UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~September 30, 2019~~March 31, 2020


			☐			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)

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

(856) 697-1441

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class

Trading symbol(s)

Name of each exchange on

Common Stock, Par Value $0.01 Per Share

TLGT

The Nasdaq Stock Market

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 every Interactive Data File required to be submitted 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “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 was ~~53,850,427~~53,899,495 shares as of ~~November 1, 2019.~~May 15, 2020.

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)


		September 30, 2019 (unaudited)		December 31, 2018			March 31, 2020 (unaudited)		December 31, 2019
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	6,707	$	9,705	Cash and cash equivalents	$	11,028	$	15,508
Restricted cash	Restricted cash	206		2,892		Restricted cash	206		206
Accounts receivable, net of allowance for doubtful accounts of $2,539 and $2,636, as of September 30, 2019 and December 31, 2018, respectively		20,361		16,120
Accounts receivable, net of allowance for doubtful accounts of $2,293 and $2,208, as of March 31, 2020 and December 31, 2019, respectively						Accounts receivable, net of allowance for doubtful accounts of $2,293 and $2,208, as of March 31, 2020 and December 31, 2019, respectively	8,497		20,374
Inventories	Inventories	22,633		16,296		Inventories	29,542		23,031
Prepaid expenses and other receivables	Prepaid expenses and other receivables	1,670		3,373		Prepaid expenses and other receivables	2,599		2,525
Total current assets	Total current assets	51,577		48,386		Total current assets	51,872		61,644
Property, plant and equipment, net	Property, plant and equipment, net	96,088		91,775		Property, plant and equipment, net	96,422		96,349
Intangible assets, net	Intangible assets, net	44,287		48,375		Intangible assets, net	34,699		44,645
Goodwill	Goodwill	484		470		Goodwill	454		491
Other assets	Other assets	3,757		1,886		Other assets	3,499		3,776
Total assets	Total assets	$	196,193	$	190,892	Total assets	$	186,946	$	206,905

LIABILITIES AND STOCKHOLDERS’ EQUITY/ (DEFICIT)
LIABILITIES AND STOCKHOLDERS’ DEFICIT						LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	8,822	$	5,933	Accounts payable	$	7,274	$	6,875
Accrued expenses	Accrued expenses	10,438		9,842		Accrued expenses	10,394		9,285
Deferred income		—		2,426
Revolver, current portion		2,500		—
Convertible 3.75% Senior Notes, net of debt discount and debt issuance costs (face of $13,022 and $15,702 as of September 30, 2019 and December 31, 2018, respectively)		12,777		14,411
Other current liabilities		434		—
Capital lease obligation, current						Capital lease obligation, current	451		446
Total current liabilities	Total current liabilities	34,971		32,612		Total current liabilities	18,119		16,606
Revolver		25,000		15,000
2023 Term Loans, net of debt issuance costs (face of $76,359 and $70,000 as of September 30, 2019 and December 31, 2018, respectively)		74,353		67,662
Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $75,090 as of September 30, 2019 and December 31, 2018, respectively)		59,434		56,909
Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $66,090 as of March 31, 2020 and December 31, 2019, respectively)						Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $66,090 as of March 31, 2020 and December 31, 2019, respectively)	53,900		53,093
Revolver, net of debt issuance costs (face of $25,000 as of March 31, 2020 and December 31, 2019, respectively)						Revolver, net of debt issuance costs (face of $25,000 as of March 31, 2020 and December 31, 2019, respectively)	25,000		25,000
Series B Senior Convertible Notes, net of debt discount and debt issuance costs (face of $34,405 as of March 31, 2020 and December 31, 2019, respectively)						Series B Senior Convertible Notes, net of debt discount and debt issuance costs (face of $34,405 as of March 31, 2020 and December 31, 2019, respectively)	22,450		21,824
2023 Term Loans, net of debt issuance costs (face of $90,846 and $88,464 as of March 31, 2020 and December 31, 2019, respectively )						2023 Term Loans, net of debt issuance costs (face of $90,846 and $88,464 as of March 31, 2020 and December 31, 2019, respectively )	88,997		86,452
Derivative liabilities						Derivative liabilities	8,034		6,776
Deferred tax liability	Deferred tax liability	223		215		Deferred tax liability	185		205
Other long term liabilities	Other long term liabilities	2,367		73		Other long term liabilities	2,107		2,256
Total liabilities	Total liabilities	196,348		172,471		Total liabilities	218,792		212,212
Commitments and Contingencies	Commitments and Contingencies					Commitments and Contingencies
Stockholders’ equity/ (deficit):
Common stock, $0.01 par value, 100,000,000 shares authorized; 53,850,427 and 53,774,221 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		558		557
Stockholders’ deficit:						Stockholders’ deficit:
Common stock, $0.01 par value, 100,000,000 shares authorized; 53,899,495 and 53,850,427 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively						Common stock, $0.01 par value, 100,000,000 shares authorized; 53,899,495 and 53,850,427 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	558		558
Additional paid-in capital	Additional paid-in capital	117,782		116,864		Additional paid-in capital	118,463		117,967
Accumulated deficit	Accumulated deficit	(116,176)		(96,350)		Accumulated deficit	(148,310)		(121,474)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,319)		(2,650)		Accumulated other comprehensive loss	(2,557)		(2,358)
Total stockholders’ equity / (deficit)		(155)		18,421
Total liabilities and stockholders' equity/ (deficit)		$	196,193	$	190,892
Total stockholders’ deficit						Total stockholders’ deficit	(31,846)		(5,307)
Total liabilities and stockholders' deficit						Total liabilities and stockholders' deficit	$	186,946	$	206,905

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 September 30,						Nine months ended September 30,							Three months ended March 31,
		2019		2018		2019		2018			2020		2019

Revenue, net	Revenue, net	$	18,466	$	18,294	$	49,929	$	49,088	Revenue, net	$	7,447	$	13,122

Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of revenues	Cost of revenues	11,186		11,575		28,346		32,365		Cost of revenues	8,610		7,360
Selling, general and administrative expenses	Selling, general and administrative expenses	5,007		4,845		15,707		15,932		Selling, general and administrative expenses	6,717		5,513
Impairment charges										Impairment charges	8,373		—
Product development and research expenses	Product development and research expenses	2,064		3,087		7,721		10,445		Product development and research expenses	1,800		2,989
Total costs and expenses	Total costs and expenses	18,257		19,507		51,774		58,742		Total costs and expenses	25,500		15,862
Operating income/(loss)		209		(1,213)		(1,845)		(9,654)
Operating loss										Operating loss	(18,053)		(2,740)

Other Expense:	Other Expense:									Other Expense:
Foreign currency exchange loss	Foreign currency exchange loss	(2,167)		(176)		(2,458)		(2,071)		Foreign currency exchange loss	(1,597)		(844)
Debt partial extinguishment of 2019 Notes	Debt partial extinguishment of 2019 Notes	—		—		(185)		(2,467)		Debt partial extinguishment of 2019 Notes	—		(185)
Interest and other expense, net	Interest and other expense, net	(5,160)		(2,693)		(15,262)		(7,764)		Interest and other expense, net	(5,876)		(4,947)
Change in the fair value of derivative liabilities										Change in the fair value of derivative liabilities	(1,258)		—
Loss before income tax expense	Loss before income tax expense	(7,118)		(4,082)		(19,750)		(21,956)		Loss before income tax expense	(26,784)		(8,716)

Income tax (benefit)/expense		(5)		(137)		76		(90)
Income tax expense										Income tax expense	52		8

Net loss attributable to common shareholders	Net loss attributable to common shareholders	$	(7,113)	$	(3,945)	$	(19,826)	$	(21,866)	Net loss attributable to common shareholders	$	(26,836)	$	(8,724)

Basic and diluted loss per share	Basic and diluted loss per share	$	(0.13)	$	(0.07)	$	(0.37)	$	(0.41)	Basic and diluted loss per share	$	(0.50)	$	(0.16)

Weighted average shares of common stock outstanding:	Weighted average shares of common stock outstanding:									Weighted average shares of common stock outstanding:
Basic and diluted shares	Basic and diluted shares	53,850,427		53,625,768		53,835,336		53,532,277		Basic and diluted shares	53,879,333		53,805,983

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

statements

TELIGENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
		2019		2018		2019		2018			2020		2019
Net loss	Net loss	$	(7,113)	$	(3,945)	$	(19,826)	$	(21,866)	Net loss	$	(26,836)	$	(8,724)

Other comprehensive income loss, net of tax:
Other comprehensive income, net of tax:										Other comprehensive income, net of tax:
Foreign currency translation adjustment	Foreign currency translation adjustment	36		108		331		(224)		Foreign currency translation adjustment	(199)		147
Other comprehensive income loss	Other comprehensive income loss	36		108		331		(224)		Other comprehensive income loss	(199)		147

Comprehensive loss	Comprehensive loss	$	(7,077)	$	(3,837)	$	(19,495)	$	(22,090)	Comprehensive loss	$	(27,035)	$	(8,577)

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

Balance, December 31, 2019 (audited)													Balance, December 31, 2019 (audited)		53,850,427	$	558	$	117,967	$	(121,474)	$	(2,358)	$	(5,307)
Stock based compensation expense	Stock based compensation expense	—	—		919		—		—		919		Stock based compensation expense		—	—		496		—		—		496

Issuance of stock for vested restricted stock units	Issuance of stock for vested restricted stock units	76,206	1		(1)		—		—		—		Issuance of stock for vested restricted stock units		49,068	—		—		—		—		—

Cumulative translation adjustment	Cumulative translation adjustment	—	—		—		—		331		331		Cumulative translation adjustment		—	—		—		—		(199)		(199)
Net loss	Net loss	—	—		—		(19,826)		—		(19,826)		Net loss		—	—		—		(26,836)		—		(26,836)

Balance, September 30, 2019 (unaudited)		53,850,427	$	558	$	117,782	$	(116,176)	$	(2,319)	$	(155)
Balance, March 31, 2020 (unaudited)													Balance, March 31, 2020 (unaudited)		53,899,495	$	558	$	118,463	$	(148,310)	$	(2,557)	$	(31,846)

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)


		Nine months ended September 30,							Three months ended March 31,
		2019		2018			2020		2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(19,826)	$	(21,866)	Net loss	$	(26,836)	$	(8,724)
Reconciliation of net loss to net cash (used in) provided by operating activities:	Reconciliation of net loss to net cash (used in) provided by operating activities:					Reconciliation of net loss to net cash (used in) provided by operating activities:
Depreciation of fixed assets and leases	Depreciation of fixed assets and leases	2,700		1,703		Depreciation of fixed assets and leases	985		876
Provision for bad debt	Provision for bad debt	(97)		601		Provision for bad debt	85		(105)
Provision for write down of inventory	Provision for write down of inventory	(295)		844		Provision for write down of inventory	1,394		453
Issuance of stock to consultant		—		102

Stock based compensation	Stock based compensation	896		1,572		Stock based compensation	491		368
Amortization of debt costs and debt discount	Amortization of debt costs and debt discount	4,657		7,080		Amortization of debt costs and debt discount	1,704		1,523
Amortization of intangible assets	Amortization of intangible assets	2,260		2,302		Amortization of intangible assets	741		756
Non cash lease expense	Non cash lease expense	308		—		Non cash lease expense	103		97
Foreign currency exchange loss	Foreign currency exchange loss	2,458		2,071		Foreign currency exchange loss	1,597		844
Partial extinguishment of Convertible 3.75% Senior Notes	Partial extinguishment of Convertible 3.75% Senior Notes	185		2,467		Partial extinguishment of Convertible 3.75% Senior Notes	—		185
Gain on sale of fixed assets		—		(20)

Loss on impairment of intangible assets	Loss on impairment of intangible assets	—		22		Loss on impairment of intangible assets	8,373		—
Non cash interest expense	Non cash interest expense	6,359		—		Non cash interest expense	1,984		2,020
Change in the fair value of derivative liabilities						Change in the fair value of derivative liabilities	1,258		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(4,018)		(4,587)		Accounts receivable	11,637		892
Inventories	Inventories	(5,970)		(2,746)		Inventories	(8,186)		(5,063)
Prepaid expenses, other current receivables and assets	Prepaid expenses, other current receivables and assets	1,666		2,085		Prepaid expenses, other current receivables and assets	(58)		558

Accounts payable and accrued expenses	Accounts payable and accrued expenses	2,747		(6,944)		Accounts payable and accrued expenses	1,889		(95)
Operating liabilities	Operating liabilities	(265)		—		Operating liabilities	(107)		(85)
Deferred income	Deferred income	(2,426)		—		Deferred income	—		(551)
Net cash used in operating activities	Net cash used in operating activities	(8,661)		(15,314)		Net cash used in operating activities	(2,946)		(6,051)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(6,082)		(18,315)		Capital expenditures	(880)		(2,129)
Proceeds from sale of fixed assets		—		38

Net cash used in investing activities	Net cash used in investing activities	(6,082)		(18,277)		Net cash used in investing activities	(880)		(2,129)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from exercise of common stock options		—		246

Proceeds from Revolver	Proceeds from Revolver	12,500		—		Proceeds from Revolver	—		5,000
Proceeds from 2021 Term Loan		—		25,000

Debt issuance costs	Debt issuance costs	(269)		(2,539)		Debt issuance costs	—		(109)
Repurchase of 3.75% senior notes	Repurchase of 3.75% senior notes	(2,686)		—		Repurchase of 3.75% senior notes	—		(2,686)
Principal paid on lease obligation	Principal paid on lease obligation	(9)		—		Principal paid on lease obligation	(3)		(3)
Net cash provided by financing activities		9,536		22,707
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(3)		2,202
Effect of exchange rate on cash and cash equivalents	Effect of exchange rate on cash and cash equivalents	(481)		(542)		Effect of exchange rate on cash and cash equivalents	(651)		(16)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(5,207)		(10,884)		Net decrease in cash, cash equivalents and restricted cash	(4,480)		(5,994)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	13,069		27,165		Cash, cash equivalents and restricted cash at beginning of period	16,182		13,069
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	7,381	$	15,739	Cash, cash equivalents and restricted cash at end of period	$	11,702	$	7,075
Supplemental Cash flow information:	Supplemental Cash flow information:					Supplemental Cash flow information:
Cash payments for interest	Cash payments for interest	$	3,211	$	3,136	Cash payments for interest	$	388	$	278
Cash payments for income taxes	Cash payments for income taxes	68		66		Cash payments for income taxes	34		20
Non-cash operating, investing and financing transactions:	Non-cash operating, investing and financing transactions:					Non-cash operating, investing and financing transactions:

Issuance of stock to a consultant		—		102

Acquisition of capital expenditures in accounts payable and accrued expenses	Acquisition of capital expenditures in accounts payable and accrued expenses	938		1,316		Acquisition of capital expenditures in accounts payable and accrued expenses	183		1,365
Capitalized interest in capital expenditures		—		2,013

Capitalized stock compensation in capital expenditures	Capitalized stock compensation in capital expenditures	23		82		Capitalized stock compensation in capital expenditures	5		10

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

TELIGENT, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. generally accepted accounting principles ~~(“GAAP”~~("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation 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~~Company's Annual Report on its Form 10-K ('Original Form 10-K") for the year ended December 31, ~~2018,~~2019, as updated by other reports we may file from time to time with the Securities and Exchange Commission ~~(“SEC”~~("SEC"). The condensed consolidated balance sheet as of December 31, ~~2018~~2019, has been derived from those audited consolidated financial statements. The Company filed an Amendment No. 1 Form 10-K/A to its Original Form 10-K solely to include the information required by Items 10 through 14 of Part III. Operating results for the ~~nine month period~~three months ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~

2020.

The company relied on the Securities and Exchange Commission's Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465) (the "Order") to delay the filing of its Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Form 10-Q”) due to circumstances related to the coronavirus disease ("COVID-19"). The original due date for filing of the Company's Form 10-Q was May 15, 2020. On May 15, 2020, the Company filed a current report with the SEC which states that it expects to file its Form 10-Q by May 26, 2020, but in any event, no later than June 25, 2020, in compliance with the provisions of the Order.

The Company required additional time to finalize the Form 10-Q because it had experienced disruptions to its business and operations as a result of the COVID-19 pandemic. The Company’s headquarters is located in New Jersey, which continues to be operating under a stay-at-home order and, accordingly, all the Company’s finance and accounting personnel are working remotely. The impact of the COVID-19 pandemic had necessitated additional analyses in connection with the preparation and review of Form 10-Q. This included reviewing financial and liquidity projections for future periods. These projections were necessary to assess tangible and intangible asset impairment risk.

