UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)



			þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2018~~

March 31, 2019



			¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to_______________________

Commission File Number 001-08568

Teligent, Inc.

(Formerly IGI Laboratories, Inc.)

(Exact name of registrant as specified in its charter)


Delaware		01-0355758
(State or other Jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

~~Delaware~~		~~01-0355758~~
~~(State or other Jurisdiction of~~	~~(I.R.S. Employer Identification No.)~~
~~incorporation or organization)~~

105 Lincoln Avenue
Buena, New Jersey		08310
(Address of Principal Executive Offices)		(Zip Code)

(856) 697-1441

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of ~~"large~~“large accelerated filer,~~" "accelerated~~” “accelerated filer,"” “smaller reporting company” and ~~"smaller reporting company"~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

The number of shares outstanding of the issuer's common stock is ~~53,537,888~~53,850,427 shares as of ~~August~~May 6, ~~2018.~~2019.

OTHER INFORMATION

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refer to Teligent, Inc., a Delaware corporation (formerly IGI Laboratories, Inc.), and its consolidated subsidiaries.

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

TELIGENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)


	June 30, 2018 (Unaudited)			December 31, 2017* (Audited)				March 31, 2019 (unaudited)		December 31, 2018
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	13,675		$	26,692		Cash and cash equivalents	$	6,397	$	9,705
Accounts receivable, net	16,232			18,143
Inventories, net	17,575			16,075
Restricted cash							Restricted cash	206		2,892
Accounts receivable, net of allowance for doubtful accounts of $2,531 and $2,636, as of March 31, 2019 and December 31, 2018, respectively							Accounts receivable, net of allowance for doubtful accounts of $2,531 and $2,636, as of March 31, 2019 and December 31, 2018, respectively	15,412		16,120
Inventories							Inventories	20,954		16,296
Prepaid expenses and other receivables	2,206			3,622			Prepaid expenses and other receivables	2,806		3,373
Total current assets	49,688			64,532			Total current assets	45,775		48,386

Property, plant and equipment, net	83,027			68,355			Property, plant and equipment, net	94,392		91,775
Intangible assets, net	52,930			56,017			Intangible assets, net	46,818		48,375
Goodwill	445			471			Goodwill	480		470
Other assets	577			611			Other assets	4,397		1,886
Total assets	$	186,667		$	189,986		Total assets	$	191,862	$	190,892

LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	8,654		$	10,595		Accounts payable	$	7,555	$	5,933
Accrued expenses	9,269			13,502			Accrued expenses	9,303		9,842
Deferred income							Deferred income	1,875		2,426
Convertible 3.75% Senior Notes, net of debt discount and debt issuance costs (face of $13,022 and $15,702 as of March 31, 2019 and December 31, 2018, respectively)							Convertible 3.75% Senior Notes, net of debt discount and debt issuance costs (face of $13,022 and $15,702 as of March 31, 2019 and December 31, 2018, respectively)	12,214		14,411
Other current liabilities							Other current liabilities	407		—
Total current liabilities	17,923			24,097			Total current liabilities	31,354		32,612

2021 Term Loan, net of debt discount and debt issuance costs (face of $15,000 as of June 30, 2018)	14,198			—
Convertible 3.75% Senior Notes, net of debt discount and debt issuance costs (face of $68,660 and $143,750 as of June 30, 2018 and December 31, 2017, respectively)	60,312			120,977
Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $75,090 as of June 30, 2018)	54,963			—
Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $75,090 as of March 31, 2019 and December 31, 2018, respectively)							Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $75,090 as of March 31, 2019 and December 31, 2018, respectively)	57,723		56,909
Revolver, net of debt issuance costs (face of $20,000 and $15,000 as of March 31, 2019 and December 31, 2018, respectively)							Revolver, net of debt issuance costs (face of $20,000 and $15,000 as of March 31, 2019 and December 31, 2018, respectively)	20,000		15,000
2023 Term Loan, net of debt issuance costs (face of $72,020 and $70,000 as of March 31, 2019 and December 31, 2018, respectively)							2023 Term Loan, net of debt issuance costs (face of $72,020 and $70,000 as of March 31, 2019 and December 31, 2018, respectively)	69,766		67,662
Deferred tax liability	148			159			Deferred tax liability	220		215
Other long term liabilities							Other long term liabilities	2,579		73
Total liabilities	147,544			145,233			Total liabilities	181,642		172,471

Commitments and Contingencies							Commitments and Contingencies

Stockholders’ equity:							Stockholders’ equity:
Common stock, $0.01 par value, 100,000,000 shares authorized; 53,512,888 and 53,400,281 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively	554			554
Common stock, $0.01 par value, 100,000,000 shares authorized; 53,845,427 and 53,774,221 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively							Common stock, $0.01 par value, 100,000,000 shares authorized; 53,845,427 and 53,774,221 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively	558		557
Additional paid-in capital	126,532			106,312			Additional paid-in capital	117,239		116,864
Accumulated deficit	(85,612		)	(60,094		)	Accumulated deficit	(105,074)		(96,350)
Accumulated other comprehensive loss	(2,351		)	(2,019		)	Accumulated other comprehensive loss	(2,503)		(2,650)
Total stockholders’ equity	39,123			44,753			Total stockholders’ equity	10,220		18,421
Total liabilities and stockholders' equity	$	186,667		$	189,986		Total liabilities and stockholders' equity	$	191,862	$	190,892

*Derived from the audited December 31, 2017 financial statement

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELIGENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except shares and per share information)

(Unaudited)


	Three months ended March 31,
	2019		2018

Revenue, net	$	13,122	$	14,545

Costs and expenses:
Cost of revenues	7,360		9,325
Selling, general and administrative expenses	5,513		5,360
Product development and research expenses	2,989		3,391
Total costs and expenses	15,862		18,076
Operating loss	(2,740)		(3,531)

Other (Expense) Income:
Foreign currency exchange (loss) gain	(844)		1,325
Debt partial extinguishment of 2019 Notes	(185)		—
Interest and other expense, net	(4,947)		(2,572)
Loss before income tax expense	(8,716)		(4,778)

Income tax expense	8		24

Net loss attributable to common shareholders	$	(8,724)	$	(4,802)

Basic and diluted loss per share	$	(0.16)	$	(0.09)


Weighted average shares of common stock outstanding:
Basic and diluted shares	53,805,983		53,458,513

Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017

Revenue, net $ 16,751
$ 18,408
$ 31,296
$ 38,299

Costs and expenses:

Cost of revenues 11,728
10,371
21,053
19,328
Selling, general and administrative expenses 5,961
4,706
11,321
9,005
Product development and research expenses 3,967
5,113
7,358
8,781
Total costs and expenses 21,656
20,190
39,732
37,114
Operating (loss) income (4,905 ) (1,782 ) (8,436 ) 1,185

Other income (expense):

Foreign currency exchange (loss) gain (3,220 ) 3,822
(1,895 ) 4,901
Debt partial extinguishment of Convertible 3.75% Senior Notes (10,069 ) —
(10,069 ) —
Interest and other expense, net (2,499 ) (2,936 ) (5,071 ) (6,068 )
(Loss) income before income tax expense (20,693 ) (896 ) (25,471 ) 18

Income tax expense 23
23
47
106

Net loss attributable to common shareholders $ (20,716 ) $ (919 ) $ (25,518 ) $ (88 )

Basic and diluted loss per share $ (0.39 ) $ (0.02 ) $ (0.48 ) $ —

Weighted average shares of common stock outstanding:

Basic and diluted shares 53,510,712
53,304,407
53,484,756
53,250,109

~~The accompanying notes are an integral part of the condensed consolidated financial statements.~~

~~TELIGENT, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(in thousands)~~

~~(Unaudited)~~

Three months ended June 30, Six months ended June 30
2018 2017 2018 2017
Net loss $ (20,716 ) $ (919 ) $ (25,518 ) $ (88 )

Other comprehensive loss, net of tax;

Foreign currency translation adjustment (28 ) (163 ) (332 ) (245 )
Other comprehensive loss (28 ) (163 ) (332 ) (245 )

Comprehensive loss $ (20,744 ) $ (1,082 ) $ (25,850 ) $ (333 )

~~The accompanying notes are an integral part of the condensed consolidated financial statements.~~

~~TELIGENT, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY~~

~~For the six months ended June 30, 2018~~

~~(in thousands, except share information)~~

~~(Unaudited)~~

Additional Accumulated
Other Total
Common Stock Paid-In Comprehensive Accumulated Stockholders’
Shares Amount Capital Loss Deficit Equity
Balance, December 31, 2017 53,400,281
$ 554
$ 106,312
$ (2,019 ) $ (60,094 ) $ 44,753

Stock based compensation expense —
—
1,165
—
—
1,165
Stock options exercised —
—
12
—
—
12
Issuance of stock for vested restricted stock units 112,607
—
—
—
—
—
Fair value of conversion feature on Convertible 4.75% Senior Notes —
—
19,043
—
—
19,043
Cumulative translation adjustment —
—
—
(332 ) —
(332 )
Net loss —
—
—
—
(25,518 ) (25,518 )

Balance, June 30, 2018 53,512,888
$ 554
$ 126,532
$ (2,351 ) $ (85,612 ) $ 39,123

~~The accompanying notes are an integral part of the condensed consolidated financial statements.~~

~~TELIGENT, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in thousands)~~

~~(Unaudited)~~

Six months ended June 30,
2018 2017
Cash flows from operating activities:

Net loss $ (25,518 ) $ (88 )
Reconciliation of net loss to net cash used in operating activities

Depreciation and amortization of fixed assets 1,133
822
Provision for bad debt expense 811
26
Provision for write down of inventory 1,154
918
Stock based compensation 1,113
1,739
Amortization of debt issuance costs 502
456
Amortization of intangibles 1,550
1,396
Foreign currency exchange loss (gain) 1,895
(4,901 )
Partial extinguishment of Convertible 3.75% Senior Notes 10,069
—
Amortization of debt discount 4,425
4,183
Loss on impairment of intangible assets 22
—
Changes in operating assets and liabilities
Accounts receivable 1,023
(5,530 )
Inventories (2,816 ) (2,554 )
Prepaid expenses and other current receivables 1,443
(208 )
Other assets 35
20
Accounts payable and accrued expenses (9,604 ) 2,414

Net cash used in operating activities (12,763 ) (1,307 )

Cash flows from investing activities:

Capital expenditures (12,270 ) (15,286 )

Net cash used in investing activities (12,270 ) (15,286 )

Cash flows from financing activities:

Proceeds from exercise of common stock options 12
267
Proceeds from 2021 Term Loan 15,000
—
Debt issuance costs on Convertible 4.75% Senior Notes and 2021 Term Loan (2,457 ) —

Net cash provided by financing activities 12,555
267

Effect of exchange rate on cash and cash equivalents (540 ) 536
Net decrease in cash, cash equivalents and restricted cash (12,478 ) (16,326 )
Cash, cash equivalents and restricted cash at beginning of period 27,165
66,481

Cash, cash equivalents and restricted cash at end of period $ 14,147
$ 50,691

Supplemental Cash flow information:

Cash payments for interest $ 2,475
$ 2,695
Cash payments for income taxes 48
93

Non cash investing and financing transactions:

  Acquisition of capital expenditures in accounts payable and accrued expenses $ 3,042
$ 4,260
  Capitalized interest in capital expenditures 477
—
  Capitalized stock compensation in capital expenditures 53
66

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELIGENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)


	Three months ended March 31,
	2019		2018
Net loss	$	(8,724)	$	(4,802)

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	147		(304)
Other comprehensive income (loss)	147		(304)

Comprehensive loss	$	(8,577)	$	(5,106)

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELIGENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands, except share information)


				Additional				Accumulated Other		Total
	Common Stock					Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance, December 31, 2018 (audited)	53,774,221	$	557	$	116,864	$	(96,350)	$	(2,650)	$	18,421

Stock based compensation expense	—	—		376		—		—		376

Issuance of stock for vested restricted stock units	71,206	1		(1)		—		—		—




Cumulative translation adjustment	—	—		—		—		147		147
Net loss	—	—		—		(8,724)		—		(8,724)

Balance, March 31, 2019 (unaudited)	53,845,427	$	558	$	117,239	(105,074)		$	(2,503)	$	10,220

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELIGENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Three months ended March 31,
	2019		2018
Cash flows from operating activities:
Net loss	$	(8,724)	$	(4,802)
Reconciliation of net loss to net cash (used in) provided by operating activities:
Depreciation of fixed assets and leases	876		561
Provision for bad debt	(105)		—
Provision for write down of inventory	453		602

Stock based compensation	368		616
Amortization of debt costs and debt discount	1,523		2,594
Amortization of intangible assets	756		791
Non cash lease expense	97		—
Foreign currency exchange loss (gain)	844		(1,325)
Partial extinguishment of Convertible 3.75% Senior Notes	185		—


Loss on impairment of intangible assets	—		22
Non cash interest expense	2,020		—
Changes in operating assets and liabilities:
Accounts receivable	892		(711)
Inventories	(5,063)		(2,376)
Prepaid expenses, other current receivables and assets	558		902

Accounts payable and accrued expenses	(95)		(6,423)
Operating liabilities	(85)		—
Deferred income	(551)		—
Net cash used in operating activities	(6,051)		(9,549)
Cash flows from investing activities:
Capital expenditures	(2,129)		(4,094)

Net cash used in investing activities	(2,129)		(4,094)
Cash flows from financing activities:

Proceeds from Revolver	5,000		—
Debt issuance costs	(109)		—
Repurchase of 3.75% senior notes	(2,686)		—
Principal paid on lease obligation	(3)		—
Net cash provided by financing activities	2,202		—
Effect of exchange rate on cash and cash equivalents	(16)		(287)
Net decrease in cash, cash equivalents and restricted cash	(5,978)		(13,643)
Cash, cash equivalents and restricted cash at beginning of period	13,069		27,165
Cash, cash equivalents and restricted cash at end of period	$	7,075	$	13,235
Supplemental Cash flow information:
Cash payments for interest	$	278	$	—
Cash payments for income taxes	20		15
Non-cash operating, investing and financing transactions:


Acquisition of capital expenditures in accounts payable and accrued expenses	1,365		3,421
Capitalized interest in capital expenditures	—		1,348
Capitalized stock compensation in capital expenditures	10		30

The accompanying notes are an integral part of the condensed consolidated financial statements.

TELIGENT, INC. AND SUBSIDIARIES

NOTES TO ~~(UNAUDITED)~~UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation ~~S-X~~.S-X. Accordingly, they do not include all of the information and footnotes required by ~~GAAP.~~GAAP . In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as updated by other reports we may file from time to time with the Securities and Exchange Commission (“SEC”). The condensed consolidated balance sheet as of December 31, ~~2017~~2018 has been derived from those audited consolidated financial statements. Operating results for the ~~six~~three month period ended ~~June 30, 2018~~March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2018.~~2019.

1. Correction of Previously Issued Consolidated Financial Statements

As previously disclosed in the Company’s 2018 Form 10-K, subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, management determined adjustments were needed to correct the presentation of certain immaterial accounting errors in the Company’s previously reported consolidated financial statements for the years ended December 31, 2017 and 2016. Accordingly, the consolidated financial statements as of and for the years ended December 31, 2017 and 2016, and the related notes (including the Company’s quarterly results disclosed in Note 15, Quarterly Results), were revised to correct these immaterial accounting errors (the “Revision”) in the Company’s 2018 Form 10-K. A summary of these immaterial accounting errors, and their impact on the accompanying consolidated statement of cash flows for the three months ended March 31, 2018 are, as follows:

(1) The Company pays wholesalers certain fees associated with the sale of the Company's product. The payment of these fees had been historically classified by the Company as cost of revenues and accrued expenses prior to the adoption of ASC 606, Revenue from Contracts with Customers ("ASC 606"). As disclosed in Note 7, Revenues, Recognition and Allowances, of the 2018 Form 10-K, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method, at which time the Company began classifying the payment of wholesaler fees as a reduction of revenue and accounts receivable. Upon further analysis, however, management determined that these fees should have always been classified as a reduction of revenue and accounts receivable, rather than as costs of revenues and accrued expenses, because the services provided by the Company’s wholesalers cannot generally be provided by third parties and the underlying fees are not specifically identifiable from other services.

The correction of this error resulted in a reduction in previously reported accounts receivable and decrease in previously reported accrued expenses of approximately $7.0 million, respectively, as of December 31, 2017.

(2) Prior to the adoption of ASC 606, the Company classified Medicaid, Medicare and other rebates (the "Rebates") as a reduction of accounts receivable, whereas subsequent to adoption of ASC 606 the Company began classifying the Rebates as accrued expenses. Upon further analysis, management determined that the Rebates should have always been classified as accrued expenses because their terms require cash settlement and are payable to third parties that are other than the Company's customer. The correction of this immaterial error resulted in an increase in previously reported accounts receivable and increase in previously reported accrued expenses of $1.6 million, respectively, as of December 31, 2017.

The following tables summarize the effects of the Revision on the accompanying consolidated statement of cash flows of the Company for the three months ended March 31, 2018:


	Consolidated Statement of Cash Flows
	Three Months Ended March 31, 2018
	As Previously Reported		Adjustment			As Revised
Cash flows from operating activities
Accounts receivable	$	4,690	$	(5,401)	(1)(2)	$	(711)
Accounts payable and accrued expenses	(11,824)		5,401		(1)(2)	(6,423)

2. Nature of the Business and Liquidity

Nature of the Business

Teligent, Inc. and its subsidiaries (collectively the “Company”), is a specialty generic pharmaceutical company. Our mission is to become a leader in the specialty generic pharmaceutical market in alternate dosage forms. Under our own label, we currently market and sell generic topical and generic and branded generic injectable pharmaceutical products in the United States and Canada. In the United States, we currently market 2834 generic topical pharmaceutical products and four branded generic injectable pharmaceutical products. In Canada, we sell over 3027 generic and branded generic injectable products and medical devices. Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide contract manufacturing services to the pharmaceutical, over-the-counter ("OTC"), and cosmetic markets. We operate our business under one reportable segment. Our common stock is traded on the ~~NASDAQ~~Nasdaq Global Select Market under the trading symbol “TLGT.” Our principal executive office, laboratories and manufacturing facilities are located at 105 Lincoln Avenue, Buena, New Jersey. We have additional offices located in Iselin, New Jersey, ~~Toronto,~~Mississauga, Canada, and Tallinn, Estonia.

Liquidity

For the six months ended June 30, 2018, we incurred a net loss of $25.5 million and cash outflows of $12.5 million. Additionally, we have an accumulated deficit of $85.6 million. The reduction in cash was largely due to the additional year-to-date investment of $12.3 million in the Company's new manufacturing facility, along with the timing of accounts receivable collections and expense payments related primarily to the launch of five new products in the U.S. market.

