UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 FORM 10-Q
 ☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20202021
 OR
 ☐    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 001-39294

 ASSERTIO HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware85-0598378
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
 100 South Saunders Road, Suite 300
Lake Forest, Illinois 60045
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES; ZIP CODE)
 (224) 419-7106
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:    Trading Symbol(s):Name of each exchange on which registered:
Common Stock, $0.0001 par value ASRTThe Nasdaq Stock Market LLC

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 ☒ 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 such files).  Yes ☒ 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☐
 
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 ☒
 
The number of issued and outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of OctoberJuly 30, 20202021 was 107,223,287.44,494,051.


ASSERTIO HOLDINGS, INC.
FORM 10-Q FOR THE PERIOD ENDED SEPTEMBERJUNE 30, 20202021
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION 
Item 1. 
Item 2. 
Item 3. 
Item 4. 
PART II — OTHER INFORMATION 
Item 1. 
Item 1A. 
Item 2.
Item 6. 
2
Table of Content

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASSERTIO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
September 30, 2020December 31, 2019 June 30, 2021December 31, 2020
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$34,737 $42,107 Cash and cash equivalents$54,428 $20,786 
Accounts receivable, netAccounts receivable, net39,223 42,744 Accounts receivable, net45,468 44,350 
Inventories, netInventories, net13,469 3,412 Inventories, net6,617 11,712 
Prepaid and other current assetsPrepaid and other current assets17,063 15,688 Prepaid and other current assets12,835 17,406 
Total current assetsTotal current assets104,492 103,951 Total current assets119,348 94,254 
Property and equipment, netProperty and equipment, net3,773 3,497 Property and equipment, net1,915 2,437 
Intangible assets, netIntangible assets, net206,628 400,535 Intangible assets, net186,318 200,082 
Goodwill9,008 0 
Other long-term assetsOther long-term assets8,896 19,187 Other long-term assets4,435 6,501 
Total assetsTotal assets$332,797 $527,170 Total assets$312,016 $303,274 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$22,981 $16,193 Accounts payable$16,483 $14,808 
Accrued rebates, returns and discountsAccrued rebates, returns and discounts48,932 58,943 Accrued rebates, returns and discounts45,108 63,114 
Accrued liabilitiesAccrued liabilities33,062 18,948 Accrued liabilities22,867 27,071 
Current portion of long-term debtCurrent portion of long-term debt11,010 80,000 Current portion of long-term debt12,222 11,942 
Contingent consideration, current portionContingent consideration, current portion6,475 0 Contingent consideration, current portion6,850 6,776 
Interest payableInterest payable5,829 8,375 Interest payable1,743 1,793 
Other current liabilitiesOther current liabilities3,085 2,094 Other current liabilities11,641 7,182 
Total current liabilitiesTotal current liabilities131,374 184,553 Total current liabilities116,914 132,686 
Long-term debtLong-term debt77,235 271,258 Long-term debt66,751 72,160 
Contingent considerationContingent consideration35,188 168 Contingent consideration30,809 31,776 
Other long-term liabilitiesOther long-term liabilities13,050 13,233 Other long-term liabilities5,277 11,138 
Total liabilitiesTotal liabilities256,847 469,212 Total liabilities219,751 247,760 
Commitments and contingenciesCommitments and contingenciesCommitments and contingencies00
Shareholders’ equity:Shareholders’ equity:Shareholders’ equity:
Common stock12 8 
Common stock, $0.0001 par value, 200,000,000 shares authorized; 44,494,051
and 28,392,149 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
Common stock, $0.0001 par value, 200,000,000 shares authorized; 44,494,051
and 28,392,149 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
4 3 
Additional paid-in capitalAdditional paid-in capital479,530 457,751 Additional paid-in capital529,831 483,456 
Accumulated deficitAccumulated deficit(403,592)(399,801)Accumulated deficit(437,570)(427,945)
Total shareholders’ equityTotal shareholders’ equity75,950 57,958 Total shareholders’ equity92,265 55,514 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$332,797 $527,170 Total liabilities and shareholders' equity$312,016 $303,274 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ASSERTIO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Revenues:Revenues:Revenues:
Product sales, netProduct sales, net$34,266 $27,502 $63,683 $79,889 Product sales, net$24,831 $20,165 $51,238 $29,417 
Commercialization agreement, netCommercialization agreement, net0 27,304 11,258 89,163 Commercialization agreement, net0 0 0 11,258 
Royalties and milestonesRoyalties and milestones299 341 1,158 1,226 Royalties and milestones542 452 975 859 
Total revenuesTotal revenues34,565 55,147 76,099 170,278 Total revenues25,373 20,617 52,213 41,534 
Costs and expenses:Costs and expenses:Costs and expenses:
Cost of sales (excluding amortization of intangible assets)6,462 2,243 13,099 6,942 
Cost of salesCost of sales3,921 5,238 7,886 6,637 
Research and development expensesResearch and development expenses1,316 1,476 3,983 4,531 Research and development expenses0 1,626 0 2,667 