1. Nature of the Business and ~~Liquidity~~Going Concern

Nature of the Business

Teligent, Inc. and its subsidiaries (collectively the “Company”), is a specialty generic pharmaceutical company. ~~Our~~Teligent’s mission is to become a leader in the specialty generic pharmaceutical market in alternate dosage forms. Under ~~our~~its own label, ~~we currently market~~the Company markets and ~~sell~~sells generic topical, ~~and~~branded generic, and ~~branded~~ generic injectable pharmaceutical products in the United States and Canada. In the United States, wethe Company currently ~~market~~markets NaN generic topical pharmaceutical products and 4 branded generic ~~injectable~~ pharmaceutical products. In Canada, ~~we sell~~the Company sells NaN generic and branded generic injectable products and medical devices. Generic pharmaceutical products are bioequivalent to their brand name counterparts. WeThe Company also ~~provide~~provides contract manufacturing services to the pharmaceutical, over the counter ~~("OTC"~~(“OTC”), and cosmetic markets. ~~We operate our~~The Company operates its business under 1 ~~reportable~~ segment. ~~Our~~Its common stock is traded on the Nasdaq Global Select Market under the trading symbol “TLGT.” ~~Our~~The Company’s principal executive office, laboratories, and manufacturing facilities are located at 105 Lincoln Avenue, Buena, New Jersey. ~~We have~~It has additional offices located in Iselin, New Jersey, Mississauga, Canada, and Tallinn, Estonia.

~~Liquidity~~Impact Related to COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease (“COVID-19”) as a pandemic, and the Company expects its operations in all locations to be affected as the virus continues to proliferate. In alignment with the directives in the state of New Jersey, as a Pharmaceutical manufacturing facility, Teligent is considered "essential" and the Company has remained open for its business. The Company will stay open as long as permitted and conditions remain safe for its employees to continue to supply its products to the patients that need them. Teligent’s first priority is the health and safety of its employees while positioning its business to manage throughout this Pandemic. The outbreak and any preventative or protective actions that Teligent, its customers, suppliers or other third parties with which it has business relationships, or governments may take in respect of the COVID-19 outbreak could disrupt its business and the business of its customers. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries in which the Company or the third parties with whom it engages operate. In addition, the COVID-19 outbreak could result in a severe economic downturn and has already significantly affected the financial markets of many countries. A severe or prolonged economic downturn or political disruption could result in a variety of risks to its business, including its ability to raise capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption could also strain its suppliers or third party CMOs, possibly resulting in supply disruption, or cause its customers to delay purchases or payments for its products. The COVID-19 pandemic may also create delays in the review and approval of its regulatory submissions as well as its pending reinspection related to the Company's warning letter and pre-approval inspection for commercial production on the newly installed injectable line at the Company’s New Jersey facility by the FDA. Given these uncertainties, the Company is unable to predict the overall impact that the COVID-19 pandemic will have on its business as of the date of this filing.

During the first quarter of 2020, the Company has taken preventative measures to help ensure business continuity while maintaining safe and stable operations. It has directed all non-production employees to work from home in accordance with state and local guidelines and has implemented social distancing measures on-site at its manufacturing facility to protect employees and its products. Its employees are provided daily personal protective equipment upon their arrival to the facility and the Company has implemented temperature monitoring services at its newly established single point of entrance. The Company has also implemented a bi-weekly sanitization process of the facility. It has adjusted its production schedule to concentrate on high demand or low stock product to help reduce employee concentrations while continuing to focus on our customer demand.

Under the provisions of ASC 360-10-55, the Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The current financial results and anticipated future results of the Company have been negatively impacted due to COVID-19 and therefore the Company performed an impairment analysis for the quarter ended March 31, 2020, by comparing the expected future cash flows of the assets to the carrying value of the related intangible assets. As a result, the Company recorded an impairment charge of $8.4 million in the current quarter related to trademarks and technology of $4.9 million and product acquisition costs of $3.5 million (Note 9).

The Company initiated a company-wide cost reduction initiative targeted at eliminating discretionary spending and ensuring that remaining expenditures are reduced in line with the lower demand for our products in light of COVID-19 impact to the business. The Company's Executive Leadership Team and all employees with annual salaries exceeding

$100,000 accepted a 20% and 15% eight-week reduction in pay, respectively, beginning May 4, 2020. Over the same eight-week period, the Company furloughed a portion of employees at its Buena, NJ manufacturing facility.

On May 15, 2020 the Company received $3.3 million of proceeds from the U.S. Small Business Administration Paycheck Protection Program (PPP) in May which is intended to help businesses keep their workforce employed during the COVID-19 crisis. The Company plans to balance the employee-related actions previously taken with the needs of the business to ensure a portion of the loan will be forgiven

From late March to the end of April 2020, several data sources suggested that patient visits to the dermatologist in the United States were down more than 50% in comparison to the typical number of dermatologist visits realized prior to shelter-in-place guidelines. These percentages vary by state. In May, as some states began to relax shelter-in-place guidelines there are signs that suggest patients are beginning to return to the dermatologist and demand for the Company’s US topical products will follow. Given the level of uncertainty and potential consequences of less stringent guidelines, it is still extremely challenging to predict the pace of the anticipated ramp and whether or not there might be a second wave of decline.

Going Concern

ASU 205-40 – Presentation of Financial Statements – Going Concern requires management to evaluate an entity’s ability to continue as a going concern within one year after the date the financial statements are available for issuance. Specifically, management is required to evaluate whether the presence of negative conditions or events, when considered individually and in the aggregate, raise substantial doubt about an entity’s ability to continue as a going concern. Substantial doubt exists when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are available for issuance. Management has identified the following negative conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern as of March 31, 2020:

•The Company has incurred significant losses and generated negative cash flows from operations in recent years and expects to continue to incur losses and generate negative cash flow for the foreseeable future. As a result, the Company had an accumulated deficit of ~~$116.2~~$148.3 million, total principal amount of outstanding borrowings of ~~$174.1~~$190.3 million, and limited capital resources to fund ongoing operations at ~~September 30, 2019.~~March 31, 2020. These capital resources were comprised of cash and equivalents of ~~$6.7~~$11.7 million at ~~September 30, 2019,~~March 31, 2020 and the generation of cash inflows from working capital, and an additional $10.0 million of borrowing capacity under the Delayed Draw Term Loan A portion of the Company’s Senior Credit Facilities that expires on December 13, 2019. In addition, subsequent to September 30, 2019, the Company issued Series B Senior Unsecured Convertible Notes for aggregate proceeds of $34.4 million, of which the Company expects approximately $27.3 million will be available to fund operations. See Note 7 for additional information regarding the Company’s Senior Credit Facilities and Note 13 for additional information regarding the Company’s Series B Senior Unsecured Convertible Notes.

capital. The Company’s available capital resources may not be sufficient for it to continue to meet its obligations as they become due over the next twelve months if the Company cannot improve its operating results or increase its operating cash inflows. In the event these capital resources are not sufficient, the Company may need to raise additional capital through the sale of equity or debt securities, enter into strategic business collaboration agreements with other companies, seek other funding facilities, or sell assets. However, the Company cannot provide assurances that additional capital will be available on acceptable terms or at all. Moreover, if the Company is unable to meet its obligations when they become due over the next twelve months through its available capital resources, or obtain new sources of capital when needed, the Company may have to delay expenditures, reduce the scope of its manufacturing operations, reduce or eliminate one or more of its development programs, or make significant changes to its operating ~~plan.~~plan or cease its operations. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~In addition, as~~•As disclosed in Note 7, the Company is subject to certain financial covenants ~~that are required~~as set forth in the April 6, 2020 amendments to ~~be met under~~ the Senior Credit Facilities. These financial covenants include a trailing twelve months (“TTM”) Minimum Revenue covenant that ~~was~~is required to be met each quarterly period from March 31, 2020 through ~~June 30, 2019,~~December 31, 2020, a TTM Minimum Adjusted EBITDA that is required to be met each quarterly period from ~~September 30, 2019~~March 31, 2021 through ~~September 30, 2020,~~maturity, and a ~~Maximum Total Net Leverage Ratio that is required to be met each quarterly period thereafter. As~~minimum liquidity covenant tested at all times through the term of ~~September 30, 2019,~~ the ~~Company was in compliance with~~agreement. These amendments supersede the ~~TTM Adjusted EBITDA covenant and currently anticipates it will remain in compliance with this covenant through September 30, 2020. However, a material change~~financial covenants included in the Company’s operating results over the next twelve months could negatively affect the Company’s ability to maintain compliance with the TTM Adjusted EBITDA covenant. Moreover, while the Company is not required to comply with the Maximum Total Net Leverage ratio until December 31, 2020, the Company currently anticipates that it will not beoriginal and amended agreements disclosed in ~~compliance with this covenant absent a significant reduction in the Company’s total principal amount of outstanding debt.~~ Note 7.In the event the Company is unable to comply with ~~this covenant,~~these covenants, or obtain a waiver from its lenders, the ~~total amounts~~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 due and payable. Furthermore, in the event that outstanding balances under the ~~Senior~~Ares Credit ~~Facilities~~agreements are declared due and payable by the lender, the lenders of the 2023 Series A and Series B Unsecured Convertible Notes ~~would immediately become~~shall have the right, but not the obligation, to declare all of the outstanding balance due in January 2021 for which the Company does not currently expect to have readily available capital resources to meet these obligations without raising additional capital through the sale of equity or debt securities.and payable as well. If the Company is unable to raise additional capital to meet these obligations, ~~if they become due in January 2021,~~ the Company may have to seek other strategic ~~alternatives.~~

alternatives, including ceasing its operations. The accompanying financial statements do not include any adjustments that might result from the outcome of ~~this uncertainty.~~these uncertainties.

10•The Company was in compliance with its financial covenants as of March 31, 2020. However, as a result of the impacts of the COVID-19 pandemic, the Company expects to be unable to continue to comply with the trailing twelve months revenue covenant throughout 2020. If it fails to comply with its trailing twelve months revenue covenant, an event of default under the Credit Agreements would be triggered and its obligations under the Senior Credit Facilities (defined in Note 7) or other agreements (including as a result of cross-default provisions) may be accelerated. During the first quarter of 2020, the Company recorded a $5.3 million derivative liability associated with certain mandatory prepayment penalties and the recognition of future interest payments in the anticipation of a potential future default on its Senior Credit Facilities (Note 8).

•In June 2019, the Company received a de-listing notice from the NASDAQ due to its share price being below $1.00 for 30 consecutive trading days. The notice ~~specifies~~specified that the ~~Company’s~~Company's share price must trade above $1.00 per share for ten consecutive trading days prior to December 2, 2019 in order to prevent ~~the Company’s~~its common stock from being de-listed. ~~As of September 30,~~For the 180 days preceding December 2, 2019 ~~and through~~ the ~~date of issuance of the accompanying financial statements, the~~Company's share price remained below $1.00. The Company requested a second 180-day extension. NASDAQ denied its request and the Company chose to file for an appeal. The Company was granted a hearing date for the end of January 2020. Subsequent to the appeal hearing, NASDAQ set a deadline of April 17, 2020 for the Company to regain compliance with NASDAQ’s continuing listing requirements. In early March 2020 the COVID-19 global pandemic triggered a significant decline in global capital markets, including NASDAQ. In light of this significant decline, the Company requested NASDAQ to reconsider the April 17, 2020 deadline. NASDAQ agreed to the Company’s ~~common stock has not traded above $1.00 per share for~~request and set a new deadline to regain compliance by June 1, 2020. In response to the ~~required ten consecutive trading days~~COVID-19 pandemic and ~~as such, the Company has filed a request~~related extraordinary market conditions, NASDAQ provided additional temporary relief ("Relief") from the continued listing bid price and market value of publicly held shares listing requirements through August 17, 2020. Under the Relief, the company will have additional time to regain compliance with the NASDAQ ~~for~~through August 17, 2020. In January 2020, the Company’s Board of Directors and shareholders approved a ~~180-day extension.~~reverse stock split in the range of any whole number between five (5) and ten (10) to one (1). While the Company believes that the ~~ongoing execution of its business plan~~reverse stock split will ultimately increase ~~the Company’s~~its share price above $1.00 for the required ten consecutive trading days, ~~the Company~~it can provide no assurances that its shares will trade above $1.00 per share ~~within~~for the ~~180-day extension period, if at all. Moreover, while~~required time period. A de-listing from the NASDAQ would be a “Fundamental Change” under the Company’s 2023 Series A and Series B Unsecured Convertible Notes which triggers a right by the holders to require the Company ~~believes~~repurchase the ~~NASDAQ will grant the 180-day extension request,~~Convertible Notes. In such an event, the Company ~~can provide~~would need to seek financing to repurchase the Convertible Notes and there is no ~~assurances~~guarantee that such ~~extension will~~financing would be ~~granted. As~~available or on terms acceptable to the Company. If noteholders demanded a ~~result, if~~repurchase of the notes and the Company could not finance the repurchase, it would be in default under the Indentures governing the Convertible Notes, and in that event the lenders of the Ares Credit agreements would have the right, but not the obligation, to declare all of the outstanding balance under those agreements due and payable as well. Therefore, in the event of the Company’s shares are de-listed from the NASDAQ, the Company would ~~be in default of the non-financial covenant required by the Company’s Senior Credit Facilities and Convertible Notes for which the Company would~~likely have to seek ~~a waiver~~some combination of waivers from ~~the~~its lenders orand noteholders and seek new capital through the sale of equity or debt securities. If the Company is unable to obtain ~~a waiver~~such waivers or raise new capital to meet these obligations if they become due, ~~the Company~~it may have to seek other strategic ~~alternatives.~~alternatives, including ceasing operations. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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2. 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~~2020 and ~~2018.~~2019. 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,~~2019, as filed with the Securities and Exchange Commission on April 1, 2019. Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have a material effect on the Company's financial condition, results of operations, ~~or cash flows~~ ~~as previously reported.~~13, 2020.

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, and Teligent Canada Inc.~~, and Teligent Jersey Limited.~~, in addition to the following inactive entities: Microburst Energy, Inc., Blood Cells, Inc. and Flavorsome, Ltd. All inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with 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 valuation of derivative liabilities associated with certain Notes and the Senior Credit Facility, 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~~The Company bases its estimates and assumptions on historical experience, known or expected trends and various other assumptions that it believes to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ significantly from ~~those~~these 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 isare included within other long-term assets ~~non-current~~ on the ~~Company's~~ Condensed Consolidated Balance Sheet. ~~In addition, pursuant~~Pursuant to the New Credit Facilities agreement, proceeds from the 2023 Term ~~Loans are~~Loan were deposited in a blocked bank account and restricted for use ~~with~~for the ~~exception~~sole purpose of repurchasing ~~remaining~~the outstanding 2019 Notes. ~~During~~In the ~~first quarter~~beginning of 2019, the Company used a total of $2.7 million of the restricted cash to repurchase a portion of the remaining 2019 Notes. The Company settled the remaining 2019 Notes upon its maturity in December 2019 (Note 7).

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:


		September 30, 2019		September 30, 2018			March 31, 2020		March 31, 2019
Cash and cash equivalents	Cash and cash equivalents	$	6,707	$	15,267	Cash and cash equivalents	$	11,028	$	6,397
Restricted cash	Restricted cash	206		—		Restricted cash	206		206
Restricted cash in other assets	Restricted cash in other assets	468		472		Restricted cash in other assets	468		472
Cash, cash equivalents and restricted cash in the statement of cash flows	Cash, cash equivalents and restricted cash in the statement of cash flows	$	7,381	$	15,739	Cash, cash equivalents and restricted cash in the statement of cash flows	$	11,702	$	7,075

Fair Value of Financial Instruments

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The carrying amounts of cash and cash equivalents, trade receivables, restricted cash, accounts payable and other accrued liabilities at ~~September 30, 2019~~March 31, 2020 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 ~~September 30, 2019,~~March 31, 2020, the fair value of the Company's 2023 Series A Notes was approximately $24.8 million compared to the carrying value of $53.9 million and the fair value of the Company's 2023 Series B Notes was $22.1 million including the derivative liability of $2.8 million as mentioned below.

As of March 31, 2020, based on level 23 inputs, the fair value of ~~our~~the derivative liability associated with the Company's 2023 Series B Notes ~~(2019 Notes~~was $2.8 million and ~~2023 Notes) was approximately $57.2 million compared to their carrying~~the fair value of ~~$72.2 million. In addition,~~ the ~~value~~Company's derivative liability associated with certain mandatory prepayment penalties and the recognition of ~~our~~future interest payments in the anticipation of a potential future default on its Senior Credit Facilities was ~~stated at carrying value at September 30, 2019.~~$5.3 million which the Company recorded in the first quarter of 2020 (Note 8).