Our liquidity needs have typically arisen from the funding of our manufacturing facility, research and development programs and the launch of new products. In the past, we have met these cash requirements through cash inflows from operations, working capital management, and proceeds from our Convertible 3.75% Senior Notes ("2019 Notes"). The 2019 Notes were issued inOn December ~~2014 and are due in December 2019. On April 27,~~13, 2018, the Company and Ares Management LLC entered ~~into separate exchange agreements with~~into: (i) a First Lien Revolving Credit Agreement, by and among the Company, as the borrower, certain ~~holders~~subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and ACF Finco I LP, as administrative agent (the “Revolver Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among us, as the borrower, certain subsidiaries of ours, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent (the “Second Lien Credit Agreement” and, together with the Revolver Credit Agreement, the “New Senior Credit Facilities”).

The New Senior Credit Facilities consist of (i) a $25.0 million senior revolving credit facility governed by the Revolver Credit Agreement (the “Revolver”); (ii) a $50.0 million second lien initial term loan (the “Initial Term Loan”); (iii) a $30.0 million second lien delayed draw term loan A (the “Delayed Draw Term Loan A”) and (iv) a $15.0 million second lien delayed draw term loan B (the “Delayed Draw Term Loan B” and the “Delayed Draw Term Loan A”, are hereto referred to as the “Delayed Draw Term Loans” and the Delayed Draw Term Loans together with the Initial Term Loan, hereto referred to as the “2023 Term Loans”). The Term Loans are governed by the Second Lien Credit Agreement. The Company's ability to borrow under the Revolver is subject to a “borrowing base” to be determined based upon eligible inventory, eligible equipment, eligible real estate and eligible receivables.

The Company’s principal sources of liquidity are cash and cash equivalents of approximately $6.4 million at March 31, 2019 ~~Notes.~~and ongoing cash from operations. On March 31, 2019, the Company had access to an additional $5.0 million on its Revolver which was subsequently drawn down in April of 2019. The ~~agreements gave the holder the right to exchange in aggregate $75.1~~Company has an additional $25.0 million still available on its 2023 Term Loans, as part of the ~~2019 Notes for $75.1~~credit facilities executed with Ares Capital Management, of which $15.0 million relates to funding required to further increase manufacturing capacity in the newly expanded Buena manufacturing facility.

The Company also has the ability to defer certain product development and other programs, as well as exercise its option to defer the payment of ~~new Convertible 4.75% Senior Notes due~~interest on its 2023 ~~(“2023 Notes”). Additional information is provided in Note 6.~~

~~In order to continue normal business operations and execution~~Term Loans, if necessary. As of ~~the Company’s growth strategy,~~March 31, 2019, the Company ~~has~~elected the paid-in-kind interest option and deferred interest expense of $2.0 million on its 2023 Term Loans.

However, the Company may require additional funding and this funding will depend, in part, on the timing and structure of potential business arrangements. If necessary, the Company may continue to ~~exercise its ability~~seek to ~~significantly defer or reduce planned discretionary investments in research and development and capital projects or seek other financing alternatives. Other financing alternatives may include raising~~raise additional capital through the sale of its equity or through a strategic alliance with a third party, ~~or securing debt. If~~subject to certain restrictions in the Ares Credit Facility agreements. There may also be additional acquisition and growth opportunities ~~arise,~~that may require external ~~financing will be required.~~

On May 4, 2018, the Company filed Form S-3 under the Securities Act of 1933. The S-3 registration allows the Company to issue, from time to time and at prices to be determined at or prior to the offering, up to $50.0 million of any combination of the securities described in the prospectus, either individually or in units should the need to raise cash arise.

On June 1, 2018, the Company secured a term loan ("2021 Term Loan") for $25.0 million to support the operations of the business. The first $15.0 million of loan proceeds was received on June 1, 2018. The remaining loan proceeds of $10.0 million was received on July 16, 2018. The Company is currently evaluating alternative financing methods. As the Company continues to review its capital and debt structure, therefinancing. There can be no assurance that ~~a strategic alliance or debt~~such financing will be

available on terms acceptable to the Company, or at all. The ~~board of directors and management of the~~ Company ~~intend to exercise all options available in order to enable the Company~~believes that its existing capital resources will be sufficient to support its current ~~growth strategy~~business plan and operations beyond ~~August 2019.~~May 2020.

~~Out of Period Adjustments~~

For the three and six months ended June 30, 2018, the Company recorded net adjustments of $0.4 million and $0.3 million, respectively, related to prior periods. The net impact of the adjustments, described below, on any prior annual or interim periods financial statements was not significant.

Three months ended Six months ended
June 30, 2018 June 30, 2018
Wholesale fees (Revenue) $ 0.9
$ 0.9
Medicaid (Revenue) 0.3
—
Sales return reserve (Revenue) —
(0.6 )
Inventory adjustments (Cost of revenues) —
0.8
Bad debt expense (Selling, general and administrative expenses) (0.8 ) (0.8 )
$ 0.4
$ 0.3

2.3. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements contained in this report are unaudited. In the opinion of management, the condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the fiscal years ending December 31, 2019 and 2018. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with the notes to the audited consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on April 1, 2019.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Teligent, Inc. and its wholly-owned and majority-owned subsidiaries. All inter-company accounts and transactions have been eliminated. The Company consolidated the following entities: Igen, Inc., Teligent Pharma. Inc., Teligent Luxembourg S.à.r.l., Teligent OÜ, Teligent Canada Inc., and Teligent Jersey Limited., in addition to the following inactive entities: Microburst Energy, Inc., Blood Cells, Inc. and Flavorsome, Ltd.

Use of Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the U.S. (GAAP)~~GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include ~~the historical valuation of the derivative liability,~~ sales returns and allowances, allowances for excess and obsolete inventories, allowances for doubtful accounts, provisions for income taxes and related valuation allowances, stock based compensation, the assessment for the impairment of long-lived assets (including intangibles, goodwill and property, plant and equipment)~~, property, plant and equipment~~ and legal accruals for environmental cleanup and remediation costs. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid instruments purchased with the original maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. Cash and cash equivalents include cash on hand and bank demand deposits used in the Company’s cash management program.

The Company has restricted cash, consisting of escrow accounts and letter of credits, which is included within other assets, non-current on the Company's Condensed Consolidated Balance Sheet. ~~The~~In addition, pursuant to the New Credit Facilities agreement, proceeds from the 2023 Term Loan are deposited in a blocked bank account and restricted for use with the exception of repurchasing remaining 2019 Notes. In January and February of 2019, the Company ~~also presents~~used a total of $2.7 million of restricted cash ~~with cash and cash equivalents in~~to repurchase a portion of the ~~Condensed Consolidated Statement of Cash Flows.~~remaining 2019 Notes (Note 8).

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported in the Condensed Consolidated Balance Sheet to the total amounts in the Condensed Consolidated Statement of Cash Flows as ~~follows (in thousands):~~follows:


	March 31, 2019		March 31, 2018
Cash and cash equivalents	$	6,397	$	12,762
Restricted cash	206		—
Restricted cash in other assets	472		473
Cash, cash equivalents and restricted cash in the statement of cash flows	$	7,075	$	13,235

June 30, 2018 December 31, 2017 June 30, 2017 December 31, 2016
Cash and cash equivalents $ 13,675
$ 26,692
$ 50,216
$ 66,006
Restricted cash in other assets 472
473
475
475
Cash, cash equivalents and restricted cash in the statement of cash flows $ 14,147
$ 27,165
$ 50,691
$ 66,481

~~Stock Based Compensation~~

ASC 718-10 defines the fair-value-based method of accounting for stock-based employee compensation plans and transactions used by the Company to account for its issuances of equity instruments to record compensation cost for stock-based employee compensation plans at fair value as well as to acquire goods or services from non-employees. Transactions in which the Company issues stock-based compensation to employees, directors and advisors and for goods or services received from non-employees are accounted for based on the fair value of the equity instruments issued. The Company utilizes pricing models in determining the fair values of options, RSU's and warrants issued as stock-based compensation. These pricing models utilize the market price of the Company’s common stock and the exercise price of the option or warrant, as well as time value and volatility factors underlying the positions. Stock-based compensation expense is recognized over the requisite service period of the award, which usually coincides with the vesting period of the grant.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, trade receivables, ~~notes payable,~~restricted cash, accounts payable and other accrued liabilities at ~~June 30, 2018~~March 31, 2019 approximate their fair value for all periods presented. The Company measures fair value in accordance with ASC 820-10, “Fair Value Measurements and Disclosures”. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

As of ~~June 30, 2018,~~March 31, 2019, based on level 2 inputs, the ~~net carrying~~fair value of ~~the 2019~~our Notes (2019 Notes and 2023 ~~Notes (discussed in Note 6)~~Notes) was approximately ~~$115.3~~$64.3 million compared to their face value of $143.75 million. This variance is due to the conversion feature in the Notes rather than to changes in market interest rates. The Notes carry a fixed interest rate and therefore do not subject the Company to interest rate risk. As of June 30, 2018, the net carrying value of $69.9 million. In addition, the ~~2021 Term Loan (discussed in Note 6) was approximately $14.2 million compared to the face~~ value of ~~$15.0 million.~~our Senior Credit Facilities was stated at carrying value at March 31, 2019. The ~~variance is due to debt discount and debt financing costs. The 2021 Term Loan bears interest~~Company believes it could obtain borrowings at ~~a rate of LIBOR plus 9%, and is~~March 31, 2019 with comparable terms as the December 31, 2018 Senior Credit Facilities, therefore, ~~subject to market risk.~~the carrying value approximates fair value.

Loss Per Common Share

Basic loss per share of common stock is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted loss per share of common stock is computed using the weighted average number of shares of common stock and potential dilutive common stock equivalents outstanding during the period. Potential dilutive common stock equivalents include shares issuable upon the conversion of the ~~2019~~notes and ~~2023 Notes,~~ the exercise of options and ~~the vesting of restricted stock units ("RSU's").~~warrants. For the three ~~and six~~ months ended ~~June 30, 2018,~~March 31, 2019, the potential dilutive common stock equivalents have been excluded from the computation of diluted loss per share, as their effect would have been anti-dilutive.

(in thousands except shares and per share data)


	Three months ended June 30,						Six months ended June 30,							Three months ended March 31,
	2018			2017			2018			2017				2019		2018
Basic loss per share computation:													Basic loss per share computation:
Net loss - basic and diluted	$	(20,716	)	$	(919	)	$	(25,518	)	$	(88	)	Net loss - basic and diluted	$	(8,724)	$	(4,802)
Weighted average common shares - basic and diluted	53,510,712			53,304,407			53,484,756			53,250,109			Weighted average common shares - basic and diluted	53,805,983		53,458,513
Basic and diluted loss per share	$	(0.39	)	$	(0.02	)	$	(0.48	)	$	0.00		Basic and diluted loss per share	$	(0.16)	$	(0.09)

~~Revenue Recognition~~

The Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. The Company's revenue is recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and returns. The Company derives its revenues from three types of transactions: sales of its own pharmaceutical products (Company product sales), sales of manufactured product for its customers (contract manufacturing sales), and research and product development services performed for third parties. Due to differences in the substance of these transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each. Taxes collected from customers and remitted to government authorities and that are related to the sales of the Company’s products are excluded from revenues. See more detailed information in Note 3.

~~Adoption of ASC Topic 606, "Revenue from Contracts with Customers”~~

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard, including subsequently issued amendments, replaces most existing revenue recognition guidance in U.S. GAAP. The key focus of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company performed a comprehensive review of its existing revenue arrangements as of January 1, 2018 following the aforementioned five-step model. Based on the Company's analysis, there were no changes identified that impacted the amount or timing of revenues recognized under the new guidance as compared to the previous guidance. Additionally, the Company's analysis indicated that there were no changes to how costs to obtain and fulfill our customer contracts would be recognized under the new guidance as compared to the previous guidance. The impact of the adoption of this standard on the Company's Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, and Condensed Consolidated Statement of Cash Flows was not material. The adoption of the new guidance impacted the way the Company analyzes, documents, and discloses revenue recognition under customer contracts beginning on January 1, 2018 and resulted in additional disclosures in the Company's financial statements.

The new revenue standard also provides additional clarity on the balance sheet classification of the Company's provisions for estimated sales returns and allowances. This resulted in reclassification of certain amounts previously reflected as accrued expenses to reductions in accounts receivable. See more detailed information in Note 3.

~~Property, Plant and Equipment~~

~~Depreciation and amortization of property, plant and equipment is provided for under the straight-line method over the assets’ estimated useful lives as follows:~~



	~~Useful Lives~~
~~Buildings and Improvements~~	~~10 - 40 years~~
~~Machinery and Equipment~~	~~5 - 15 years~~
~~Computer Hardware and Software~~	~~3 - 5 years~~
~~Furniture Fixtures~~	~~5 years~~

Leasehold improvements are amortized over the shorter of estimated useful life or the lease term. Repair and maintenance costs are charged to operations as incurred while major improvements are capitalized. Construction in progress ("CIP") costs are amortized based on the asset class when they are put into service. When assets are retired or disposed, the related cost and accumulated depreciation thereon are removed and any gains or losses are included in operating results.

Concentration of Credit Risk

Major customers of the Company are defined as those constituting greater than 10% of ~~our~~the Company's total revenue. For the three months ended ~~June 30, 2018,~~March 31, 2019, two of the Company’s customers accounted for ~~47%~~48% of the Company’s revenue, consisting of ~~34%~~30% and ~~13%~~18%, respectively. For the three months ended ~~June 30, 2017,~~March 31, 2018, three of the Company’s customers accounted for ~~55%~~59% of the Company’s revenue, consisting of ~~26%~~38%, ~~12%~~11% and 17%, respectively. For the six months ended June 30, 2018, two of the Company's customers accounted for 48% of the Company's revenue, consisting of 36% and 12%, respectively. For the six months ended June 30, 2017, three of the company's customers accounted for 57% of the Company's revenue, consisting of 26%, 15% and 16%10%, respectively. Accounts receivable related to the Company’s major customers comprised ~~49%~~37% of all accounts receivable as of ~~June 30, 2018,~~March 31, 2019, and ~~82%~~52% of all accounts receivable as of ~~June 30, 2017. This decrease is a result of the adoption of ASC 606, “Revenue from Contracts with Customers.”~~March 31, 2018. The loss of one or more of these major customers could have a significant impact on our revenues and harm our business and results of ~~operations~~.operations.

For the three months ended ~~June 30, 2018,~~March 31, 2019, domestic net revenues were ~~$11.9~~$9.7 million and foreign net revenues were ~~$4.9 million. For the six months ended June 30, 2018, domestic net revenues were $22.1 million and foreign net revenues were $9.2~~$3.4 million. As of ~~June 30, 2018,~~March 31, 2019, domestic assets were ~~$125.8~~$135.5 million and foreign assets were ~~$60.9~~$56.4 million. For the three months ended ~~June 30, 2017,~~March 31, 2018, domestic net revenues were ~~$14.8~~$10.2 million and foreign net revenues were ~~$3.6 million. For the six months ended June 30, 2017, domestic net revenues were $31.8 million and foreign net revenues were $6.5~~

$4.3 million. As of ~~June 30, 2017,~~March 31, 2018, domestic assets were ~~$127.4~~$115.9 million and foreign assets were ~~$69.0~~$65.2 million.

~~Foreign Currency Translation~~

The net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S. dollars using current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreign currency translation account, which is included in Accumulated Other Comprehensive Income (Loss) ("AOCI") and reflected as a separate component of equity. For those subsidiaries where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes included in Foreign currency exchange gain line item under the Other income (expense), net section of the Income Statement.

~~Debt Issuance Costs~~

Expenses related to debt financing activities are capitalized and amortized on an effective interest method, over the term of the loan and are to be netted against the carrying value of the financial liability, as required by ASU 2015-3. This standard aligns the treatment of debt issuance costs and debt discounts in that both reduce the carrying value of the liability. Amortization of debt issuance costs is to be recorded as interest expense on the income statement.

~~Reclassification~~

~~Certain prior year amounts were reclassified to conform to current year presentation.~~

~~Adoption of Other Recent~~Recently Adopted Accounting Pronouncements

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): "Restricted Cash (a consensus of the FASB Emerging Issues Task Force)". The update addresses the diversity in the industry with respect to classification and presentation of changes in restricted cash on the statement of cash flows. These amendments require that a statement of cash flows explain the restricted cash change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. It affects those reporting entities that are required to evaluate whether they should consolidate a variable interest entity "VIE". The amendments in this update were effective for fiscal years beginning after December 15, 2017 for public business entities, including interim periods within those fiscal years. For the Company, the amendments were effective January 1, 2018. The Company's adoption of this ASU, effective January 1, 2018, did not have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): “Clarifying the Definition of a Business”. The update clarifies the definition of a business, specifically for companies to better evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update were effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company's adoption of this ASU, effective January 1, 2018, did not have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): “Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings”. The update shows amendments to two SEC Announcements made late in 2016 regarding four specific standards as follows: ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ASU 2016-02, Leases (Topic 842), ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), and ASU 2014-01, Investments - Equity Method and Joint Ventures (Topic 323). The amendments in this update require changes to the U.S. GAAP Financial Reporting Taxonomy and the changes will be incorporated into the proposed 2018 Taxonomy which are available for public comment and finalized as part of the annual release process. The Company's adoption of this ASU, effective January 1, 2018, did not have a significant impact on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. This update addresses guidance for partial sales of nonfinancial assets. It affects (i) an entity that enters into a contract to transfer to a customer a nonfinancial asset, group of nonfinancial assets, or ownership interest in a consolidated subsidiary that is not a business or nonprofit entity, (ii) an entity that historically had transactions within the scope of the real estate-specific derecognition guidance, and (iii) an entity that contributes nonfinancial assets that are not a business or a nonprofit activity to a joint venture or other noncontrolled investee. The amendments were effective at the same time as the amendments in ASU 2014-09. Therefore, for the Company, the amendments were effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Public entities may apply the guidance earlier but only as of annual reporting periods beginning after December 15, 2016, including

interim reporting periods within that reporting period. The Company does not currently expect to enter into any such nonfinancial asset or ownership interest in its consolidated subsidiaries agreements but will refer to the guidance in ASU 2017-05 should that occur. The Company's adoption of this ASU, effective January 1, 2018, did not have any significant impact on its consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): “Scope of Modification Accounting”. This update provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments affect any entity that changes the terms or conditions of a share-based payment award. The amendments are effective for fiscal years beginning after December 15, 2017. For the Company, the amendments were effective January 1, 2018. The Company has not made any changes to the terms or conditions of share-based payment awards but will refer to the guidance in ASU 2017-09 should that occur. The Company's adoption of this ASU, effective January 1, 2018, did not have a significant impact on its consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842)~~: “Recognition and Measurement of Financial Assets and Financial Liabilities”.~~, which supersedes the existing lease guidance under Topic 840. The ~~update supersedes Topic 840, Leases and~~new standard requires ~~the recognition of lease~~lessees to recognize Right-of-Use ("ROU") assets and lease liabilities ~~by lessees~~ for all leases with terms greater than 12 months, including those leases that were previously classified as operating ~~leases under previous GAAP.~~leases. Topic 842 retains a distinction between finance leases and operating leases, with measurement and presentation of expenses and cash ~~payments from operating leases classified within operating activities in~~flows being dependent upon the ~~statement of cash flows. The amendments in this update are effective for fiscal years beginning after December 15, 2018 for public business entities, which for the Company means January 1, 2019.~~classification. The Company ~~is reviewing all lease agreements inclusive of supplier agreements. The Company is currently evaluating~~adopted the ~~impact of this ASU on its consolidated financial statements.~~

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. A public entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. For the Company, the amendments arenew standard effective January 1, ~~2020. The Company is currently evaluating~~2019 utilizing the ~~impact of this~~optional transition method allowed under ASU ~~on its consolidated financial statements.~~2018-11, Leases (Topic 842): Targeted Improvements. See Note 7 for the Company's additional required disclosures under Topic 842.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance is effective for all entities for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The amendments in ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company's adoption of this ~~guidance is~~ASU, effective January 1, 2019, did not ~~expected to~~ have a material impact on its condensed consolidated financial statements.

