review did not identify material issues with many of our products, it identified certain issues of non-conformance with respect to certain products which have resulted in recalls and halting the production of certain products, that we are actively reviewing and remediating. We have experienced and may continue to experience, among other matters, product recalls, long-term production pauses, short-term clear path to market production pauses, and continued production with minor process corrections. We believe the foregoing disruptions with respect to certain of our products and the diversion of resources to remediate the product quality issues will have a negative impact on our business, financial position, results of operations and cash flows during 2021, including reducing our revenue, negatively impacting operating/(loss), and possibly resulting in impairment and other expenses paidcharges. Further, we anticipate that the FDA’s issuance of the warning letter and review of our processes will continue to delay the FDA’s pre-approval inspection for commercial production on the newly installed injectable line at the Buena, NJ facility. The continued failure to address the issues identified by us.the FDA in its warning letter and those subsequently identified by us in our comprehensive product quality review as well as the continued delay in obtaining the FDA’s pre-approval inspection for commercial production on the newly installed injectable line at the Buena, NJ facility will have a negative impact on our business, financial position, results of operations and cash flows.

Our TICO strategy originated from ourthe opportunity to leverage our value chain, which we have developed and strengthened through our topical portfolio. Our value chain includes our internal expertise in product and molecule selection and development, manufacturing, sales, logistics and distribution, as well as our relationships with our customers and consumers. With the expansion of our existing manufacturing facility, we see the potential to effectively leverage our existing infrastructure across this value chain and to further expand our strategic reach beyond topical generics to theinclude injectable complexgenerics and ophthalmic generic pharmaceutical markets.other high-barrier dosage forms.

In our topical contract development and manufacturing services business, we have developed strong customer relationships that we believe provide us with both recurring revenue streams from those customers and opportunities to selectively increase our product offerings to our customers. We intend to continue to capitalize on our strong customer relationships to maintain someand grow contract manufacturingdevelopment and developmentmanufacturing revenues.

We have an FDA-registered cGMP-compliant facility that is equipped for manufacturing topical, semi-solid and liquid products. The design and configuration of our manufacturing facility provides flexibility in manufacturing batch sizes from 250 kg up to 4,0002,400 kg. We intend to leverage this flexibility and capacity to support our growth in the topical prescription markets. We are progressing with the

completed a significant expansion and utilities upgrade in this facility which will increaseincreased our manufacturing capacity for topical products to accommodate the expected growth created by the eventual commercial launch of the 29 topical generic pharmaceutical products in our pipeline.products.

 

For the years ended December 31, 2017,2020, and 2016, 57%2019, 47% and 41% of our total product sales, net, respectively, were to the three large wholesale drug distributors: AmerisourceBergen Corporation, or ABC; Cardinal Health, Inc., or Cardinal; and McKesson Drug Company, or McKesson. As of December 31, 2017,2020, Cardinal accounted for 47%19% of our accounts receivable, ABC accounted for 15%8% of our accounts receivable, and McKesson accounted for 14%48% of our accounts receivable. As of December 31, 2016,2019, Cardinal accounted for 56%22% of our accounts receivable, McKesson accounted for 20%25% of our accounts receivable, and ABC accounted for approximately 11% of our accounts receivable.

  

ABC, Cardinal and McKesson are key distributors of our products, as well as a broad range of health care products for many other companies. None of these distributors is an end user of our products. Generally, if sales to any one of these distributors were to diminish or cease, we believe that the end users of our products would likely find little difficulty obtaining our products either directly from us or from another distributor. However, the loss of one or more of these distributors, together with a delay or inability to secure an alternative distribution source for end users, could have a material adverse effect on our revenue, business, financial condition, and results of operations.operations and cash flows. There are generally three major negotiating entities in the US market.market: (i) the Walgreens Boots Alliance Development (WBAD), which consists of Walgreens and AmerisourceBergen’s PRxO Generics program, and Econdisc members.(ii) Red Oak Sourcing, which consists of CVS and Cardinal’s source program. Finally,program and (iii) ClarusOne, which consists of Walmart, RiteAid and McKesson’s OneStop program. A loss of any of these major entities could result in a significant reduction in revenue.

We consider our business relationships with ABC, Cardinal and McKesson to be in good standing and have fee for services contracts with each of them. However, a change in purchasing patterns, a decrease in inventory levels, an increase in returns of our products, delays in purchasing products and delays in payment for products by one or more of these distributors could have a material adverse effect on our revenue, business, financial condition, and results of operations.operations and cash flows. We continue to analyze the market for other opportunities to expand our current relationships with other customers, while we continue to seek to diversify our existing portfolio of specialty generic drug products through internal

research and development. In addition, we continue to explore business development opportunities to add additional products and /or capabilities to our existing portfolio.

 

 

Expansion into foreign operations in the fourth quarter of 2015 has generated net revenues greater than 10% outside of the United States. For the year ended December 31, 2017,2020, domestic net revenues were $53.5 million and foreign net revenues were $13.8 million. As of December 31, 2017, domestic net assets were $117.7 million and foreign assets were $72.3 million. For the year ended December 31, 2016, domestic net revenues were $56.1$34.5 million and foreign net revenues were $10.8 million. As of December 31, 2016,2020, domestic net assets were $120.0$139.9 million and foreign assets were $63.2$41.2 million. For the year ended December 31, 2015,2019, domestic net revenues were $42.7$48.4 million and foreign net revenues were $1.6$17.5 million. As of December 31, 2015,2019, domestic assets were $129.0$154.3 million and foreign assets were $51.7$52.6 million.

 

We recorded net revenue from oneThere was no product Econazole Nitrate Cream 1%, which individually accounted for 4%, 8% and 45%more than 10% of the total revenues in 2017, 2016 and 2015, respectively. Lidocaine2020. Diflorasone Diacetate Ointment 5%, which we launched at the endUSP 0.05% accounted for 15% of the first quarter of 2016, accounted for 17%, 23% and 0% ofCompany's total revenues in 2017, 2016,2019.

We were incorporated in Delaware in 1977, and on May 7, 2008, our stockholders approved our name change from IGI, Inc. to IGI Laboratories, Inc. Effective October 23, 2015, respectively. Zantac for injection, whichwe changed our name to Teligent Inc. Our principal offices are located at 105 Lincoln Avenue, Buena, New Jersey 08310. Our telephone number is (856) 697-1441. We maintain a website at www.teligent.com. We make available on or through our website our periodic reports that we file with the Company acquired inSecurities and Exchange Commission, or the fourth quarterSEC. This information is available on our website free of 2015, accounted for 10%, 3%charge as soon as reasonably practicable after we electronically file the information with or furnish it to the SEC. The contents of our website are not incorporated by reference into this document and 0%shall not be deemed “filed” under the Securities Exchange Act of total revenues in 2017, 2016 and 2015.1934, as amended, or the Exchange Act.

(2) Product approved in 2017Cross-licensed products registered under Teligent Canada Inc.