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 notes and the exercise of options and warrants. For the three ~~and nine~~ months ended ~~September 30, 2019,~~March 31, 2020, 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 September 30,						Nine months ended September 30,							Three months ended March 31,
		2019		2018		2019		2018			2020		2019
Basic loss per share computation:	Basic loss per share computation:									Basic loss per share computation:
Net loss - basic and diluted	Net loss - basic and diluted	$	(7,113)	$	(3,945)	$	(19,826)	$	(21,866)	Net loss - basic and diluted	$	(26,836)	$	(8,724)
Weighted average common shares - basic and diluted	Weighted average common shares - basic and diluted	53,850,427		53,625,768		53,835,336		53,532,277		Weighted average common shares - basic and diluted	53,879,333		53,805,983
Basic and diluted loss per share	Basic and diluted loss per share	$	(0.13)	$	(0.07)	$	(0.37)	$	(0.41)	Basic and diluted loss per share	$	(0.50)	$	(0.16)

Concentration of Credit Risk

Major customers of the Company are defined as those constituting greater than 10% of the Company's total revenue. For the three months ended ~~September 30, 2019, two~~March 31, 2020, one of the Company’s customers accounted for ~~47%~~16.9% of the Company’s ~~revenue, consisting of 35% and 12%, respectively.~~revenue. For the three months ended ~~September 30, 2018, three of the Company’s customers accounted for 49% of the Company’s revenue, consisting of 25%, 12% and 12%, respectively. For the nine months ended September 30,~~March 31, 2019, two of the Company’s customers accounted for 48% of the Company’s revenue, consisting of ~~29%~~30% and ~~19%, respectively. For the nine months ended September 30, 2018, three of the Company’s customers accounted for 54% of the Company’s revenue, consisting of 32%, 12% and 10%~~18%, respectively. Accounts receivable related to the Company’s major customers comprised ~~47%~~12% of all accounts receivable as of ~~September 30, 2019~~March 31, 2020 and ~~56%~~37% as of ~~September 30, 2018~~March 31, 2019 respectively. 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.

For the three months ended ~~September 30, 2019,~~March 31, 2020, domestic net revenues were ~~$13.4~~$5.6 million and foreign net revenues were ~~$5.1~~$1.8 million. As of March 31, 2020, domestic assets were $146.4 million and foreign assets were $40.5 million. For the ~~nine~~three months ended ~~September 30,~~March 31, 2019, domestic net revenues were ~~$36.5~~$9.7 million and foreign net revenues were ~~$13.4~~$3.4 million. As of ~~September 30,~~March 31, 2019, domestic assets were ~~$142.5~~$135.5 million and foreign assets were ~~$53.7~~$56.4 million. For the three months ended September 30, 2018, domestic net revenues were $13.3 million and foreign net revenues were $5.0 million. For the nine months ended September 30, 2018, domestic net revenues were $34.9 million and foreign net revenues were $14.2 million. As of September 30, 2018, domestic assets were $131.9 million and foreign assets were $61.0 million.

~~Recently Adopted Accounting Pronouncements~~

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 effective January 1, 2019 utilizing the optional transition method allowed under ASU 2018-11, Leases (Topic 842): Targeted Improvements. See Note 6 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 ASU, effective January 1, 2019, did not have a material impact on its condensed consolidated financial statements.

Recently Issued Not Yet Adopted Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU No. 2020-04”). The update provides optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) contract modifications on financial reporting caused by reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is evaluating the impact upon adoption of the update on its Condensed Consolidated Financial Statements and related disclosures.

In December 2019, the FASB issued an accounting standard update to simplify the accounting for income taxes. The standard’s amendments include changes in various subtopics of accounting for income taxes including, but not limited to, accounting for “hybrid” tax regimes, tax basis step-up in goodwill obtained in a transaction that is not a business combination, intraperiod tax allocation exception to an incremental approach, ownership changes in investments, interim-period accounting for enacted changes in tax law, and year-to-date loss limitation in interim-period tax accounting. The guidance is effective for fiscal years beginning after December 15, 2020 with early adoption permitted, including the interim periods within those years. The Company is evaluating the impact this guidance will have on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which requires that a financial asset (or a group of financial assets) measured at an amortized cost basis be presented at the net amount expected to be collected. This approach to estimating credit losses applies to most financial assets measured at amortized cost and certain other instruments, including but not limited to, trade and other receivables. The amendments in this update are initially effective for public business entities for fiscal years beginning after December 15, ~~2019,~~2019. The Financial Accounting Standards Board subsequently postponed the effective date for small reporting companies to January 2023, which for the Company means January 1, ~~2020.~~2023. Based on the current status of the evaluation, the Company believes the adoption of the guidance will not have a material impact on its Condensed Consolidated Financial Statements and related disclosures. The Company ~~is currently evaluating~~expects to continue and finalize its evaluation and assessment as required by the ~~impact of this ASU on its condensed 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. 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.upon adoption.

3. Revenues, Recognition and Allowances

Revenue Recognition

The Company derives its revenues from 3 types of transactions: sales of its own pharmaceutical products (Company product sales), sales of the manufactured ~~product~~products 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.

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 ana FOB destination basis and because of the inventory risk and risk of ownership ~~passes~~pass to the customer upon delivery.

Company product sales are recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and returns.

Contract Manufacturing Sales

The Company recognizes revenue for contract manufacturing sales over-time, as milestones are achieved. Shipments are made in accordance with sales commitments and related sales orders that the Company entered into with customers either verbally or in written form.

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

Research and Development Services and Other Income

The Company establishes ~~agreed upon~~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 that would be recognized over time, or at a point in time, or based upon the contractual term upon completion of the earnings process. Judgments are required to evaluate contingencies such as potential variances in the schedule or costs, the impact of change orders, liability claims, contract disputes, or the achievement of contractual performance standards.

Revenues by Transaction Type

The Company operates inunder 1 reportable segment and therefore the results of the Company's operations are reported on a consolidated basis, which is consistent with internal management reporting utilized by the chief decision maker.

Net revenues for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ were as follows:


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
		2019		2018		2019		2018			2020		2019
Company product sales	Company product sales	$	18,228	$	16,375	$	48,591	$	44,288	Company product sales	$	7,139	$	12,495
Contract manufacturing sales	Contract manufacturing sales	167		1,878		1,097		4,626		Contract manufacturing sales	197		542
Research and development services and other income	Research and development services and other income	71		41		$	241	$	174	Research and development services and other income	$	111	$	85
Revenue, net	Revenue, net	$	18,466	$	18,294	$	49,929	$	49,088	Revenue, net	$	7,447	$	13,122

1516

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:


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
Company Product Sales	Company Product Sales	2019		2018		2019		2018		Company Product Sales	2020		2019
Topical	Topical	$	13,271	$	10,503	$	35,240	$	26,297	Topical	$	5,380	$	9,032
Injectables	Injectables	4,957		5,872		13,351		17,991		Injectables	1,759		3,463
Total	Total	$	18,228	$	16,375	$	48,591	$	44,288	Total	$	7,139	$	12,495

In the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, 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 returns and allowances, which are established at the time of sale. The Company analyzes the adequacy of its accruals for 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 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 return and allowances reserves.

~~The~~Net revenue and accounts receivable balances in the Company’s condensed consolidated financial statements are presented net of sales, returns, and allowances ~~were $19.2~~(SRA). Accounts receivable are presented net of SRA estimates of $23.4 million and ~~$18.1~~$30.5 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019, respectively. ~~In addition, the~~Certain SRA balances are included in accounts payable and accrued expenses.

The allowance for doubtful accounts was ~~$2.5~~$2.3 million and ~~$2.6~~$2.2 million at ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, respectively. The allowance for doubtful accounts was primarily related to one specific customer ~~in the amount of~~for $1.7 million.

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~~vary 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~~estimates 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 athe 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.

Rebates are used for various discounts which can be programs or one-time events. 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 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 declined in 2019. The Company's adjustments for the deductions to gross product sales are as follows:

1617


		Three months ended September 30,						Nine months ended September 30,							Three months ended March 31,
		2019		2018		2019		2018			2020		2019
Gross product sales	Gross product sales	$	41,814	$	40,111	$	108,550	$	124,801	Gross product sales	$	23,166	$	27,414

Deduction to gross product sales:	Deduction to gross product sales:									Deduction to gross product sales:
Chargebacks and billbacks	Chargebacks and billbacks	14,573		10,739		37,285		49,103		Chargebacks and billbacks	11,955		10,886
Wholesaler fees for service	Wholesaler fees for service	2,355		1,662		6,303		2,774		Wholesaler fees for service	1,142		1,766
Sales discounts and other allowances	Sales discounts and other allowances	6,658		11,335		16,371		28,636		Sales discounts and other allowances	2,930		2,267
Total reduction to gross product sales	Total reduction to gross product sales	$	23,586	$	23,736	$	59,959	$	80,513	Total reduction to gross product sales	$	16,027	$	14,919

Company product sales, net	Company product sales, net	$	18,228	$	16,375	$	48,591	$	44,288	Company product sales, net	$	7,139	$	12,495

Financing and Payment

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

Costs to Obtain or Fulfill a Customer Contract

Costs related to shipping and handling are 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 the cost of sales in the Condensed Consolidated Statements of Operations.

The Company is required to pay a 40% royalty on certain product net sales to a pharmaceutical partner. There are currently 4 products manufactured and distributed under the Company’s label in the U.S. which are subject to this agreement. Payments are made quarterly. Royalty expense of ~~$0.5~~$0.1 million and $0.3 million was included in the cost of sales in the Condensed Consolidated Statements of Operations for the three months ended ~~September 30,~~March 31, 2020 and 2019, and 2018, respectively. Royalty expense of $1.1 million and $2.0 million was included in cost of sales in the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2019 and 2018, respectively.

4. Inventories

Inventories are valued at the lower of cost or net realizable value and using the first-in-first-out ~~method~~method. Inventories as of March 31, 2020 and ~~consist of the following:~~December 31, 2019 consisted of:


		September 30, 2019		December 31, 2018			March 31, 2020		December 31, 2019
Raw materials	Raw materials	$	14,143	$	10,456	Raw materials	$	15,221	$	14,117
Work in progress	Work in progress	388		116		Work in progress	217		133
Finished goods	Finished goods	10,473		8,391		Finished goods	17,704		10,989
Inventories reserve	Inventories reserve	(2,371)		(2,667)		Inventories reserve	(3,600)		(2,208)
Inventories, net	Inventories, net	$	22,633	$	16,296	Inventories, net	$	29,542	$	23,031

5. Property, Plant and Equipment

Property, plant and equipment consists of the following:


		September 30, 2019		December 31, 2018			March 31, 2020		December 31, 2019
Land	Land	$	401	$	401	Land	$	401	$	401
Building and improvements	Building and improvements	58,889		53,813		Building and improvements	58,969		58,959
Machinery and equipment	Machinery and equipment	14,717		12,229		Machinery and equipment	14,961		14,897
Computer hardware and software	Computer hardware and software	4,738		4,182		Computer hardware and software	4,814		4,771
Furniture and fixtures	Furniture and fixtures	698		694		Furniture and fixtures	702		705
Construction in progress	Construction in progress	29,807		30,949		Construction in progress	31,694		30,759
		109,250		102,268			111,541		110,492
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(13,162)		(10,493)		Less accumulated depreciation and amortization	(15,119)		(14,143)
Property, plant and equipment, net	Property, plant and equipment, net	$	96,088	$	91,775	Property, plant and equipment, net	$	96,422	$	96,349

The Company recorded depreciation expense of ~~$0.9~~$1.0 million and ~~$0.6~~$0.9 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and September 30, 2018, respectively. The Company recorded depreciation expense of $2.7 million and $1.7 million for the nine months ended September 30, 2019 and September 30, 2018,~~ respectively.

~~There was no interest expense capitalized as construction~~The Company received the certificate of completion of its building in ~~progress during~~ the ~~three and nine months ended September 30, 2019. Interest expense~~fourth quarter of ~~$1.5 million and $4.4 million was capitalized as construction in progress during the three and nine months ended September 30, 2018 respectively. In addition, during~~2018. For the three months ended ~~September 30,~~March 31, 2020 and March 31, 2019, ~~and September 30, 2018,~~ there was $0.3 ~~million and $0.4 million of payroll costs, respectively, capitalized as construction in progress. For the nine months ended September 30, 2019 and September 30, 2018, there was $0.9 million and $1.5~~ million of payroll costs, respectively, capitalized as construction in progress.

6. Leases

~~In February 2016,~~According to ASC Topic 842, Leases, 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~~Company recognizes 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.months. 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.~~

determines whether an agreement is a lease at its inception. 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 $1.9 million and $2.0 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~~its corporate, manufacturing, and international facilities as well as certain equipment. ~~Our~~Its leases have remaining terms of less than one year to up to 10nine years, including available options to extend some of ~~our~~its lease terms for up to 5 years. One of ~~our~~its lease agreements has an early termination option within one year. As the interest rates implicit in ~~our~~the Company's 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:

Three months ended
September 30, 2019 Nine months ended
September 30, 2019
Operating lease cost $ 159 $ 476
Finance lease cost:
Amortization of right-of-use assets $ 5 $ 11
Interest on lease liabilities $ 1 $ 5
Total finance lease cost $ 6 $ 16


	Three months ended March 31, 2020		Three months ended March 31, 2019
Operating lease cost	$	158	$	159
Finance lease cost:
Amortization of right-of-use assets	4		3
Interest on lease liabilities	1		2
Total finance lease cost	$	5	$	5

Right-of-use assets obtained in exchange for new operating lease liabilities ~~were~~was 0 and $1.0 million as of ~~September 30, 2019.~~March 31, 2020 and 2019, respectively. Cash paid for amounts included in the measurement of operating lease liabilities ~~during~~for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019 was $0.1 million and ~~$0.4~~$0.1 million, respectively. Cash paid for amounts included in the measurement of finance lease liabilities ~~during~~for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and 2019, respectively, was not material.

Supplemental balance sheet information related to leases as of the periods presented were as follows:


	~~September 30, 2019~~
~~Operating Leases~~
~~Other assets~~	$	~~2,547~~
~~Other current liabilities~~	~~421~~
~~Other long-term liabilities~~	~~2,307~~
~~Total operating lease liabilities~~	~~2,728~~

~~Finance Leases~~
~~Property, plant, and equipment~~	81
~~Accumulated depreciation~~	~~(10)~~
~~Property, plant, and equipment, net~~	71

~~Other current liabilities~~	13
~~Other long-term liabilities~~	60
~~Total finance lease liabilities~~	$	73


	March 31, 2020		December 31, 2019
Operating Leases
Other assets	$	2,321	$	2,453
Other current liabilities	438		434
Other long-term liabilities	2,053		2,199
Total operating lease liabilities	2,491		2,633

Finance Leases
Property, plant, and equipment	81		81
Accumulated depreciation	(18)		(12)
Property, plant, and equipment, net	63		69

Other current liabilities	13		12
Other long-term liabilities	54		57
Total finance lease liabilities	$	67	$	69

The weighted average remaining lease terms as of March 31, 2020 for operating and financing leases ~~are 6.5~~were 6.1 years and ~~4.9~~4.4 years, respectively. The weighted average discount rates for operating and finance leases ~~are 8.2%~~as of March 31, 2020 were 8.3% and 8.0%, respectively.

As of ~~September 30, 2019~~March 31, 2020, maturities of lease liabilities were as follows:


		Operating		Financing			Operating		Financing
Year Ending December 31,	Year Ending December 31,	Leases				Year Ending December 31,	Leases
2019 (excluding the nine months ended September 30, 2019)		$	161	$	4
2020		631		18
Remainder of 2020						Remainder of 2020	$	466	$	14
2021	2021	607		18		2021	602		18
2022	2022	548		18		2022	546		18
2023	2023	548		18		2023	545		18
2024	2024	235		12		2024	232		12
2025						2025	204		—
Thereafter	Thereafter	841		—		Thereafter	622		—
Total lease payments	Total lease payments	3,571		88		Total lease payments	3,217		80
Less imputed interest	Less imputed interest	843		15		Less imputed interest	726		13
Total	Total	$	2,728	$	73	Total	$	2,491	$	67

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:

2122

Commitments
2019 $ 573
2020 611
2021 633
2022 610
2023 607
2024 200
$ 3,234

7. Debt

Convertible Notes

2019 Notes, 2023 Notes and 2023 Series B 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~~bore 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~~matured on December 15, 2019, unless earlier repurchased, redeemed or converted. The 2019 Notes ~~are~~were 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 possible 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 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. At the option of the holders, the 2023 Notes are convertible into shares of the Company’s common stock, cash or a combination thereof. The initial conversion rate is ~~$224.71~~$4.45 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~~debt issuance 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, wethe Company 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 of $19.0 million and is being amortized to interest expense using the effective interest method through the maturity date. WeThe Company allocated the total amount of ~~transaction~~debt issuance costs incurred to the liability and equity components using the same proportions as the proceeds from the 2023 Notes. ~~Transaction~~The debt issuance costs attributable to the liability component were recorded as a direct deduction from the liability component of the 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 discount and issuance costs, is 11.90%.

The exchange of $75.1 million of the 2019 Notes for the 2023 Notes is considered ana 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 aforementioned guidance, the Company ~~recorded~~allocated a portion of the $75.1 million to the extinguishment of the liability component equal to the fair value of that component immediately before extinguishment and recognized a $2.5 million ~~of non-cash interest expense as an~~ extinguishment loss ~~related to the 2019 Notes~~ in the Condensed Consolidated Statement of ~~Operations.~~Operations to measure the difference between (i) the fair value of the liability component and (ii) the net carrying amount of the liability component (which is already net of any unamortized debt issuance costs). In addition, the Company recorded a $7.6 million reduction of Additional Paid in Capital in connection with the extinguishment of $75.1 million of the 2019 Notes.