Recently Issued Not Yet Adopted Accounting Pronouncements

In January 2017, the ~~Company's Consolidated Financial Statements~~FASB issued ASU 2017-04, Intangibles - Goodwill and ~~related disclosures.~~Other (Topic 350): “Simplifying the Test for Goodwill Impairment”. The update simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. For the Company, the amendments are effective January 1, 2020. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): “Clarifying the Interaction between Topic 808 and Topic 606”. The guidance clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer. For the Company, the amendment will be effective January 1, 2020. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

4. Revenues, Recognition and Allowances

Revenue Recognition

As of January 1, 2018, the Company adopted the ASC 606 guidance for revenue recognition for contracts, using the modified retrospective method. The implementation of this guidance had no material impact on the measurement or recognition of revenue from customer contracts of prior periods.

~~Upon adoption of this new guidance, the Company recognizes revenue using the following five steps:~~

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

•~~Identification of the performance obligations in the contract;~~

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

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

•~~Recognition of revenue when we satisfy a performance obligation.~~

The Company derives its revenues from three types of transactions: sales of its own pharmaceutical products (Company product sales), sales of manufactured product for its customers (contract manufacturing sales), and research and product development services performed for third parties.

Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience as well as applicable information currently available.

~~The table below summarizes the effect of the adoption of ASC 606 on the Company's Condensed Consolidated Balance Sheet as of June 30, 2018:~~

As Reported Balance Without Adoption of New Revenue Standard Effect of Change Higher/(Lower)
ASSETS
Current assets:
Accounts receivable, net $ 16,232
$ 18,144
$ (1,912 )

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses $ 9,269
$ 11,181
$ (1,912 )

~~The table below summarizes the effect of the adoption of ASC 606 on the Company's Condensed Consolidated Statement of Operations as of June 30, 2018:~~

Three months ended June 30, Six months ended June 30,
As Reported Balance Without Adoption of New Revenue Standard Effect of Change Increase/(Decrease) As Reported Balance Without Adoption of New Revenue Standard Effect of Change Increase/(Decrease)

Revenue, net $ 16,751
$ 17,228
$ (477 ) $ 31,296
$ 32,408
$ (1,112 )

Cost of revenue 11,728
12,205
(477 ) 21,053
22,165
(1,112 )

Gross margin 30 % 29 % (1 )% 33 % 32 % (1 )%

Company Product Sales

Revenue from Company product sales is recognized upon transfer of control of a product to a customer at a point in time, generally as the Company's products are sold on an FOB destination basis and because inventory risk and risk of ownership passes to the customer upon delivery.

Company product sales are recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and ~~returns (collectively, sales returns and allowances or “SRA”).~~returns.

Contract Manufacturing Sales

The Company recognizes revenue for contract manufacturing sales upon transfer of control of a product to a customer, which is generally upon shipment of products. However, with the new adoption of revenue recognition for contracts, the Company recognizes the revenue over time, rather than upon shipment. These shipmentsover-time, as milestones are achieved. Shipments are made in accordance with sales commitments and related sales orders entered into with customers either verbally or in written form.

Contract manufacturing sales are recognized net of accruals for cash discounts ~~and returns~~ which are established at the time of sale, and are included in ~~Product sales,~~Revenue, net in the Company's Condensed Consolidated Statement of Operations.

Research and Development Services and Other Income

The Company establishes agreed upon product development agreements with its customers to perform product development services. Revenues are recognized in accordance with the agreement upon the completion of the phases of development and when the Company has no future performance obligations relating to that phase of development. Other types of revenue include royalty or licensing revenue, and would be recognized over time, or at a point in time, based upon the contractual term upon completion of the earnings process. Judgments are required to evaluate contingencies such as potential variances in schedule and the costs, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards.

Revenues by Transaction Type

The Company operates in one reportable segment and, therefore, the results of the Company's operations are reported on a consolidated basis, ~~for purposes of segment reporting,~~ consistent with internal management reporting for the chief decision makers.

Net ~~Sales (in thousands)~~revenues for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018 ~~and 2017~~ were as ~~follows (prior-period amounts are not adjusted under the modified-retrospective method of adoption):~~follows:


	Three Months Ended March 31,
	2019		2018
Company product sales	$	12,495	$	13,236
Contract manufacturing sales	542		1,298
Research and development services and other income	85		11
Revenue, net	$	13,122	$	14,545

Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
Company product sales $ 15,179
$ 15,888
$ 28,415
$ 32,324
Contract manufacturing sales 1,450
2,407
2,748
5,824
Research and development services and other income 122
113
$ 133
$ 151
Revenue, net $ 16,751
$ 18,408
$ 31,296
$ 38,299

Disaggregated information for the Company product sales revenue has been recognized in the accompanying unaudited interim Condensed Consolidated Statements of Operations, and is presented below according to contract ~~type (in thousands):~~type:


	Three months ended June 30,				Six months ended June 30,					Three Months Ended March 31,
Company Product Sales	2018		2017		2018		2017		Company Product Sales	2019		2018
Topical	$	8,369	$	9,885	$	16,277	$	18,833	Topical	$	9,032	$	7,908
Injectables	6,810		6,003		12,138		13,491		Injectables	3,463		5,328
Total	$	15,179	$	15,888	$	28,415	$	32,324	Total	$	12,495	$	13,236

In the ~~six~~three months ended ~~June 30, 2018,~~March 31, 2019, the Company did not incur, and therefore did not defer, any material incremental costs to obtain contracts.

Sales Returns and Allowances

As is customary in the pharmaceutical industry, the Company’s product sales are subject to a variety of deductions including chargebacks, rebates, cash discounts, other allowances, and returns. Product sales are recorded net of accruals for ~~SRA,~~returns and allowances, which are established at the time of sale. The Company analyzes the adequacy of its accruals for ~~SRA~~returns and allowances quarterly. Amounts accrued for sales deductions are adjusted when trends or significant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. These provisions are estimates based on historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with direct and indirect customers. The Company uses a variety of methods to assess the adequacy of its ~~SRA~~returns and allowances reserves to ensure that its financial statements are fairly stated. These include periodic reviews of customer inventory data, customer contract programs, subsequent actual payment experience, and product pricing trends to analyze and validate the ~~SRA~~return and allowances reserves.

Net Company product sales of $15.2 million and $15.9 million for the three months ended June 30, 2018 and 2017, respectively, are included in product sales, net in the Condensed Consolidated Statements of Operations. Net Company product revenue of $28.4 million and $32.3 million for the six months ended June 30, 2018 and 2017, respectively, are included in product sales, net in the Condensed Consolidated Statements of Operations. Accounts receivable ~~are~~balance was presented net of ~~SRA balances of $19.3~~sales returns and allowances, which was $13.7 million and ~~$30.9~~$18.1 million at ~~June 30,~~March 31, 2019 and December 31, 2018 ~~and 2017,~~ respectively. ~~Accounts payable and accrued expenses include $0.0~~In addition, the allowance for doubtful accounts was $2.5 million and ~~$5.5~~$2.6 million at ~~June 30,~~March 31, 2019 and December 31, 2018, ~~and 2017, respectively,~~respectively. The allowance for ~~certain fees related to services provided by the wholesalers. For the six months ended June 30, 2018, the Company recorded income of $0.8 million due to a decrease in the Medicaid reserve~~doubtful accounts was primarily related to ~~finalizing~~one specific customer in the ~~payment per the terms~~amount of ~~the product acquisition agreement.~~$1.7 million.

~~The accrual for chargebacks is~~Chargebacks are one of the Company's most significant estimates for recognition of product sales. A chargeback represents an amount payable in the future to a wholesaler for the difference between the invoice price paid to the Company by its wholesale customer for a particular product and the negotiated contract price that the wholesaler’s customer pays for that product. The Company’s chargeback provision and related reserve varies with changes in product mix, changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expected wholesaler sell-through levels to indirect customers at contract prices. The Company validates the chargeback accrual quarterly through a review of the inventory reports obtained from its largest wholesale customers. This customer inventory information is used to establish the estimated liability for future chargeback claims based on historical chargeback and contract rates. These large wholesalers represent a majority of the Company’s chargeback payments. The Company continually monitors current pricing trends and wholesaler inventory levels to ensure the liability for future chargebacks is fairly stated.

~~The rebate accrual is~~Rebates are used for various discounts ~~and rebates provided to customers. This account has been used for various~~which can be programs or one-time ~~discounts given to customers.~~event. The Company reviews the percentage of products sold through these programs by reviewing chargeback data and uses the appropriate percentages to calculate the rebate accrual. Rebates are invoiced monthly, quarterly or ~~quarterly~~annually and reviewed against the accruals. Other items that could be included in accrued rebates would be price protection fees, shelf stock adjustments (SSAs), or other various amounts that would serve as one time discounts on specific products.

Consistent with its cash management strategy, the Company reduced the price paid by wholesalers (also referred to as the “WAC” or wholesaler acquisition cost) on several of its products in the second and third quarters of 2018. As a result, its gross product sales and related chargebacks and billbacks are reduced accordingly. The Company's adjustments for the deductions to gross product sales are as ~~follows (in thousands):~~follows:


	Three months ended June 30,				Six months ended June 30,					Three Months Ended March 31,
	2018		2017		2018		2017			2019		2018
Gross product sales	$	48,142	$	66,744	$	84,690	$	121,044	Gross product sales	$	27,414	$	36,548

Deduction to gross product sales:									Deduction to gross product sales:
Chargebacks and billbacks	21,449		44,090		38,364		74,105		Chargebacks and billbacks	10,886		16,915
Wholesaler fees for service	477		—		1,112		—		Wholesaler fees for service	1,766		635
Sales discounts and other allowances	11,037		6,766		16,799		14,615		Sales discounts and other allowances	2,267		5,762
Total reduction to gross product sales	$	32,963	$	50,856	$	56,275	$	88,720	Total reduction to gross product sales	$	14,919	$	23,312

Company product sales, net	$	15,179	$	15,888	$	28,415	$	32,324	Company product sales, net	$	12,495	$	13,236

Financing and Payment

The Company's payment terms vary by the type ~~and location~~ of the customer and the products or services offered. The term between invoicing and when payment is due is not significant. ~~The~~Generally, the Company ~~generally~~ does not ~~have~~incur incremental costs to obtain ~~contracts that would otherwise not have been incurred.~~contracts. The Company does not adjust revenue for the ~~promised amount of consideration for the~~ effects of a significant financing component ~~because~~as the Company's customers generally pay ~~the Company~~ within 100 days.

Costs to Obtain or Fulfill a Customer Contract

Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.

Costs related to shipping and handling isare comprised of outbound freight and associated labor. The Company accounts for shipping and handling activities related to contracts with customers as fulfillment costs which are included in cost of sales in the Condensed Consolidated Statements of Operations.

In connection with four of the 30 products the Company currently manufactures, markets and distributes in its own label in the U.S., in accordance with an agreement entered into in December of 2011, theThe Company is required to pay a 40% royalty ~~calculated based~~ on certain product net sales to ~~one of its pharmaceutical partners. The royalty is calculated based on contracted terms of 40% of net sales for the four products, which is to be paid quarterly to the~~a pharmaceutical partner. ~~In accordance with~~There are currently 4 products manufactured and distributed under the ~~agreement, net sales exclude fees related~~Company’s label in the U.S. which are subject to ~~services provided by the wholesalers. Accounts payable and accrued expenses include $0.6 million and $0.4 million at June 30, 2018 and 2017, respectively, related to these royalties.~~this agreement. Payments are made quarterly. Royalty expense of ~~$0.7~~$0.3 million and ~~$0.4~~$0.8 million was included in cost of sales in the Condensed Consolidated Statements of Operations for the three months ended ~~June 30,~~March 31, 2019 and 2018, and 2017, respectively. Royalty expense of $1.5 million and $0.9 million was included in cost of sales in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2018 and 2017, respectively.

5. Inventories

Inventories are valued at the lower of cost or net realizable value, using the first-in-first-out method and consist of the ~~following (in thousands):~~following:


	March 31, 2019		December 31, 2018
Raw materials	$	12,629	$	10,456
Work in progress	77		116
Finished goods	11,368		8,391
Inventories reserve	(3,120)		(2,667)
Inventories, net	$	20,954	$	16,296

June 30, 2018 December 31, 2017
(Unaudited) (Audited)
Raw materials $ 10,655
$ 8,231
Work in progress 944
616
Finished goods 8,434
8,532
Inventories reserve (2,458 ) (1,304 )
Inventories, net $ 17,575
$ 16,075

5. 6. Property, Plant and Equipment

Property, plant and equipment consists of the ~~following (in thousands):~~following:


	June 30, 2018			December 31, 2017
	(Unaudited)			(Audited)				March 31, 2019		December 31, 2018
Land	$	257		$	257		Land	$	401	$	401
Building and improvements	17,474			8,613			Building and improvements	53,810		53,813
Machinery and equipment	9,674			9,142			Machinery and equipment	12,358		12,229
Computer hardware and software	4,059			3,244			Computer hardware and software	4,586		4,182
Furniture and fixtures	553			449			Furniture and fixtures	687		694
Construction in progress	60,268			55,017			Construction in progress	33,911		30,949
	92,285			76,722				105,753		102,268
Less accumulated depreciation and amortization	(9,258		)	(8,367		)	Less accumulated depreciation and amortization	(11,361)		(10,493)
Property, plant and equipment, net	$	83,027		$	68,355		Property, plant and equipment, net	$	94,392	$	91,775

The Company recorded depreciation expense of ~~$1.1~~$0.9 million and ~~$0.8~~$0.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2019 and March 31, 2018, ~~and June 30, 2017,~~ respectively. During the three months ended ~~June 30,~~March 31, 2019 and March 31, 2018, ~~and June 30, 2017,~~ there was ~~$1.5 million of interest~~zero and ~~$0.7~~$1.3 million of interest, respectively, capitalized ~~into~~as construction in progress. For the six months ended June 30, 2018 and June 30, 2017, there was $2.8 million of interest and $1.2 million of interest, respectively, capitalized into construction in progress. This increase in capitalized interest is related to outstanding costs for the Company's facility expansion project in Buena. DuringIn addition, during the three months ended ~~June 30,~~March 31, 2019 and March 31, 2018, ~~and June 30, 2017,~~ there was ~~$0.4~~$0.3 million ~~of payroll costs and $0.2 million of payroll costs, respectively, capitalized into construction in progress. For the six months ended June 30, 2018 and~~

~~June 30, 2017, there was $0.8 million of payroll costs~~ and $0.4 million of payroll costs, respectively, capitalized ~~into~~as construction in progress.

7. Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing lease guidance under Topic 840. The new standard requires lessees to recognize Right-of-Use ("ROU") assets and lease liabilities for all leases with terms greater than 12 months, including those leases that were previously classified as operating leases. Topic 842 retains a distinction between finance leases and operating leases, with measurement and presentation of expenses and cash flows being dependent upon the classification. The Company adopted the new standard on January 1, 2019 utilizing the optional transition method allowed under ASU 2018-11, Leases (Topic 842): Targeted Improvements.

The Company elected to adopt the package of practical expedients allowed under the new accounting guidance, which allows the Company to not reassess previous conclusions regarding 1) whether existing or expired leases are or contain leases 2) the lease classification of existing or expired leases and 3) initial direct costs for existing leases. In addition, the Company adopted the practical expedient to combine lease and non-lease components for all classes of underlying assets.

The Company reviewed its portfolio of lease agreements, and other service contracts to identify embedded leases, and reached conclusions on key accounting assessments related to the standard and finalized the related accounting policies. As a result of the implementation of the new standard, all leases with a term greater than 12 months previously classified as operating leases and only expensed through the Consolidated Statements of Operations are now recorded on the Consolidated Balance Sheets. Per the requirements of the standard the Company has recorded a ROU asset and a lease liability representing the present value of future lease payments to be paid in exchange of the use of an asset of $2.8 million and $3.0 million respectively as of January 1, 2019. However, there was no cumulative effect adjustment to the opening balance of retained earnings as the assets and the liabilities recorded upon adoption off-set each other.

We have operating and finance leases for our corporate, manufacturing and international facilities as well as certain equipment. Our leases have remaining terms of less than one year to up to 10 years, some of which include options to extend the leases for up to 5 years and one of which have an early termination option at any time. As the interest rates implicit in our leases are typically not readily determinable, the Company has elected to utilize an incremental borrowing rate as the discount rate, determined based on the expected term of the lease, the Company’s credit risk and existing borrowings. The discount rates utilized ranged from 4.86% to 8.60% and were utilized to determine the present value of the lease liabilities.

The components of lease expense were as follows:


	March 31, 2019
Operating lease cost	$	159
Finance lease cost:
Amortization of right-of-use assets	3
Interest on lease liabilities	2
Total finance lease cost	$	5

Right-of-use assets obtained in exchange for new operating lease liabilities was $1.0 million as of March 31, 2019. Cash paid for amounts included in the measurement of operating lease liabilities during the three months ended March 31, 2019 was $0.1 million. Cash paid for amounts included in the measurement of finance lease liabilities during the three months ended March 31, 2019 was not material.

Supplemental balance sheet information related to leases were as follows:


	March 31, 2019
Operating Leases
Other assets	$	2,746
Other current liabilities	395
Other long-term liabilities	2,512
Total operating lease liabilities	2,907

Finance Leases
Property, plant, and equipment	81
Accumulated depreciation	(3)
Property, plant, and equipment, net	78

Other current liabilities	12
Other long-term liabilities	67
Total finance lease liabilities	$	79

The weighted average remaining lease terms for operating and financing leases are 6.8 years and 5.4 years, respectively. The weighted average discount rates for operating and finance leases are 8.18% and 7.97%, respectively.