Selling, general and administrative expensesSelling, general and administrative expenses25,746 36,117 81,191 85,917 Selling, general and administrative expenses26,235 28,131 33,966 55,445 
Amortization of intangible assetsAmortization of intangible assets5,587 25,444 18,237 76,331 Amortization of intangible assets7,218 4,855 13,764 12,650 
Restructuring chargesRestructuring charges268 0 6,787 0 Restructuring charges0 6,519 1,089 6,519 
Total costs and expensesTotal costs and expenses39,379 65,280 123,297 173,721 Total costs and expenses37,374 46,369 56,705 83,918 
Loss from operationsLoss from operations(4,814)(10,133)(47,198)(3,443)Loss from operations(12,001)(25,752)(4,492)(42,384)
Other income (expense):
Gain on sale of Gralise0 0 126,655 0 
(Loss) Gain on extinguishment of convertible notes0 26,385 (47,880)26,385 
Loss on sale of NUCYNTA0 0 (14,749)0 
Other (expense) income :Other (expense) income :
Interest expenseInterest expense(3,050)(13,872)(13,328)(45,268)Interest expense(2,605)(1,604)(5,288)(10,278)
Change in fair value of contingent consideration(1,861)0 (1,861)0 
Loss on prepayment of Senior Notes0 0 (8,233)0 
Other gain (loss)253 (764)(3,571)(2,613)
Other gain (loss), netOther gain (loss), net137 (499)403 (3,824)
(Loss) Gain on sale of Gralise(Loss) Gain on sale of Gralise0 (850)0 126,655 
Loss on extinguishment of convertible notesLoss on extinguishment of convertible notes0 (16,272)0 (47,880)
Gain (Loss) on sale of NUCYNTA Gain (Loss) on sale of NUCYNTA0 1,006 0 (14,749)
Loss on debt extinguishmentLoss on debt extinguishment0 0 0 (8,233)
Total other (expense) incomeTotal other (expense) income(4,658)11,749 37,033 (21,496)Total other (expense) income(2,468)(18,219)(4,885)41,691 
Net (loss) income before income taxes(9,472)1,616 (10,165)(24,939)
Income tax (expense) benefit(1,050)1,715 6,374 364 
Net loss before income taxesNet loss before income taxes(14,469)(43,971)(9,377)(693)
Income tax benefit (expense)Income tax benefit (expense)300 9,472 (248)7,424 
Net (loss) income and Comprehensive (loss) incomeNet (loss) income and Comprehensive (loss) income$(10,522)$3,331 $(3,791)$(24,575)Net (loss) income and Comprehensive (loss) income$(14,169)$(34,499)$(9,625)$6,731 
Basic and diluted net (loss) income per share$(0.09)$0.05 $(0.04)$(0.36)
Basic net (loss) income per shareBasic net (loss) income per share$(0.32)$(1.40)$(0.23)$0.30 
Diluted net (loss) income per shareDiluted net (loss) income per share$(0.32)$(1.40)$(0.23)$0.30 
Shares used in computing basic net (loss) income per shareShares used in computing basic net (loss) income per share44,706 24,640 41,321 22,459 
Shares used in computing diluted net (loss) income per shareShares used in computing diluted net (loss) income per share44,706 24,640 41,321 22,559 
Shares used in computing basic and diluted net (loss) income per share119,564 72,747 99,832 67,332 
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ASSERTIO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(Unaudited)
Common StockAdditional
Paid-In
Capital*		Accumulated
Earnings
(Deficit)		Shareholders’
Equity
Shares*Amount*
Balances at December 31, 202028,392 $3 $483,456 $(427,945)$55,514 
Issuance of common stock upon exercise of options73 — — — — 
Issuance of common stock in connection with stock offerings14,400 1 44,860 — 44,861 
Issuance of common stock in conjunction with vesting of restricted stock units211 — — — — 
Issuance of common stock in conjunction with vesting of performance stock units13 — — — — 
Issuance of common stock upon exercise of warrant347 — — — — 
Stock-based compensation— — 772 — 772 
Shares withheld for payment of employee's withholding tax liability— — (388)— (388)
Net income and comprehensive income— — — 4,544 4,544 
Balances at March 31, 202143,436$4 $528,700 $(423,401)$105,303 
Issuance of common stock upon exercise of options— — 193 — 193 
Issuance of common stock under employee stock purchase plan4 — — — — 
Issuance of common stock in conjunction with vesting of restricted stock units227 — — — — 
Issuance of common stock upon exercise of warrant845 — — — — 
Stock split fractional shares settlement(18)— — — 
Stock-based compensation— — 957 — 957 
Shares withheld for payment of employee's withholding tax liability— — (19)— (19)
Net loss and comprehensive loss— — — (14,169)(14,169)
Balances at June 30, 202144,494$4 $529,831 $(437,570)$92,265 
Balances at December 31, 201920,222 $2 $457,757 $(399,801)$57,958 
Issuance of common stock in conjunction with vesting of restricted stock units109 — — — — 
Reacquisition of equity component of 2021 Notes and 2024 Notes— — (16,814)— (16,814)
Stock-based compensation— — 1,934 — 1,934 
Shares withheld for payment of employee's withholding tax liability— — (271)— (271)
Net income and comprehensive income— — — 41,230 41,230 
Balances at March 31, 202020,331 $2 $442,606 $(358,571)$84,037 
Issuance of common stock under employee stock purchase plan19 — 49 — 49 
Issuance of common stock in conjunction with vesting of restricted stock units54 — — — — 
Issuance of common stock in connection with the Zyla Merger6,370 122,930 — 22,931 
Issuance of warrants and stock options in conjunction with the Zyla Merger— — 11,626 — 11,626 
Reacquisition of equity component of 2021 Notes and 2024 Notes— — (2,718)— (2,718)
Stock-based compensation— — 3,593 — 3,593 
Shares withheld for payment of employee's withholding tax liability— — (41)— (41)
Net loss and comprehensive loss— — — (34,499)(34,499)
Balances at June 30, 202026,774 $3 $478,045 $(393,070)$84,978 