In December 2018 the Company used $52.8 million of proceeds from the Senior Credit Facilities (see below) to repurchase a portion of 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 already 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.

~~During~~In the ~~quarter ended March 31,~~beginning 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~~The reduction of Additional Paid in Capital in connection with this extinguishment was immaterial. The Company settled the remaining 2019 Notes of $13.0 million in principal upon its maturity in December 2019.

2023 Series B Notes

On October 31, 2019, the Company closed its offering of the 2023 Series B Notes in the aggregate principal amount of $34.4 million (“2023 Series B Notes” and together with the 2023 Notes, the “Notes”). The 2023 Series B Notes will mature in May 2023 and are convertible at the option of the holder at any time prior to maturity at an initial conversion price of $0.72 per share, subject to adjustment under certain circumstances. The 2023 Series B Notes and any shares of common stock issuable upon conversion of the 2023 Series B Notes (the “Conversion Shares”) have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or other jurisdiction’s securities laws, and the 2023 Notes and the Conversion Shares may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws. The Company does not intend to file a registration statement for the resale of the 2023 Series B Notes or any Conversion Shares.

As part of the offering, the Company entered into agreements with certain holders of its existing 2023 Notes to exchange $9.0 million of the 2023 Notes for $5.1 million of the 2023 Series B Notes. The gross cash proceeds of approximately $29.3 million from the financing were used to extinguish the Company’s existing 2019 Notes in December 2019 and intended to pay amounts owing with respect to other indebtedness and to fund general corporate and working capital requirements. The 2023 Series B Notes bear interest at a rate of 7.00% per annum if paid in cash, semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020. The Company also has an option, and has agreed with its senior lender, to PIK the interest at 8.00% per annum, to defer cash payments. The net proceeds from the financing were $26.9 million after deducting a total of $2.3 million of the initial purchasers’ discounts and professional fees associated with the transaction.

Under ASC 470-60, Troubled Debt Restructurings by Debtors, the exchange of the $9.0 million of the 2023 Notes for the $5.1 million of the 2023 Series B Notes represents a troubled debt restructuring ("TDR"). The TDR did not result in a gain recognition. As a result, a new effective interest rate was established based on the $7.2 million carrying value of the original debt, net of the $2.0 million fair value of the embedded derivative liability related to the new debt issued in the TDR and $0.2 million issuance costs, getting accreted to $6.8 million representing the total amount of the future undiscounted cash flows related to the $5.1 million of the 2023 Series B Notes.

the first quarter of 2020. Further, the $0.9 million of allocated issuance costs associated with the bifurcated conversion features embedded in the notes was recognized as a loss on debt restructuring in the Company’s statement of operations for the year ended December 31, 2019. In accordance with ASC 470-20, the initial carrying amount of the liability component of the 2023 Series B Notes, excluding the $5.1 million portion above is accounted for as a TDR, upon issuance is the residual amount between total proceeds from the transaction and the derivative liability net of allocated issuance costs. The $1.4 million debt issuance costs attributable to the liability component were recorded as a direct deduction from the liability component of the 2023 Series B Notes and are being amortized to interest expense using the effective interest method through the maturity date. The discount from the par amount of the 2023 Series B Notes will be accreted to par utilizing the effective-interest rate method over the term of the Notes from the issuance date through May 2023. The effective interest rate of the 2023 Notes, inclusive of the debt discount and issuance costs is 27.4%.

Senior Credit Facilities

On December 13, 2018, the Company entered into: (i) a First Lien Revolving Credit Agreement, by and among the Company, as the borrower, certain of our subsidiaries, as guarantors, the lenders from time to time party thereto, and ACF Finco I LP, as administrative agent (the “First Lien Agent”) (as amended on October 31, 2019, the “First Lien Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among us, as the borrower, certain of our subsidiaries, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent (the “Second Lien Agent”) (as amended on February 8, 2019, June 29, 2019 and October 31, 2019, the “Second Lien Credit Agreement” and, together with the First Credit Agreement, the “Senior Credit Facilities”). The ~~Company’s~~ Senior Credit Facilities consist of a first lien asset based revolving credit facility of up to $25.0 ~~million revolver (the "Revolver"~~million("Revolver") and 3an aggregate of $80.0 million in original principal amount of second lien term loans ~~totaling $95.0 million (collectively the "2023 Term Loans") that it entered via an agreement with Ares Management LLC on December 13, 2018.~~ ~~The 2023 Term Loans consist~~consisting of ~~(i)~~ a $50.0 million ~~Initial Term Loan; (ii)~~initial term loan and a $30.0 million ~~Delayed Draw Term Loan A; and (iii)~~delayed draw term loan A (collectively, the “Term Loans”). The Senior Credit Facilities also included a $15.0 million ~~Delayed Draw Term Loan B. The $15.0 million Delayed Draw Term Loan~~delayed draw term loan B ~~was then~~commitment, which remained undrawn and expired ~~in conjunction with the New 2023 Notes that the Company closed~~ on October 31, 2019. As of March 31, 2020, $25.0 million was drawn under the Revolver and $90.8 million of Term Loans were outstanding. The ~~Initial Term Loan matures on the earlier to occur of (a) three months prior to maturity of the 2023 Notes or (b) June 13, 2024.~~Revolver was fully drawn in 2019. The Company extended commitments related to undrawn amounts of the Delayed Draw Term Loan A from June 30, 2019 to December 13, 2019, pursuant to an amendment the Company entered with ~~Ares Management LLC~~the Second Lien Agent on July 18, 2019. The extended Delayed Draw Term Loan A was subsequently drawn down by the Company in December 2019. Drawn amounts under the Delayed Draw Term Loans mature at the same time as the Initial Term Loan. The Term Loans mature on the earliest to occur of June 23, 2024 and the date of that is 181 days prior to the maturity date of each of (x) the 2023 Notes and (y) the 2023 Series B Notes. The Revolver matures on the ~~earlier~~earliest to occur of ~~(a) six months~~the June 23, 2024 and the date of that is 91 days prior to the maturity date of each of (x) the 2023 Notes ~~or (b) December 13, 2023.~~and (y) the 2023 Series B Notes. 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~~liens securing the Term Loans are subordinate to the liens securing the Revolver. The Senior Credit Facilities ~~have~~had customary financial and non-financial covenants, 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.~~FDA which were superseded by the amendments noted below. The financial covenants ~~starts with~~consisted of a minimum revenue test, ~~through the quarter ended June 30, 2019, then converts to~~ a minimum adjusted EBITDA test ~~through the quarter ended September 30, 2020~~ and ~~then converts to~~ a maximum total net leverage ~~ratio through expiry of the Senior Credit Facilities.~~ratio.

The Revolver bears interest at a fluctuating 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 Loans is calculated, at the option of the Company, at either the~~equal to one, two, three or six-month LIBOR plus a margin of 3.75% or a rate based on the prime rate plus a margin of 2.75%. The Term Loans bear interest at a fluctuating rate of interest equal to one, two, three or six-month LIBOR plus a margin of 8.75% or a rate based on the ~~base~~prime rate plus a margin of 7.75%. Interest on the Senior Credit Facilities is payable in cash ~~except~~quarterly in arrears (or more frequently in connection with customary LIBOR interest provisions), provided, that the Company may elect (and has covenanted to the lenders under its First Lien Credit Agreement to) pay interest on the ~~2023~~ Term Loans ~~is payable, at the option of the Company, in cash or~~ in kind ~~by being added to the principal balance thereof,~~ until the earlier to occur of ~~December 13, 2020 and~~ the date ~~the~~upon which Company has provided ~~the lenders of the Senior Credit Facilities~~ financial statements demonstrating ~~that the Company has attained twelve months~~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 Loans.~~million and (ii) December 28, 2020.

Amounts drawn under the Revolver may be prepaid at the option of the Company without premium or penalty, subject, in the case of acceleration of the Revolver or termination or reduction of the revolving credit commitments thereunder, to certain call protections which vary depending on the time at which such prepayments are made. Amounts drawn under the Revolver are subject to 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, including non-ordinary course asset dispositions, receipt of certain insurance proceeds and condemnation awards and issuances of certain debt obligations. Amounts outstanding under the ~~2023~~ Term Loans 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 Loans 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 a debt discount of $0.5 million and debt issuance issue costs of $0.3 million. The debt discount ~~relates~~is due 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 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 access period of the Delayed Draw Term Loans through June 30, 2019. ~~As of December 31, 2018, the~~The effective interest rates, inclusive of the debt discounts and ~~issue~~issuance costs, for the various borrowing tranches of the Revolver were between 6.2% and 9.1%. The effective interest rates, inclusive of the debt discounts and issuance costs for the Initial Term Loan and Delayed Draw Term Loan A ~~is 9.3%~~were between 9.1% and ~~12.4%, respectively.~~12.2%.

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 January 2019, the Company drew $5.0 million and subsequently the remaining $5.0 million under the Revolver were drawn down by the Company in April 2019. On September 18, 2019, pursuant to terms of the ~~Protective Advance clause in the Company’s~~ First Lien Credit Agreement, ~~with Ares Capital,~~ the Company borrowed an ~~incremental~~advance in the aggregate principal amount of $2.5 million ~~from it’s existing revolving credit facility. Consistent with the terms of the revolving credit facility,~~(the “Protective Advance”). The Protective ~~Advances are~~Advance is a secured ~~by the Administrative Agent’s liens, constitute~~ Obligations ~~pursuant to~~under the First Lien Credit Agreement and ~~bear~~bears interest at the rate applicable to the ~~outstanding revolving credit facility balances, however, the~~Revolver. The Protective Advance ~~is repayable on demand.~~was subsequently repaid in November 2019 along with a repayment fee of $0.1 million. The ~~liability was classified as a short-term obligation as~~Company drew down the remaining $10.0 million under its borrowing capacity of ~~September 30,~~Delayed Draw Term Loan A before its expiry in December of 2019. The $15.0 million Delayed Draw Term Loan B expired upon the issuance of the 2023 Series B Notes, prior to the Company drawing down any monies.

The Term Loans are governed by the Second Lien Credit Agreement. The ~~2023~~ Term Loans include 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 facility. The Company has elected the paid-in-kind interest option and increased the principal balance of ~~2023~~ Term Loans by ~~$2.2~~$2.4 million and ~~$6.4~~$10.9 million for the three months and ~~nine months periods~~since inception through the period ended ~~September 30, 2019~~March 31, 2020, respectively.

~~The Ares Senior Credit Facilities require that~~On April 6, 2020 (the “Amendment Closing Date”), the Company ~~remains in compliance with~~entered (i) Amendment No. 2 of the Revolver and Amendment No. 4 of the Term Loans, effective as of December 31, 2019. The amendments collectively among other things, (i) increase the interest rates, (ii) reset certain prepayment premiums and modify the terms of certain mandatory prepayments and (iii) modify 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 expirationcovenant levels inclusive of the ~~facility. Pursuant to~~disposition of prior covenants as of and for 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.period ended December 31, 2019. The Company was in compliance with ~~all~~its financial covenants ~~within~~as of March 31, 2020. However, as a result of the impacts of the COVID-19 pandemic, the Company expects to be unable to continue to comply with the trailing twelve months revenue covenant throughout 2020. If the Company fails to comply with its trailing twelve months revenue covenant, an event of default under the Credit Agreement would be triggered and its obligations under the Senior Credit Facilities or other agreements (including as a result of cross-default provisions) may be accelerated. As such, the Company recorded a $5.3 million derivative liability associated with certain mandatory prepayment penalties and the recognition of future interest payments in the anticipation of a potential future default on its Senior Credit Facilities (Note 8).

The associated increase in interest rates are effective as of ~~September 30,~~the Amendment Closing Date. The Revolver bears interest at a fluctuating rate of interest equal to the one, two, three or six-month LIBOR plus a margin of 5.5% or a rate based on the prime rate plus a margin of 4.5%, with a LIBOR floor of 1.5%. The Term Loans bear interest at a fluctuating rate of interest equal to the one, two, three or six-month LIBOR plus a margin of 13.0% or a rate based on the prime rate plus a margin of 12.0%, with a LIBOR floor of 1.5%. Interest on the Senior Credit Facilities is payable in cash quarterly in arrears (or more frequently in connection with customary LIBOR interest provisions), provided, that the Company may elect (and has covenanted to the lenders under its Senior Credit Facilities and subsequent amendments thereto) to pay interest on the Term Loans in kind through December 13, 2021 but only if the following occurs: (1) the Company receives a “warning letter close-out letter” from the Federal Drug Administration in response to corrective actions taken by the

Company since receipt of the warning letter in November 2019 and (2) the Company receives a written recommendation from the Federal Drug Administration setting forth its approval decision in respect of the pre-approval inspection for commercial production on the newly installed injectable line at the Company’s New Jersey facility. If only one of those items occurs by December 13, 2020, then the Company may still elect to pay interest in kind during 2021, but only from the time the second condition has been satisfied until December 13, 2021. Thereafter, a portion of interest on the loans accruing at a rate of 4.25% per annum may continue to be paid in kind.

Both amendments provide that in the event of receipt of net proceeds from a disposition triggering a mandatory prepayment, net proceeds of such disposition will ~~continuously monitor~~be applied as follows: (i) first, to be retained by the Company or applied to amounts outstanding under the First Lien Credit Agreement until such time as liquidity of the Company and its ~~compliance~~subsidiaries equals $10.0 million, (ii) next to amounts outstanding under the Revolver (without a permanent reduction in the revolving loan commitments of the lenders) until such amounts are paid in full (with the first lien administrative agent having the right to waive such prepayment, in which event, such net proceeds are applied to amounts outstanding under the Second Lien Credit Agreement), and (iii) finally, to amounts outstanding under the Term Loans. In addition, pursuant to the Revolver, the Company has agreed at all times to maintain book cash of the Company and its subsidiaries not in excess of $10.0 million with any excess being required to prepay the outstanding obligations under the Revolver.

The following additions and changes to financial covenants set forth in both Amendments are: (i) a new minimum net revenue covenant is added that is tested on the last day of each fiscal quarter from March 31, 2020 until the quarter ending December 31, 2020, (ii) resets a minimum consolidated adjusted EBITDA covenant that is tested on the last day of each fiscal quarter ending during the period from March 31, 2021 to maturity, (iii) eliminates a total net leverage covenant and (iv) adds a minimum liquidity covenant tested at all times during the term of the Senior Credit Facilities.

In connection with the ~~covenants contained~~transactions contemplated by the Term Loan Amendment, on April 6, 2020, the Company issued to the Term Loan lenders certain warrants to purchase shares of the Company’s common stock (collectively, the “Warrants”). The Warrants are exercisable for up to, in the ~~Credit Agreement.~~aggregate, 5,389,949 of pre-reverse stock split shares of the Company’s common stock at an exercise price of $0.01 per share of common stock. The Warrants will become exercisable at any time after the Company implements the reverse stock split previously approved by its stockholders and will remain exercisable, in whole or in part, for a period of 5 years.

The number of shares issuable upon the exercise of the Warrants is subject to customary adjustments upon the occurrence of certain events, including (i) payment of a dividend or distribution to holders of shares of the Company’s common stock payable in shares of the Company’s common stock, (ii) a subdivision, capital reorganization or reclassification of the Company’s common stock or (iii) a merger, sale or other change of control transaction.

At ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the net carrying value of the debt and the remaining unamortized debt discounts and debt issuance costs were as follows:



	March 31, 2020		December 31, 2019
Face amount of the 2023 Notes (due May 2023)	$	66,090	$	66,090
Face amount of the Revolver Credit Facility (due December 2022)	25,000		25,000
Face amount of the 2023 Series B Notes (due May 2023)	34,405		34,405
Face amount of the 2023 Loan (due February 2023)	90,846		88,464
Total carrying value, current	216,341		213,959
Less unamortized discounts and debt issuance costs	(25,994)		(27,589)
Total net carrying value, current	$	190,347	$	186,370

September 30, 2019 December 31, 2018
Face amount of the 2019 Notes (due December 2019) $ 13,022 $ 15,702
Revolver, current 2,500 —
Less unamortized discounts and debt issuance costs (245) (1,291)
Total net carrying value, current $ 15,277 $ 14,411
September 30, 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) 25,000 15,000
Face amount of the 2023 Loan (due February 2023) 76,359 70,000
Total carrying value, non-current 176,449 160,090
Less unamortized discounts and debt issuance costs (17,662) (20,519)
Total net carrying value, non-current $ 158,787 $ 139,571

2527

8. Derivatives

The Company accounts for its derivative instruments in accordance with ASC 815-10, “Derivatives and Hedging”. ASC 815-10 establishes accounting and reporting standards requiring that derivative instruments, including derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at its fair value. ASC 815-10 also requires that changes in the fair value of derivative instruments be recognized currently in results of operations unless specific hedge accounting criteria are met.