As of March 31, 2019 maturities of lease liabilities were as follows:


	Operating		Financing
Year Ending December 31,	Leases		Leases
2019 (excluding the three months ended March 31, 2019)	$	458	$	13
2020	631		18
2021	607		18
2022	548		18
2023	547		18
2024	235		12
Thereafter	839		—
Total lease payments	3,865		97
Less imputed interest	958		18
Total	$	2,907	$	79

As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future minimum lease payments for operating leases having initial or remaining noncancellable lease terms in excess of one year would have been as follows:


	Commitments

2019	$	573
2020	611
2021	633
2022	610
2023	607
2024	200

	$	3,234

8. Debt

Convertible Notes

On December 16, 2014, the Company issued $125.0 million aggregate principal amount of Convertible 3.75% Senior Notes, due 2019 (the “2019 Notes”). On December 22, 2014, the Company announced the closing of the initial purchasers’ exercise in full of their option to purchase an additional $18.75 million aggregate principal amount of 2019 Notes. The 2019 Notes bear interest at a fixed rate of 3.75% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2015, and mature on December 15, 2019, unless earlier repurchased, redeemed or converted. The 2019 Notes are convertible into shares of the Company’s common stock, cash or a combination thereof. On May 20, 2015, the Company received shareholder approval for the increase in the number of shares of common stock authorized and available for issuance upon conversion of the 2019 Notes.

On April 27, 2018, the Company entered into separate exchange agreements with certain holders of the 2019 Notes. The agreements gave the ~~holder~~holders the right to exchange, in aggregate, $75.1 million of the 2019 Notes for $75.1 million of new Convertible 4.75% Senior Notes due 2023 (the “2023 Notes”). The new 2023 Notes bear a fixed interest rate of 4.75% per year, payable semi-annually with the principal payable in May 2023. ~~The 2023 Notes incurred loan issue costs~~At the option of ~~$1.6 million and a discount of $19.0 million. Consistent with~~ the ~~2019 Notes,~~holders, the 2023 Notes are convertible into shares of the Company’s common stock, cash or a combination thereof. ~~The discount is directly related to the convertible feature on the 2023 Notes.~~ The initial conversion rate is $224.71 per share, subject to certain adjustments, related to either the Company's stock price volatility, or the Company's declaration of a stock dividend, stock distribution, share combination or share split expected dividends or other anti-dilutive activities. In addition, holders will be entitled to receive additional shares of common stock for a potential increase of the conversion rate up to $280.90 per share under a make-whole provision in some circumstances. The Company incurred loan issue costs of $1.6 million upon issuance of the 2023 Notes.

In accordance with accounting for convertible debt within the cash conversion guidance of ASC 470-20, we allocated the principal amount of the 2023 Notes between its liability and equity components. The carrying amount of the liability component was determined by measuring the fair value of a similar debt instrument of similar credit quality and maturity that did not have the conversion feature. The carrying amount of the equity component, representing the embedded conversion option, was determined by deducting the fair value of the liability component from the principal amount of the 2023 Notes as a whole. The equity component was recorded to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the 2023 Notes over the carrying amount of the liability component was recorded as a debt discount ~~are recognized as~~of $19.0 million, and is being amortized to interest expense ~~over~~using the ~~term~~effective interest method through the maturity date. We allocated the total amount of transaction costs incurred to the liability and equity components using the same proportions as the proceeds from the 2023 Notes. Transaction costs attributable to the liability component were recorded as a direct deduction from the liability component of the ~~Notes.~~2023 Notes, and are being amortized to interest expense using the effective interest method through the maturity date. Transaction costs attributable to the equity component were netted with the equity component of the 2023 Notes in additional paid-in capital. The effective interest rate of the 2023 Notes, inclusive of the debt ~~discounts~~discount and ~~issue~~issuance costs, is ~~12.10%~~11.90%.

The exchange of $75.1 million ~~exchange~~ of the 2019 Notes for the 2023 Notes is considered an extinguishment under ASC ~~470, as~~470-50. The 2019 Notes are accounted for under cash conversion guidance ASC 470-20, which requires the ~~present~~Company to allocate the fair value of the ~~future cash flows has changed greater than 10%. The~~consideration transferred upon settlement to the extinguishment of ~~this portion~~the liability component and the reacquisition of the ~~2019 Notes has been referenced here as "partial extinguishment". The partial extinguishment resulted in~~equity component upon derecognition. In accordance with the ~~recognition of an additional $10.1~~aforementioned guidance, the Company recorded $2.5 million of non-cash interest expense as an extinguishment loss related to the 2019 Notes in the ~~quarter ended June 30, 2018. The $10.1~~Condensed Consolidated Statement of Operations. In addition the Company recorded a $7.6 million ~~is related to an unamortized debt discount~~reduction of ~~$9.1 million and unamortized debt financing costs of $1.0 million associated~~Additional Paid in Capital in connection with the ~~partial~~ extinguishment of ~~the~~ $75.1 million of the 2019 Notes.

~~Term Loan~~In December 2018 the Company used $52.8 million of proceeds from the Senior Credit Facilities (see below) to repurchase the 2019 Notes as well as $0.3 million of proceeds to pay for transaction costs. The repurchase of the 2019 Notes is considered a debt extinguishment under ASC 470-50. The 2019 Notes are accounted for under cash conversion guidance ASC 470-20, which requires the Company to allocate the fair value of the consideration transferred upon settlement to the extinguishment of the liability component and the reacquisition of the equity component upon derecognition. In accordance with the guidance above, the Company allocated a portion of the $52.8 million to the extinguishment of the liability component equal to the fair value of that component immediately before extinguishment and recognized a $1.7 million extinguishment loss in the Consolidated Statement of Operations to measure the difference between (i) the fair value of the liability component and (ii) the net carrying value amount of the liability component (which is net of any unamortized debt issuance costs). In addition, the Company recorded a $2.9 million reduction of Additional Paid in Capital in connection with the extinguishment of the 2019 Notes.

In January and February of 2019, the Company used a total of $2.7 million of proceeds from the Senior Credit Facilities to repurchase a portion of the remaining 2019 Notes. The repurchase of the 2019 Notes is considered a debt extinguishment under ASC 470-50. The 2019 Notes are accounted for under cash conversion guidance ASC 470-20, which requires the Company to allocate the fair value of the consideration transferred upon settlement to the extinguishment of the liability component and the reacquisition of the equity component upon derecognition. In accordance with the guidance above, the Company allocated a portion of the $2.7 million to the extinguishment of the liability component equal to the fair value of that component immediately before extinguishment and recognized a $0.2 million extinguishment loss in the Consolidated Statement of Operations to measure the difference between (i) the fair value of the liability component and (ii) the net carrying value amount of the liability component (which is already net of any unamortized debt issuance costs). In addition, the reduction of Additional Paid in Capital in connection with this extinguishment was immaterial.

Senior Credit Facilities

On ~~June 1,~~December 13, 2018, the Company entered into a ~~credit agreement for~~ $25.0 million ~~secured by all Company assets, due June 1, 2021 (“2021~~Revolving Credit Agreement (the “Revolver”) and Term Loan Agreement (the “2023 Term Loan”, and together with the Revolver, the “Senior Credit Facilities”). The ~~2021~~ Term Loan ~~has limited~~consists of (i) a $50.0 million initial term loan (the “Initial Term Loan”); (ii) a $30.0 million delayed draw term loan A (the “Delayed Draw Term Loan A”) and (iii) a $15.0 million delayed draw term loan B (the “Delayed Draw Term Loan B” and, together with the Delayed Draw Term Loan A, the “Delayed Draw Term Loans”). The Initial Term Loan matures on the earlier to occur of (a) three months prior to maturity of the 2023 Notes and (b) June 13, 2024. Commitments related to undrawn amounts of the Delayed Draw Term Loan A terminate on June 30, 2019, and drawn amounts under the Delayed Draw Term Loans mature at the same time as the Initial Term Loan. The Revolver matures on the earlier to occur of (a) six months prior to the maturity of the 2023 Notes and (b) December 13, 2023. The Company’s ability to borrow under the Revolver is subject to a borrowing base determined based upon eligible inventory, eligible equipment, eligible real estate and eligible receivables. The Senior Credit Facilities are secured by substantially all of the Company’s assets. All of the Company’s debt is subordinated to the Senior Credit Facilities. The 2023 Term Loan is subordinate to the Revolver. The Senior Credit Facilities have customary financial and non-financial covenants, ~~inclusive~~including affirmative, negative and reporting covenants, representations and warranties, and events of default, including cross-defaults on other material indebtedness, as well as events of default triggered by a change of control and certain actions initiated by the FDA. The financial covenants consist of a minimum revenue test, a minimum adjusted EBITDA test and a maximum total net leverage ratio.

The interest rate under the Revolver is calculated, at the option of the Company, at either the one, two, three or six-month London Inter-Bank Offered Rate (or LIBOR) plus 3.75% or the base rate plus 2.75%. The interest rate on the 2023 Term Loan is calculated, at the option of the Company, at either the one, two, three or six-month LIBOR plus 8.75% or the base rate plus 7.75%. Interest on the Senior Credit Facilities is payable in cash ~~carry balance~~except that interest on the 2023 Term Loan is payable, at the option of ~~$5.0 million. The 2019 Notes and 2023 Notes are subordinate~~the Company, in cash or in kind by being added to the ~~2021~~principal balance thereof, until the earlier of December 13, 2020 and the date the Company has provided the lenders of the Senior Credit Facilities financial statements demonstrating that the Company has attained twelve months of revenue of at least $125.0 million. A commitment fee of 1.0% per annum is payable by the Company quarterly in arrears on the unused portion of the Delayed Draw Term ~~Loan. The first $15.0 million~~Loans.

Amounts drawn under the Revolver may be prepaid at the option of ~~loan proceeds was received~~the Company without premium or penalty, subject, in the case of acceleration of the Revolver or termination of the revolving credit commitments thereunder, to certain call protections which vary depending on ~~June 1, 2018. The remaining loan proceeds of $10.0 million were~~the time at which such prepayments are made. Amounts drawn under the Revolver are subject to ~~closing~~mandatory prepayment to the extent that aggregate extensions under the Revolver exceed the lesser of the revolving credit commitment then in effect and the borrowing base then in effect, and upon the occurrence of certain events and conditions, ~~as defined in~~including non-ordinary course asset dispositions, receipt of certain insurance proceeds and condemnation awards and issuances of certain debt obligations. Amounts outstanding under the ~~agreement and were received on July 16, 2018. The 2021~~2023 Term Loan may be prepaid at the option of the Company subject to applicable premiums, including a make-whole premium, and certain call protections which vary depending on the time at which such prepayments are made. Subject to payment of outstanding obligations under the Revolver as a result of any corresponding mandatory prepayment requirements thereunder, amounts outstanding under the 2023 Term Loan are subject to mandatory prepayment upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt of certain insurance proceeds and condemnation awards, issuances of certain debt obligations and a change of control transaction.

In connection with the Revolver the Company incurred ~~loan issue costs~~a debt discount of $0.5 million and ~~a discount~~debt issuance issue costs of ~~$0.4~~$0.3 million. The debt discount ~~is due~~relates to annual fees and lender fees paid on the initial drawdown of $15.0 million. The debt issuance costs and debt discount are recorded as an asset on the Consolidated Balance Sheet and are amortized to interest expense using the straight-line method through the estimated Revolver maturity date. The annual fees related to

the Revolver and the Initial Term Loan are amortized to interest expense using the straight-line method over the annual period they relate to. In connection with the Initial Term Loan and Delayed Draw Term Loan A, the Company incurred a debt discount of $1.8 million and debt issuance issue costs of $0.8 million. The debt discount is due to lender fees paid on the Initial Term Loan of $50.0 million and drawdown of Delayed Draw Term Loan A of $20.0 million. The debt issuance costs and debt discount costs are ~~recognized as~~amortized to interest expense using the effective interest rate method through the estimated maturity date. In addition, the Company incurred $0.5 million of debt issuance costs related to the commitment fees paid to the lenders for the undrawn amounts of the Delayed Draw Term Loans. These debt issuance costs are recorded as an asset on the balance sheet and amortized on a straight-line basis over the ~~term~~access period of the ~~2021~~Delayed Draw Term ~~Loan. The 2021 Term Loan bears interest at a rate~~Loans through June 30, 2019. As of ~~LIBOR plus 9%, with a stated floor of 2%. The~~December 31, 2018, the effective interest, inclusive of the debt discounts and issue costs, of the Revolver and Initial Term Loan and Delayed Draw Term Loan A is ~~13.56% per year.~~9.3% and 12.4%, respectively.

The Initial Term Loan of $50.0 million and $15.0 million of the Revolver were drawn by the Company on December 13, 2018. On December 21, 2018, the Company drew $20.0 million of the Delayed Draw Term Loan A. In addition, in January 2019, the Company drew $5.0 million from the remaining $10.0 million Revolver. As of March 31, 2019, the $10.0 million of the Delayed Draw Term Loan A, $15.0 million of the Delayed Draw Term Loan B and $5.0 million of the Revolver remain available to the Company. In April 2019, the Company drew down the remaining $5.0 million Revolver. The 2023 Term Loan and the 2023 Delayed Draw Term Loan bear interest at either the one, two, three or six-month at a rate of LIBOR plus 8.75% or base rate plus 7.75%, with a 24-month paid-in-kind interest option available to the Company should it choose to defer cash payments in order to maintain the liquidity needed to continue launching new products, and preparing for an FDA prior approval inspection of its new injectable manufacturing capability. As of March 31, 2019, the Company elected the paid-in-kind interest option and increased the principal balance of 2023 Term Loan by $2.0 million to $72.0 million.

The Ares Senior Credit Facilities require that the Company remains in compliance with certain financial performance covenants including a trailing-twelve-month minimum revenue through June 30, 2019, which then transitions to a trailing-twelve-month EBITDA from September 30, 2019 through September 30, 2020 which then finally transitions to a leverage ratio through expiration of the facility. Pursuant to the Ares Credit Agreement, in the event of a default related to the failure to meet certain covenants, the lender shall have the right, but not the obligation, to permanently reduce the commitment in whole or in part or to declare all or any portion of the outstanding balance to become due and payable. The Company will continuously monitor its compliance with the covenants contained in its Credit Agreement.

At ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the net carrying value of the debt and the remaining unamortized debt discounts and debt issuance costs were as ~~follows (in thousands):~~follows:


	March 31, 2019		December 31, 2018
Face amount of the 2019 Notes (due December 2019)	$	13,022	$	15,702
Less unamortized discounts and debt issuance costs	(808)		(1,291)
Total net carrying value	$	12,214	$	14,411

	March 31, 2019		December 31, 2018
Face amount of the 2023 Notes (due May 2023)	$	75,090	$	75,090
Face amount of the Revolver Credit Facility (due December 2022)	20,000		15,000
Face amount of the 2023 Loan (due February 2023)	72,020		70,000
Total carrying value, non-current	167,110		160,090
Less unamortized discounts and debt issuance costs	(19,621)		(20,519)
Total net carrying value, non-current	$	147,489	$	139,571

June 30, 2018 December 31, 2017
(Unaudited) (Audited)
Face amount of the 2019 Notes (due December 2019) $ 68,660
$ 143,750
Face amount of the 2021 Loan (due June 2021) 15,000
—
Face amount of the 2023 Notes (due May 2023) 75,090
—

158,750
143,750
Less unamortized discounts and debt issuance costs 29,277
22,773
Total Carrying Value, Net $ 129,473
$ 120,977

~~For the six months ended June 30, 2018 and 2017, the Company recorded the following expenses in relation to the debt (in thousands):~~

Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
Interest expense of the 2019 Notes (1) $ 878
$ 1,347
$ 2,226
$ 2,695
Interest expense of the 2021 Loan 141
—
141
—
Interest expense of the 2023 Notes (1) 634
—
634
—
Debt partial extinguishment of 2019 Notes 10,069
—
10,069
—
Debt discount amortization of the 2019 Notes (1) 1,571
2,126
3,910
4,183
Debt discount amortization of the 2021 Loan 17
—
17
—
Debt discount amortization of the 2023 Notes (1) 498
—
498
—
Debt financing amortization of the 2019 Notes (1) 191
232
446
456
Debt financing amortization of the 2021 Loan 14
—
14

Debt financing amortization of the 2023 Notes (1) 42
—
42

Interest expense $ 14,055
$ 3,705
$ 17,997
$ 7,334

~~(1) Included within "Interest and other expense, net" on the Condensed Consolidated Statements of Operations, offset by interest income and capitalized interest, as disclosed Note 5.~~

7.9. Goodwill and Intangible Assets

Goodwill

The Company ~~acquired the assets of Canadian pharmaceutical company Alveda Pharmaceuticals, Inc., in November 2015. As a result of the acquisition, we recorded goodwill of $0.4 million. We assess~~assesses the recoverability of the carrying value of goodwill ~~in the fourth quarter~~on a reporting unit basis on October 1 of each year, ~~and~~ whenever events occur or changes in circumstances ~~change that would, more likely than not, reduce~~indicate the ~~fair~~carrying value of ~~our reporting unit below its carrying value.~~ goodwill may not be recoverable.

There have been no events or changes in circumstances that would ~~have reduced~~indicate the ~~fair~~carrying value of ~~our reporting unit below its carrying value from December~~goodwill may not be recoverable through March 31, ~~2017, through June 30, 2018. No impairment losses were recognized during the six months ended June 30, 2018.~~2019.

Changes in goodwill during the ~~six~~three months ended ~~June 30,~~March 31, 2019 and the year ended December 31, 2018

were as ~~follows (in thousands):~~follows:


	Goodwill
Goodwill balance at December 31, 2017	$	471
Foreign currency translation	(1)
Goodwill balance at December 31, 2018	$	470
Foreign currency translation	10
Goodwill balance at March 31, 2019	$	480

Goodwill balance at December 31, 2017 $ 471
Foreign currency translation (26 )
Goodwill balance at June 30, 2018 $ 445

Intangible Assets

The following sets forth the major categories of the Company’s intangible assets and the weighted-average remaining amortization period as of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017 (in thousands).~~2018.