Common StockAdditional
Paid-In
Capital		Accumulated
Earnings
(Deficit)		Shareholders’
Equity
SharesAmount
Balances at December 31, 201980,888 $8 $457,751 $(399,801)$57,958 
Issuance of common stock upon exercise of options— — — — — 
Issuance of common stock in conjunction with vesting of restricted stock units434 — — — — 
Reacquisition of equity component of 2021 Notes and 2024 Notes— — (16,814)— (16,814)
Stock-based compensation— — 1,934 — 1,934 
Shares withheld for payment of employee's withholding tax liability— — (271)— (271)
Net income and comprehensive income— — — 41,230 41,230 
Balances at March 31, 202081,322$8 $442,600 $(358,571)$84,037 
Issuance of common stock under employee stock purchase plan76 — 49 — 49 
Issuance of common stock in conjunction with vesting of restricted stock units215 — — — — 
Issuance of common stock in connection with the Zyla Merger25,479 3 22,928 — 22,931 
Issuance of warrants and stock options in conjunction with the Zyla Merger— — 11,626 — 11,626 
Reacquisition of equity component of 2021 Notes and 2024 Notes— — (2,718)— (2,718)
Stock-based compensation— — 3,593 — 3,593 
Shares withheld for payment of employee's withholding tax liability— — (41)— (41)
Net loss and comprehensive loss— — — (34,499)(34,499)
Balances at June 30, 2020107,092$11 $478,037 $(393,070)$84,978 
Issuance of common stock in conjunction with vesting of restricted stock units82 1 — — 1 
Stock-based compensation— — 1,511 — 1,511 
Shares withheld for payment of employee's withholding tax liability— — (18)— (18)
Net loss and comprehensive loss— — — (10,522)(10,522)
Balances at September 30, 2020107,174$12 $479,530 $(403,592)$75,950 