The Company has not entered into hedging activities to date. The Company's derivative liability at March 31, 2020 included the embedded convertible option of its 2023 Series B Notes issued on October 31, 2019, which was recorded as a liability at fair value upon its issuance and was revalued at each reporting date, with the change in the fair value of the instruments included in the change in the derivative liabilities line on the condensed consolidated statements of operations.

The terms and assumptions used in connection with the valuation of the convertible option of the 2023 Series B Notes were as follows:


	12/31/2019			3/31/2020
Issuance date	10/31/2019			10/31/2019
Maturity date	5/1/2023			5/1/2023
Term (years)	3.33			3.08
Principal	$	34,405		$	34,405

Seniority	Senior unsecured			Senior unsecured
Conversion price	$	0.72		$	0.72

Stock price	$	0.43		$	0.28
Risk free rate	1.6		%	0.3		%

Volatility	47.3		%	55.0		%

During the first quarter of 2020, the Company recorded a derivative liability of $5.3 million associated with certain mandatory prepayment penalties and the recognition of future interest payments in the anticipation of a potential future default on its Senior Credit Facilities.

The following table presents the Company’s liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 31, 2019 and March 31, 2020, respectively.


	Quoted Prices in Active markets for Identical Assets and Liabilities	Significant Other Observable Inputs	Significant Unobservable Inputs		Balance as of		Quoted Prices in Active markets for Identical Assets and Liabilities	Significant Other Observable Inputs	Significant Unobservable Inputs		Balance as of
Descriptions	(Level 1)	(Level 2)	(Level 3)		December 31, 2019		(Level 1)	(Level 2)	(Level 3)		March 31, 2020
Derivative liability related to Series B Convertible Notes	—	—	$	6,776	$	6,776	—	—	$	2,781	$	2,781
Derivative liabilities related to the Senior Credit Facilities	—	—	—		—		—	—	5,253		5,253
Derivative liabilities as of March 31, 2020	—	—	$	6,776	$	6,776	—	—	$	8,034	$	8,034

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the three months ended March 31, 2020. Any unrealized gains or losses on the derivative liabilities are recorded as non-operating income or expense in the Company’s statement of operations.


Descriptions	Balance as of 12/31/2019		(Gain) or loss recognized in earnings from Change in Fair Value	Balance as of 3/31/2020
Fair value of convertible feature of Series B Convertible Notes	$	6,776	(3,995)	$	2,781
Fair value of the derivative liabilities related to the Senior Credit Facilities	—		5,253	5,253
Change in the fair value of derivative liabilities for the quarter ended March 31, 2020	$	6,776	1,258	$	8,034

9. Goodwill and Intangible Assets

Goodwill

The Company assesses the recoverability of the carrying value of goodwill on a reporting unit basis on October 1 of each year, whenever events occur or changes in circumstances indicate the carrying value of goodwill may not be recoverable. There have been no events or changes in circumstances that would indicate the carrying value of goodwill may not be recoverable through ~~September 30, 2019.~~March 31, 2020.

Changes in goodwill during the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 and the year ended December 31, ~~2018~~

2019 were as follows:


	Goodwill
Goodwill balance at December 31, ~~2017~~	$	~~471~~
~~Foreign currency translation~~	~~(1)~~
~~Goodwill balance at December 31,~~ 2018	$	470
Foreign currency translation	1421
Goodwill balance at ~~September 30,~~December 31, 2019	$	~~484~~491
Foreign currency translation	(37)
Goodwill balance at March 31, 2020	$	454

Intangible Assets

The following sets forth the major categories of the Company’s intangible assets and the weighted-average remaining amortization period as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018.~~2019.


		September 30, 2019												March 31, 2020
		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	Trademarks and Technology	$	39,243	$	(10,228)	$	29,015	11.0	Trademarks and Technology	$	32,823	$	(9,516)		$	23,307	10.5
Product acquisition costs	Product acquisition costs	12,836		—		12,836		N/A- See description below	Product acquisition costs	9,225		—			9,225		N/A - Indefinite lived
In process research and development ("IPR&D")	In process research and development ("IPR&D")	217		—		217		N/A- See description below	In process research and development ("IPR&D")	255		—			255		N/A- See description below
Customer relationships	Customer relationships	3,629		(1,410)		2,219		6.1	Customer relationships	3,502		(1,590)			1,912		5.6
Total	Total	$	55,925	$	(11,638)	$	44,287		Total	$	45,805	$	(11,106)		$	34,699


		December 31, 2018												December 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	Trademarks and Technology	$	40,169	$	(8,239)	$	31,930	11.8	Trademarks and Technology	$	39,943	$	(10,885)	$	29,058	10.8
Product acquisition costs	Product acquisition costs	13,308		—		13,308		N/A- See description below	Product acquisition costs	13,103		—		13,103		N/A - Indefinite lived
In-process research and development ("IPR&D")	In-process research and development ("IPR&D")	719		—		719		N/A- See description below	In-process research and development ("IPR&D")	327		—		327		N/A - Indefinite lived
Customer relationships	Customer relationships	3,557		(1,139)		2,418		6.9	Customer relationships	3,658		(1,501)		2,157		5.9
Total	Total	$	57,753	$	(9,378)	$	48,375		Total	$	57,031	$	(12,386)	$	44,645

Changes in intangibles during the three months ended March 31, 2020 were as follows (in thousands):


	Trademarks and Technology		Product Acquisition costs		IPR&D		Customer Relationships
Balance at December 31, 2019	$	29,058	$	13,103	$	327	$	2,157
Amortization	(652)		—		—		(89)
IPR&D placed in service
Loss on impairment	(4,861)		(3,512)		—		—
Foreign currency translation	(238)		(366)		(72)		(156)
Balance at March 31, 2020	$	23,307	$	9,225	$	255	$	1,912

Under the provisions of ASC 360-10-55, the Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The current financial results and anticipated future results of the Company have been negatively impacted due to COVID-19 and therefore the Company performed an impairment analysis for the quarter ended March 31, 2020, by comparing the expected future cash flows of the assets to the carrying value of the related intangible assets.

The Company recorded impairment charges of $8.4 million in the current quarter related to trademarks and technology of $4.9 million and product acquisition costs of $3.5 million. The Company presented the $8.4 million in the impairment charges line on its condensed consolidated statements of income for the three months ended March 31, 2020, accordingly.

The useful lives of the 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 Product Acquisition costs will be amortized over their estimated useful lives once products are commercialized.

9.10. Stock-Based Compensation

Stock Options

The Company recognized ~~$0.2~~$0.4 million and ~~$0.4~~$0.3 million of compensation expense related to stock options during the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively, and $0.7 million and $1.2 million during the nine months ended September 30, 2019 and 2018,~~ respectively.

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~~or the 2009 Plan, any available shares from both are now incorporated into the 2016 Plan.

As of ~~September 30,~~March 31, 2020, there were 13,612 RSUs outstanding, 185,564 shares of common stock outstanding and 4,278,773 stock options under the 2016 Plan. As of December 31, 2019, there were ~~75,048~~62,680 RSUs outstanding, 136,496 shares of common stock outstanding and 2,835,131 stock options ~~to purchase 3,131,033 shares of common stock~~ outstanding under the 2016 Plan. As of ~~December~~March 31, ~~2018, there were 161,214 RSUs outstanding, 74,667 shares of common stock outstanding and options to purchase 1,394,285 shares of common stock outstanding under the 2016 Plan. As of September 30, 2019~~2020, and December 31, ~~2018,~~2019, there were a total of ~~1,764,961 shares of common stock~~921,089 and ~~3,113,374 shares of common stock~~2,334,731 options available under the ~~2016~~ Plan, respectively.

As of September 30, 2019 and December 31, 2018, there were options to purchase 5,725,141 and 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 ~~September 30, 2019,~~March 31, 2020, 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.


		Nine Months Ended September 30,					Three Months Ended March 31,
Assumptions	Assumptions	2019	2018		Assumptions	2020	2019
Expected dividends	Expected dividends	—	—		Expected dividends	—	—
Risk-free rate	Risk-free rate	1.38% - 2.47%	2.38	%	Risk-free rate	0.85% - 1.60%	2.47	%
Expected volatility	Expected volatility	64.3% - 75.2%	53.2% - 72.5%		Expected volatility	78.56% - 79.58%	57.8%-60.2%
Expected term (in years)	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, 2009 Equity Incentive Plan, and the 2016 Equity Incentive Plan as of ~~September 30, 2019~~March 31, 2020 and changes during the period are presented below:

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		Number of Options	Weighted Average Exercise Price			Number of Options	Weighted Average Exercise Price
Outstanding as of January 1, 2019		4,352,391	$	4.61
Outstanding as of January 1, 2020					Outstanding as of January 1, 2020	5,167,739	$	3.34
Issued	Issued	2,365,357	1.44		Issued	3,049,178	0.41
Exercised	Exercised	—	—		Exercised	—	—
Forfeited	Forfeited	(569,516)	2.48		Forfeited	(66,588)	2.17
Expired	Expired	(423,091)	4.10		Expired	(68,948)	4.81
Outstanding as of September 30, 2019		5,725,141	$	3.55
Outstanding as of March 31, 2020					Outstanding as of March 31, 2020	8,081,381	$	2.23

Exercisable as of September 30, 2019		3,291,600	$	4.77
Exercisable as of March 31, 2020					Exercisable as of March 31, 2020	3,562,724	$	4.06

The following tables summarize information regarding options outstanding and exercisable at ~~September 30, 2019:~~March 31, 2020:

Outstanding:


		Stock Options	Weighted Average		Weighted Average Remaining		Stock Options	Weighted Average		Weighted Average Remaining
Range of Exercise Prices	Range of Exercise Prices	Outstanding	Exercise Price		Contractual Life	Range of Exercise Prices	Outstanding	Exercise Price		Contractual Life
$0.00 - $0.78	$0.00 - $0.78	163,905	$	0.66	9.78	$0.00 - $0.78	3,228,583	$	0.42	9.85
$0.79 - $1.50	$0.79 - $1.50	1,712,347	1.03		4.56	$0.79 - $1.50	1,745,369	1.03		4.31
$1.51 - $5.50	$1.51 - $5.50	2,197,871	2.22		8.61	$1.51 - $5.50	1,835,130	2.30		7.99
$5.51 - $10.67	$5.51 - $10.67	1,651,018	8.21		6.64	$5.51 - $10.67	1,272,299	7.69		5.98
Total	Total	5,725,141	$	3.55	6.87	Total	8,081,381	$	2.23	7.57

Exercisable:


Range of Exercise Prices	Range of Exercise Prices	Stock Options Exercisable	Weighted Average Exercise Price		Range of Exercise Prices	Stock Options Exercisable	Weighted Average Exercise Price
$0.79 - $1.50	$0.79 - $1.50	1,257,500	$	1.03	$0.79 - $1.50	1,370,748	$	1.06
$1.51 - $5.50	$1.51 - $5.50	470,250	3.17		$1.51 - $5.50	934,052	2.56
$5.51 - $10.67	$5.51 - $10.67	1,563,850	8.26		$5.51 - $10.67	1,257,924	8.45
Total	Total	3,291,600	$	4.77	Total	3,562,724	$	4.06

As of ~~September 30, 2019,~~March 31, 2020, the intrinsic value of the options outstanding was ~~$0.1 million~~none, and none of the options were exercisable. As of ~~September 30, 2019,~~March 31, 2020, there was ~~$1.3~~$1.2 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the Plan. The costs will be recognized through ~~September 2022.~~February 2023.

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 ~~immaterial~~$0.1 million and $0.1 million of compensation expense ~~respectively~~ during the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018, respectively and $0.2 million and $0.4 million of compensation expense during the nine months ended September 30, 2019 and 2018,~~ respectively related to restricted stock and RSU awards. Stock compensation expense is recognized over the vesting period of the restricted stock and RSUs. At ~~September 30, 2019,~~March 31, 2020, the Company had approximately ~~$0.2 million~~$36.0 thousand of total unrecognized compensation cost related to RSUs, all of which will be recognized through March 2021. The following table summarizes the number of unvested RSUs and their weighted average exercise price for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020.

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		Number of RSUs	Weighted Average Grant Date Fair Value			Number of RSUs	Weighted Average Grant Date Fair Value
Non-vested balance at January 1, 2019		175,591	$	4.78
Non-vested balance at January 1, 2020					Non-vested balance at January 1, 2020	62,680	$	4.07
Changes during the period:	Changes during the period:				Changes during the period:
Shares granted	Shares granted	—	—		Shares granted	—	—
Shares vested	Shares vested	(76,206)	5.39		Shares vested	(49,068)	4.36
Shares forfeited	Shares forfeited	(24,337)	4.40		Shares forfeited	—	—
Non-vested balance at September 30, 2019		75,048	$	4.29
Non-vested balance at March 31, 2020					Non-vested balance at March 31, 2020	13,612	$	3.03

~~10.~~11. Income Taxes

The Company’s income tax expense ~~(benefit)~~ was ~~nil~~$0.05 million and ~~$(0.1)~~$0.01 million for the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ with effective tax rates of ~~0.07%~~0.19% and 3.36%, respectively. The Company's income tax expense (benefit) for the nine months ended September 30, 2019 and 2018 was $0.1 million and $(0.1) million with effective tax rates of (0.38)% and 0.41%0.09%, respectively.

The Company excludes from the calculation of the effective tax rate any entities that are projected to operate at a loss, have no tax benefit that can reasonably be expected, and those entities which operate in a zero tax rate jurisdiction. 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~~On March 27, 2020, the president signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES) providing nearly $2 trillion in economic relief to eligible businesses impacted by the coronavirus outbreak. The Company is currently studying its options under the CARES Act. Tax implications of the CARES Act include expansion of the business interest expense deduction from 30% to 50% for the years 2019 and 2020 and the suspension of the 80% limitation on usage of Net Operating Losses incurred in the years 2018 ~~the~~through 2020.

The Company’s net interest expense ~~became subject to limitations imposed by the Tax Cuts and Jobs Act of 2017 (TCJA). Based on actual and projected operating results, the Company~~ is subject to ~~an interest expense limitation.~~limitation under Section 163(j). 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~~The foreign entities 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~~are projected 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 generatedgenerate an additional operating loss ~~and that loss exceeds~~for the ~~projected foreign entities’ income for 2019.~~year 2020. Therefore, the Company has not made any adjustments related to potential GILTI tax in its financial ~~statements and has not yet made a policy decision regarding whether or not to record deferred taxes associated with GILTI.~~statements.

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 of its attributes including operating losses. 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, ~~2018,~~2019, the Company’s U.S. federal net operating loss carryforwards totaled ~~$45.1~~$48.5 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. 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 $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) 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 ~~2014~~2015 to ~~2017.~~2018. The Company has not recorded any liability for uncertain tax positions.

~~11.~~12. Accrued Expenses

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

As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the largest components of accrued expenses were:

September 30, 2019 December 31, 2018
Interest expense $ 2,103 $ 1,042
Payroll 1,968 1,908
Professional fees 1,754 2,153
Wholesaler fees 1,376 203
Medicaid and Medicare rebates 1,161 383
Rebates 601 714
Royalties 585 222
Clinical studies 334 334
Income Tax 64 45
Capital expenditures 52 275
Inventory and Supplies 42 1,809
Other 398 754
$ 10,438 $ 9,842


	March 31, 2020		December 31, 2019
Interest expense	$	2,998	$	1,539
Payroll	2,127		1,789
Professional fees	2,140		1,881
Wholesaler fees	687		747
Medicaid and Medicare rebates	863		987
Rebates	606		774
Royalties	85		377
Clinical studies	334		334
Income Tax	19		20
Capital expenditures	77		23
Inventory and Supplies	258		250
Other	200		564
	$	10,394	$	9,285

~~12.~~13. Legal and U.S. Regulatory Proceedings

To date, 13 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., regarding the pricing of generic pharmaceuticals, including econazole ~~nitrate cream ("econazole").~~nitrate. 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~~pharmaceuticals from as early as July 1, ~~2014~~2009 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~~The 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'~~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. On December 19, 2019 certain class plaintiffs filed a further complaint that included additional claims against the Company based on the Company’s sales of fluocinolone acetonide. A motion to dismiss this complaint has not yet been filed.