 

We require a supply of quality raw materials and components to manufacture and package pharmaceutical products for ourselves and third parties with which we have contracted. The principal components of our products are active and inactive pharmaceutical ingredients and certain packaging materials. The APIs and other materials and supplies used in our pharmaceutical manufacturing operations are generally available and purchased from many different U.S. and non-U.S. suppliers. However, in some cases, the raw materials used to manufacture pharmaceutical products are available only from a single supplier. Even when more than one supplier exists, we may choose, and in some cases have chosen, only to list one supplier in our applications submitted to the FDA. Any change in a supplier not previously approved must then be submitted through a formal approval process with the FDA. No raw materials or components suppliers represented 10% or more of our purchases in 2017, 2016 or 2015.

 

Our R&D activities are integral to our business and are conducted at our facilityfacilities in Buena, New Jersey. Our R&D department is led by our Chief Scientific Officer, Stephen Richardson, who joined the Teligent team in October 2015. The R&D team consists of 38 full-time employees and their responsibilities include:is responsible for formulation, reverse engineering, methods development, analytical and microbiologic testing and scale up, and regulatory expertise. Our employees have specific expertise in developing injectable products and topical products in a wide range of dosage forms,formulation types, including simple solutions through complex creams. All ANDA topical development is conducted in-house except for bioequivalence testing, which is performed by a contract research organization ("CRO"). Our injectable development is primarily conducted in house with some assistance from certain CRO's.

We have been steadily increasing our investment in R&D as we believe that R&D is the future of the Company. We incurred $19.3, $17.1,$7.7 million and $13.2$10.8 million in R&D expenses in 2017, 20162020 and 2015,2019, respectively. As the business continues to grow over the next three to five years, we expect research and development costs as a percentage of revenue to decline.

 

 

 

Generic pharmaceutical products are the pharmaceutical and therapeutic equivalents of the brand product, also known as the reference listed drug, or RLD. A reference listed brand drug is an approved drug product listed in the FDA publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations, popularly known as the Orange Book. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, provides that generic drugs may enter the market after the approval of an ANDA. An ANDA approval requires that bioequivalence to the reference listed drug be demonstrated and also requires that any patents on the corresponding reference listed drug be expired, invalidated, non-infringed and/or any other relevant market exclusivity periods related to the reference listed drug be expired as well. Generic drugs are bioequivalent to their reference brand name counterparts. Accordingly, generic products provide a safe, effective and cost-efficient alternative to users of these reference brand products. Branded generic pharmaceutical products are generic products in that they are approved for marketing under an ANDA, but they may be more responsive to promotion efforts generally used to promote branded pharmaceutical products. Growth in the generic pharmaceutical industry has been, and will continue to be, driven by the increased market acceptance of generic drugs, as well as the number of brand drugs for which patent terms and/or other market exclusivities have expired.

 

We obtain new generic products primarily through internal product development. Additionally, we license or co-develop products through arrangements with other companies. All applications for FDA approval must contain information relating to product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling and quality control. Information to support the bioequivalence of generic drug products or the safety and effectiveness of new drug products for their intended use is also required to be submitted. There are generally two types of applications used for obtaining FDA approval of new products:

 

RLD) or for a new dosage strength for a drug previously approved under an ANDA.

 

 

 

 

An additional requirement for FDA approval of NDAs and ANDAs is that our manufacturing procedures and operations conform to FDA requirements and guidelines, generally referred to as current Good Manufacturing Practices, or cGMPs. The requirements for FDA approval encompass all aspects of the production process, including validation and recordkeeping, the standards around which are continuously changing and evolving.

Facilities, procedures, operations and/or testing of products are subject to periodic inspection by the FDA, the U.S. Drug Enforcement Administration, or DEA, and other authorities. In addition, the FDA conducts pre-approval and post-approval reviews and plant inspections to determine whether our systems and processes are in compliance with cGMP and other FDA regulations. Our suppliers are subject to similar regulations and periodic inspections.

 

In 2012, the U.S. Food and Drug Administration Safety and Innovation Act, or the FDASIA, was enacted into law. FDASIA is intended to enhance the safety and security of the U.S. drug supply chain by holding all drug manufacturers supplying products to the U.S. to the same FDA inspection standards and schedules. Specifically, prior to the passage of FDASIA, U.S. law required U.S. based manufacturers to be inspected by the FDA every two years but remained silent with respect to foreign manufacturers, causing some foreign manufacturers to go as many as nine years without a routine FDA cGMP inspection, according to the Government Accountability Office.

 

 

Under GDUFA, 70% of the total fees are beingwere derived from facility fees paid by Finished Dosage Form manufacturers and API facilities listed in pending or approved generic drug applications. The remaining 30% of the total fees are beingwere derived

from application fees, including generic drug application fees, prior approval supplement fees and fees for certain types of Drug Master Files, or DMFs.

 

 

In Canada, the registration process for approval of all generic pharmaceuticals has two tracks that proceed in parallel. The first track of the process involves an examination of the proposed generic product by Health Canada, the federal department responsible for national public health, to ensure that the quality, safety and efficacy of the proposed generic product meets Canadian standards and bioequivalence requirements. The second track concerns patent rights of the brand drug owner. Companies may submit an application called an abbreviated new drug submission, or ANDS, to Health Canada that compares the proposed generic drug to another drug marketed in Canada under a Notice of Compliance, or NOC, issued to a first person. When Health Canada is satisfied that the generic pharmaceutical product described in the ANDS satisfies the statutory requirements, it issues an NOC for that product for the uses specified in the ANDS, subject to any court order that may be made in the second track of the approval process.

 

The second track of the approval process is governed by the Patented Medicines NOC Regulations, or the Regulations. We currently do not have any applications in development that would utilize this track.

Section C.08.004.1 of the Canadian Food and Drug Regulations is the so-called data protection provision, and the current version of this section applies in respect of all drugs for which an NOC was issued on or after June 17, 2006. A subsequent applicant for approval to market a drug for which an NOC has already been issued does not need to perform duplicate clinical trials similar to those conducted by the first NOC holder, but is permitted to demonstrate safety and efficacy by submitting data demonstrating that its formulation is bioequivalent to the formulation that was issued for the first NOC. The first party to obtain an NOC for a drug will have an eight-year period of exclusivity starting from the date it received its NOC based on those clinical data. A subsequent applicant for approval that seeks to establish safety and efficacy by comparing its product to the product that received the first NOC will not be able to file its own application until six years after the issuance of the first NOC. The Minister of Health will not be permitted to issue ana NOC to that applicant until eight years after the issuance of the first NOC — this additional two-year period will correspond in most cases to the 24-month automatic stay under the Regulations. If the first person provides the Minister with the description and results of clinical trials relating to the use of the drug in pediatric populations, it will be entitled to an extra six months of data protection. A drug is only entitled to data protection so long as it is being marketed in Canada.

 

 

 

 

 

We manufacture, sell, distribute and market our prescription drug products to national chain drug stores and drug wholesalers and distributors and group purchasing organizations, or GPOs, in the United States and Canada. This commercialization infrastructure includes satisfying our state, provincial, territorial, or national licensing requirements, implementing procedures with our third-party logistics partners, and maintaining appropriate sales order to cash administrative processes and a manager of national accounts to manage our sales.