(*) Adjusted to reflect the 1-for-4 reverse stock split effected on May 18, 2021.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Common StockAdditional
Paid-In
Capital		Accumulated
Earnings
(Deficit)		Accumulated
Other
Comprehensive
Loss		Shareholders’
Equity
SharesAmount
Balances at December 31, 201864,185 $6 $402,934 $(182,600)$(5)$220,335 
Issuance of common stock upon exercise of options14 — 25 — — 25 
Issuance of common stock in conjunction with vesting of restricted stock units132 — — — — — 
Stock-based compensation— — 2,702 — — 2,702 
Shares withheld for payment of employee's withholding tax liability— — (216)— — (216)
Net loss and comprehensive loss— — — (14,301)— (14,301)
Balances at March 31, 201964,331 $6 $405,445 $(196,901)$(5)$208,545 
Issuance of common stock under employee stock purchase plan64 — 158 — — 158 
Issuance of common stock in conjunction with vesting of restricted stock units426 — — — — — 
Stock-based compensation— — 2,634 — — 2,634 
Shares withheld for payment of employee's withholding tax liability— — (293)— — (293)
Net loss and comprehensive loss— — — (13,605)— (13,605)
Balances at June 30, 201964,821 $6 $407,944 $(210,506)$(5)$197,439 
Issuance of common stock in conjunction with vesting of restricted stock units42 — — — — — 
Issuance of common stock in conjunction with the Convertible Note Exchange15,817 225,305 — — 25,307 
Reacquisition of equity component of 2021 Notes, net of tax— — (4,796)— — (4,796)
Equity component of issued 2024 Notes, net of tax— — 24,165 — — 24,165 
Stock-based compensation— — 3,004 — — 3,004 
Shares withheld for payment of employee's withholding tax liability— — (19)— — (19)
Unrealized loss on available-for-sale securities— — — — 5 5 
Net income and comprehensive income— — — 3,331 — 3,331 
Balances at September 30, 201980,680 $8 $455,601 $(207,175)$0 $248,434 
ASSERTIO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Six Months Ended June 30,
 20212020
Operating Activities  
Net (loss) income$(9,625)$6,731 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Gain on sale of Gralise0 (126,655)
Loss on sale of NUCYNTA0 14,749 
Loss on extinguishment of Convertible Notes0 47,880 
Loss on prepayment of Senior Notes0 8,233 
Depreciation and amortization14,286 13,319 
     Amortization of debt discount, debt issuance costs and royalty rights118 5,511 
Recurring fair value measurement of assets and liabilities1,602 3,629 
Stock-based compensation1,729 5,527 
Provision for inventory and other assets140 1,808 
Other0 (9)
Changes in assets and liabilities, net of acquisition:
Accounts receivable(1,118)29,414 
Inventories4,955 512 
Prepaid and other assets6,640 4,810 
Accounts payable and other accrued liabilities(3,933)(13,337)
Accrued rebates, returns and discounts(18,006)(39,757)
Interest payable(50)(7,524)
Net cash used in operating activities(3,262)(45,159)
Investing Activities
Purchases of property and equipment0 (9)
Cash acquired in Zyla Merger0 7,585 
Proceeds from sale of NUCYNTA0 368,965 
Proceeds from sale of Gralise0 130,261 
Proceeds from sale of investments0 6,000 
Net cash provided by investing activities0 512,802 
Financing Activities
Payments in connection with convertible notes extinguishment0 (264,731)
Payment in connection with Series A-1 and A-2 debt(4,750)0 
Payment of contingent consideration(2,495)0 
Payments in connection with Senior Notes settlement0 (171,775)
Payments on Revolver0 (10,000)
Payments on Promissory Note0 (3,000)
Payment of Royalty Rights(498)0 
Proceeds from issuance of common stock44,861 0 
Proceeds from exercise of stock options193 0 
Shares withheld for payment of employee's withholding tax liability(407)(841)
Net cash provided by (used in) financing activities36,904 (450,347)
Net increase in cash and cash equivalents33,642 17,296 
Cash and cash equivalents at beginning of year20,786 42,107 
Cash and cash equivalents at end of period$54,428 $59,403 
Supplemental Disclosure of Cash Flow Information
Net cash paid for income taxes$0 $396 
Cash paid for interest$5,216 $11,213 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ASSERTIO HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months Ended September 30,