~~Three "opt-out"~~“Opt-out” antitrust lawsuits have additionally been filed against the Company by various plaintiffs, including Humana Inc.,; The Kroger Co. et al., ~~and~~; United HealthCare Services, Inc.,; Molina Healthcare, Inc.; MSP Recovery Claims, Series LLC; Health Care Service Corp.; and Harris County, Texas. These complaints have been consolidated into the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter by the Judicial Panel on Multidistrict Litigation. Each of the opt-out complaints names ~~between NaN and~~up to NaN defendants (including the Company) and involves allegations regarding the pricing of econazole along with ~~between NaN and NaN~~up to 180 other drug products, ~~that~~most of which were not manufactured or sold by the Company during the period at issue. The opt-out plaintiffs seek treble damages for alleged overcharges for the drug products identified in the complaint during the alleged period of conspiracy, and ~~two of the complaints~~some also seek injunctive relief. A motion to dismiss 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.~~remaining opt-out ~~complaint~~complaints has not yet been filed. A writ of summons initiating a Pennsylvania state lawsuit has also been filed against the Company and sixty-nine other defendants by apparent additional “opt-out” insurers that purchased, paid and/or reimbursed patients for the purchase of generic econazole in connection with the foregoing, but no complaint has been filed in that matter.

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

On October 20, 2017, a Demand for Arbitration was filed with the American Arbitration Association by Stayma Consulting Services, Inc. ~~("Stayma"~~(“Stayma”) against the Company regarding the ~~Company's~~Company’s development and manufacture for Stayma of ~~two~~2 generic drug products, one a lotion and one a cream, containing 0.05% of the active pharmaceutical ingredient flurandrenolide. The Company developed the ~~two~~2 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. The ~~Arbitrator~~arbitrator has issued an interim award finding that the Company is not liable to Stayma on ~~two~~2 of Stayma’s ~~three~~3 claims against the Company. The third claim will proceed to a damages phase. The Company ~~believes~~has argued that Stayma did not suffer any damages related to this claim and will vigorously pursue complete dismissal of ~~this~~the third claim. Notwithstanding the Company’s current belief regarding no damages and notwithstanding the Company’s continuing efforts to secure the dismissal of this claim, the Arbitrator may eventually assess damages against the Company. However, the Company is unable at this time, because of the early stages of the assessment of damages, if any, to provide an estimate of the amount or range of the potential loss. In addition, the ~~Arbitrator~~arbitrator will determine money damages owed by Stayma to the Company relating to Stayma’s failure to pay several past due invoices of approximately $1.7 million.

On December 13, 2018, Valdepharm SA filed a lawsuit alleging that the Company breached contracts regarding ~~two~~2 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. On April 23, 2020 the court largely denied Valdepharm’s motion to dismiss Teligent’s counterclaims. Due to the early stage of the case ~~we are~~the Company is unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the amount or range of potential loss. ~~We believe~~The Company believes the claims against Teligent are without merit, and ~~we intend~~it intends 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~~

federal 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. On July 1, 2019,was filed the Oklahoma Police Pension Fund and Retirement System ~~was appointed as lead plaintiff~~against the Company and certain individual defendants in the ~~case ("Lead Plaintiff"). Lead Plaintiff file~~d ~~a consolidated amended~~U.S. District Court, Southern District of New York. The lawsuit was brought on behalf of persons or entities who purchased or otherwise acquired publicly-traded Teligent, Inc. securities from March 7, 2017 through November 6, 2017. The complaint ~~on September 13, 2019. Defendants have until November 13, 2019~~alleges that defendants made false or misleading statements regarding the Company’s business, operational, and compliance policies in violation of U.S. securities laws. The plaintiff seeks to ~~answer or move with respect to the consolidated amended complaint.~~recover compensable damages. Due to the early stage of these cases, the ~~case, we are~~Company is unable to

form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the amount or range of potential loss. ~~We believe the claims~~The Company believes these cases are without merit and ~~we intend~~it intends to vigorously defend against ~~them.~~

these claims.

~~13.~~14. Subsequent Events

~~On October 28, 2019,~~The Company received $3.3 million of proceeds from the U.S. Small Business Administration Paycheck Protection Program (PPP) in May and plans to balance the employee-related actions previously taken with the needs of the business to ensure a portion of the loan will be forgiven. In the meantime, the Company ~~filed~~also initiated a company-wide cost reduction initiative targeted at eliminating discretionary spending and ensuring that remaining expenditures are reduced in line with the ~~prior approval supplement~~lower demand for ~~its planned first injectable product to be manufactured out~~our products in light of ~~its newly completed expansion of manufacturing site in Buena, NJ. As this is the first injectable filing related~~COVID-19 impact to the ~~new expansion,~~business. The Company's Executive Leadership Team and all employees with annual salaries exceeding 100,000 accepted a 20% and 15% eight-week reduction in pay, respectively, beginning May 4, 2020. Over the ~~review will be subject to a pre-approval inspection of the manufacturing site by the FDA, which~~same eight-week period, the Company ~~expects to occur within four months~~furloughed a portion of ~~the date of the filing.~~employees at our Buena, NJ manufacturing facility.

On ~~October 31, 2019,~~May 26, 2020, the Company ~~closed~~announced that it will effect a one-for-ten reverse stock split of its ~~Series B Senior Unsecured Convertible Notes offering in the aggregate principal amount of $34.4 million. The New 2023 Notes~~outstanding common stock, which will ~~mature in May 2023 and are convertible at the option~~be effective for trading purposes as of the ~~holder at any time prior to maturity at an initial conversion price~~commencement of ~~$0.72 per share, subject to adjustment under certain circumstances.~~trading on May 28, 2020. The ~~New 2023 Notes and any~~reverse stock split reduces the number of shares outstanding from approximately 53.9 million shares of common stock ~~issuable upon conversion~~to approximately 5.4 million shares of ~~the New 2023 Notes (the “Conversion Shares”) have not been registered under the Securities Act~~common stock post-reverse split. The number of ~~1933, as amended (the “Securities Act”), or any state or other jurisdiction’s securities laws,~~outstanding options and warrants will also be adjusted accordingly. The number of authorized shares of common stock and the ~~New 2023 Notes and~~par value per share will remain unchanged. All prior period share amounts will be retroactively adjusted to reflect the Conversion Shares may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws. The Company does not intend to file a registration statement for the resale of the New 2023 Notes or any Conversion Shares. The gross cash proceeds of approximately $29.3 million from the offering are being used to extinguish the Company’s existing 2019 Notes due December 2019, pay amounts owing with respect to other indebtedness, and to fund general corporate and working capital requirements. As part of the offering, the Company entered into agreements with certain holders of its existing 2023 Notes to exchange $9.0 million of the old 2023 Series A Unsecured Convertible Notes for $5.1 million of the Series B Senior Unsecured Convertible Notes. The New 2023 Notes bear interest at a rate of 7.00% per annum if paid in cash, semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020. The Company also has an option, and has agreed with its senior lender, to PIK the interest at 8.00% per annum, to defer cash payments. The net proceeds from the offering were $27.3 million after deducting the initial purchasers’ discounts and professional fees associated with the transaction.

In connection with the issuance of the New 2023 Series B Unsecured Convertible Notes, the expiration of the $15.0 million Delayed Draw Term Loan B, a part of the Company’s Senior Credit Facility, was accelerated to

~~October 31, 2019.~~

reverse stock split.

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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, ~~2018,~~2019, 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.

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 36 generic topical pharmaceutical products and four branded injectable pharmaceutical products. We have received FDA approvals for 36 topical generic products from our internally developed pipeline and we have 17 Abbreviated New Drug Applications, ("ANDAs") submitted to the FDA that are awaiting approval. In Canada, we sell 32 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 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, 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, Inc. consists of Walgreens, Amerisource

3640

Bergen'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 ~~September 30, 2019,~~March 31, 2020, we had sales to ~~two customers,~~one customer, which individually accounted for 10% or more of our total revenue. Total sales to ~~these customers~~this customer represented ~~35% and 12%, respectively, and represented 47%~~16.9% of total revenues. Accounts receivable related to the Company’s major customers comprised ~~47%~~12% of all accounts receivable as of ~~September 30, 2019.~~March 31, 2020. For the three months ended ~~September 30, 2018,~~March 31, 2019, we had sales to ~~three~~two customers which individually accounted for more than 10% of our total revenue. Total sales to these customers represented ~~25%~~30%, ~~12% and 12%~~18%, respectively, and represented ~~49%~~48% of total revenues. Accounts receivable related to the Company’s major customers comprised ~~56%~~37% of all accounts receivable as of September 30, 2018. For the nine months ended September 30, 2019, we had sales to two customers, which individually accounted for 10% or more of our total revenue. Total sales to these customers represented 29% and 19% respectively, and represented 48% of total revenues. For the nine months ended September 30, 2018, we had sales to three customers, which individually accounted for 10% or more of our total revenue. Total sales to these customers represented 32%, 12% and 10%, respectively, and represented 54% of total revenues.March 31, 2019.

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 ~~September 30, 2019,~~March 31, 2020, approximately 0%39% of our contract manufacturing revenue was derived from pharmaceutical projects, as compared to ~~80%~~73% of total contract manufacturing revenue for the three months ended September 30, 2018. For the nine months ended September 30, 2019, approximately 53% of our contract manufacturing revenue was derived from pharmaceutical projects, as compared to 78% of total contract manufacturing revenue for the nine months ended September 30, 2018.March 31, 2019. None of our contract manufacturing services customers represented greater than 10% of total revenue for both the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018. None~~2019.

From late March to the end of April 2020, several data sources suggested that patient visits to the dermatologist in the United States were down more than 50% in comparison to the typical number of dermatologist visits realized prior to shelter-in-place guidelines.These percentages vary by state.In May, as some states began to relax shelter-in-place guidelines there are signs that suggest patients are beginning to return to the dermatologist and demand for our ~~contract manufacturing services customers represented greater than 10%~~US topical products will follow.Given the level of ~~total revenue for both~~uncertainty and potential consequences of less stringent guidelines, it is still extremely challenging to predict the ~~nine months ended September 30, 2019~~pace of the anticipated ramp and ~~2018.~~whether or not there might be a second wave of decline.

Product and Pipeline Approvals

~~The following is a summary of~~There were no significant approvals announced in ~~2019:~~

On January 2, 2019, we announced approval of an ANDA for Gentamicin Sulfate Ointment USP, 0.1%. This was our thirteenth approval for 2018, and our thirty-second approval from its internally developed pipeline of topical generic pharmaceutical medicines. We launched this product in the first quarter of 2019.

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

On March 14, 2019, we announced approval of an ANDA for Desonide ointment, 0.05%. This was our second approval of 2019, and our thirty-fourth approval from its internally developed pipeline of topical generic pharmaceutical medicines. We launched this product in the second quarter of 2019.

On March 19, 2019, we announced approval of an ANDA for Fluocinonide Topical Solution USP, 0.05%. This was our third approval of 2019, and our thirty-fifth approval from its internally developed pipeline of topical generic pharmaceutical medicines. We launched this product in the early third quarter of 2019.2020 to date.

On April 4, 2019, we announced approval of an ANDA for Fluocinonide Cream USP, 0.1%. This was our fourth approval of 2019, and our thirty-sixth approval from its internally developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the second half of 2021.

On October 18, 2019, we announced approval of an ANDA for Gentamicin Sulfate Cream USP, 0.1% (gentamicin base). This was our fifth approval of 2019, and our thirty-seventh approval from our internally developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the fourth quarter of 2019.

Results of Operations

Three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~September 30, 2018~~March 31, 2019

We had a net loss of ~~$7.1~~$26.8 million, or ~~$0.13~~$0.50 per share, for the ~~three~~Three months ended ~~September 30, 2019~~March 31, 2020 ("Current ~~Period"~~Year"), compared to a net loss of ~~$3.9~~$8.7 million, or ~~$0.07~~$0.16 per share, for the ~~three~~Three months ended ~~September 30, 2018~~March 31, 2019 ("Prior ~~Period"~~Year"). Product Sales, net, include Company Product Sales and Contract Manufacturing Sales, as follows:

Revenues:


		Three months ended September 30,						Increase/(Decrease)							Three months ended March 31,				Increase/(Decrease)
Components of Revenue:	Components of Revenue:	2019		2018		$		%		Components of Revenue:	2020		2019		$		%
Product sales, net	Product sales, net	$	18,395	$	18,253	$	142	1	%	Product sales, net	$	7,336	$	13,037	$	(5,701)	(44)	%

Research and development services and other income	Research and development services and other income	71		41		30		73	%	Research and development services and other income	111		85		26		31	%
Total Revenues	Total Revenues	$	18,466	$	18,294	$	172	1	%	Total Revenues	$	7,447	$	13,122	$	(5,675)	(43)	%

Total revenues ~~increased~~decreased by 1%(43)% to ~~$18.5~~$7.4 million for the Current ~~Period~~Year from ~~$18.3~~$13.1 million from the Prior ~~Period.~~Year. The ~~$0.2~~$5.7 million ~~increase~~decrease was driven primarily ~~resulted from our efforts~~by a $3.8 million decrease in US Teligent label products relating to ~~broaden~~ lost contract volume

and ~~diversify our customer base. As~~incremental price erosion, a ~~result we have been able~~decrease of $1.6 million in Canadian revenues due to ~~increase demand for our in-line generic topical portfolio as well as enter into increasingly favorable contracts which have allowed us to increase our gross margin.~~supply constraints, and a $.3 million decline in contract manufacturing sales..

Research and development services and other ~~income~~revenues 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:


		Three months ended September 30,						Increase/(Decrease)							Three months ended March 31,				Increase/(Decrease)
		2019		2018		$		%			2020		2019		$		%
Cost of revenues	Cost of revenues	$	11,186	$	11,575	$	(389)	(3)	%	Cost of revenues	$	8,610	$	7,360	$	1,250	17	%
Selling, general and administrative expenses	Selling, general and administrative expenses	5,007		4,845		162		3	%	Selling, general and administrative expenses	6,717		5,513		1,204		22	%
Impairment charge										Impairment charge	8,373		—		8,373		100	%
Product development and research expenses	Product development and research expenses	2,064		3,087		(1,023)		(33)	%	Product development and research expenses	1,800		2,989		(1,189)		(40)	%
Totals costs and expenditures	Totals costs and expenditures	$	18,257	$	19,507	$	(1,250)	(6)	%	Totals costs and expenditures	$	25,500	$	15,862	$	9,638	61	%

Cost of revenues ~~decreased~~increased by 3%17% to ~~$11.2~~$8.6 million for the Current ~~Period~~Year from ~~$11.6~~$7.4 million from the Prior ~~Period.~~Year. Gross margin ~~increased~~decreased to ~~39%~~(16)% in the Current ~~Period~~Year from ~~37%~~44% from the Prior ~~Period which reflects our efforts~~Year.The increase is attributable to ~~optimize our~~inventory reserve build of $1.4 million, decreased volume lowering fixed cost absorption and product ~~portfolio and improve our product profitability from the second half of 2018.~~mix.

Selling, general and administrative expenses in the Current ~~Period~~Year increased by ~~$0.2~~$1.2 million as compared to the Prior ~~Period. This change~~Year. The increase was primarily due to an(i) $0.8 million increase in personnel costs, ~~of $0.3 million, $0.1~~(ii) $0.5 million increase in legal fees, (iii) $0.3 million increase in bad debt expense offset by ~~decline~~a $0.4 million decrease in professional ~~fees~~fees.

An impairment charge was recorded in the Current Year of ~~$0.2~~$8.4 million related to trademark and technology of $4.9 million and product acquisition costs of $3.5 million. There were no impairment charges in the Prior Year.

Product development and research expenses decreased by $1.0 million as compared to the Prior period. The decrease in product development and research expenses was primarily due to (i) $0.3 million decrease in GDUFA fee (the “Generic Drug User Fee Amendments”) and associated Abbreviated New Drug Applications filings, (ii) $0.3 million decrease in exhibit and pilot batch costs, (iii) $0.2 million decrease in personnel costs, (iv) $0.1 million decrease in clinical studies and a $0.1 million decrease in other costs.

~~Other (Expense) Income, net:~~

Three months ended September 30, (Increase)/Decrease
2019 2018 $ %
Interest and other expense, net $ (5,160) $ (2,693) $ (2,467) (92) %
Foreign currency exchange gain / (loss) (2,167) (176) (1,991) 1131 %
$ (7,327) $ (2,869) $ (4,458) 155 %

Interest and other expense, net increased in the Current Period primarily as a result of an increase in interest expense of $0.8 million related to the current debt structure and capitalized interest of $1.6 million from the Prior Period pertaining to the Buena facility.

Foreign exchange loss of $2.2 million in the Current Period was related to the foreign currency translation of our intercompany loans denominated in U.S. dollars to our foreign 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 remaining term of these loans.

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

Three months ended September 30, Increase/(Decrease)
2019 2018 $ %
Net loss attributable to common stockholders $ (7,113) $ (3,945) $ 3,168 80 %
Basic and diluted loss per share $ (0.13) $ (0.07) $ 0.06 (86) %

Net loss for the Current Period was $7.1 million as compared to net loss of $3.9 million for the Prior Period. The decrease was primarily due to an increase in i) interest expenses of $2.5 million and ii) greater foreign exchange losses of $2.0 million, offset by a decrease in product development and research expenses of $1.0 million.