 

 

In our generic topical prescription drug business, we face competition from other generic drug manufacturers and brand-name pharmaceutical companies through authorized generics. Although there are a significant number of competitors in the generic drug market, there are fewer competitors in the topical generic drug market. The five dominant companies in the topical generic drug market are: Perrigo Company, Sandoz (the generic pharmaceutical division of Novartis AG), Taro Pharmaceutical Industries, Ltd., Mylan N.V., and Teva Pharmaceutical Industries, Ltd. Collectively, these five competitors control approximately 59% of the generic topical market by value based on IQVIA data from December 2017. We believe the concentrated nature of the topical generic drug market creates an opportunity for us to be able to compete based on a variety of factors, including our focus on niche opportunities within the market segment and our dedication to quality in every area of our business.

 

In our generic injectable prescription drug business, we also face competition from other generic drug manufacturers and brand-name pharmaceutical companies through authorized generics. Although there are a significant number of competitors in the generic drug market, there are fewer dominant competitors in the injectable generic drug market. The threefour dominant companies in the injectable generic drug market in the United States consist of Fresenius Kabi USA, Hospira, Inc. (a subsidiary of Pfizer, Inc.)Par and Sandoz (the generic pharmaceutical division of Novartis AG). Collectively, these three competitors control approximately 55% of the generic injectable market by value based on IQVIA data from December 2017.Hikma. In Canada, we face competition from largely the same firms as in the United States as well as certain Canada-only firms. The Canadian generic injectable market is dominated by Sandoz (the generic pharmaceutical division of Novartis AG), Pfizer Injectables and Fresenius Kabi Canada. 

 

Our generic injectable strategy is focused on injectable products with limited competition, and products that have a history of lack of supply, or instability in the supply chain, where we can add value and leverage on our ability to be a reliable supplier to the marketplace.  We believe the concentrated nature of some molecules within the injectable generic drug market, and history of lack of supply of certain molecules in the marketplace, create opportunities for us that we believe will enable us to compete based on a variety of factors, including our focus on niche opportunities within the market segment and our dedication to quality in every area of our business.

 

The contract development and manufacturing services market is highly competitive and includes larger organizations with substantially greater resources than us. Many of our competitors are companies that commercialize and/or manufacture their required products at their own facilities. These competitors include major pharmaceutical companies, generic drug manufacturers and consumer health product companies that generally have substantially greater manufacturing, R&D, marketing and financial resources than us and, in some cases, have more geographically diversified international operations. We compete specifically with a number of different privately-heldprivately held contract manufacturing companies. Although this market is competitive, the competition is limited due to the need for specific expertise in topical formulations and cGMP facilities. We believe that we have the expertise required and we will continue to service our existing customers in this market by providing high quality, customer-oriented service, complemented by our contract development expertise in topical formulations.

 

 

Our operations are subject to a variety of environmental, health and safety laws and regulations, including those of the United States Environmental Protection Agency and equivalent state and local regulatory agencies. These laws and regulations govern, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. Our manufacturing facility uses, in varying degrees, hazardous substances in its processes. Contamination at our facility can result and has resulted in liability to us, for which we have recorded appropriate reserves as needed. For example, two of the Company’s facilities have undergone remediation of environmental contamination. See Note 12 to the Company’s Consolidated Financial Statements included elsewhere in this Annual Report.

 

To compete effectively, we need to develop and maintain a proprietary position with regard to our own technology, product candidates and business. Our goal is to safeguard our trade secrets and know-how, attain, maintain and enforce patent protection for our product candidates, formulations, processes, methods and other proprietary technologies, and operate without infringing on the proprietary rights of others. We seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietary technology. We seek to achieve this protection through a combination of contractual arrangements and patents.

 

We depend upon the skills, knowledge, experience and know-how of our management and R&D personnel, as well as that of our consultants, advisors and collaborators. To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely, and will continue to rely in the future, on confidentiality agreements to protect our interests. We require our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to any other parties. We also require our employees and consultants to disclose and assign to us their ideas, developments, discoveries and inventions. We understand that these agreements may not provide us with adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

 

We also seek to obtain patent protection when necessary, and we understand that this may not provide us with complete protection against competitors who may attempt to circumvent our patents.

 

 

 

We operate our facility in accordance with cGMP, utilizing the same high standards as our pharmaceutical customers.cGMP. Our facility is registered with the FDA.FDA as a drug establishment. We believe that our facility and equipment are in good condition, are well-maintained and are able tocan operate at present levels. Our manufacturing operations are focused on regulatory compliance, continuous improvement, process standardization and excellence in quality and execution across the organization. On November 26, 2019, the FDA issued us a Warning Letter following an inspection of our manufacturing facility at 105 Lincoln Avenue, Buena, New Jersey, that identified several cGMP violations.

 

The Company also leases approximately 9,500 square feet of corporate office space in Iselin, New Jersey, and approximately 4,000 square feet of office space in Toronto, Canada and approximately 3,000 square feet of office and laboratory space in Tallinn, Estonia.Mississauga, Canada.

 

 

Our employees are the heart of our Company. On December 31, 2017,2020, we had a total of 183142 full-time employees, including eight11 full-time employees in Canada and 13 full-time employees in Estonia.Canada. In addition, as the need arises, we occasionally utilize short-term, part-time employees who are paid on an hourly basis. We also utilize temporary employees provided by third-parties on a regular basis, primarily in our production department. We do not have a collective bargaining agreement with our employees and we believe that our employee relations are good.

 

Our current business and future results may be affected by a number of risks and uncertainties, including those described below. The risks and uncertainties described below are not the only risks and uncertainties we face. It is not possible to predict or identify all risk factors that could impact us. For example, the current pandemic related to the COVID-19 coronavirus is causing a dramatic negative impact on the health of citizens globally which has negatively affected the economies and markets around the world. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also may impair our business operations. If any of the following risks

 

We received a warning letter from the FDA in November 2019 relating to our Buena, NJ manufacturing facility resulting from an inspection at such facility from April 2, 2019 to May 20, 2019 (the “FDA Warning Letter”). The FDA Warning Letter cited issues regarding out-of-specification test results, our stability program, our complaint handling, and drug product validation issues. We investigated the issues with the assistance of a consultant, responded to the FDA in December 2019 and March 2020, and submitted a final closeout letter on April 12, 2020. On August 13, 2020, we received an additional comment letter from the FDA in which the FDA indicated that it had reviewed our responses and deemed them to be inadequate as we failed to address and/or provide supporting documentation to several of the concerns raised in the FDA Warning Letter. We have since submitted response letters to the FDA outlining certain changes in our practices, submitting additional documentation to support previous and ongoing independent assessments, providing updates to our organizational structure, and providing additional detail on ongoing remediation projects (including comprehensive product quality assessments) to ensure all of our products are safe, effective and compliant.

As part of our efforts to remediate the issues identified in the FDA Warning Letter and to strengthen our quality systems, we undertook a historycomprehensive review of losses and cannot assure youall of our products that we will become profitable.completed in the fourth quarter of 2020. While the review did not identify material issues with many of our products, it did identify issues of non-conformance with respect to certain products, which has resulted in recalls and halting the production of certain products, that we are actively reviewing and remediating. As a result, there have been, and we believe there will continue to be, supply disruptions or process changes with respect to these products including product recalls, long-term production pauses, short-term clear path to market production pauses, and continued production with minor process corrections. We believe disruptions with respect to certain of our products and the diversion of resources to remediate the product quality issues will have a negative impact on our business, financial position, operating results and cash flows for the fourth quarter of 2020 and during 2021, including reducing revenue, negatively impacting operating/(loss), and possibly resulting in impairment and other charges. Further, we anticipate that the FDA’s issuance of the FDA Warning Letter and review of our processes will continue to delay the FDA’s pre-approval inspection for commercial production on the newly installed injectable line at our Buena, NJ facility. The continued failure to address the issues identified by the FDA in the FDA Warning Letter and those subsequently identified by us in our comprehensive product quality review as well as the continued delay in obtaining the FDA’s pre-approval inspection for commercial production on the newly installed injectable line at the Buena, NJ facility will have a negative impact on our business, financial position, operating results and cash flows.