	June 30, 2018									March 31, 2019
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Amortization Period (Years)
Trademarks and Technology	$	39,294	$	(6,875	)	$	32,419	12.4	Trademarks and Technology	$	39,607	$	(8,904)	$	30,703	11.5
Product acquisition costs									Product acquisition costs	13,086		—		13,086		N/A- See description below
In process research and development ("IPR&D")	17,831		—			17,831		N/A	In process research and development ("IPR&D")	649		—		649		N/A- See description below
Customer relationships	3,637		(957		)	2,680		7.6	Customer relationships	3,610		(1,230)		2,380		6.6
Total	$	60,762	$	(7,832	)	$	52,930		Total	$	56,952	$	(10,134)	$	46,818


	December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Amortization Period (Years)
Trademarks and Technology	$	40,169	$	(8,239)	$	31,930	11.8
Product acquisition costs	13,308		—		13,308		N/A- See description below
In-process research and development ("IPR&D")	719		—		719		N/A- See description below
Customer relationships	3,557		(1,139)		2,418		6.9
Total	$	57,753	$	(9,378)	$	48,375

December 31, 2017
Gross Carrying
Amount Accumulated
Amortization Net Carrying
Amount Weighted Average
Remaining Amortization
Period (Years)
Trademarks and Technology $ 40,380
$ (5,684 ) $ 34,696
12.8
In-process research and development ("IPR&D") 18,311
—
18,311
N/A
Customer relationships 3,783
(773 ) 3,010
7.9
Total $ 62,474
$ (6,457 ) $ 56,017

~~Changes in intangibles during the six months ended June 30, 2018 were as follows (in thousands):~~

Trademarks and Technology IPR&D Customer Relationships
Balance at January 1, 2018 $ 34,696
$ 18,311
$ 3,010
Amortization (1,363 ) —
(187 )
Loss on impairment (7 ) (15 ) —
Foreign currency translation (907 ) (465 ) (143 )
Balance at June 30, 2018 $ 32,419
$ 17,831
$ 2,680

~~Assuming no additions, disposals or adjustments are made to the carrying values and/or~~The useful lives of the ~~intangible assets, annual amortization expense on product rights~~Company’s intangibles are as follows:


Intangibles Category			Amortizable Life
Product Acquisition Costs			10 years
Trademarks and Technology			15 years
Customer Relationships			10 years

IPR&D and ~~other related intangibles as of June 30, 2018 over the remainder of 2018 and each of the next five years is estimated to be as follows (in thousands):~~

Amortization Expense *
2018 (remainder of the year) $ 1,550
2019 3,099
2020 3,099
2021 3,099
2022 3,099
2023 3,099
Thereafter 18,054
Total $ 35,099

*IPR&D amountsProduct Acquisition costs are assessed for impairment at least annually and will be amortized over their estimated useful lives once products are ~~approved, including the product's respective manufacturing process approvals, and are not included in the table.~~commercialized.

~~The useful lives of the Company’s intangibles are as follows:~~



~~Intangibles Category~~	~~Amortizable Life~~
~~Trademarks and Technology~~	15
~~Customer Relationships~~	10

8.10. Stock-Based Compensation

Stock Options

The ~~1999 Director Stock Option Plan, as amended (the “Director Plan”), provides for the grant~~Company recognized $0.3 million and $0.6 million of compensation expense related to stock options ~~to non-employee directors of~~during the ~~Company at an exercise price equal to the fair market value per share on the date of the grant. As of December~~three months ended March 31, ~~2017, an aggregate of 1,975,000 shares had been approved~~2019 and authorized for issuance pursuant to the Director Plan with no change as of June 30, 2018. A total of 2,634,798 options had been granted to non-employee directors through December 31, 2017, with no change as of June 30, 2018. A total of 807,782 of those had been forfeited through December 31, 2017 and returned to the option pool for future issuance, with no change as of June 30, 2018. The options granted under the Director Plan vest in full one year after their respective grant dates and have a maximum term of ten years. As of December 31, 2017 and June 30, 2018, there were 500,000 shares of common stock options outstanding. As of December 31, 2017, the 147,984 options available were transferred to a plan that has superseded the Director Plan, as discussed further in this section, with no additional options transferred as of June 30, 2018.respectively.

The 1999 Stock Incentive Plan, as amended (“1999 Plan”), replaced all previously authorized employee stock option plans, and no additional options may be granted under those previous plans. Under the 1999 Plan, options or stock awards may be granted to all of the Company’s employees, officers, directors, consultants and advisors to purchase a maximum of 3,200,000 shares of common stock. However, pursuant to the terms of the 1999 Plan, no awards may be granted after March 16, 2009. A total of 2,892,500 options, having a maximum term of ten years, have been granted at 100% of the fair market value of the Company’s common stock at the date of grant. Options outstanding under the 1999 Plan were generally exercisable in cumulative increments over four years commencing one year from date of grant. As of June 30, 2018, there are no options outstanding under the 1999 Plan.

��

On June 26, 2009, the Board of Directors adopted, and the Company’s stockholders subsequently approved by written consent, the IGI Laboratories, Inc. 2009 Equity Incentive Plan (the “2009 Plan”). The 2009 Plan became effective on July 29, 2009. The 2009 Plan allows the Company to continue to grant options and restricted stock, as under the 1999 Plan, but also authorizes the Board of Directors to grant a broad range of other equity-based awards, including stock appreciation rights, restricted stock units (“RSUs”) and performance awards. The 2009 Plan has been created, pursuant to and consistent with the Company's current compensation philosophy, to assist the Company in attracting, retaining and rewarding designated employees, directors, consultants and other service providers of the Company and its subsidiaries and affiliates, in a manner that will be cost efficient to the Company from both an economic and financial accounting perspective. On April 12, 2010, the Board of Directors adopted, and the Company’s stockholders subsequently approved, an amendment and restatement of the 2009 Plan to increase the number of shares of Common Stock available for grant under such plan by adding 2,000,000 shares of Common Stock. The 2009 Plan, as amended on May 29, 2010, authorizes up to 5,000,000 shares of the Company’s common stock for issuance pursuant to the terms of the 2009 Plan. The maximum number of shares that may be subject to awards made to any individual in any single calendar year under the 2009 Plan is 1,000,000 shares. As of June 30, 2018, there were 24,376 RSUs outstanding, 1,493,960 shares of stock outstanding, and options to purchase 2,932,846 shares of common stock outstanding. As of December 31, 2017, there were 99,626 RSUs outstanding, 1,422,020 shares of stock outstanding and options to purchase 3,038,634 shares of common stock outstanding. As of December 31, 2017, the 249,052 options available were transferred to a plan that has superseded the 2009 Plan, as discussed further in this section. As of June 30, 2018, an additional 98,098 options available were transferred to the superseded plan.

On May 25, 2016, the Board of Directors approved the Company’s 2016 Equity Incentive Plan (the “2016 Plan”). On May 21, 2018, the Board of Directors adopted, and the Company’s stockholders subsequently approved, an amendment and restatement of the 2016 Plan to increase the number of shares of Common Stock available for grant under such plan by adding 2,000,000 shares of Common Stock. The 2016 Plan, as amended, provides for the issuance of awards of up to 4,000,000 shares of the Company’s common stock, plus any shares of common stock that are represented by awards granted under our Director Plan and 2009 Plan that are forfeited, expire or are canceled without delivery of shares of common stock or which result in the forfeiture of shares of common stock back to the Company on or after May 25, 2016, up to 2,500,000 shares. Generally, shares of common stock reserved for awards under the 2016 Plan that lapse or are canceled, will be added back to the share reserve available for future awards. However, shares of common stock tendered in payment for an award or shares of common stock withheld for taxes will not be available again for grant. The 2016 Plan provides that no participant may receive awards for more than 1,000,000 shares of common stock in any fiscal year. As the 2016 Plan supersedes both the Director Plan and the 2009 Plan, any available shares from both are now incorporated into the 2016 Plan. As of ~~June 30, 2018,~~March 31, 2019, there were ~~174,472~~100,773 RSUs outstanding, ~~49,667~~131,496 shares of common stock outstanding and options to purchase ~~1,335,529~~3,164,345 shares of common stock outstanding under the 2016 Plan. As ~~compared to 2017, as~~ of December 31, ~~2017,~~2018, there were ~~89,003~~161,214 RSUs outstanding, ~~20,000~~74,667 shares of common stock outstanding and options to purchase ~~761,176~~1,394,285 shares of common stock

outstanding under the 2016 Plan. As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, there were a total of ~~2,935,736~~1,363,758 shares of common stock and ~~1,526,857~~3,113,374 shares of common stock available under the 2016 Plan, respectively.

As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, there were options to purchase ~~4,768,105~~6,105,619 and ~~4,299,810~~4,352,391 shares of common stock outstanding, respectively, collectively in the Director Plan, 2009 Plan, and the 2016 Plan.

In the interest of maintaining consistency with the Company's 2016 Equity Incentive Plan, on March 13, 2017, the Company entered into (i) an amendment to the option agreements governing each option grant currently outstanding under the Company's 2009 Equity Incentive Plan, and (ii) an amendment to the RSU, agreements governing each RSU grant currently outstanding under the 2009 Plan. The amendments provide for the automatic vesting upon a change of control of the Company of each option grant and RSU grant, as applicable, outstanding under the 2009 Plan. The amendments had a de minimis value to the holders as of ~~June 30, 2018,~~March 31, 2019, and therefore no additional stock compensation expense was recognized related to the amendments.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses assumptions noted in the following table. Expected volatilities and risk-free interest rates are based upon the expected life of the grant.


	Six months ended June 30,					Three Months Ended March 31,
Assumptions	2018		2017		Assumptions	2019		2018
Expected dividends	—		—		Expected dividends	—		—
Risk-free rate	2.36	%	1.55	%	Risk-free rate	2.47	%	2.32	%
Expected volatility	60.5% - 62.3%		58.0% - 69.7%		Expected volatility	57.8%-60.2%		60.5%-60.9%
Expected term (in years)	3.2 - 3.3 years		3.2 - 3.3 years		Expected term (in years)	3.2-3.3 years		3.2 - 3.3 years

Expected volatility was calculated using the historical volatility of the Company's stock over the expected life of the options. The expected life of the options was estimated based on the Company's historical data. The risk free interest rate is based on U.S. Treasury yields for securities with terms approximating the terms of the grants. Forfeitures are recognized in the period they occur. The assumptions used in the Black-Scholes options valuation model are highly subjective, and can materially affect the resulting valuation.

A summary of option activity under the 1999 Director Stock Option Plan, ~~the~~ 2009 Equity Incentive Plan, and the 2016 Equity Incentive Plan as of ~~June 30, 2018~~March 31, 2019 and changes during the period are presented below:


						Number of Options	Weighted Average Exercise Price
	Number of Options		Weighted Average Exercise Price
Outstanding as of January 1, 2018	4,299,810		$	5.09
Outstanding as of January 1, 2019					Outstanding as of January 1, 2019	4,352,391	$	4.61
Issued	679,785		3.29		Issued	1,866,855	1.60
Exercised	(11,000	)	1.08		Exercised	—	—
Forfeited	(200,490	)	7.02		Forfeited	(113,627)	4.84
Expired	—		—		Expired	—	—
Outstanding as of June 30, 2018	4,768,105		$	4.76
Outstanding as of March 31, 2019					Outstanding as of March 31, 2019	6,105,619	$	3.68

Exercisable as of June 30, 2018	3,546,700		$	4.63
Exercisable as of March 31, 2019					Exercisable as of March 31, 2019	3,601,093	$	4.65

The following tables summarize information regarding options outstanding and exercisable at ~~June 30, 2018:~~March 31, 2019:

Outstanding:


Range of Exercise Prices	Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
$0.79 - $1.50	1,652,250	$	1.08	3.47
$1.51 - $5.50	2,642,313	2.17		9.22
$5.51 - $10.67	1,811,056	8.25		6.73
Total	6,105,619	$	3.68	6.93

Range of Exercise Prices Stock Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life
$0.55 - $1.50 1,735,000
$ 1.06
3.61
$1.51 - $5.50 873,469
3.18
8.52
$5.51 - $10.67 2,159,636
8.38
7.45
Total 4,768,105
$ 4.76
6.25

Exercisable:

~~Exercisable:~~


Range of Exercise Prices	Stock Options Exercisable	Weighted Average Exercise Price		Range of Exercise Prices	Stock Options Exercisable	Weighted Average Exercise Price
$0.55 - $1.50	1,735,000	$	1.06
$0.79 - $1.50				$0.79 - $1.50	1,510,000	$	1.06
$1.51 - $5.50	202,166	2.75		$1.51 - $5.50	452,961	3.17
$5.51 - $10.67	1,609,534	8.72		$5.51 - $10.67	1,638,132	8.36
Total	3,546,700	$	4.63	Total	3,601,093	$	4.65

As of ~~June 30, 2018,~~March 31, 2019, the intrinsic value of the options outstanding was ~~$4.5~~$0.2 million and the intrinsic value of the options exercisable was ~~$4.3~~$0.2 million. As of ~~June 30, 2018,~~March 31, 2019, there was ~~$2.0~~$2.1 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the Plan. The costs will be recognized through ~~February 2021.~~March 2022.

Restricted Stock and RSUs

The Company periodically grants restricted stock and RSU awards to certain officers and other employees that typically vest one to three years from their grant date. The Company recognized ~~$120,000~~$0.1 million and ~~$245,000~~$0.2 million of compensation expense during the three months ended ~~June 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and $303,000 and $468,000 during the six months ended June 30, 2018 and 2017, respectively, related to restricted stock and RSU awards.~~respectively. Stock compensation expense is recognized over the vesting period of the restricted stock and RSUs. At ~~June 30, 2018,~~March 31, 2019, the Company had approximately ~~$0.8~~$0.4 million of total unrecognized compensation cost related to ~~non-vested restricted stock and~~ RSUs, all of which will be recognized through ~~April 2021.~~March 2022. The following table summarizes the number of unvested RSUs and their weighted average exercise price for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.


						Number of RSUs	Weighted Average Grant Date Fair Value
	Number of RSUs		Weighted Average Exercise Price
Non-vested balance at January 1, 2018	188,629		$	8.27
Non-vested balance at January 1, 2019					Non-vested balance at January 1, 2019	175,591	$	4.78
Changes during the period:					Changes during the period:
Shares granted	122,949		3.36		Shares granted	—	—
Shares vested	(101,607	)	9.07		Shares vested	(71,206)	5.20
Shares forfeited	(11,123	)	7.21		Shares forfeited	(3,612)	3.53
Non-vested balance at June 30, 2018	198,848		$	4.88
Non-vested balance at March 31, 2019					Non-vested balance at March 31, 2019	100,773	$	4.53

11. Income Taxes

The ~~Company conducts operations in the United States~~Company’s income tax expense (benefit) was $0.01 million and certain foreign countries. It is the intent of the Company to permanently reinvest any earnings and profits generated by its foreign affiliates. One of its foreign affiliates is subject to tax in Estonia. Estonia has a dual tax regime: 0% tax rate for earnings and profits as they are generated and 14% to 20% tax rates for earnings and profits that are distributed to shareholders. The Company has taken the position that the 14% to 20% tax rates apply only when dividends have been declared and recognized as a liability. Accordingly, the Company has provided no taxes on the current earnings generated by its Estonian affiliate.

~~Income tax expense~~$0.02 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2019 and 2018, ~~and June 30, 2017, is recognized based on~~respectively. For the ~~Company’s estimated annual~~same two periods, the effective tax ~~rate, which is based on the tax rate expected for the full calendar year applied to the pre-tax income of the interim period adjusted for discrete items.~~ rates were 0.09% and 0.5%, respectively.

The Company excludes from the calculation of the ~~annual~~ effective tax rate ~~those jurisdictions~~any entities that are projected to operate at a loss, ~~and in which a~~have no tax benefit ~~will not~~that can reasonably be ~~recognized or~~expected, and those entities which operate in a zero tax rate jurisdiction.

~~The Company has assessed the impacts of the changes resulting from~~ Due to continuing operating losses in the United States, the tax provision is based on minimum U.S. state income taxes and the operations of certain foreign affiliates that are subject to taxes in their respective countries.

Beginning in 2018, the Company’s net interest expense became subject to limitations imposed by the Tax Cuts and Jobs Act ~~(U.S. TCJA)~~of 2017 (TCJA). Based on actual and projected operating results, the Company is subject to an interest expense limitation. The limitation serves to reduce the net operating loss and create an additional attribute for the disallowed net interest expense. Therefore, there is no effect on earnings.

Also beginning in 2018, TCJA imposed a new tax on the current earnings of controlled foreign subsidiaries called Global Intangible Low-Taxed Income (“GILTI”). The Company continues to monitor the new GLITI tax provisions, associated regulations and rulings as they are issued with the application of ASC 740, Income Taxes. The Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company's measurement of its deferred taxes (the “deferred method”). The Company's selection of an accounting policy with respect to the new GILTI tax rules will depend, in part, on analyzing its global income to determine whether it expects to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected to be. Whether the Company expects to have future U.S. inclusions in taxable income related to GILTI depends not only on the Company's current structure and estimated future results of global operations, but also on its intent and ability to modify its structure. The Company is currently in the process of analyzing its structure. For 2018, the Company’s foreign entities as a whole generated an operating loss and that loss exceeds the projected foreign entities’ income for 2019. Therefore, the Company has not made any adjustments related to potential GILTI tax in its financial statements and has ~~recognized an income tax benefit and~~not yet made a corresponding receivable of $0.1 million related to the recoverability of Alternative Minimum Tax Credits. Deferred tax assets, liabilities and valuation allowances have been remeasured at the new rate of 21%. Except for the recognition of the Alternative Minimum Tax Credit, there was no income impact from the remeasurement since all U.S. net deferred tax assets are fully reserved by the Company. At present, we do not estimate any material impacts from the repatriation tax. While we have completed our provisional analysis of the income tax effects of

the U.S.TCJA, the related tax effects may need to be adjusted, possibly materially, due to further refinement of our calculations, changes in interpretations and assumptions that we have made, additional guidance that may be issued by regulatory bodies, and actions and related accounting policy decision we may take as a result of the new legislation. We will complete our analysis over the one-year measurement period from the enactment of the law as provided for by SAB 118, and any adjustments during this measurement period will be included in net earnings from continuing operations as an adjustmentregarding whether or not to ~~income tax expense in the reporting period(s) when such adjustments are determined.~~record deferred taxes associated with GILTI.

The Company evaluates the recoverability of its net deferred tax assets based on its history of operating results, its expectations for the future and expiration dates. ~~Based on the preponderance of the evidence, the~~The Company has concluded that it is more likely than not it will be unable to realize the net deferred tax assets in the immediate future and has established a valuation allowance for all U.S. and foreign net deferred tax assets.

At December 31, ~~2017,~~2018, the Company’s U.S. federal net operating loss carryforwards totaled ~~$41.7~~$45 million. The Company’s ability to use net operating loss carry forwards is subject to limitation in future periods under certain provisions of Section 382 of the Internal Revenue Code of 1986, as amended, which limit the utilization of net operating losses upon a more than 50% change in ownership of the Company’s ~~stock that is held by 5% or greater stockholders.~~stock. The Company 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. The Company believes that net operating losses subsequent to the change date in 2010 (aggregating ~~$23.1~~$26.5 million) are not subject to Section 382 limitations. The Company has estimated that the annual limitation starting in 2010 aggregates from $1.0 million to $2.3 million per year including the effect of amortization of built in gains. The Company’s net loss carryforwards may be further limited in the future if additional ownership changes occur.

The Company is subject to the provisions of ASC 740-10-25, “Income Taxes”. (ASC ~~740~~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, the Company undergoes a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions. For federal purposes, post 1998 tax years remain open to examination as a result of net operating loss carryforwards. The Company is currently open to audit by the appropriate state income taxing authorities for tax years ~~2013~~2014 to 2017. The Company has not recorded any liability for uncertain tax positions.

~~10.~~

12. Accrued Expenses

Accrued expenses represent various obligations of the Company including certain operating expenses and taxes payable.