~~Nine months ended September 30, 2019 compared to September 30, 2018~~

We had a net loss of $19.8 million, or $0.37 per share, for the nine months ended September 30, 2019 ("Current Year"), compared to a net loss of $21.9 million, or $0.41 per share, for the nine months ended September 30, 2018 ("Prior Year"). Product Sales, net, include Company Product Sales and Contract Manufacturing Sales, as follows:

~~Revenues:~~

Nine months ended September 30, Increase/(Decrease)
Components of Revenue: 2019 2018 $ %
Product sales, net $ 49,688 $ 48,914 $ 774 2 %
Research and development services and other income 241 174 67 39 %
Total Revenues $ 49,929 $ 49,088 $ 841 2 %

Total revenues increased by 2% to $49.9 million for the Current Year from $49.1 million from the Prior Year. The $0.8 million increase primarily resulted from our efforts to broaden and diversify our customer base. As a result, we have been able to increase the demand surrounding our in-line generic topical portfolio as well as enter into increasingly favorable contracts which have allowed us to improve our gross margin.

~~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:~~

Nine months ended September 30, Increase/(Decrease)
2019 2018 $ %
Cost of revenues $ 28,346 $ 32,365 $ (4,019) (12) %
Selling, general and administrative expenses 15,707 15,932 (225) (1) %
Product development and research expenses 7,721 10,445 (2,724) (26) %
Totals costs and expenditures $ 51,774 $ 58,742 $ (6,968) (12) %

Cost of revenues decreased by 12% to $28.3 million for the Current Period from $32.4 million from the Prior Period. Gross margin increased to 43% in the Current Year from 34% from the Prior Year which is reflective of our efforts to optimize our product portfolio and improve our product profitability from the second half of 2018.

Selling, general and administrative expenses in the Current Period decreased by $0.2 million as compared to the Prior Period. This change was due to a reduction in personnel costs of $0.4 million, a decline in bad debt expense of $0.9 million and a decrease in professional fees and other costs of $0.2 million offset by an increase in legal fees of $1.3 million.

~~Product development and research expenses decreased by $2.7~~$1.2 million as compared to the Prior Year. The decrease in product development and research expenses was primarily due to (i) ~~$0.9~~$0.5 million decrease in exhibit and pilot batch costs, (ii) $0.3 million decrease in personnel costs, (iii) $0.3 million decrease in clinical studies, and (iv) $0.1 million decrease in GDUFA fees and associated Abbreviated New Drug Applications ~~filings, (ii) $0.7 million decrease in exhibit and pilot batch costs, (iii) $0.7 million decrease in personnel costs, (iv) $0.3 million decrease in clinical studies and $0.1 decrease in other costs.~~filings.

Other (Expense) Income, net:


		Nine months ended September 30,						(Increase)/Decrease							Three months ended March 31,				(Increase)/Decrease
		2019		2018		$		%			2020		2019		$		%
Interest and other expense, net	Interest and other expense, net	$	(15,262)	$	(7,764)	$	(7,498)	97	%	Interest and other expense, net	$	(5,876)	$	(4,947)	$	(929)	19	%
Foreign currency exchange loss	Foreign currency exchange loss	(2,458)		(2,071)		(387)		19	%	Foreign currency exchange loss	(1,597)		(844)		(753)		89	%
Partial debt extinguishment of 2019 Notes		(185)		(2,467)		2,282		(93)	%
Change in the fair value of derivative liability										Change in the fair value of derivative liability	(1,258)		—		(1,258)		100	%
Debt partial extinguishment of 2019 Notes										Debt partial extinguishment of 2019 Notes	—		(185)		185		(100)	%
		$	(17,905)	$	(12,302)	$	(5,603)	46	%		$	(8,731)	$	(5,976)	$	(2,755)	46	%

Interest and other expense, net increased in the Current Year primarily as a result of ~~a decrease in capitalized interest of $4.5 million from Prior Year pertaining to the Buena facility and~~ an increase in interest expense of ~~$3.0~~$0.9 million related to the current debt structure.

Foreign exchange loss of ~~$2.5~~$1.6 million in the Current Year was related to the foreign currency translation of our intercompany loans denominated in U.S. dollars to our foreign 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 remaining term of these loans.

The ~~change~~charge in the fair value of derivatives of $1.3 million relates to the recorded liability of $5.3 million during the first quarter of 2020 pertaining to the Company's Senior Credit Facility, offset by the 2023 Series B Note gain of $4.0 million in the Current Year.

Debt partial ~~debt~~ extinguishment of the 2019 Notes ~~of $2.3 million~~ was ~~due to~~zero in the ~~partial debt extinguishment loss of $2.5 million in connection with the exchange of certain of the 2019 Notes for the 2023 Notes during the second quarter of 2018, in comparison~~Current Year compared to $0.2 million ~~of partial debt extinguishment loss~~ in ~~connection with~~ the ~~repurchase of $2.7 million of our 2019 Notes during the first quarter of 2019, as discussed in Note 7.~~Prior Year.

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


		Nine months ended September 30,						Increase/(Decrease)							Three months ended March 31,				Increase/(Decrease)
		2019		2018		$		%			2020		2019		$		%
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(19,826)	$	(21,866)	$	(2,040)	(9)	%	Net loss attributable to common stockholders	$	(26,836)	$	(8,724)	$	18,112	208	%
Basic and diluted loss per share	Basic and diluted loss per share	$	(0.37)	$	(0.41)	$	(0.04)	(10)	%	Basic and diluted loss per share	$	(0.50)	$	(0.16)	$	0.34	213	%

Net loss for the Current Year was ~~$19.8~~$26.8 million as compared to net loss of ~~$21.9~~$8.7 million for the Prior Year. The ~~improvement~~decline was primarily due to a decrease in revenues of $5.7 million, an increase in ~~revenues~~costs and expenses of ~~$0.8~~$9.6 million, ~~a decrease~~an increase in ~~cost~~interest expense of ~~goods sold of $4.0~~$0.9 million, the ~~decrease~~derivative liability increase pertaining to the Senior Credit Facility of ~~research~~$5.3 million and ~~development costs of $2.7 million,~~ foreign exchange movement of ~~$0.4~~$1.6 million, ~~and a $2.3 million decrease of loss on the partial debt extinguishment in the Current Year,~~partially offset by ~~an increase in interest and other expenses~~the Series B Notes derivative liability gain of ~~$7.5 million as discussed above.~~$4.0 million.

Liquidity and Capital Resources

~~We have~~The Company has incurred significant losses and generated negative cash flows from operations in recent years and ~~expect~~expects to continue to incur losses and generate negative cash flow for the foreseeable future. As a result, we had an accumulated deficit of ~~$116.2~~$148.3 million, total principal amount of outstanding borrowings of ~~$174.1~~$190.3 million, and limited capital resources to fund ongoing operations at ~~September 30, 2019.~~March 31, 2020. These capital resources were comprised of cash and equivalents of ~~$6.7~~$11.7 million at ~~September 30, 2019,~~March 31, 2020 and the generation of cash inflows from working capital, and an additional $10.0 million of borrowing capacity under the Delayed Draw Term Loan A portion of our Senior Credit Facilities that expires on December 13, 2019. In addition, subsequent to September 30, 2019, we issued Series B Senior Unsecured Convertible Notes for aggregate proceeds of $34.4 million, of which we expect approximately $27.3 million will be available to fund operations. See Note 7 for additional information regarding our Senior Credit Facilities and Note 13 for additional information regarding our Series B Senior Unsecured Convertible Notes.

~~Our~~capital. The Company’s available capital resources may not be sufficient for usit to continue to meet ~~our~~its obligations as they become due over the next twelve months if wethe Company cannot improve ~~our~~its operating results or increase ~~our~~its operating cash inflows. In the event these capital resources are not sufficient, wethe Company may need to raise additional capital through the sale of equity or debt securities, enter into strategic business collaboration agreements with other companies, seek other funding facilities, or sell assets. However, wethe Company cannot provide assurances that additional capital will be available on acceptable terms or at all. Moreover, if ~~we are~~the Company is unable to meet ~~our~~its obligations when they become due over the next twelve months through ~~our~~its available capital resources, or obtain new sources of capital when needed, wethe Company may have to delay expenditures, reduce the scope of ~~our~~its manufacturing operations, reduce or eliminate one or more of ~~our~~its development programs, or make significant changes to ~~our~~its operating ~~plan. The accompanying financial statements do not include any adjustments that might result~~plan or cease its operations.

Our liquidity needs have typically arisen from the ~~outcome~~funding of ~~this uncertainty.~~our new manufacturing facility, product manufacturing costs, 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 borrowings discussed in Note 6. Although the construction of our new manufacturing facility was substantially completed in October of 2018, additional investment was made in order to prepare the facility and our employees for a prior approval inspection from the FDA for our injectable line. In addition, we expect to continue to incur significant expenditures for the development of new products in our pipeline, and the manufacturing, sales and marketing of our existing product. While we rely heavily on cash flows from operating activities and borrowings from outside sources to execute our operational strategy, meet our financial commitments and other short-term financial needs, we cannot be certain that sufficient capital will be generated through operations or will be available to the Company to the extent required and on acceptable terms.

The $4.5 million decrease in our cash during the three months ended March 31, 2020 was mainly to support our operational activities. In addition, we had an accumulated deficit of $148.3 million as of March 31, 2020 and incurred a $26.8 million net loss.

In ~~addition, as disclosed in Note 7, we are subject to certain financial covenants that are required to be met under~~the beginning of 2019, the Company used a total of $2.7 million of proceeds from the Senior Credit ~~Facilities.~~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). The reduction of Additional Paid in Capital in connection with this extinguishment was immaterial. The Company settled the remaining 2019 Notes of $13.0 million in principal upon its maturity in December 2019.

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 January 2019, the Company drew $5.0 million and subsequently the remaining $5.0 million under the Revolver were drawn down by the Company in April 2019. On September 18, 2019, pursuant to the Protective Advance clause in the Company’s First Lien Credit Agreement with Ares Capital, the Company borrowed an incremental $2.5 million from its existing revolving credit facility. Consistent with the terms of the revolving credit facility, Protective Advances are secured by the Administrative Agent’s liens, constitute Obligations pursuant to the First Lien Credit Agreement, and bear interest at the rate applicable to the outstanding revolving credit facility balances, however, the Protective Advance is repayable on demand. The liability was subsequently paid off in November 2019 along with repayment fee of $0.1 million. The Company drew down the remaining $10 million under its borrowing capacity of Delayed Draw Term Loan A before its expiry in December of 2019.The $15 million Delayed Draw Term Loan B expired upon the issuance of the Series B Notes, prior to the Company drawing down any monies.

The Term Loans are governed by the Second Lien Credit Agreement. The Term Loans include 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 facility. The Company has elected the paid-in-kind interest option and increased the principal balance of Term Loans by $2.4 million and $10.9 million for the three months and since inception through the period ended March 31, 2020, respectively.

On October 31, 2019, the Company closed its Series B Notes offering in the aggregate principal amount of $34.4 million. The Series B Notes will mature in May 2023 and are convertible at the option of the holder at any time prior to maturity at an initial conversion price of $0.72 per share, subject to adjustment under certain circumstances. The Series B Notes and any shares of common stock issuable upon conversion of the Series B Notes (the “Conversion Shares”) have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or other jurisdiction’s securities laws, and the New 2023 Notes and the Conversion Shares may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws. The Company does not intend to file a registration statement for the resale of the Series B Notes or any Conversion Shares.

As part of the offering, the Company entered into agreements with certain holders of its existing 2023 Notes to exchange $9.0 million of the 2023 Series A Unsecured Convertible Notes for $5.1 million of the Series B Senior Unsecured Convertible Notes. The gross cash proceeds of approximately $29.3 million from the financing were used to extinguish the Company’s existing 2019 Notes in December 2019 and intended to pay amounts owing with respect to other indebtedness and to fund general corporate and working capital requirements. The Series B Notes bear interest at a rate of 7.00% per annum if paid in cash, semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2020. The Company also has an option, and has agreed with its senior lender, to PIK the interest at 8.00% per annum, to defer cash payments. The net proceeds from the financing were $26.9 million after deducting a total of $2.3 million of the initial purchasers’ discounts and professional fees associated with the transaction.

In accordance with ASC 815-15, Derivatives and hedging, Embedded Derivatives, the embedded conversion option should be bifurcated and separately accounted for as a derivative instrument, because the Company did not have enough authorized shares available to share-settle the conversion option. Such derivative instruments should be initially and subsequently measured at fair value, with changes in fair value recognized in earnings (see Note 7). The derivative liability recorded at the issuance date was $13.5 million, including the $2.0 million above accounted for in the TDR, which was subsequently remeasured to $2.8 million as of March 31, 2020, with $4.0 million recognized as a gain on change in fair value of derivative in the Company's statement of operations during the first quarter of 2020. Further, the $0.9 million of allocated issuance costs associated with the bifurcated conversion features embedded in the notes was recognized as a loss on debt restructuring in the Company’s statement of operations for the year ended December 31, 2019. In accordance with ASC 470-20, the initial carrying amount of the liability component of the 2023 Series B Notes, excluding the $5.1 million portion above is accounted for as a TDR, upon issuance is the residual amount between total proceeds from the transaction and the derivative liability net of allocated issuance costs. The $1.4 million debt issuance costs attributable to the liability component were recorded as a direct deduction from the liability component of the 2023 Series B Notes and are being amortized to interest expense using the effective interest method through the maturity date. The discount from the par amount of the 2023 Series B Notes will be accreted to par utilizing the effective-interest rate method over the term of the Notes from the issuance date through May 2023. The effective interest rate of the 2023 Notes, inclusive of the debt discount and issuance costs is 27.4%.

On April 6, 2020, the Company entered (i) Amendment No. 2 of the Revolver and Amendment No. 4 of the Term Loans, effective as of December 31, 2019. The amendments collectively among other things, (i) increase the interest rates, (ii) reset certain prepayment premiums and modify the terms of certain mandatory prepayments and (iii) modify certain financial covenant levels inclusive of the disposition of prior covenants as of and for the period ended December 31, 2019. These financial covenants include a trailing twelve months (“TTM”) Minimum Revenue covenant that ~~was~~is required to be met each quarterly period from March 31, 2020 through ~~June 30, 2019,~~December 31, 2020, a TTM Minimum Adjusted EBITDA that is required to be met each quarterly period from ~~September 30, 2019~~March 31, 2021 through ~~September 30, 2020,~~maturity, and a ~~Maximum Total Net Leverage Ratio that is required~~minimum liquidity covenant tested at all times through the term of the agreement. These amendments supersede the financial covenants included in the original and amended agreements. Pursuant to ~~be met each quarterly period thereafter. As of September 30, 2019, we were~~the amended Ares Credit Agreements, in compliance with the TTM Adjusted EBITDA covenant and currently anticipate we will remain in compliance with this covenant through September 30, 2020. However, a material change in our operating results over the next twelve months could negatively affect our ability to maintain compliance with the TTM Adjusted EBITDA covenant. Moreover, while we are not required to comply with the Maximum Total Net Leverage ratio until December 31, 2020, we currently anticipate that we will not be in compliance with this covenant absent a significant reduction in our total principal amount of outstanding debt. In the event ~~we are~~the Company is unable to comply with ~~this covenant,~~these covenants, or obtain a waiver from ~~our~~its lenders, the ~~total amounts~~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 due and payable. Furthermore, in the event that outstanding balances under the ~~Senior~~Ares Credit ~~Facilities~~agreements are declared due and payable by the lender, the lenders of the 2023 Series A and Series B Unsecured Convertible Notes ~~would immediately become~~shall have the right, but not the obligation, to declare all of the outstanding balance due ~~in January 2021 for which we do~~and payable as well. The Company does not currently ~~expect~~have available liquidity to ~~have readily available capital resources to meet~~repay these ~~obligations without raising additional capital through~~outstanding borrowings in the ~~sale~~event of ~~equity or debt securities.~~a default. If ~~we are~~the Company is unable to raise additional capital to meet these obligations, ~~if they become due in January 2021, we~~the Company may have to seek other strategic ~~alternatives. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.~~alternatives, including ceasing its operations.