If COVID-19 continues to spread in the United States and elsewhere, we may have to cease operations and liquidate our business.

We depend on a limited number of customers for a large portion of our revenue. ThreeWe have three customers that accounted for approximately 47% of our revenue for the twelve months ended December 31, 2020, and we have two customers that accounted for 57%41% of our revenue for the year ended December 31, 2017, and three of our customers accounted for 43% of our revenue for the year ended December 31, 2016.2019. The loss of one or more of these customers could have a significant impact on our revenues and harm our business, and results of operations.operations and cash flows.

We expect to generate a significant portion of our total revenues and gross margin from the sale of a limited number of products. While we continue to diversify our product portfolio, none of our products accounted for more than 10% of our revenue for the twelve months ended December 31, 2020, and one of our products accounted for 17% and 23%15% of our revenue for the yearsyear ended December 31, 2017 and 2016, respectively.2019. Any material adverse developments, including increased competition, loss of customers, pricing pressures and supply shortages, with respect to the sale or use of our products and prospective products, or our failure to successfully introduce such products, could have a material adverse effect on our revenues and gross margin.

The pharmaceutical industry in which we operate is intensely competitive. The competition that we encounter has an effect on our product prices, market share, revenue and profitability. Depending upon how we respond to this competition, its effect may be materially adverse to us.

Most of the products that we are developing are either generic drugs or products without patent protection. These drugs and are therefore more subject to the risk ofdirect competition than patented products. In addition, because many of our competitors have substantially greater financial, production and research and development resources, substantially larger sales and marketing organizations, and substantially greater name recognition than we have, we are particularly subject to the risks inherent in competing with them. For example, many of our competitors may be able to develop products and processes competitive with, or superior to, our own. Furthermore, weWe may not be able to successfully develop or introduce new products that are less costly than those of our competitors or offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors.

Revenues and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that we believe are unique to the generic pharmaceutical industry. As the patent(s) for a brand name product and the statutory marketing exclusivity period (if any) expires, the first generic manufacturer to receive regulatory approval for a generic equivalent of the product often is able to capture a substantial share of the market. However, as other generic manufacturers receive regulatory approvals for identical competing products, that market share, and the price of that product, may decline depending on several factors, including the number of competitors, the price of the brand product and the pricing strategy of the new competitors. In addition,Further, in the FDA has continuedevent we encounter delays in testing and manufacturing new pharmaceutical products, submitting applications for, and obtaining, regulatory approval, and commercializing new products, our competitors

may successfully launch competing products ahead of us, reducing our competitive advantage and ability to shorten the reviewsuccessfully market and response time to certain ANDAs, as a result of their guidelines established under GDUFA. If this trend continues, and the FDA is successful in reducing the current backlog of unapproved ANDAs, currently pending approval at the FDA, competitors could potentially enter the markets in which we compete more quickly.sell our products. We cannot provide assurance that we will be able to continue to develop such products or that the number of competitors with such products will not increase to such an extent that we may stop marketing a product for which we previously obtained approval, which may have a material adverse impact on our revenues and gross margin.

Many pharmaceutical companies increasingly have used state and federal legislative and regulatory means to delay generic competition.competition, including competition from generic manufacturers such as us. These efforts have included:included, among others:

If pharmaceutical companies or other third parties are successful in limiting the use of generic products through these or other means, our sales of our generic products may decline. If we experience a material decline, in generic product sales,which may adversely impact our results of operations, financial condition and cash flows may be significantly and adversely impacted.

Our generics business also faces increasing competition from brand-name manufacturers that do not face any significant regulatory approval or other barriers to enter into the generics market. These brand-name companies sell “authorized generic” versions of their products to the market directly, acquire or form strategic alliances with our competitor generic pharmaceutical companies, or grant them rights to sell “authorized generics.” Moreover, brand-name companies continually seek new ways to delay the

Our principal customers are wholesale drug distributors and major retail drug store chains. These customers comprise a significant part of the distribution network for pharmaceutical products in the U.S. This distribution network is continuing to undergo significant consolidation marked by mergers and acquisitions, alliances and partnerships among wholesale distributors and the growth of large retail drug store chains. As a result, a small number of large wholesale distributors control a significant share of the market, and the number of independent drug stores and small drug store chains has decreased. We expect that consolidation of drug wholesalers and retailers will increase pricing and other competitive pressures on drug manufacturers. In addition, the Companywe generally doesdo not enter into long-term supply agreements with itsour customers that would require them to purchase our products. The result of these developments may have a material adverse impact on our business, financial position and results of operations, and could cause the market value of our common stock to decline.

Affordable, high quality raw materials and packaging components are essential to our business due to the nature of the products we manufacture. Raw materials and packaging componentsWe maintain several single-source supplier relationships, either because alternative sources are generallynot available from multiple suppliers. Supplies of certain

In addition, raw materials purchased from third parties, including those from foreign countries, may contain counterfeit ingredients or other adulterants. We maintain a strict program of verification and product testing throughout the ingredient sourcing and manufacturing process to identify potential counterfeit ingredients, adulterants and toxic substances. Nevertheless, discovery of previously unknown problems with the raw materials or product manufacturing processes, or new data suggesting an unacceptable safety risk associated therewith, could result in a voluntary or mandatory withdrawal of a potentially contaminated product from the marketplace, either temporarily or permanently. In addition, because regulatory authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers or the quality of their products may result in production delays or higher raw material costs. Also, any future recall or removal would result in additional costs to us, may significantly harm our reputation, and may give rise to product liability or other litigation, eitherany of which could have a material adverse effect on our operating results.results and financial condition.

Our products, and the raw materials used to make those products, generally have limited shelf lives. Our inventory levels are based, in part, on expectations regarding future sales. We may experience build-ups in inventory if sales slow. Any significant shortfall in sales may result in higher inventory levels of raw materials and finished products, thereby increasing the risk of inventory spoilage and corresponding inventory write-downs and write-offs, which may materially and adversely affect our results of operations. Additionally, labeling changes required for regulatory compliance could render packaging inventories obsolete. Cargo thefts and/or diversions and economically or maliciously motivated product tampering in store shelves may be experienced from time to time, causing unexpected shortages.

In the United States, we and our suppliers of raw materials are also subject to regulation under the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other current and potential future federal, state or local regulations. In Canada, we and our suppliers of raw materials are also subject to regulation under the Hazardous Products Act, Controlled Products Regulations, Consumer Product Safety Act, Canadian Environmental Protection Act and other current and potential future federal, provincial/territorial or local regulations. Failure to adhere to such regulations, by either us or our suppliers, could harm our business and results of operations.