As of ~~June 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the largest components of accrued expenses ~~were (in thousands):~~were:


						March 31, 2019		December 31, 2018
	June 30, 2018		December 31, 2017
	(Unaudited)		(Audited)
Capital expenditures	$	2,476	$	1,947
Payroll	1,483		1,580
Professional fees	1,284		546		Professional fees	$	2,523	$	2,153
Interest expense	763		240		Interest expense	2,112		1,042
Payroll					Payroll	1,392		1,908
Wholesaler fees					Wholesaler fees	797		203
Medicaid and Medicare					Medicaid and Medicare	440		383
Royalties					Royalties	378		222
Rebates					Rebates	363		714
Clinical studies	603		596		Clinical studies	334		334
Royalties	578		856
Medicaid and Medicare *	542		—
Inventory and Supplies	460		58		Inventory and Supplies	317		1,809
Rebates *	332		—
Capital expenditures					Capital expenditures	156		275
Income Tax	60		58		Income Tax	11		45
Wholesaler fees *	—		7,044
Other	688		577		Other	480		754
	$	9,269	$	13,502		$	9,303	$	9,842

* Wholesale fees ($2.8 million) have been reclassified to Accounts Receivable and Medicaid $0.5 million, Medicare Fees $0.1 million and Rebates $0.3 million have been reclassified to Accrued Expenses upon adoption of ASC Topic 606, "Revenue from Contracts and Customers" in 2018.

~~11.~~13. Legal and U.S. Regulatory Proceedings

The Company is involved from time to time in claims which arise in the ordinary course of business. In management's opinion, the Company has made adequate provision for potential liabilities, if any, arising from any such matters. However, litigation is inherently unpredictable, and the costs and other effects of pending or future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in any such matters, and developments or assertions by or against the Company relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on its business, financial condition and operating results.

To date, ~~twelve~~thirteen putative class action antitrust lawsuits have been filed against 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 the Company along with thirty-four generic manufacturer co-defendants~~, regarding the pricing of generic econazole nitrate cream along with twenty-nine additional drug products not manufactured or sold by the Company. All actions have been consolidated by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part of the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter, and the class actions have been consolidated into three actions: the direct purchaser, end payer and indirect reseller actions.

("econazole"). 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 econazole from July 1, 2014 until the time the ~~defendants’~~defendants' allegedly unlawful conduct ceased or will cease. The class plaintiffs seek treble damages for alleged overcharges for econazole during the alleged period of conspiracy, and certain of the class plaintiffs also seek injunctive relief against the defendants. All actions have been consolidated by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part of the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter. On October 16, 2018 the court dismissed the class plaintiffs' 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. This motion remains pending.

Three "opt-out" antitrust lawsuits have additionally been filed against the Company by Humana Inc.; The Kroger Co. et al.; and United HealthCare Services, Inc., and consolidated into the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter by the Judicial Panel on Multidistrict Litigation. Each of the opt-out ~~plaintiffs allege a conspiracy by thirty-five generic manufacturers to fix prices for thirty~~complaints names between thirty-six and forty-three defendants (including the Company) and involves allegations regarding the pricing of econazole along with between twenty-four and twenty-nine other drug products ~~including econazole nitrate cream, in violation of federal antitrust laws.~~that were not manufactured or sold by the Company during the period at issue. The opt-out plaintiffs seek treble damages for alleged ~~price~~

overcharges for the ~~thirty~~ drug products identified in the complaint during the alleged period of conspiracy, and two of the complaints also seek injunctive ~~relief against the defendants.~~

~~All of these cases are in their initial stages and motions~~relief. A motion to dismiss ~~have~~the Humana Inc. and The Kroger Co., et al. opt-out complaints was filed on February 21, 2019. A motion to dismiss the United HealthCare Services, Inc. opt-out complaint has not yet been ~~filed with respect to each of the three consolidated class actions.~~ filed.

Due to the early stage of these cases, we are 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 these cases are without merit, and we intend 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”~~("Stayma") against the Company regarding the ~~Company’s~~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 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. ~~Because discovery in~~At this ~~matter is ongoing,~~time, 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. The Company believes this case is without merit, and the Company intends to vigorously defend against these claims. The Company filed ~~a counter-claim~~three counter-claims against Stayma for its failure to pay several past due invoices of approximately $1.7 million relating to the development and commercial supply of the two subject ~~products.~~products and for breaching the confidentiality provisions and exclusivity provisions of the parties' agreements.

On December 13, 2018, Valdepharm SA filed a lawsuit alleging that the Company breached contracts regarding two drug products that the Company had sought to have Valdepharm manufacture. On February 12, 2019 the Company answered the complaint and counterclaimed, alleging that Valdepharm breached the contracts by failing to perform its work in compliance with FDA regulations and current Good Manufacturing Practices. Each party seeks damages associated with the alleged breach and related claims. Due to the early stage of the case we are 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 the claims against Teligent are without merit, and we intend to vigorously defend against them.

On April 15, 2019, Mo-Kan Iron Workers Pension Fund, on behalf of itself and all other persons or entities, except defendants, who purchased Teligent common stock between May 2, 2017 and November 7, 2017, commenced a putative class action against the Company and its CEO, Jason Grenfell-Gardner, alleging violations of the securities laws. The complaint alleges that the defendants made materially misleading statements regarding the Company’s business, operational and compliance policies. The plaintiff has agreed to adjourn the response date until after the completion of the lead plaintiff appointment process under the Private Securities Litigation Reform Act of 1995. Due to the early stage of the case, we are 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 the claims are without merit, and we intend to vigorously defend against them.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, that are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates and on management's beliefs and assumptions. In addition, other written or oral statements, which constitute forward-looking statements, may be made by or on behalf of the Company. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on current expectations of management and are not guarantees of future performance, and involve certain risks, uncertainties and assumptions, which are difficult to predict. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, the general economic conditions in the markets in which the Company operates, levels of industry research and development spending, the Company’s ability to continue to attract and retain qualified personnel, the fixed price nature of product development agreements or the loss of customers and other factors described in the Company’s filings with the Securities and Exchange Commission, including the “Risk Factors” section as set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as updated below in this Quarterly Report on Form 10-Q. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The forward-looking statements set forth herein speak only as of the date of this report. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. The Company operates its business under one reportable segment.

Company Overview

Strategic Overview

Teligent, Inc. and its subsidiaries (collectively the “Company”) is a specialty generic pharmaceutical company. All references to "Teligent," the "Company," "we," "us," and "our" refer to Teligent, Inc. Our mission is to become a leader in the specialty generic pharmaceutical market. Our platform for growth is centered around the development, manufacturing and marketing a portfolio of generic pharmaceutical products in our own label in topical, injectable, complex and ophthalmic dosage forms. We believe 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"), will leverage our existing expertise and capabilities, and broaden our platform for more diversified strategic growth.

Our pipeline includes 26 Abbreviated New Drug Applications ("ANDAs") for additional pharmaceutical products filed with the FDA. Our pipeline also includes one Prior Approval Supplement for our first opthalmic product filed in the second quarter 2017. We have three abbreviated new drug submissions ("ANDSs") on file with Health Canada. In addition, we have 39 product candidates at various stages of our development pipeline. We expect to continue to expand our presence in the generic topical pharmaceutical market through the filing of additional ANDAs with the FDA, the filing of applications to Health Canada, and the subsequent launch of products as these applications are approved. We will also seek to license or acquire further products, intellectual property, or pending applications to expand our portfolio.

We currently market and sell generic topical and generic and branded generic injectable pharmaceutical products in the United States and Canada. In the United States, we currently market 2834 generic topical pharmaceutical products and four branded ~~generic~~ injectable pharmaceutical products. We have received FDA approvals for 34 topical generic products from our internally developed pipeline and we have 19 Abbreviated New Drug Applications, ("ANDAs") submitted to the FDA that are awaiting approval. In Canada, we sell over 3027 generic and branded generic injectable products and medical devices. In addition, we have 45 product candidates at various stages of our development pipeline. Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide contract manufacturing services to the pharmaceutical, ("OTC"), and cosmetic markets. We operate our business under one segment. Our common stock is traded on the ~~NASDAQ~~Nasdaq Global Select Market under the trading symbol “TLGT.” Our principal executive office, laboratories and manufacturing facilities are located at 105 Lincoln Avenue, Buena, New Jersey. We have additional offices located in Iselin, New Jersey, ~~Toronto,~~Mississauga, Canada, and Tallinn, Estonia.

The manufacturing and commercialization of generic specialty pharmaceutical markets is competitive, and there are established manufacturers, suppliers and distributors actively engaged in all phases of our business. We currently manufacture and sell topical generic pharmaceutical products under our own label.

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 Boot Alliance, ~~Development~~Inc. consists of Walgreens,

AmerisourceBergen's PRxO Generics program, and Econdisc members. Red Oak Sourcing consists of CVS and Cardinal’s source program. 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 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 negative impact on our revenue, business, financial condition and results of operations. We continue to analyze the market for other 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.

For the three months ended ~~June 30, 2018,~~March 31, 2019, we had sales to two customers, which individually accounted for 10% or more of our total revenue. Total sales to these customers represented ~~34%~~30% and ~~13%~~18%, respectively, and represented ~~47%~~48% of total revenues. Accounts receivable related to ~~these~~the Company’s major customers comprised ~~33% and 16%, respectively,~~37% of all accounts receivable as of ~~June 30, 2018.~~March 31, 2019. For the three months ended ~~June 30, 2017,~~March 31, 2018, we had sales to three customers which individually accounted for more than 10% of our total revenue. Total sales to these customers represented ~~26%~~38%, ~~17%~~11% and ~~12%~~10%, respectively, and represented ~~55%~~59% of total revenues. Accounts receivable related to ~~these~~the Company’s major customers comprised ~~82%~~52% of all accounts receivable as of June 30, 2017. For the six months ended June 30, 2018, we had sales to two customers, which individually accounted for more than 10% of our total revenue. Total sales to these customers represented 36% and12%, respectively, and represented 48% of total revenues. For the six months ended June 30, 2017, we had sales to three customers, which individually accounted for more than 10% of our total revenue. Total sales to these customers represented 26%, 16% and 15%, respectively, and represented 57% of total revenues.March 31, 2018.

Our customers in the contract manufacturing business generally consist of pharmaceutical companies, as well as cosmetic and OTC product marketers, who require product development/manufacturing support. For the three months ended ~~June 30, 2018,~~March 31, 2019, approximately ~~67%~~73% of our contract manufacturing revenue was derived from pharmaceutical projects, as compared to ~~86%~~84% of total contract manufacturing revenue for the three months ended June 30, 2017. For the six months ended June 30, 2018, approximately 75% of our contract manufacturing revenue was derived from pharmaceutical projects, as compared to 85% of total contract manufacturing revenue for the six months ended June 30, 2017.March 31, 2018. None of our contract manufacturing services customers represented greater than 10% of total revenue for both the three months ended ~~June 30, 2018~~March 31, 2019 and ~~June 30, 2017. None of our contract manufacturing services customers represented greater than 10% of total revenue for both the six months ended June 30, 2018 and June 30, 2017.~~2018.

Product and Pipeline Approvals

The following is a summary of significant approvals received ~~in 2018:~~during the three months ended March 31, 2019:

On ~~February 14, 2018,~~January 2, 2019, we announced approval of an ANDA for ~~Betamethasone Dipropionate Lotion~~Gentamicin Sulfate Ointment USP, ~~(Augmented), 0.05%~~0.1%. This was our ~~first~~thirteenth approval for 2018, and our ~~twentieth~~thirty-second approval from ~~our~~its internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in ~~May~~the first quarter of ~~2018.~~2019.

On ~~March 21, 2018,~~January 24, 2019, we announced approval of an ANDA for ~~Halobetasol~~Clobetasol Propionate Ointment USP, 0.05%. This was our ~~second~~first approval for ~~2018~~2019, and our ~~twenty-first~~thirty-third approval from ~~our~~its internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in ~~April~~the first quarter of ~~2018.~~2019.

On ~~April 6, 2018,~~March 14, 2019, we announced approval of an ANDA for Ciclopirox Shampoo, 1%. This was our third approval for 2018 and our twenty-second approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in May of 2018.

~~On April 17, 2018, we announced approval of an ANDA for Clobetasol Propionate Cream USP,~~Desonide ointment, 0.05%. This was our ~~fourth~~second approval ~~for 2018~~of 2019, and our ~~twenty-third~~thirty-fourth approval from ~~our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in May of 2018.~~

~~On June 13, 2018, we announced approval of an ANDA for Diflorasone Diacetate Ointment, 0.05%. This was our fifth approval for 2018 and our twenty-fourth approval from our~~its internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the ~~third~~second quarter of ~~2018.~~2019.

On ~~June 20, 2018,~~March 19, 2019, we announced approval of an ANDA for Fluocinonide ~~Gel~~Topical Solution USP, 0.05%. This was our ~~sixth~~third approval ~~for 2018~~of 2019, and our ~~twenty-fifth~~thirty-fifth approval from ~~our~~its internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the ~~third~~second quarter of ~~2018.~~2019.

On July 2, 2018, we announced approval of an ANDA for Lidocaine and Prilocaine Cream USP, 2.5%/2.5%. This was our seventh approval for 2018 and our twenty-sixth approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the third quarter of 2018.

On July 24, 2018, we announced approval of an ANDA for Hydrocortisone Cream USP, 2.5%. This was our eighth approval for 2018 and our twenty-seventh approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the third quarter of 2018.

On July 30, 2018, we announced approval of an ANDA for Hydrocortisone Lotion USP, 2.5%. This was our ninth approval for 2018 and our twenty-eighth approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the third quarter of 2018.

~~Out of Period Adjustments~~

Results of Operations

Three months ended ~~June 30, 2018~~March 31, 2019 compared to ~~June 30, 2017~~March 31, 2018

We had a net loss of ~~$20.7~~$8.7 million, or ~~$0.39~~$0.16 per share, for the three months ended ~~June 30, 2018,~~March 31, 2019 ("Current Period"), compared to a net loss of ~~$0.9~~$4.8 million, or ~~$0.02~~$0.09 per share, for the three months ended ~~June 30, 2017.~~March 31, 2018 ("Prior Period"). Product Sales, net, include Company Product Sales and Contract Manufacturing Sales, as follows:

~~Revenues (in thousands):~~

Three Months Ended June 30, Increase/(Decrease)
Components of Revenue: 2018 2017 $ %
Product sales, net $ 16,629
$ 18,295
$ (1,666 ) (9 )%
Research and development services and other income 122
113
9
8 %
Total Revenues $ 16,751
$ 18,408
$ (1,657 ) (9 )%
Revenues:


	Three Months Ended March 31,						Increase/(Decrease)
Components of Revenue:	2019		2018		$		%
Product sales, net	$	13,037	$	14,534	$	(1,497)	(10)	%
Research and development services and other income	85		11		74		673	%
Total Revenues	$	13,122	$	14,545	$	(1,423)	(10)	%

~~Revenues were $16.8~~

Total revenues decreased by 10% to $13.1 million for the ~~three months ended June 30, 2018, compared to $18.4~~Current Period from $14.5 million ~~for~~from the ~~same period in the prior year. This represents a $1.7~~Prior Period. The $1.4 million decrease primarily resulted from a decline in ~~2018 from the same period~~our contract manufacturing revenues of $0.7 million and a decline in ~~the prior year. This decrease in~~our own generic pharmaceutical product sales of ~~$1.7~~$0.7 million ~~is attributed~~as we proactively discontinued unprofitable contracts in order to ~~a decrease~~optimize the commercial viability of our in-line product portfolio in ~~revenue from Zantac Injectable which represented 9% of total revenue in the second quarter of 2017, as compared~~order to 7% of total revenue in the second quarter of 2018, Lidocaine Ointment which represented 22% of total revenue in the second quarter of 2017, as compared to 7% of total revenue in the second quarter of 2018 and contract manufacturingincrease gross margin.

~~services revenue decreased quarter over quarter, from 13% of total revenue down to 9%. This was partially offset by the product launch of Hydrocortisone Butyrate Lotion.~~

Research and development services and other income will not be consistent and will vary, from period to period, depending on the required timeline of each development project and/or agreement.

Costs and ~~Expenses (in thousands):~~Expenses:


	Three Months Ended March 31,						Increase/(Decrease)
	2019		2018		$		%
Cost of revenues	$	7,360	$	9,325	$	(1,965)	(21)	%
Selling, general and administrative expenses	5,513		5,360		153		3	%
Product development and research expenses	2,989		3,391		(402)		(12)	%
Totals costs and expenditures	$	15,862	$	18,076	$	(2,214)	(12)	%

Three Months Ended June 30, Increase/(Decrease)
2018 2017 $ %
Cost of revenues $ 11,728
$ 10,371
$ 1,357
13 %
Selling, general and administrative expenses 5,961
4,706
1,255
27 %
Product development and research expenses 3,967
5,113
(1,146 ) (22 )%
Totals costs and expenditures $ 21,656
$ 20,190
$ 1,466
7 %

Cost of revenues ~~increased as a percentage of total revenue~~decreased by 21% to ~~70%~~$7.4 million for the ~~three months ended June 30, 2018 as compared~~Current Period from $9.3 million from the Prior Period. Gross margin increased to ~~56% for~~44% in the ~~same period in 2017. The increase in cost~~Current Period from 36% from the Prior Period which supports our effort to optimize our product portfolio and improve our product profitability from the second half of sales as a percentage of revenue was driven by new product launches as well as changes in product mix, pricing and related fees, such as wholesaler fees, in addition to customer and product mix for our contract services revenue. For the three months ended June 30, 2018, cost2018. Cost of revenues ~~also included an increase~~decreased $2.0 million in inventory reserves of $0.5 million of costs related to the write-down of inventory and other costs. Some production inefficiencies can be attributed to the expanding of our manufacturing footprint and capacityCurrent Year mainly resulted from decrease in ~~topical manufacturing, and adding sterile manufacturing capabilities at the existing facility.~~ sales volume.

Selling, general and administrative expenses ~~for~~in the ~~three months ended June 30, 2018~~Current Period increased by ~~$1.3~~$0.2 million as compared to the ~~same period in 2017. In 2018 there were increases of $0.8 million for bad debt expense, $0.5 million increase in legal and professional fees and $0.1 million increase in salaries and related costs~~Prior Period. This change was due to an increase in ~~headcount.~~professional fees of $0.8 million partially offset by a reduction in personnel costs of $0.4 million and a decline in bad debt expense of $0.2 million.

Product development and research expenses ~~for the three months ended June 30, 2018~~ decreased by ~~approximately $1.1~~$0.4 million as compared to the ~~same period in 2017.~~Prior period. The decrease in product development and research expenses was primarily due to a(i) $0.2 million decrease ~~in clinical studies of $1.1 million and related testing of $0.4 million offset by an increase~~ in GDUFA fees, of(ii) $0.3 million decrease in personnel costs and anpartially offset by $0.2 million increase in ~~business insurance of $0.1 million.~~clinical studies.