 20202019
Operating Activities  
Net loss$(3,791)$(24,575)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on sale of Gralise(126,655)0 
Loss on sale of NUCYNTA14,749 0 
Gain (Loss) on extinguishment of Convertible Notes47,880 (26,385)
Loss on prepayment of Senior Notes8,233 0 
Depreciation and amortization19,468 77,225 
Loss on disposal of equipment0 10,076 
    Amortization of debt discount, debt issuance costs and royalty rights5,614 18,090 
Recurring fair value measurement of assets and liabilities5,485 4,843 
Stock-based compensation7,038 8,340 
Provision for inventory and other assets2,561 295 
Deferred income tax benefit0 (5,636)
Other0 (328)
Changes in assets and liabilities:
Accounts receivable24,944 (6,216)
Inventories(792)(213)
Income tax receivable(6,979)0 
Prepaid and other assets8,816 38,600 
Accounts payable and other accrued liabilities(18,447)17,381 
Accrued rebates, returns and discounts(43,265)(14,780)
Interest payable(4,449)(4,958)
  Income taxes payable0 (9,139)
Net cash (used in) provided by operating activities(59,590)82,620 
Investing Activities
Purchases of property and equipment(10)(1,526)
Cash acquired in Zyla Merger7,585 0 
Proceeds from sale of NUCYNTA368,965 0 
Proceeds from sale of Gralise130,261 0 
Proceeds from sale of investments6,000 0 
Purchases of marketable securities0 (12,065)
Sales of marketable securities0 4,209 
Maturities of marketable securities0 7,856 
Net cash provided by (used in) investing activities512,801 (1,526)
Financing Activities
Payments in connection with convertible notes extinguishment(264,731)(30,000)
Payments in connection with Senior Notes settlement(171,775)(100,000)
Payment in connection with Series A-1 and A-2 debt(10,000)0 
Payments on Revolver(10,000)0 
Payments on Promissory Note(3,000)0 
Convertible notes issuance costs0 (4,268)
Payment of contingent consideration(261)0 
Fees for modification of Senior Notes0 (3,249)
Proceeds from issuance of common stock0 183 
Shares withheld for payment of employee's withholding tax liability(814)(528)
Net cash used in financing activities(460,581)(137,862)
Net decrease in cash and cash equivalents(7,370)(56,768)
Cash and cash equivalents at beginning of year42,107 110,949 
Cash and cash equivalents at end of period$34,737 $54,181 
Supplemental Disclosure of Cash Flow Information
Net cash paid for income taxes$865 $420 
Cash paid for interest$12,100 $32,054 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ASSERTIO HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 
NOTE 1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On May 20, 2020, Assertio Holdings, Inc. (Assertio or the Company) completed a Merger (the Zyla Merger) with Zyla Life Sciences (Zyla) pursuant to an Agreement and Plan of Merger (Merger Agreement), dated as of March 16, 2020. Prior to the consummation of the Zyla Merger, Assertio Therapeutics, Inc. implemented a holding company reorganization (Assertio Reorganization) pursuant to an Agreement and Plan of Merger, dated as of May 19, 2020, by and among Assertio Therapeutics, Inc., the Company and a wholly-owned subsidiary formed to effectuate the Assertio Reorganization. As a result of the Assertio Reorganization, Assertio Therapeutics, Inc. became a direct, wholly-owned subsidiary of the Company, with the Company assuming Assertio Therapeutics, Inc.’s listing on the Nasdaq Stock Market and being deemed as successor issuer to Assertio Therapeutics, Inc. under applicable securities law. Each issued and outstanding share of common stock, $0.0001 par value per share, of Assertio Therapeutics, Inc. immediately prior to the Assertio Reorganization automatically converted into an equivalent corresponding share of common stock, $0.0001 par value per share, of the Company having the same designations, rights, powers, preferences, qualifications, limitations and restrictions as the converted share of Assertio Therapeutics, Inc. common stock. Unless otherwise noted or required by context, the Company uses “Assertio” to refer to Assertio Reorganization and Assertio Holdings, Inc. following the Assertio Reorganization.