In addition, because chemical ingredients are used in the manufacture of our analytical department uses certain hazardous materialsproducts and chemicals in limiteddue to the nature of the manufacturing process itself, there is a risk of incurring liability for damages caused by or during the storage or manufacture of both the chemical ingredients and controlled quantities.the finished products. We have implemented safety procedures for handling and disposing of such materials, however, such procedures may not comply with the standards prescribed by federal, state and local regulations. Even if we follow such safety procedures for handling and disposing of hazardous materials and chemicals and such procedures comply with applicable law, the risk of accidental

Our operations and properties are also subject to a wide variety of increasingly complex and stringent federal, state and local environmental laws and regulations, including those governing the remediation of contaminated soil and groundwater. Such environmental laws may apply to conditions at properties and facilities presently or formerly owned or operated by us, as well as to conditions at properties at which wastes or other contamination attributable to us have been sent or otherwise come to be located. One of our facilities has undergone remediation of environmental contamination, and one of ourformer facilities is currently undergoing remediation of environmental contamination. The total estimated costs for the clean-up and remediation is $0.9 million as of December 31, 2017, and remaining costs accrued at December 31, 2017 totaled $0.1 million. Based on information provided to us from our environmental consultants and what is known to date, we believe the reserves are sufficient for the remaining remediation of the environmental contamination. There is a possibility, however, that the remediation costs may exceed our estimates. In addition, we can give no assurance that the future cost of compliance with existing environmental laws will not give rise to additional significant expenditures or liabilities that would be material to us. Future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal,

state or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations.

The manufacturing, processing, formulation, packaging, labeling, testing, storing, distributing, marketing, advertising and sale of our products, among other things, are subject to extensive regulation by one or more U.S. or Canadian agencies, including the FDA, the Federal Trade Commission and the Consumer Products Safety Commission, Health Canada, as well as by several state, provincial/territorial and local agencies in localities where our products are stored, distributed or sold. In addition, we manufacture and market certain of our products in accordance with standards set by organizations, such as the United States Pharmacopeial Convention,USP, British Pharmacopeia, or USP, aBP, scientific nonprofit organizationorganizations that sets standards for the identity, strength, quality, and purity of medicines, food ingredients, and dietary supplements manufactured, distributed and consumed worldwide. USP’sAdherence to USP and BP published drug standards are enforceable in the United Statesprescribed by the FDA.FDA and the Canadian Food and Drug Regulations, as applicable.

The FDA regulatesand Health Canada regulate the testing, manufacture, labeling, marketing and sale of pharmaceutical products. Approval by the FDA or Health Canada is required before any new drug, including any new generic drug, may be marketed or sold in the United States. In order to receiveStates or Canada. To obtain approval from the FDA and Health Canada for our product candidates that are generic versions of brand-name drugs, we intend to use thesubmit an Abbreviated New Drug Application (ANDA) in the United States and an Abbreviated New Drug Submission (ANDS), or ANDA, route, which requiresDrug Identification Number Application (DINA) in Canada. These require us to demonstrate to the FDA or Health Canada that each generic product candidate has the same active ingredient, strength, dosage form, route of administration and intended use as a corresponding approved drug product and is bioequivalent to the branded drug product (approved under a New Drug Application (NDA) in the United States, or NDA)a New Drug Submission (NDS) or DINA in Canada), meaning that there is no significant difference between the drugs in their rate and extent of absorption in the body. However, if the FDA determines that an ANDA, or Health Canada determines that an ANDS or DINA, for a generic drug product is not adequate to support approval, it could deny our application or request additional data or information, which could delay approval of the product and impair our ability to compete with the brand-name drug product and/or other generic versions of the product.product

If our product candidates receive FDA or Health Canada approval through the ANDA, process,ANDS or DINA processes, as applicable, the labeling claims and marketing statements that we can make for our generic drugs are generally limited to the claims approved by the FDA or Canada for use in the brand-name product’s label. In addition, following regulatory approval, the labeling, packaging, adverse event reporting, storage, advertising and promotion for the product will be subject to extensive and ongoing regulatory requirements. Our ongoing compliance with these ongoing regulatory requirements could result in additional information requests from the FDA or Health Canada and potentially result in a request from the agency to conduct a product recall or to strengthen warnings and/or revise other label information about the product. Any of these regulatory actions could adversely affect our business, financial condition, results of operations and cash flows.

As a manufacturer, importer and distributor of pharmaceutical products, we must also comply with cGMPs, or current Good Manufacturing Practices, which include requirements related to production processes, quality control and assurance and recordkeeping. Our manufacturing facilities and procedures and those of our suppliers are subject to periodic inspection by the FDA or Health Canada and foreign regulatory agencies.agencies to ensure compliance with cGMP and other requirements applicable to such products. Any material deviations from pharmaceutical cGMPs or other applicable requirements identified during such inspections may result in recalls or other enforcement actions, including warning letters and non-compliance ratings, a delay or suspension in manufacturing operations, consent decrees or civil or criminal penalties. Further, discovery of previously unknown problems with a product or manufacturer may result in restrictions or sanctions, including suspension or withdrawal of marketing approvals, seizures or recalls of products from the market, or civil or criminal fines or penalties, any of which could significantly and adversely affect supplies of our products.

In many activities, including the conduct of clinical trials, we are subject to extensive government regulation by Health Canadalaws and regulations governing data privacy and the protection of health-related and other federal, state provincial/territorialpersonal information. These laws and local regulatory authorities that increasesregulations govern our processing of personal data,

including the collection, access, use, analysis, modification, storage, transfer, security breach notification, destruction and disposal of personal data. We must comply with laws and regulations associated with the international transfer of personal data based on the location in which the personal data originates and the location in which it is processed. Complying with the enhanced obligations imposed by the General Data Privacy Regulation, or the GDPR, to and other applicable international and US privacy laws and regulations may result in significant costs to our business and could preventrequire us from marketing or selling our products.

The privacy and security of operations.

We manufacture drug products at one domestic manufacturing facility. This facility may be forced to shut down or may be unable to operate at full capacity as a result of potential expansion plans. A significant disruption at this facility, even on a short-term basis, could impair our ability to produce and ship drug products to the market on a timely basis, which may have a material adverse effect on our business, financial position and results of operations.

Federal laws regarding reporting and payment obligations with respect to a pharmaceutical company’s participation in federal health care programs, including Medicare and Medicaid, are complex. These programs generally require us to pay rebates or provide discounts to government payors in connection with our products that are dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate calculations that we report on a quarterly basis to the government agencies that administer the programs. Because our processes for calculating applicable government prices and the judgments involved in making these calculations involve subjective decisions and complex methodologies, these calculations are subject to risk of errors and differing interpretations. In addition, they are subject to review and challenge by the applicable governmental agencies, and it is possible that such reviews could result in changes that may have material adverse legal, regulatory, or economic consequences. Responding to current and future changes may increase our costs and the complexity of compliance will be time-consuming, and could have a material adverse effect on our results of operations.