Other (Expense) Income, net:

~~Other Expense (in thousands):~~


	Three Months Ended March 31,						(Increase)/Decrease
	2019		2018		$		%

Interest and other expense, net	$	(4,947)	$	(2,572)	$	(2,375)	(92)	%
Foreign currency exchange (loss) / gain	(844)		1,325		(2,169)		(164)	%
Debt partial extinguishment of 2019 Notes	(185)		—		(185)		—	%

Three Months Ended June 30, Increase/(Decrease)
2018 2017 $ %
Debt partial extinguishment of 2019 Notes $ (10,069 ) $ —
$ 10,069
— %
Interest and other expense, net $ (2,499 ) $ (2,936 ) $ (437 ) (15 )%
Foreign currency exchange (loss) gain $ (3,220 ) $ 3,822
$ (7,042 ) (184 )%

As discussed in Note 6, on April 27, 2018, the Company entered into separate exchange agreements with certain holders of the 2019 Notes. There was a $75.1 million exchange of the 2019 Notes for 2023 Notes, which is considered a partial extinguishment,Interest and ~~which resulted~~other expense, net increased in the ~~acceleration~~Current Period primarily as a result of $10.1 million of non-cash interest expense in the quarter ended June 30, 2018. Interest expense decreased by $0.4 million for the three months ended June 30, 2018 as compared to the same period in 2017. The decrease is related to the increase in capitalized interest, from $0.7 million for the three months ended June 30, 2017 to $1.5 million for the three months ended June 30, 2018 (related to our facility expansion), offset by a slightan increase in interest expense ~~amortization~~ of $1.0 million related to the current debt ~~discount~~structure and ~~amortization~~a decrease in capitalized interest of ~~debt issuance costs of~~$1.3 million from Prior Period pertaining to the ~~new debt. A foreign~~Buena facility.

Foreign exchange loss of ~~$3.2~~$0.8 million ~~was recorded~~ in the ~~three months ended June 30, 2018, primarily~~Current Period was related to the foreign currency translation of our intercompany loans denominated in U.S. dollars to our foreign ~~subsidiaries.~~subsidiaries to be repaid in November 2022. Depending on the changes in

foreign currency exchange rates, we will continue to record a non-cash gain or loss on translation for the ~~remainder of the~~remaining term of these loans. ~~Due to the nature of this transaction, there is no economic benefit to the Company to hedge this transaction.~~

Net ~~Loss~~loss attributable to common stockholders (in thousands, except per share numbers):


	Three Months Ended June 30,						Increase/(Decrease)						Three Months Ended March 31,						Increase/(Decrease)
	2018			2017			$			%			2019		2018		$		%
Net loss attributable to common stockholders	$	(20,716	)	$	(919	)	$	(19,797	)	(2,154	)%	Net loss attributable to common stockholders	$	(8,724)	$	(4,802)	$	3,922	82	%
Basic and diluted loss per share	$	(0.39	)	$	(0.02	)	$	(0.37	)	(1,850	)%	Basic and diluted loss per share	$	(0.16)	$	(0.09)	$	0.07	78	%

Net loss for the ~~three months ended June 30, 2018~~Current Period was ~~$20.7~~$8.7 million as compared to ~~$0.9~~net loss of $4.8 million infor the ~~same period last year.~~Prior Period. The increase ~~in loss is~~was primarily due to ~~a decrease in revenue of $1.7 million and increases in costs and expenses in 2018 of $1.5 million,~~ an increase in interest and other ~~expense~~expenses of ~~$9.6 million; and an increase in the foreign currency exchange loss of $7.0 million.~~

~~Six months ended June 30, 2018 compared to June 30, 2017~~

~~We had net loss of $25.5~~$2.4 million, ~~or $0.48 per share, for the six months ended June 30, 2018, compared to a net loss of $0.1 million, or $0.00 per share, for the six months ended June 30, 2017, which resulted from the following:~~

~~Revenues (in thousands):~~

Six Months Ended June 30, Increase/(Decrease)
Components of Revenue: 2018 2017 $ %
Product sales, net $ 31,163
$ 38,148
$ (6,985 ) (18 )%
Research and development services and other income 133
151
(18 ) (12 )%
Total Revenues $ 31,296
$ 38,299
$ (7,003 ) (18 )%

Revenues were $31.3 million for the six months ended June 30, 2018, compared to $38.3 million for the same period in the prior year. This represents a $7.0 million decrease in 2018 from the same period in the prior year. This decrease in product sales of $7.0 million is attributed to a decrease in revenue from Zantac Injectable which represented 14% of total revenue for the six months ended June 30, 2017, as compared to 7% of total revenue for the six months ended June 30, 2018, Lidocaine Ointment which represented 19% of total revenue for the six months ended June 30, 2017, as compared to 6% of total revenue for the six months ended June 30, 2018 and contract manufacturing services revenue decreased year over year, from 15% of total revenue down to 9%. This was partially offset by the product launch of Hydrocortisone Butyrate Lotion.

~~Research and development services and other income will not be consistent and will vary, from period to period, depending on the required timeline of each development project and/or agreement.~~

~~Costs and Expenses (in thousands):~~

Six Months Ended June 30, Increase/(Decrease)
2018 2017 $ %
Cost of revenues $ 21,053
$ 19,328
$ 1,725
9 %
Selling, general and administrative expenses 11,321
9,005
2,316
26 %
Product development and research expenses 7,358
8,781
(1,423 ) (16 )%
Totals costs and expenditures $ 39,732
$ 37,114
$ 2,618
7 %

Cost of revenues increased as a percentage of total revenue to 67% for the six months ended June 30, 2018 as compared to 50% for the same period in 2017. The increase in cost of sales as a percentage of revenue was driven by new product launches as well as changes in product mix, pricing and related fees, such as wholesaler fees, in addition to customer and product mix for our contract services revenue. For the six months ended June 30, 2018, cost of revenues also included an increase in inventory reserves of $1.4 million of costs related to inventory and raw materials that were expected to expire in less than six months, and other costs. Some production inefficiencies can be attributed to the expanding of our manufacturing footprint and capacity in topical manufacturing, and adding sterile manufacturing capabilities at the existing facility.

Selling, general and administrative expenses for the six months ended June 30, 2018 increased by $2.3 million as compared to the same period in 2017. In 2018 there were increases of $1.1 million in legal and professional fees, $0.8 million in bad debt expense, $0.7 million in salaries and related costs, primarily driven by a one time payment of $0.2 million (see Exhibit 33.1), $0.2 million in other costs, offset by a decrease of $0.5 million in stock based compensation related to options and restricted stock.

Product development and research expenses for the six months ended June 30, 2018 decreased by approximately $1.4 million as compared to the same period in 2017. The decrease in product development and research expenses was primarily due to a decrease in clinical studies of $1.4 million and related testing of $0.5 million offset by an increase in GDUFA fees of $0.3 million and an increase in business insurance of $0.2 million, due to an increase in headcount.

~~Other Expense (in thousands):~~

Six Months Ended June 30, Increase/(Decrease)
2018 2017 $ %
Debt partial extinguishment of 2019 Notes $ (10,069 ) $ —
$ 10,069
— %
Interest and other expense, net $ (5,071 ) $ (6,068 ) $ (997 ) (16 )%
Foreign currency exchange (loss) gain $ (1,895 ) $ 4,901
$ (6,796 ) (139 )%

As discussed in Note 6, on April 27, 2018, the Company entered into separate exchange agreements with certain holders of the 2019 Notes. There was a $75.1 million exchange of the 2019 Notes for 2023 Notes, which is considered a partial extinguishment, and which resulted in the acceleration of $10.1 million of non-cash interest expense in the quarter ended June 30, 2018. Interest expense decreased by $1.0 million for the six months ended June 30, 2018 as compared to the same period in 2017. The decrease is related to the increase in capitalized interest, from $1.2 million for the six months ended June 30, 2017 to $2.8 million for the six months ended June 30, 2018 (related to our facility expansion), offset by an increase in interest expense, amortization of debt discount and amortization of debt issuance costs of the new debt. A foreign exchange loss of ~~$1.9~~$2.2 million, ~~was recorded in the six months ended June 30, 2018, as compared to~~debt extinguishment losses of $0.2 million, partially offset by a $4.9 million foreign exchange gain, recorded in the six months ended June 30, 2017, primarily related to the foreign currency translation of our intercompany loans denominated in U.S. dollars to our foreign subsidiaries. Depending on the changes in foreign currency exchange rates, we will continue to record a non-cash gain or loss on translation for the remainder of the term of these loans. Due to the nature of this transaction, there is no economic benefit to the Company to hedge this transaction.

~~Net Loss (in thousands, except per share numbers):~~

Six Months Ended June 30, Increase/(Decrease)
2018 2017 $ %
Net loss attributable to common stockholders $ (25,518 ) $ (88 ) $ (25,606 ) — %
Basic and diluted loss per share $ (0.48 ) $ 0.00
$ (0.48 ) — %

Net loss for the six months ended June 30, 2018 was $25.5 million as compared to $0.1 million in the same period last year. The increase in loss is due to a decrease in revenue of $7.0 million and increasesdecline in costs and expenses ~~in 2018~~ of ~~$2.6 million, an increase in interest and other expense of $9.1~~$2.2 million and ~~an increase~~a decline in revenues of $1.4 million in the ~~foreign currency exchange loss of $6.8 million,~~Current Period as ~~noted~~discussed above.

Liquidity and Capital Resources

Our cash flows from operating, investing and financing activities, as reflected in the condensed Consolidated Statements of Cash Flows, are summarized in the following ~~table (in thousands):~~table:


	Three months ended March 31,
	2019		2018
Net cash provided by (used in)
Operating Activities	$	(6,051)	$	(9,549)
Investing Activities	$	(2,129)	$	(4,094)
Financing Activities	$	2,202	$	—

Six Months Ended June 30,
2018 2017
Net cash provided by (used in)

Operating Activities $ (12,763 ) $ (1,307 )
Investing Activities $ (12,270 ) $ (15,286 )
Financing Activities $ 12,555
$ 267

Operating Activities

Our operating activities used ~~$12.8~~$6.1 million and $9.5 million of cash and cash equivalents in the ~~six~~three months ended ~~June 30,~~March 31, 2019 and 2018, ~~compared~~respectively, mainly to ~~$1.3~~support our operational activities, which includes a $5.1 million ~~used during the same period last year. The cash used~~build in ~~operating activities for the six months ended June 30, 2018 was a result of our net loss, adjusted for $22.9 million of non-cash expenses offset by a $10.1 million change~~inventory and normal timing differences in operating assets and liabilities. The change is related to a significant decrease in accounts payable and accrued expenses resulting from payments made towards our manufacturing expansion project. The cash used in operating activities for the six months ended June 30, 2017 was a result of our net loss, adjusted for $4.6 million of non-cash expenses offset by a $5.8 million change in operating assets and liabilities.working capital balances.

Investing Activities

Our investing activities used ~~$12.3 million during the six months ended June 30, 2018, compared to $15.3~~$2.1 million of cash and equivalents during the three months ended March 31, 2019, compared to $4.1 million used ~~in investing activities~~ during the same period last ~~year. The funds used for both periods were for capital expenditures, mainly~~year, which was primarily related ~~to the ongoing~~with our facility expansion ~~located~~project in Buena, ~~New Jersey. The decrease during~~NJ. We received certification of completion of our expanded facility in the ~~six months ended June 30,~~fourth quarter of 2018 ~~is due~~and continued to develop and file further regulatory submissions with the ~~timing of payments directly related to our manufacturing expansion project.~~FDA in 2019.

Financing Activities

Our financing activities provided ~~$12.6~~$2.2 million of cash and cash equivalents during the three months ended March 31, 2019. Our financing activities neither provided nor used cash during the ~~six~~three months ended ~~June 30, 2018, compared to $267,000 of~~March 31, 2018. The cash provided during the ~~six~~three months ended ~~June 30, 2017. In the six months ended June 30, 2018, $15.0~~March 31, 2019 consisted of $5.0 million was borrowed from the 2021 Term Loan, while $2.5 million was used to pay costs associated with the 2019 Notes, 2023 Notes and 2021 Term Loan. The $267,000 of cash provided in the six months ended June 30, 2017 consisted of proceeds from the ~~exercise~~Revolver offset by $2.7 million used to repurchase a portion of ~~options to purchase common stock.~~the remaining 2019 Notes.

Our ~~principal sources~~capital resources were comprised of ~~liquidity are~~ cash and cash equivalents of ~~approximately $13.7~~$6.4 million and $9.7 million as of March 31, 2019 and December 31, 2018 respectively. We had working capital of $14.4 million at ~~June 30, 2018~~March 31, 2019 and ~~future cash from operations. Our working capital was $31.8~~$15.8 million at ~~June 30, 2018.~~December 31, 2018 respectively.

In order to continue normal business operations and execution of the Company’s growth strategy, the Company ~~will need to~~may exercise its ability to significantly defer or reduce planned discretionary investments in research and development and capital projects or seek other financing alternatives. Other financing alternatives may include raising additional capital through the sale of its equity, a strategic alliance with a third party or securing debt. If additional acquisition and growth opportunities arise, external financing will be required.

On ~~May 4,~~November 12, 2018, the Company filed Form S-3 under the Securities Act of 1933. The S-3 registration allows the Company to issue, from time to time and at prices to be determined at or prior to the offering, up to $50 million of any combination of the securities described in the prospectus, either individually or in units should the need to raise cash arise. On June 1, 2018, the Company entered intosecured a credit agreement for ~~$25~~$120.0 million. The facility includes three tranches of funding, an asset based revolving credit facility of $25.0 million due ~~June 1, 2021 ('2021~~November 2022 (“Revolver”), a term loan of $80.0 million due February 2023 (“2023 Term ~~Loan"~~Loan”) ~~to support~~, and a delayed draw term loan of $15.0 million also due in February 2023 (“2023 Delayed Draw Term Loan”).

The interest rate under the ~~operations~~Revolver is calculated, at the option of the ~~business.~~Company, at either the one, two, three or six-month LIBOR plus 3.75% or the base rate plus 2.75%. The ~~first $15.0 million of loan proceeds was received~~interest rate on ~~June 1, 2018. The remaining loan proceeds of $10.0 million was received on July 16, 2018.~~

~~The Company still has a portion of convertible senior notes (“2019 Notes”) due December 2019. The Company is currently evaluating alternative financing methods to assist with repayment~~the 2023 Term Loan and the 2023 Delayed Draw Term Loan bear interest, at the option of the ~~2019 Notes in addition to continued financing of major projects including~~Company, at either the ~~manufacturing facility in Buena. As~~one, two, three or six-month LIBOR plus 8.75% or the ~~Company continues to review its capital and debt structure, there can be no assurance that~~base rate plus 7.75%, with a ~~strategic alliance or debt financing will be~~24-month paid-in-kind interest option available ~~on terms acceptable~~ to the Company ~~or at all. The board of directors and management of the Company intend~~should it choose to ~~exhaust all options available~~defer cash payments in order to ~~enable~~maintain the liquidity needed to continue launching new products, build inventory, and prepare for the FDA prior approval inspection. As of March 31, 2019, the Company elected the paid-in-kind interest option and increased the principal balance of 2023 Term Loan by $2.0 million to ~~support its current growth strategy and operations beyond August 2019.~~$72.0 million.

Off Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our shareholders.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from these estimates.

Please refer to our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 for a complete list of all Critical Accounting Policies and Estimates. See also Item 1 for our Condensed Consolidated Financial Statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

As of ~~June 30, 2018,~~March 31, 2019, our principal debt obligation was related to our 2019 and 2023 ~~Notes.~~Notes and New Senior Credit Facilities. Interest accrues at a fixed rate of 3.75% on the outstanding principal amount of the 2019 Notes and is paid semi-annually every June 15 and December 15 until the 2019 Notes mature on December 15, 2019. Interest accrues at a fixed rate of 4.75% on the outstanding principal amount of the 2023 Notes and is paid semi-annually every May 1 and November 1 until the 2023 Notes mature on May 1, 2023. Since the interest rate is fixed, we have no market risk related to the 2019 and 2023 Notes.

~~Additionally, on June 1,~~On December 13, 2018, pursuant to a Commitment Letter, dated November 12, 2018, between us and Ares Management LLC, we entered into: (i) a First Lien Revolving Credit Agreement, by and among us, as the borrower, certain subsidiaries of the ours, as guarantors, the lenders from time to time party thereto, and ACF Finco I LP, as administrative agent (the “Revolver Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among the Company, ~~entered into a~~as the borrower, certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent (the “Second Lien Credit Agreement” and, together with the Revolver Credit Agreement, the “New Senior Credit Facilities”).

The New Senior Credit Facilities consist of an asset based revolving credit ~~agreement for~~facility of $25.0 million ~~secured by all Company assets,~~ due ~~June 1, 2021~~November 2022 ("Revolver"), a term loan of $80.0 million due February 2023 (“~~2021~~2023 Term Loan”), and a delayed draw term loan of $15.0 million also due in February 2023 (“2023 Delayed Draw Term Loan”). The ~~first $15.0 million~~interest rate under the Revolver is calculated, at the option of ~~loan proceeds was received~~the Company, at either the one, two, three or six-month LIBOR plus 3.75% or the base rate plus 2.75%. The interest rate on ~~June 1, 2018. The remaining loan proceeds of $10.0 million was received on July 16, 2018. The 2021~~the 2023 Term Loan ~~bears~~and 2023 Delayed Draw Term Loan bear interest, at ~~a rate~~the option of the Company, at either the one, two, three or six-month LIBOR plus 9%8.75% or the base rate plus 7.75%, ~~and is therefore~~with a 24-month paid-in-kind interest option available to us should the Company choose to defer cash payments in order to maintain the liquidity needed to continue launching new products. All three tranches of funding are subject to market risk.

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and ~~the~~ Notes. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate book value because of the short maturity of these instruments. ~~Based~~As of March 31, 2019, based on ~~the closing price of our common stock as of June 30, 2018,~~level 2 inputs, the fair value of our Notes (2019 Notes and 2023 Notes) was approximately ~~$115.3~~$64.3 million compared to their ~~face~~carrying value of ~~$143.75 million~~$69.9 million. For description of the fair value hierarchy and the Company's fair value methodologies, see Note 2 " Summary of Significant Accounting Policies". In addition, the value

of our Senior Credit Facilities was stated at carrying value at March 31, 2019. The Company believes it could obtain borrowings at March 31, 2019 with comparable terms as ~~of June 30, 2018. However, this variance is due to~~ the ~~conversion feature in~~December 13, 2018 Senior Credit Facilities, therefore, the ~~Notes rather than to changes in market interest rates. As noted above, the Notes carry a fixed interest rate and therefore do not subject us to interest rate risk.~~carrying value approximates fair value.