Assertio is a commercial pharmaceutical company offering differentiated products to patients. The Company’s commercial portfolio of branded products focuses on three areas: neurology; hospital; and pain and inflammation. The Company has built its commercial portfolio through a combination of increased opportunities with its existing products, as well as through the acquisition or licensing of additional approved products.

The Company’s primary marketed products include:

SPRIX Nasal Spray® (ketorolac)
A nonsteroidal anti-inflammatory drug (NSAID) indicated in adult patients for the short term (up to five days) management of moderate to moderately severe pain that requires analgesia at the opioid level.
CAMBIA® (diclofenac potassium for oral solution)
A prescription medicine used to treat migraine attacks in adults. It does not prevent or lessen the number of migraines one has, and it is not for other types of headaches. It contains diclofenac potassium, an NSAID.
INDOCIN® (indomethacin) Suppositories

INDOCIN® (indomethacin) Oral Suspension
A suppository form and oral solution of indomethacin approved for:
•Moderate to severe rheumatoid arthritis including acute flares of chronic disease
•Moderate to severe ankylosing spondylitis
•Moderate to severe osteoarthritis
•Acute painful shoulder (bursitis and/or tendinitis)
•Acute gouty arthritis
ZIPSOR® (diclofenac potassium) Liquid filled capsules)
A prescription NSAID used for relief of mild-to-moderate pain in adults (18 years of age and older)

Additional commercially available products include ZORVOLEX® (diclofenac), VIVLODEX® (meloxicam) (collectively the SOLUMATRIX® products), and OXAYDO® (oxycodone HCI, USP) tablets for oral use only —CII.

In September 2020, the Company terminated its Second Amended and Restated Nano-Reformulated Compound License Agreement as of January 27, 2020 (the “iCeutica License”), with iCeutica Inc. and iCeutica Pty Ltd. (collectively, “iCeutica”). The iCeutica License allowed the Company to utilize certain technology and intellectual property related to iCeutica’s SOLUMATRIX technology and certain other rights of iCeutica. The intellectual property related to SOLUMATRIX technology will no longer be used by the Company and the Company will no longer manufacture products using SOLUMATRIX technology.

On February 13, 2020, the Company completed the sale of its remaining rights, title and interest in and to the NUCYNTA® franchise to Collegium Pharmaceutical, Inc. (Collegium) for $375.0 million, less royalties, in cash at closing.
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Collegium assumed certain contracts, liabilities and obligations relating to the NUCYNTA products, including those related to manufacturing and supply, post-market commitments and clinical development costs. Collegium also paid for certain inventories relating to the products.

On January 10, 2020, the Company completed the sale of Gralise® (gabapentin) to Golf Acquiror LLC, an affiliate to Alvogen, Inc. (Alvogen), for cash proceeds of $130.3 million. The total value included $75.0 million in cash at closing, with the balance receivable as 75% of Alvogen’s first $70.0 million of Gralise net sales after the closing (consideration receivable). Alvogen also paid for certain inventories relating to Gralise. On June 3, 2020, the Company entered into an agreement with Alvogen to settle the remaining balance of $39.7 million in consideration receivable, whereby the Company reduced the consideration receivable by $0.9 million and Alvogen paid $38.8 million in cash.

Basis of Presentation

The unaudited condensed consolidated financial statements of Assertio Holdings, Inc. (the Company or Assertio) and its subsidiaries and the related footnote information of the Company have been prepared pursuant to the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the information for the periods presented. Certain amounts in prior periods have been reclassified to conform with current period presentation. The results for the three and ninesix months ended SeptemberJune 30, 20202021 are not necessarily indicative of results to be expected for the entire year ending December 31, 20202021 or future operating periods.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 20192020 included in Assertio Therapeutics,Holdings, Inc.’s Annual Report on Form 10-K filed with the SEC on March 10,12, 2021 (the 2020 (the 2019 Form 10-K). The Condensed Consolidated Condensed Balance Sheet as of December 31, 20192020 has been derived from the audited financial statements at that date, as filed in the Company’s 20192020 Form 10-K.