We, like other generic drug manufacturers, have agreements with customers allowing chargebacks, product returns, administrative fees, failure to supply penalties and other rebates. Under many of these arrangements, we may match lower prices offered to customers by competitors. If we choose to lower our prices and, if contractually obligated, we issue a credit on the products that the customer is holding in inventory, whichit could reduce sales revenue and gross margin for the period the credit is provided. Under many of these arrangements, we may have failure to supply penalties, which in the event we are unable to supply a certain product and are unable to meet the needs of our customers, we may incur failure to supply penalties which may be significant. Like our competitors, we also give credits for chargebacks to wholesalers with whom we have contracts for their sales to hospitals, group purchasing organizations, pharmacies or other customers. A chargeback is the difference between the price at which we invoice the wholesaler and the price that the wholesaler’s end-customer pays for a product. Although we establish reserves based on prior experience and our best estimates of the impact that these policies may have in subsequent periods, we cannot ensure that our reserves are adequate or that actual product returns, allowances, and chargebacks will not exceed our estimates. As we continue to experience the consolidation of our customers, which may result in changes to previous patterns of ordering and/or pricing of our products, this could disrupt our established methodologies for calculating our provisions for chargebacks and other accruals.

We are subject to state and federal healthcare laws pertaining to fraud and abuse, physician payment transparency and laws that govern the submission of claims for reimbursement. These laws include the following:

If our past or present operations are found to be in violation of any of such laws or any other governmental regulations that may apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from federal health care programs, and/or the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment, or restructuring of our operations could adversely affect our ability to operate our business and our financial results, action against

us for violation of these laws, even if we successfully defend against them, it could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010,costs, and there continues to be significant uncertainty regarding health care, health care coverage and health care insurance markets. The uncertainty around the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, orfuture of the Affordable Care Act, was passed,and in particular the impact to reimbursement levels, may lead to uncertainty or delay in the purchasing decisions of our customers, which substantially changes the way health care is financed by both governmentalmay in turn negatively impact our product sales and private insurers,results of operations. Similarly, there are a number of state and significantly impacts the U.S.local legislative and regulatory efforts related to drug pricing, including drug price transparency laws that apply to pharmaceutical industry. The Affordable Care Act, among other things, addresses a new methodology by which rebates owed by manufacturers, under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations.may have an impact on our business. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services,reimbursement levels, which could result in reduced demand for our products or create additional pricing pressures.

Even if we are able to obtain regulatory approvals for our generic pharmaceutical products the success of those products is dependent upon market acceptance. Levels of market acceptance for our products could be impacted by several factors, including but not limited to:

Additionally, studies of the proper utilization, safety, and efficacy of pharmaceutical products are being conducted by the industry, government agencies, and others. Such studies, which increasingly employ sophisticated methods and techniques, including methods to investigate the comparative effectiveness of different products used for similar indications,others can call into question the utilization, safety, and efficacy of previously marketed as well as future products. In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk management programs, such as the need for a patient registry, as well as delays in approvals. The occurrence of any of the above risks could adversely affect our profitability, business, financial position, results of operations and/or cash flow, and could cause the market value of our common stock to decline.flow.

Product recalls or product field alerts may be issued at our discretion or required by the FDA and Health Canada, other governmental agencies or other companies having regulatory authority for pharmaceutical product sales. From time to time, we may recall products for various reasons, including failure of our products to maintain their stability through their expiration dates or other

We face the risk of loss resulting from, and adverse publicity and reputational harm associated with, product liability lawsuits, whether or not such claims are valid. We may not be able to avoid such claims. In addition, our product liability insurance may not be adequate to cover such claims and we may not be able to obtain adequate insurance coverage in the future at acceptable costs. A successful product liability claim that exceeds our policy limits could require us to pay substantial sums. In addition, product liability coverage for pharmaceutical companies is becoming more expensive and increasingly difficult to obtain and, as a result, we may not be able to obtain the type and amount of coverage we desire or to maintain our current coverage.

Our applications for the regulatory approval of our products incorporate the results of testing and other information that is conducted or gathered by independent third parties (including, for example, manufacturers of raw materials, testing laboratories, CROs or independent research facilities). Our ability to obtain regulatory approval of the products being tested is dependent upon the quality of the work performed by these third parties, the quality of the third parties’ facilities, and the accuracy of the information provided to us by third parties. We have little or no control over any of these factors. If this testing is not performed properly, our ability to obtain regulatory approvals could be restricted or delayed. In addition, if third party fraud or other recordkeeping problems are discovered after our products are approved for marketing, any government investigations or findings could result in any products that incorporated those fraudulent results having their regulatory approvals withdrawn. The recent COVID-19 pandemic may create additional risk and delays at our independent third party service providers.

From time to time, third parties have asserted intellectual property infringement claims against us and our customers and there can be no assurance that third parties will not assert infringement claims against either us or our customers in the future. While we believe that our product offeringsproducts do not infringe in any material respect upon proprietary rights of other parties and/or that meritorious defenses would exist with respect to any assertions to the contrary, there can be no assurance that we would not be found to infringe on the proprietary rights of others.

In addition, our customers’ products may be subject to claims of intellectual property infringement and such claims, which could materially affect our business if their products cease to be manufactured and they have to discontinue the use of the infringing technology which we may provide. Further, depending on the particular circumstances of any given claim, it may be the case that we may be responsible for indemnifying our customers for a claim ofan intellectual property infringement.infringement claim.

If we were to assert any of our own intellectual property infringement claims against third parties and the third parties were found not to infringe our intellectual property or our intellectual property was found to be invalid and/or unenforceable, we would lose the opportunity to leverage our own intellectual property, for example, through licensing of our technology to others, collection of damages and/or royalty payments based upon successful assertion of our intellectual property rights via enjoining others from practicing the technology at issue.

Any of the foregoing could affect our ability to compete or have a material adverse effect on our business, financial condition and results of operations.

We assess the recoverability of our long-lived assets, which include property and equipment and definite-lived intangible assets, annually or whenever significant events or changes in circumstances indicate impairment may have occurred. Impairment may result from various factors, including adverse changes in assumptions used for valuation purposes, such as actual or projected revenue growth rates, profitability, or discount rates. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to its carrying amount to determine whether the asset’s value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset in excess of fair value and a charge to operating results. For the twelve months ended December 31, 2020, we determined that there was an impairment of $101.5 million to our long-lived assets, and we may experience such charges in the future, particularly if our business performance continues to decline or expected growth is not realized. We cannot predict the amount and timing of any would be recorded in operating income andfuture impairments, if

any. Any future impairment of our goodwill, tangible assets or other intangible assets could have a material adverse effect on our results of operations and financial condition.

In the ordinary course of our business, we may be involved in legal proceedings with both private parties and certain government agencies, including the FDA. Enforcement actions and litigation may result in verdicts against us, which may include significant monetary awards, judgments that certain of our intellectual property rights are invalid or unenforceable and injunctions preventing the manufacture, marketing and sale of our products. If disputes are resolved unfavorably, our business, financial condition and results of operations may be adversely affected.

In the normal course of business, we periodically enter into employment agreements, legal settlements, and other agreements which incorporate indemnification provisions. We maintain insurance coverage which we believe will effectively mitigate our obligations under these indemnification provisions. However, should our obligation under an indemnification provision exceed our coverage or should coverage be denied, it could have a material adverse effect on our business, financial position and results of operations.

Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions in our operations could result in a material disruption of our product development programs. To the extent that any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability and the further development of our product candidates may be delayed.