At ~~June 30, 2018,~~March 31, 2019, the majority of our cash and cash equivalents was invested in overnight instruments, the interest rates of which may change daily. Accordingly, these overnight investments are subject to market risk.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Based on~~In connection with the filing of this Form 10-Q for the quarter ended March 31, 2019, our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO") conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)~~) under the Securities Exchange Act of 1934) required by Rules 13a-15(b) or 15d-15(b)~~ under the Securities Exchange Act of 1934, as amended (“Exchange Act”)). As a result of this evaluation, our ~~Chief Executive Officer~~CEO and ~~our Chief Financial Officer have~~CFO concluded that ~~the Company has not maintained effective controls due to~~those material weaknesses previously identified in ~~internal control over financial reporting described in Part II,~~ Item 9A9A. “Controls and Procedures” of our ~~2017~~Annual Report on Form 10-K for the year ended December 31, ~~2017. These~~2018 were still present as of March 31, 2019 (“the Evaluation Date”). Based on those material weaknesses, ~~remain unremediated~~and the evaluation of our disclosure controls and procedures, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of ~~June 30, 2018. Furthermore, management also concluded that~~ the ~~Company has not maintained effective controls over the transition and implementation of the new accounting standard related to revenue recognition in the first quarter of 2018.~~Evaluation Date.

Changes in Internal Control over Financial Reporting

There ~~was~~were no ~~change~~changes during the quarter ended March 31, 2019 in our internal control over financial reporting ~~during our second quarter~~ that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. ~~However, as noted below,~~

Remediation Plan and Status

Our remediation efforts previously identified in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2018 are ongoing and we ~~have begun~~continue our initiatives to implement ~~changes~~and document policies, procedures, and internal controls. Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2019 and beyond, as necessary. We will test the operating effectiveness of certain new and existing controls in connection with our annual evaluation of the effectiveness of internal control over financial reporting; however, the material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. While we believe the steps taken to date and those planned for implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts. Accordingly, as we continue to ~~address~~monitor the ~~material weakness described above.~~

~~Remediation Plan for Material Weaknesses~~effectiveness of our internal control over financial reporting in ~~Internal Control over Financial Reporting~~

~~Remediation~~

~~To remediate~~the areas affected by the material weaknesses, we have and will continue to perform additional procedures prescribed by management, including the ~~Company has begun to implement new~~use of manual mitigating control procedures and ~~employ~~employing any additional tools and resources ~~including the following:~~

Hiring new team members and engaging external resources with significant prior experience with systems similar to the Company's new ERP system to provide additional capacity, analytical and functional capabilities, and cross-training.

~~Implementing business process improvements, that are anticipated to both strengthen controls governing management review and approvals and enable a more efficient and effective month end close.~~

~~Conducting regular reviews of all information system access to validate that access is appropriate and appropriate segregation of duties exist.~~

Hired a new senior leader in one of its foreign affiliates who, among other responsibilities, will ensure customer contract terms are reviewed with key members of the Finance Department on a timely basisdeemed necessary, to ensure ~~customer price concessions~~that our consolidated financial statements are ~~reflected appropriately~~fairly stated in ~~the financial records.~~

~~Establishing formal policies~~all material respects. The planned remediation activities described in Item 9A. “Controls and ~~procedures~~Procedures” of our Annual Report on Form 10-K for the ~~accounting~~year ended December 31, 2018 highlight our commitment to remediating our identified material weaknesses and ~~internal audit function.~~remain largely unchanged through the date of filing this Quarterly Report on Form 10-Q.”

~~Developing policies and procedures addressing the internal control framework of the Company’s ERP service provider.~~

PART II

OTHER INFORMATION

ITEM 1. Legal Proceedings

~~We are involved from time~~Information about the legal proceedings is included in Item 1, Notes to ~~time in claims which arise in the ordinary course~~unaudited Condensed Consolidated Financial Statements of business. In the opinion of management, we have made adequate provision for potential liabilities, if any, arising from any such matters. However, litigation is inherently unpredictable, and the costs and other effects of pending or future litigation, governmental investigations, legal and administrative cases and proceedings (whether civil or criminal), settlements, judgments and investigations, claims and changes in any such matters, and developments or assertions by or against us relating to intellectual property rights and intellectual property licenses, could have a material adverse effect on our business, financial condition and operating results.this Form 10-Q.

To date, twelve putative class action antitrust lawsuits have been filed against us 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 econazole nitrate cream and twenty nine additional drug products not manufactured or sold by us. All actions have been transferred by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part of the In ~~re Generic Pharmaceuticals Pricing Antitrust Litigation~~ ~~matter, and the class actions have been consolidated into direct purchaser, end payer and indirect reseller actions.~~

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 econazole from July 1, 2014 until the time the defendants’ allegedly unlawful conduct ceased or will cease.

The opt-out plaintiffs allege a conspiracy by thirty six generic manufacturers to fix prices for thirty drug products including econazole nitrate cream, in violation of federal antitrust laws. The opt-out plaintiffs seek treble damages for alleged price overcharges for the thirty drug products identified in the complaint during the alleged period of conspiracy, and also seek injunctive relief against the defendants.

All of these cases are in their initial stages and motions to dismiss have been filed with respect to each of the complaints. Due to the early stage of these cases, we are 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 these cases are without merit, and we intend 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 us regarding our 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. We developed the two products and Stayma purchased commercial quantities of each; however, Stayma now alleges that we 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. Because discovery in this matter is ongoing, we are 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 is without merit, and we intend to vigorously defend against these claims. We filed a counter-claim against Stayma for its failure to pay several past due invoices of approximately $1.7 million relating to the development and commercial supply of the two subject products.

ITEM 1A. Risk Factors

Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 includes a detailed discussion of risks and uncertainties which could adversely affect our future results. Except as set forth below, the risks described in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 have not materially changed.

~~Risks Related to Our Business~~

~~We have a history of losses and cannot assure you that we will become profitable, and as a result, we may have to cease operations and liquidate our business.~~

With the exception of 2015 and the three month period ended March 31, 2017, our expenses have exceeded our revenue in each of the last 12 years, and no net income has been available to common stockholders during each of these years. As of June 30, 2018, our stockholders’ equity was $39.1 million and we had an accumulated deficit of $85.6 million. Our future profitability depends on revenue exceeding expenses, but we cannot assure you that this will occur. If we do not become profitable or continue to raise external financing, we could be forced to curtail operations and sell or liquidate our business, and you could lose some or all of your investment.

~~We rely on a limited number of customers for a large portion of our revenues.~~

We depend on a limited number of customers for a large portion of our revenue. Two of our customers accounted for 47% of our revenue for the three months ended June 30, 2018, and three of our customers accounted for 55% of our revenue for the three months ended June 30, 2017. For the six months ended June 30, 2018, two of our customers accounted for 48% of our revenue and for the six months ended June 30, 2017, three of our customers accounted for 57% of our revenue. 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.

~~Due to concentration of sales in a limited number of products, our business will be materially adversely affected if these products do not perform as well as expected.~~

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, two of our products accounted for 14% of our revenue for the three months ended June 30, 2018. 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.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting.

We are required by the SEC to establish and maintain adequate internal control over financial reporting that provides reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We are likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses in those internal controls.

As disclosed elsewhere herein, in connection with our financial review management concluded that a material weakness related to the Company not having adequate personnel and resources in place for its implementation of a new ERP existed, and consequently, the same financial reporting personnel were not able to perform a timely and effective review of our period-end closing process.

Since the determination regarding this material weakness, we have devoted, and will continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. Our plans include the following: new internal and external personnel, new business process improvements and a review of relevant training. The elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects. Any failure to maintain such internal controls could adversely impact our ability to report our financial results

on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations, which may have a material adverse effect on our business.

~~We are subject to stringent regulatory requirements. Failure to adhere to such requirements could harm our business and results of operations.~~

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. Failure to adhere to such regulations, by either us or our suppliers, could harm our business and results of operations. In addition, our analytical department uses certain hazardous materials and chemicals in limited and controlled quantities. 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 contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages and any such liability could exceed our resources.

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 our facilities is currently undergoing remediation of environmental contamination. The total estimated costs for the clean-up and remediation is $0.9 million as of June 30, 2018, and remaining costs accrued at June 30, 2018 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.

In Canada, we and our suppliers of raw materials are also subject to regulation under 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, our analytical department uses certain hazardous materials and chemicals in limited and controlled quantities. We have implemented safety procedures for handling and disposing of such materials, however, such procedures may not comply with the standards prescribed by federal, provincial/territorial 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 contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages and any such liability could exceed our resources.

Future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal, provincial/territorial or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations.

Significant balances of intangible assets, including goodwill, are subject to impairment testing and may result in impairment charges, which may materially and adversely affect our results of operations and financial condition.

A significant amount of our total assets is related to goodwill and intangible assets. As of June 30, 2018, the value of our goodwill and intangible assets net of accumulated amortization was $53.4 million. Goodwill and other intangible assets are tested for impairment annually when events occur or circumstances change that could potentially reduce the fair value of the reporting unit or intangible asset. Impairment testing compares the fair value of the reporting unit or intangible asset to its carrying amount. Any future goodwill or other intangible asset impairment, if any, would be recorded in operating income and could have a material adverse effect on our results of operations and financial condition.

~~Our ability to use our net operating loss carry forwards and certain other tax attributes may be limited.~~

As of December 31, 2017, we had U.S. federal net operating losses (NOLs) of approximately $41.7 million which will expire from 2020 through 2037. The use of these NOLs may be limited in future years under IRC Section 382 which imposes an annual limitation on the amount of taxable income that can be offset by NOL carryovers and certain built in losses (collectively referred

to as Pre-change Losses) that are attributable to the period preceding an ownership change. Under Code Section 382, an ownership change occurs when one or more “Five-percent Shareholders” increase their ownership in the corporation’s stock, in the aggregate, by more than fifty percentage points during a three-year testing period. An ownership change as defined by Code Section 382 occurred during 2010 and triggered a limitation under Code Section 382 on the usage of an aggregated $23.3 million of NOLs at the change date. We estimate that the annual limitation on such NOLs aggregates from $1.0 million to $2.3 million per year including the effect of amortization of built in gains. Net Operating Losses since the 2010 change date aggregate $23.1 million and we do not believe that these NOLs are subject to limitation. Limitation NOLs utilized aggregated $4.7 million as of December 31, 2017.

~~Currency fluctuations and changes in exchange rates could adversely affect our business, financial condition, results of operations, cash flows, and/or common stock price.~~

Although we report our financial results in U.S. Dollars, a portion of our revenues and other liabilities and our costs are denominated in non-U.S. currencies, including the Euro and Canadian Dollar. Our results of operations and, in some cases, cash flows, have in the past been and may in the future be adversely affected by certain movements in currency exchange rates. The occurrence of any of the above risks could cause a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

~~The Company is exposed to market risk from fluctuations in currency exchange rates.~~

~~The Company operates in multiple jurisdictions denominated in currencies of the local jurisdiction. Additionally, the Company~~

~~may enter into acquisition, licensing, borrowing or other financial transactions that may give rise to currency exposure. Since~~

~~the Company cannot, with certainty, foresee and mitigate against such adverse fluctuations, fluctuations in currency exchange~~

~~rates could negatively affect the Company’s results of operations, financial position and cash flows.~~

We have identified material weaknesses in our internal control over financial reporting, and if we are unable to satisfy regulatory requirements relating to internal controls, our stock price could suffer.

Section 404 of the Sarbanes-Oxley Act of 2002 requires companies to conduct a comprehensive evaluation of the effectiveness of their internal control over financial reporting. At the end of each fiscal year, we must perform an evaluation of our internal control over financial reporting, include in our annual report the results of the evaluation and have our external auditors also publicly attest to the effectiveness of our internal control over financial reporting. We have identified material weaknesses in our internal control over financial reporting, and if additional material weaknesses are found in our internal controls in the future, if we fail to remediate our existing material weaknesses, if we fail to complete future evaluations on time or if our external auditors cannot attest to the effectiveness of our internal control over financial reporting, we could fail to meet our regulatory reporting requirements and be subject to regulatory scrutiny and a loss of public confidence in our internal controls, which could have an adverse effect on our stock price.

We have identified material weaknesses in our internal control over financial reporting, which could continue to impact negatively our ability to report our results of operations and financial condition accurately and in a timely manner.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has conducted an evaluation of the effectiveness of our internal control over financial reporting at June 30, 2018. We identified a number of material weaknesses in our internal control over financial reporting and concluded that, as of June 30, 2018, we did not maintain effective control over financial reporting based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. For a detailed description of these material weaknesses, see Item 9A, "Controls and Procedures." Each of our material weaknesses results in more than a remote likelihood that a material misstatement of the annual or interim financial statements that we prepare will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonable assurance regarding the reliability of our financial statements. As described in Item 4, "Controls and Procedures" we restated our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. Moreover, other material weaknesses may be identified.

We are in the process of remedying all of the identified material weaknesses, and this work will continue during fiscal 2018 and beyond. For a detailed description of our remedial efforts, see Item 4, "Controls and Procedures." There can be no assurance as to when all of the material weaknesses will be remedied. Until our remedial efforts are completed, management will continue to devote significant time and attention to these efforts, and we will continue to incur expenses associated with the additional procedures and resources required to prepare our Consolidated Financial Statements. Certain of our remedial actions, such as hiring additional qualified personnel to implement our reconciliation and review procedures, will be ongoing and will result in our incurring additional costs even after our material weaknesses are remedied.

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 into our controls system, 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.

~~Risks Related to our Indebtedness~~

~~Our substantial indebtedness could materially adversely affect our business, financial condition or results of operations and prevent us from fulfilling our obligations under the Notes.~~

As of June 30, 2018, our total consolidated net indebtedness was $129.5 million. Our substantial level of indebtedness coupled with our net loss increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on, or other amounts due in respect of our indebtedness. Our substantial indebtedness, combined with our other financial obligations and contractual commitments, may have a material adverse impact on us. For example, it could

~~make it difficult for us to satisfy our obligations with respect to our outstanding and other future debt obligations;~~

~~increase our vulnerability to general adverse economic conditions or a downturn in the industries in which we operate;~~

~~impair our ability to obtain additional financing in the future for working capital, investments, acquisitions and other general corporate purposes;~~

require us to dedicate a substantial portion of our cash flows to the payment to our financing sources, thereby reducing the availability of our cash flows to fund working capital, investments, acquisitions and other general corporate purposes; and

~~place us at a disadvantage compared to our competitors.~~

~~Risks Related to Our Securities~~

~~Shares of our common stock are relatively illiquid which may affect the trading price of our common stock.~~

For the six months ended June 30, 2018, the average daily trading volume of our common stock on the NASDAQ Global Select Market was approximately 693,254 shares. As a result of our relatively small public float, our common stock may be less liquid than the stock of companies with broader public ownership. Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price for our shares than would be the case if our public float were larger.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

None.

ITEM 5. Other Information

None.

ITEM 6. Exhibits


Exhibit Number		Description

~~Exhibit Number~~31.1*		~~Description~~

31.1*	Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002 .

32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

33.1*		~~Separation Agreement~~

10.1101		The Company is filing a corrected copy of its Amended and Restated 2016 Equity Incentive Plan (the “2016 Plan”) as Exhibit [10.1] hereto, in the interest of correcting a typographical error that appeared in the previous filing of the 2016 Plan. No other changes have been made to the 2016 Plan.”

101*	The following financial information from this Quarterly Report on Form 10-Q for the period ended ~~June 30, 2018,~~March 31, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Balance Sheets; (iii) the Condensed Consolidated Statements of Cash Flows; (iv) the Condensed Consolidated Statement of Comprehensive Income(Loss); (v) the Condensed Consolidated Statement of Equity; and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Teligent, Inc.

Date: May 10, 2019			~~Teligent, Inc.~~
By:
~~Date: August 9, 2018~~	~~By:~~	/s/ Jason Grenfell-Gardner
				Jason Grenfell-Gardner
				President and Chief Executive Officer

Date: ~~August 9, 2018~~May 10, 2019			By:	/s/ Damian Finio
				Damian Finio
				Chief Financial Officer

Exhibit Index


Exhibit Number		Description

~~Exhibit Number~~31.1*		~~Description~~

31.1*	Certification of the President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

33.1*		~~Separation Agreement~~

10.1*		The Company is filing a corrected copy of its Amended and Restated 2016 Equity Incentive Plan (the “2016 Plan”) as Exhibit [10.1] hereto, in the interest of correcting a typographical error that appeared in the previous filing of the 2016 Plan. No other changes have been made to the 2016 Plan.”

101*		The following financial information from this Quarterly Report on Form 10-Q for the period ended ~~June 30, 2018,~~March 31, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Balance Sheets; (iii) the Condensed Consolidated Statements of Cash Flows; (iv) the Condensed Consolidated Statement of Comprehensive Income(Loss); (v) the Condensed Consolidated Statement of Equity; and (vi) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

* Filed herewith.



	Three months ended June 30,						Six months ended June 30
	2018			2017			2018			2017
Net loss	$	(20,716	)	$	(919	)	$	(25,518	)	$	(88	)

Other comprehensive loss, net of tax;
Foreign currency translation adjustment	(28		)	(163		)	(332		)	(245		)
Other comprehensive loss	(28		)	(163		)	(332		)	(245		)

Comprehensive loss	$	(20,744	)	$	(1,082	)	$	(25,850	)	$	(333	)



	Three months ended			Six months ended
	June 30, 2018			June 30, 2018
Wholesale fees (Revenue)	$	0.9		$	0.9
Medicaid (Revenue)	0.3			—
Sales return reserve (Revenue)	—			(0.6		)
Inventory adjustments (Cost of revenues)	—			0.8
Bad debt expense (Selling, general and administrative expenses)	(0.8		)	(0.8		)
	$	0.4		$	0.3



	June 30, 2018		December 31, 2017		June 30, 2017		December 31, 2016
Cash and cash equivalents	$	13,675	$	26,692	$	50,216	$	66,006
Restricted cash in other assets	472		473		475		475
Cash, cash equivalents and restricted cash in the statement of cash flows	$	14,147	$	27,165	$	50,691	$	66,481



	As Reported		Balance Without Adoption of New Revenue Standard		Effect of Change Higher/(Lower)
ASSETS
Current assets:
Accounts receivable, net	$	16,232	$	18,144	$	(1,912	)

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accrued expenses	$	9,269	$	11,181	$	(1,912	)



Goodwill balance at December 31, 2017	$	471
Foreign currency translation	(26		)
Goodwill balance at June 30, 2018	$	445



	Trademarks and Technology			IPR&D			Customer Relationships
Balance at January 1, 2018	$	34,696		$	18,311		$	3,010
Amortization	(1,363		)	—			(187		)
Loss on impairment	(7		)	(15		)	—
Foreign currency translation	(907		)	(465		)	(143		)
Balance at June 30, 2018	$	32,419		$	17,831		$	2,680



	Amortization Expense *
2018 (remainder of the year)	$	1,550
2019	3,099
2020	3,099
2021	3,099
2022	3,099
2023	3,099
Thereafter	18,054
Total	$	35,099