In June 2019, wethe Company received a de-listing notice from the NASDAQ due to ~~our~~its share price being below $1.00 for 30 consecutive trading days. The notice ~~specifies~~specified that ~~our~~the Company's share price must trade above $1.00 per share for ten consecutive trading days prior to December 2, 2019 in order to prevent ~~our~~its common stock from being de-listed. ~~As of September 30,~~For the 180 days preceding December 2, 2019 ~~and through~~ the ~~date of issuance of the accompanying financial statements, the~~Company's share price ~~of our common stock has not traded above $1.00 per share~~remained below $1.00. The Company requested a second 180-day extension. NASDAQ denied its request and the Company chose to file for an appeal. The Company was granted a hearing date for the ~~required ten consecutive trading days~~end of January 2020. Subsequent to the appeal hearing, NASDAQ set a deadline of April 17, 2020 for the Company to regain compliance with NASDAQ’s continuing listing requirements. In early March 2020 the COVID-19 global pandemic triggered a significant decline in global capital markets, including NASDAQ. In light of this significant decline, the Company requested NASDAQ to reconsider the April 17, 2020 deadline. NASDAQ agreed to the Company’s request and ~~as such, we have filed~~set a ~~request~~new deadline to regain compliance by June 1, 2020. In response to the COVID-19 pandemic and related extraordinary market conditions, NASDAQ provided additional temporary relief ("Relief") from the continued listing bid price and market value of publicly held shares listing requirements through August 17, 2020. Under the Relief, the company will have additional time to regain compliance with the NASDAQ ~~for~~through August 17, 2020. In January 2020, the Company’s Board of Directors and shareholders approved a ~~180-day extension.~~reverse stock split in the range of any whole number between five (5) and ten (10) to one (1). While ~~we believe~~the Company believes that the ~~ongoing execution of our business plan~~reverse stock split will ultimately increase ~~our~~its share price above $1.00 for the required ten consecutive trading days, weit can provide no assurances that ~~our~~its shares will trade above $1.00 per share ~~within~~for the ~~180-day extension period, if at all. Moreover, while we believe~~required time period. A de-listing from the NASDAQ ~~will grant~~would be a “Fundamental Change” under the ~~180-day extension request, we can provide~~Company’s 2023 Series A and Series B Unsecured Convertible Notes which triggers a right by the holders to require the Company repurchase the Convertible Notes. In such an event, the Company would need to seek financing to repurchase the Convertible Notes and there is no ~~assurances~~guarantee that such ~~extension will~~financing would be ~~granted. As~~available or on terms acceptable to the Company. If noteholders demanded a ~~result, if our~~repurchase of the notes and the Company could not finance the repurchase, it would be in default under the Indentures governing the Convertible Notes, and in that event the lenders of the Ares Credit agreements would have the right, but not the obligation, to declare all of the outstanding balance under those agreements due and payable as well. Therefore, in the event of the Company’s shares are de-listed from the NASDAQ, wethe Company would ~~be in default of the non-financial covenant required by our Senior Credit Facilities and Convertible Notes for which we would~~likely have to seek ~~a waiver~~some combination of waivers from ~~the~~its lenders orand noteholders and seek new capital through the sale of equity or debt securities. If ~~we are~~the Company is unable to obtain ~~a waiver~~such waivers or raise new capital to meet these obligations if they become due, weit may have to seek other strategic alternatives, including ceasing operations.

~~alternatives.~~ The ~~accompanying~~negative financial ~~statements do not include any adjustments that might result from the outcome~~conditions described above raise substantial doubt about our ability to continue as a going concern as of ~~this uncertainty.~~ March 31, 2020.

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:


		Nine months ended September 30,							Three months ended March 31,
		2019		2018			2020		2019
Net cash provided by (used in)	Net cash provided by (used in)					Net cash provided by (used in)
Operating Activities	Operating Activities	$	(8,661)	$	(15,314)	Operating Activities	$	(2,946)	$	(6,051)
Investing Activities	Investing Activities	$	(6,082)	$	(18,277)	Investing Activities	$	(880)	$	(2,129)
Financing Activities	Financing Activities	$	9,536	$	22,707	Financing Activities	$	(3)	$	2,202

Operating Activities

Our operating activities used ~~$8.7~~$2.9 million and ~~$15.3~~$6.1 million of cash and cash equivalents in the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively, mainly to support our operational activities, which includes a ~~$6.0~~$6.5 million build in inventory to help avoid failure-to-supply fees and ~~for the anticipated launch of injectable manufacturing.~~normal timing differences in working capital balances.

Investing Activities

Our investing activities used ~~$6.1~~$0.9 million of cash and equivalents during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, compared to ~~$18.3~~$2.1 million used during the same period last year, which was ~~primarily related to our~~used for the continued facility expansion ~~project~~ in Buena, NJ. ~~We received our certification of our certificate of occupancy for our expanded facility in the fourth quarter of 2018 and continued to develop and file ANDAs with the FDA in 2019.~~

Financing Activities

Our financing activities neither provided ~~$9.6~~nor used cash and cash equivalents during the three months ended March 31, 2020, Our financing activities provided $2.2 million of cash and cash equivalents during the ~~nine~~three months ended ~~September 30,~~March 31, 2019. The cash provided during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 consisted of ~~$12.5~~$5.0 million of proceeds from the Revolver offset by ~~the~~ $2.7 million repurchase of our 2019 Notes. Our financing activities provided $22.7 million of cash and cash equivalents during the nine months ended September 30, 2018 primarily due to $25.0 million borrowed from the 2021 Term loan offset by $2.5 million used to ~~pay costs associated with~~repurchase a portion of the remaining 2019 ~~Notes, 2023 Notes and 2021 Term loan. The 2021 Term loan was repaid in December 2018.~~Notes.

Our capital resources were comprised of cash and cash equivalents of ~~$6.7~~$11.0 million and ~~$9.7~~$15.5 million as of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018~~2019 respectively. We had working capital of ~~$16.6~~$33.8 million at ~~September 30, 2019~~March 31, 2020 and ~~$15.8~~$45.0 million at December 31, ~~2018~~2019 respectively.

In order to continue normal business operations and execution of the Company’s growth strategy, the Company 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 November 12, 2018, the Company secured a credit agreement for $120.0 million. The facility includes three tranches of funding, an asset based revolving credit facility of $25.0 million due November 2022 (“Revolver”), a term loan of $80.0 million due February 2023 (“2023 Term Loan”), 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 Revolver is calculated, at the option of 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 the 2023 Term Loan and the 2023 Delayed Draw Term Loan bear interest, 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%, 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, build inventory, and prepare for the FDA prior approval inspection. As of ~~September 30, 2019,~~March 31, 2020, the Company elected the paid-in-kind interest option which increased the principal balance of the 2023 Term Loan by ~~$6.4~~$2.4 million to ~~$76.4~~$90.8 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, ~~2018~~2019 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 ~~September 30, 2019,~~March 31, 2020, our principal debt ~~obligation was related to~~obligations consisted of our ~~2019 and~~ 2023 Notes, our 2023 Series B Notes and our Senior Credit Facilities. ~~Interest accrues at a fixed rate~~

On April 27, 2018, we entered into separate exchange agreements with certain holders of ~~3.75% on~~our then outstanding 2019 Notes. The agreements gave the ~~outstanding principal amount~~holders the right to exchange an aggregate of $75.1 million of the 2019 Notes ~~and is paid semi-annually every June 15 and December 15 until the 2019~~for $75.1 million of 2023 Notes. The 2023 Notes ~~mature on December 15, 2019. Interest accrues at~~bear a fixed interest rate of 4.75% onper year, payable semi-annually in cash with the ~~outstanding~~ principal ~~amount~~payable in May 2023. At the option of the holders, the 2023 Notes ~~and is paid semi-annually every May 1 and November 1 until~~are convertible into shares of the Company’s common stock, cash or a combination thereof at an initial conversion price per share of $4.45, subject to adjustment in certain circumstances. In addition, holders will be entitled to receive additional shares of common stock for a potential increase in the conversion rate under a make-whole provision in some circumstances. As the interest rate under the 2023 Notes ~~mature on May 1, 2023. Since the interest rate~~ is fixed, we have no market risk related tothereto.

On October 28, 2019, we completed the ~~2019~~sale of $29.3 million aggregate principal amount of our 2023 Series B Notes for cash and we issued an additional $5.1 million aggregate principal amount of the 2023 Series B Notes in exchange for an aggregate principal amount of $9.0 million of the 2023 Notes. Interest on the outstanding principal of the 2023 Series B Notes accrues at either (x) a fixed rate of 7% if the Company elects to pay interest in cash or (y) 8% if the Company elects to pay interest in kind. In any case, interest is due and payable (either in cash or in kind, as elected by the Company) semi-annually every May 1 and November 1 (commencing on May 1, 2020) until the 2023 Series B Notes mature on May 1, 2023. Holders of the 2023 Series B Notes are entitled to convert principal and accrued, unpaid interest on the 2023 Series B Notes into, at the Company’s election, cash, shares of Common Stock, or a combination thereof, at an initial conversion price per share of Common Stock equal to $0.72, subject to adjustment under certain circumstances. The Company has covenanted to its lenders under the Senior Credit Facilities to not elect to pay interest in cash for so long as it has the option to do so. As the interest rate under 2023 Series B Notes is fixed, we have no market risk related thereto.

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~~into the Senior Credit ~~Agreement, by and among us, as the borrower, certain subsidiaries~~Facilities, consisting of the ~~ours, as guarantors,~~Revolver and Term Loans. The Senior Credit Facilities also included a $15.0 delayed draw term loan b commitment, which remained undrawn and expired on October 31, 2019. As of March 31, 2020, $25.0 million was drawn under the Revolver and $88.5 million of Term Loans were outstanding. The Revolver was fully drawn in 2019. The Revolver bears interest at a fluctuating rate of interest equal to one, two, three or six-month LIBOR plus a margin of 3.75% or a rate based on the prime rate plus a margin of 2.75%. The Revolver matures on the earliest to occur of the June 23, 2024 and the date of that is 91 days prior to the maturity date of each of (x) the 2023 Notes and (y) the 2023 Series B Notes. The Term Loans bear interest at a fluctuating rate of interest equal to one, two, three or six-month LIBOR plus a margin of 8.75% or a rate based on the prime rate plus a margin of 7.75%. The Term Loans mature on the earliest to occur of the June 23, 2024 and the date of that is 181 days prior to the maturity date of each of (x) the 2023 Notes and (y) the 2023 Series B Notes. Interest on the Senior Credit Facilities is payable in cash quarterly in arrears (or more frequently in connection with customary LIBOR interest provisions), provided, that the Company may elect (and has covenanted to the lenders ~~from time to time party thereto, and ACF Finco I LP, as administrative agent and (ii) a Second~~under its First Lien Credit Agreement ~~by and among~~to) pay interest on the ~~Company, as~~Term Loans in kind until the ~~borrower, certain subsidiaries~~earlier to occur of the date upon which Company has provided financial statements demonstrating twelve-months of revenue of at least $125,000,000 and (ii) December 28, 2020. As the interest rates applicable to the Senior Facilities are fluctuating, we do have market risk related thereto.

On April 6, 2020, we entered (i) Amendment No. 2 of the Revolver and Amendment No. 4 of the Term Loans, effective as ~~guarantors,~~of December 31, 2019. The amendments collectively among other things, (i) increase the ~~lenders from time to time party thereto,~~interest rates, (ii) reset certain prepayment premiums and ~~Ares Capital Corporation,~~modify the terms of certain mandatory prepayments and (iii) modify certain financial covenant levels inclusive of the disposition of prior covenants as ~~administrative agent.~~of and for the period ended December 31, 2019.

The Senior Credit Facilities consist of an asset based revolving credit facility of $27.5 million (the "Revolver") due November 2022 and three term loans totaling $95.0 million (collectively the "2023 Term Loans") due February 2023. Theassociated increase in interest ~~rate under the Revolver is calculated, at the option~~rates are effective as of the ~~Company,~~Amendment Closing Date. The Revolver bears interest at ~~either~~a fluctuating rate of interest equal to the one, two, three or six-month LIBOR plus ~~3.75%~~a margin of 5.50% or a rate based on the ~~base~~prime rate plus ~~2.75%~~a margin of 4.50%, with a LIBOR floor of 1.5%. The ~~interest rate on the 2023~~ Term ~~Loan and 2023 Delayed Draw Term Loan~~Loans bear interest at ~~the option~~a fluctuating rate of ~~the Company, at either~~interest equal to the one, two, three or six-month LIBOR plus ~~8.75%~~a margin of 13.0% or a rate based on the ~~base~~prime rate plus ~~7.75%~~a margin of 12.0%, with a ~~24-month paid-in-kind~~LIBOR floor of 1.5%. Interest on the Senior Credit Facilities is payable in cash quarterly in arrears (or more frequently in connection with customary LIBOR interest ~~option available to us should~~provisions), provided, that the Company ~~choose~~may elect (and has covenanted to ~~defer cash payments~~the lenders under its Senior Credit Facilities and subsequent amendments thereto) to pay interest on the Term Loans in ~~order to maintain~~kind through December 13, 2021 but only if the ~~liquidity needed to continue launching new products. As of September 30, 2019,~~following occurs: (1) the Company ~~was utilizing~~receives a ~~short-term advance~~“warning letter close-out letter” from the Federal Drug Administration in response to corrective actions taken by the Company since receipt of ~~$2.5 million~~the warning letter in November 2019 and (2) the Company receives a written recommendation from the Federal Drug Administration setting forth its approval decision in respect of the pre-approval inspection for commercial production on the ~~Revolver which was subsequently repaid~~newly installed injectable line at the Company’s New Jersey facility. If only one of those items occurs by December 13, 2020, then the Company may still elect

to pay interest in kind during 2021, but only from the time the second condition has been satisfied until December 13, 2021. Thereafter, a portion of interest on ~~October 31, 2019. Each tranche~~the loans accruing at a rate of ~~the funding is subject~~4.25% per annum may continue to ~~market risk.~~be paid in kind.

Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and 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.

As of ~~September 30, 2019,~~March 31, 2020, the fair value of our 2023 Notes was approximately $24.8 million compared to the carrying value of $53.9 million. The fair value of our 2023 Series B Notes was approximately $22.1 million including the derivative liability of $2.8 million.

As of March 31, 2020, based on level 23 inputs, the fair value of the derivative liability associated with our 2023 Series B Notes ~~(2019 Notes~~was $2.8 million and ~~2023 Notes) was approximately $57.2 million compared to their carrying~~the fair value of ~~$72.2 million.~~ our derivative liability associated with certain mandatory prepayment penalties and the recognition of future interest payments in the anticipation of a potential future default on our Senior Credit Facilities was $5.3 million which we recorded in the first quarter of 2020 (Note 8).

For a description of the fair value hierarchy and the Company's fair value methodologies, see Note 2 ~~" Summary~~"Summary of Significant Accounting ~~Policies". In addition, the value of our Senior Credit Facilities was stated at carrying value at September 30, 2019.~~Policies."

~~At September 30, 2019,~~As of March 31, 2020, 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.~~risk.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the filing of this Form 10-Q for the quarter ended ~~September 30, 2019,~~March 31, 2020, 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, as amended (“Exchange Act”)). As a result of this evaluation, our CEO and CFO concluded that those material weaknesses previously identified in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December

31, ~~2018~~2019 were still present as of ~~September 30, 2019~~March 31, 2020 (“the Evaluation Date”). Based on those material weaknesses, 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 the Evaluation Date.

Changes in Internal Control over Financial Reporting

There were no changes during the quarter ended ~~September 30, 2019~~March 31, 2020 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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~~2019 are ongoing and we continue our initiatives to implement 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~~2020 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 monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses, we have and will continue to perform additional procedures prescribed by management, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensure that our consolidated financial statements are fairly stated in all material respects. The planned remediation activities described in Item 9A. “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 highlight our commitment to remediating our identified material weaknesses and remain largely unchanged through the date of filing this Quarterly Report on Form 10-Q.

PART II

OTHER INFORMATION

ITEM 1. Legal Proceedings

Information about the legal proceedings is included in Item 1, Notes to unaudited Condensed Consolidated Financial Statements of this Form 10-Q.

ITEM 1A. Risk Factors

Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 includes a detailed discussion of risks and uncertainties which could adversely affect our future results. The risks described in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 have not materially changed.

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

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.



101*						The following financial information from this Quarterly Report on Form 10-Q for the period ended ~~September 30, 2019,~~March 31, 2020, 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.

~~Exhibit Index~~


~~Exhibit Number~~		~~Description~~Teligent, Inc.

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.~~





101*Date: May 27, 2020	By:	/s/ Timothy B. Sawyer
		The following financial information from this Quarterly Report on Form 10-Q for the period ended September 30, 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;Timothy B. Sawyer
		President and ~~(vi) the Notes to Condensed Consolidated~~Chief Executive Officer

Date: May 27, 2020	By:	/s/ Damian Finio
		Damian Finio
		Principal Financial ~~Statements, tagged as blocks of text.~~Officer, Principal Accounting Officer

* Filed herewith.


	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	159	$	476
Finance lease cost:
Amortization of right-of-use assets	$	5	$	11
Interest on lease liabilities	$	1	$	5
Total finance lease cost	$	6	$	16


	Commitments

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

	$	3,234


	September 30, 2019		December 31, 2018
Face amount of the 2019 Notes (due December 2019)	$	13,022	$	15,702
Revolver, current	2,500		—
Less unamortized discounts and debt issuance costs	(245)		(1,291)
Total net carrying value, current	$	15,277	$	14,411

	September 30, 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)	25,000		15,000
Face amount of the 2023 Loan (due February 2023)	76,359		70,000
Total carrying value, non-current	176,449		160,090
Less unamortized discounts and debt issuance costs	(17,662)		(20,519)
Total net carrying value, non-current	$	158,787	$	139,571