In addition, we rely on complex information technology systems, including Internet-based systems, to support our supply chain processes as well as internal and external communications. The size and complexity of our systems make them potentially vulnerable to breakdown or interruption, whether due to computer viruses or other causes that may result in the loss of key information or the impairment of production and other supply chain processes. Such disruptions and breaches of security could adversely affect our business.

Current economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance. Our operating results are impacted by the health of the North American economies. Our business and financial performance, including collection of our accounts receivable, realization of inventory, recoverability of assets including investments, may be adversely affected by current and future economic conditions, such as a reduction in the availability of credit, financial market volatility and recession.

We will need to hire or retain qualified personnel with expertise in quality systems, nonclinical testing, government regulation, formulation and manufacturing, sales and marketing and finance. We compete for qualified individuals with numerous pharmaceutical and consumer products companies, universities and other research institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attracting and retaining qualified personnel will be critical to our success.

As a public company, we are required to comply with the periodic reporting obligations of the Exchange Act including preparing annual reports, quarterly reports and current reports. We did not timely file our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which quarterly report was filed on December 31, 2020. Our failure to prepare and disclose this information in a timely manner.manner could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing.

AsIn addition, we are required by Section 404under applicable law and regulations to integrate our systems of the Sarbanes-Oxley Act of 2002, management has conducted an evaluation of the effectiveness of ourdisclosure controls and procedures and internal control over financial reporting at December 31, 2017. We identified a number of material weaknesses inreporting. Our management assessed our internal

Our remediation efforts identified in Item 9A, "Controls“Controls and Procedures"Procedures” below are ongoing and we restatedcontinue our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. Moreover, other material weaknesses may be identified.

If we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our business evolves, or to integrate acquired businesses intoif additional material weaknesses are found in our internal controls system,in the future, we may not be able to timely or accurately report our financial condition, results of operations or cash flows or to maintain effective disclosure controls and procedures. If we are unable to report financial information in a timely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, an inability for us to be accepted for listing on any national securities exchange in the near future, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our Common Stock. Further, there are inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. We could face additional litigation exposure and a greater likelihood of an SEC enforcement or other regulatory action if further restatements were to occur or other accounting-related problems emerge. In addition, any future restatements or other accounting-related problems may adversely affect our financial condition, results of operations and cash flows.

Since we did not file a prior periodic report within the timeframe required by the SEC, we are not currently eligible to use a registration statement on Form S-3 that would allow us to continuously incorporate by reference our SEC reports into the registration statement, or to use “shelf” registration statements to conduct offerings, until approximately one year from the date we regained and maintain status as a current and timely filer. If we wish to pursue an equity or debt offering within the next year, we would be required to conduct the offering on an exempt basis, such as in exchange ratesaccordance with Rule 144A, or file a registration statement on Form S-1. Using a Form S-1 registration statement for a public offering would likely take significantly longer than using a registration statement on Form S-3 and increase our transaction costs, and could, to the extent we are not able to conduct offerings using alternative methods, adversely affectimpact our business, financial condition, results of operations, cash flows, and/liquidity or common stock price.ability to raise capital in a timely manner.

As of December 31, 2017,2020, we had federal net operating loss carry forwards, or NOLs, of approximately $41.7$10.7 million which expire from 20202021 through 2037. Federal operating losses arising during and after 2018 are not subject to expiration; however, their usage except for losses incurred in the years 2018 through 2020 is limited to 80% of taxable income during the year of use assuming that they qualify for use under the CARES Act. Our ability to utilize our NOLs may beis limited under Section 382 of the Internal Revenue Code. The limitations apply if an ownership change, as defined by Section 382, occurs. Generally, an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). Our ability to use net operating loss carry forwardsNOLs is subject to substantial limitation in future periods under certain provisions of Section 382 of the Internal Revenue Code, which limit the utilization of net operating losses upon a more than 50% change in ownership of our stock that is held by 5% or greater stockholders. We examined the application of Section 382 with respect to an ownership change that took place during 2010, as well as the limitation on the application of net operating loss carry forwards. We believe that operating losses subsequent to the change date in 2010 (aggregating $23.1million)$26.5 million) are not subject to Section 382 limitations.limitations unless additional ownership changes occur. We havereexamined the application of Section 382 for years after 2010 and discovered that changes in ownership occurred on August 19, 2020, October 31, 2020 and December 31, 2020. Additionally, as of December 31, 2020, we estimated that thean annual limitation startingof $28 thousand per year. The Company has also estimated the amounts of net operating loss and research and development tax credit carryforwards which will expire unutilized as a result of its estimated annual limitations under Section 382 and has made the decision to write them down, detail of which is in 2010 aggregates from $1.0 million to $2.3 million per year including the effecttax footnote. Finally, future use of amortization of builtthe NOLs can be limited again if the Company has any additional changes in gains.ownership under Section 382.

We are subject to the provisions of ASC 740-10-25, Income Taxes (ASC 740). ASC 740 which prescribes a more likely-than-not threshold for the financial statement recognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. On a quarterly basis, we undergo a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions. For federal purposes, (except for the years 2014 and 2015, which have been examined by the Internal Revenue Services), post 1998 tax years remain open to examination as a result of net operating loss carryforwards.NOLs. We are currently open to audit by the appropriate state income taxing authorities for tax years 2013 through 2016.2016 to 2019. Currently, we are under audit by the state of New Jersey for the period 2015 to 2020.

For the tax reform billyear ended December 31 2020, we have recorded an unrecognized tax benefit of $2.3 million.

On December 22, 2017, President Trump signed into lawWe have a substantial amount of indebtedness which will require significant cash to service. As of the “Tax Cutsdate of this Form 10-K filing and Jobs Act,” or TCJA, which significantly reformsafter giving effect to the Internal Revenue CodeJanuary 2021 Debt Exchange Transactions, our total consolidated indebtedness was approximately $109.7 million. Our substantial level of 1986, as amended, orindebtedness, coupled with our expectation that we will continue to incur losses and generate negative cash flows from operations for the Code. The TCJA, among other things, includes changesforeseeable future, makes it unlikely that we will be able to U.S. federal tax rates, imposes significant additional limitations ongenerate sufficient cash to pay, when due, the deductibilityprincipal of, interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. Our net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate rate, and the impact was recognizedon, or other amounts due in our tax expense in the year of enactment. We continue to examine the impact this tax reform legislation may have on our business. The overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected.

To the extent we incur new indebtedness, the related risks we now face regarding our substantial leverage could be intensified. Further, our ability to meet our expenses, to remain in compliance with our covenants under our debt instruments and to make future payments in respect of our indebtedness depends on, among other factors, our operating performance, competitive developments and financial market conditions, all of which are significantly affected by financial, business, economic, regulatory and other factors. We are not able to control many of these factors. Given current industry and economic conditions, our cash flow may not be sufficient to allow us to pay principal and interest on our debt and meet our other obligations. If we fail to meet our obligations under our existing or future indebtedness and the lenders declare one or more events of default thereunder, you will suffer a total loss of your investment in our common stock, whether through pursuit of a reorganization under the U.S. Bankruptcy Code, foreclosure or otherwise.

Our Senior Credit Facilities contain certain affirmative, negative, and financial conditioncovenants, including cross-defaults on other material indebtedness, as well as events of default triggered by a change of control and results of operations.certain actions initiated by the FDA. These restrictions may interfere with our ability to obtain additional advances under our credit facilities or to obtain new financing or to engage in other business activities, which may inhibit our ability to grow our business and increase revenue.

Shares of our common stock can be relatively illiquid which may affect the trading price of our common stock.

We have not paid dividends to our common stockholders in the past nor do we expect to pay dividends in the foreseeable future, and any return on investment may be limited to potential future appreciation on the value of our common stock.

Item 2.        PROPERTIES

 

The Company’s executive administrative offices are located in Buena, New Jersey, in two facilities now totaling approximately 33,000110,000 square feet with the expansion of the facility completed in the fourth quarter of 2018 and was built on 8.44 acres of land in 1995, which we own. In 2017 we acquired an additional 3.0 acres of adjacent land in support of our facility expansion. We now own a total of 11.44 acres at our Buena facility. One of those facilities is used for production, product development, marketing and warehousing for our own generic prescription pharmaceutical products and pharmaceutical, cosmeceutical and cosmetic products. In July 2016, the Company completed the first phase of the facility expansion in the Buena, New Jersey location. The facility now houses our new product development laboratory for work on topical and sterile pharmaceuticals. The other facility is currently being expanded to increase our manufacturing capacity for topical products, and will also enable the production of sterile injectable products in both vial and ampule presentations. We lease an additional 11,000 square feet of warehouse space as needed in Vineland, New Jersey, lease approximately 9,500 square feet of corporate office space in Iselin, New Jersey, and lease approximately 4,000 square feet of office space in Toronto,Mississauga, Canada. The Company also leases approximately 3,000 square feet of office and laboratory space in Tallinn, Estonia.

To date, twelvethirteen putative class action antitrust lawsuits werehave been filed against us,the Company along with co-defendants, including Taro Pharmaceuticals U.S.A., Inc. and Perrigo New York Inc. One “opt-out” action has additionally been filed against us along with thirty-five generic manufacturer co-defendants, regarding the pricing of generic pharmaceuticals, including econazole nitrate creamnitrate. The class plaintiffs seek to represent nationwide or state classes consisting of persons who directly purchased, indirectly purchased, paid and/or reimbursed patients for the purchase of generic pharmaceuticals from as early as July 1, 2009 until the time the defendants’ allegedly unlawful conduct ceased or will cease. The class plaintiffs seek treble damages for alleged overcharges during the alleged period of conspiracy, and twenty-nine additional drug products not manufactured or sold by us. Allcertain of the class plaintiffs also seek injunctive relief against the defendants. The actions have been transferredconsolidated by the Judicial Panel on Multidistrict Litigation to the U.S. District Court, Eastern District of Pennsylvania for pre-trial proceedings as part of the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter, andmatter. On October 16, 2018 the court dismissed the class actionsplaintiffs’ claims against the Company with leave to replead. On December 21, 2018 the class plaintiffs filed amended complaints, which the Company moved to dismiss on February 21, 2019. On December 19, 2019 certain class plaintiffs filed a further complaint that included additional claims against the Company based on the Company’s sales of fluocinolone acetonide. On October 16, 2020 and October 21, 2020, class plaintiffs amended or moved to amend their complaints to add additional allegations, mooting the motion to dismiss.

“Opt-out” antitrust lawsuits have additionally been filed against the Company by various plaintiffs, including Humana Inc.; The Kroger Co. et al.; United HealthCare Services, Inc.; Molina Healthcare, Inc.; MSP Recovery Claims, Series LLC; Health Care Service Corp.; Harris County, Texas; Rite Aid Corporation; JM Smith Corporation; and Suffolk County, New York. These complaints have been consolidated into direct purchaser, end payer and indirect reseller actions.

A complaint has also been filed by state Attorneys General based on pricing of topical drugs, and naming the Company as a defendant with respect to eacheconazole nitrate. The Attorney General plaintiffs seek treble damages for alleged overcharges during the alleged period of conspiracy. This action has been consolidated by the Judicial Panel on Multidistrict Litigation to the U.S. District Court, Eastern District of Pennsylvania for pre-trial proceedings as part of the complaints. In re Generic Pharmaceuticals Pricing Antitrust Litigation matter.

Due to the early stage of these cases, we arethe Company is unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the amount or range of potential loss. We believeThe Company believes these cases are without merit and we intendit intends to vigorously defend against these claims.

On October 20, 2017, a Demand for Arbitration was filed with the American Arbitration Association by Stayma Consulting Services, Inc. (“Stayma”) against the Company regarding the Company’s development and manufacture for Stayma of two generic drug products, one a lotion and one a cream, containing 0.05% of the active pharmaceutical ingredient flurandrenolide. The Company developed the two products and Stayma purchased commercial quantities of each; however, Stayma now alleges that the Company breached agreements between the parties by developing an additional and different generic drug product, an ointment, containing flurandrenolide, and failing to meet certain contractual requirements. Stayma seeks monetary damages. The arbitrator has issued an interim award finding that the Company is not liable to Stayma on two of Stayma’s three claims

Due to the early stage of this matter, we arethese shareholder cases, the Company is unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the amount or range of potential loss. We believe this case isThe Company believes these cases are without merit and we intendit intends to vigorously defend against these claims. We

On June 18, 2020, the State of New Mexico filed a counter-claimlawsuit in the 1st Judicial District Court, County of Santa Fe, State of New Mexico against Stayma for its failurevarious brand drug manufacturers, generic drug manufacturers, and stores that manufactured, designed, distributed, supplied, marketed, promoted, advertised, and/or sold ranitidine and/or Zantac® to pay several past due invoicesNew Mexico residents. The lawsuit alleges that these products contain unsafe levels on N-Nitrosodimethylamine (NDMA), a known carcinogen. It further alleges that Defendants withheld the known dangers of approximately $1.7 million relatingthe products from the U.S. Food and Drug Administration (“FDA”) and knew or should have known of various studies demonstrating that Zantac®/ranitidine products contained and/or produced levels of NDMA well above FDA’s daily acceptable limit of 90ng. As to the developmentCompany specifically, New Mexico states that the Company maintains an active pharmacy wholesaler license in New Mexico and commercial supplymanufactures injectable prescription Zantac which is sold into New Mexico through its aforementioned license. It asserts that the Company created a public nuisance and was also negligent in its sale of this product. As to the public nuisance claim, New Mexico seeks unspecified funding for a statewide medical monitoring program. As to the negligence claim, New Mexico seeks unspecified monetary damages. Due to the early stage of this case, the Company is unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the two subject products.amount or range of potential loss, if any. The Company believes this case to be without merit and it intends to vigorously defend against these claims.

Not applicable.

PART II

 

 

 

We transferred the listing of our common stock from the NYSE MKT to the NASDAQ Global Select Market. Our common stock ceased tradingis traded on the NYSE MKT under the symbol “IG” at the close of business on October 23, 2015 and began trading on the NASDAQNasdaq Global Select Market under the symbol “TLGT” on October 26, 2015.“TLGT.”

 

As of March 6, 2018,April 30, 2021, there were approximately 35946 stockholders of record of our 53,496,88992,817,493 outstanding shares of common stock.