In connection with The Company’s significant one-time 2020 transactions such as the preparationsale of the financial statements for the threeNUCYNTA franchise, sale of Gralise, repayment of its debt obligations, and nine months ended September 30, 2020, the Company evaluated whether there were conditions and events, consideredmerger with Zyla Life Sciences are discussed in the aggregate, which raised substantial doubt as to2020 Form 10-K and have not been duplicated in the entity's ability to continue as a going concern within twelve months after the date of the issuance of these financial statements noting that there did not appear to be evidence of substantial doubt of the entity's ability to continue as a going concern.

Principles of Consolidation

The condensed consolidated financial statements of Assertio include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in theaccompanying unaudited condensed consolidated financial statements and accompanying notes. Estimates are used when accounting for amounts recorded in connection with acquisitions, including initial fair value determinations of assets and liabilities as well as subsequent fair value measurements. Additionally, estimates are used in determining items such as sales discounts and product returns, depreciable and amortizable lives, share-based compensation assumptions and taxes on income. Although management believes these estimates are based upon reasonable assumptions within the bounds of its knowledge of the Company’s business and operations, actual results could differ materially from these estimates.
Segment Information

The Company manages its business within 1 reportable segment. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. To date, substantially all of the Company’s revenues from product sales are related to sales in the United States.

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Acquisitions

The Company accounts for acquired businesses using the acquisition method of accounting under ASC 805, Business Combinations (ASC 805), which requires that assets acquired and liabilities assumed be recorded at date of acquisition at their respective fair values. The fair value of the consideration paid, including contingent consideration, is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Significant judgments are used in determining the estimated fair values assigned to the assets acquired and liabilities assumed and in determining estimates of useful lives of long-lived assets. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future net cash flows, estimates of appropriate discount rates used to present value expected future net cash flows, the assessment of each asset’s life cycle, and the impact of competitive trends on each asset’s life cycle and other factors. These judgments can materially impact the estimates used to allocate acquisition date fair values to assets acquired and liabilities assumed and the resulting timing and amounts charged to, or recognized in current and future operating results. For these and other reasons, actual results may vary significantly from estimated results.

Any changes in the fair value of contingent consideration resulting from a change in the underlying inputs is recognized in operating expenses until the contingent consideration arrangement is settled. Changes in the fair value of contingent consideration resulting from the passage of time are recorded within interest expense until the contingent consideration is settled.

If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired in-process research and development (IPR&D) with no alternative future use is charged to expense at the acquisition date.

Revenue Recognition

Under ASC 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when its customer obtains control of the promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation, when (or as) the performance obligation is satisfied. The Company assesses the term of the contract based upon the contractual period in which the Company and Collegium have enforceable rights and obligations.

Variable consideration arising from sales or usage-based royalties, promised in exchange for a license of the Company’s Intellectual Property, is recognized at the later of (i) when the subsequent product sales occur or (ii) the performance obligation, to which some or all of the sales-based royalty has been allocated, has been satisfied.

The Company recognizes a contract asset relating to its conditional right to consideration for completed performance obligations. Accounts receivable are recorded when the right to consideration becomes unconditional. A contract liability is recorded for payments received in advance of the related performance obligation being satisfied under the contract.

Product Sales

The Company sells commercial products to wholesale distributors and specialty pharmacies. Product sales revenue is recognized when title has transferred to the customer and the customer has assumed the risks and rewards of ownership, which typically occurs on delivery to the customer. The Company’s performance obligation is to deliver product to the customer, and the performance obligation is completed upon delivery. The transaction price consists of a fixed invoice price and variable product sales allowances, which include rebates, discounts and returns. Product sales revenues are recorded net of applicable sales tax and reserves for these product sales allowances. Receivables related to product sales are typically collected one to two months after delivery.
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Product Sales Allowances—The Company considers products sales allowances to be variable consideration and estimates and recognizes product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Product sales allowances are based on actual or estimated amounts owed on the related sales. These estimates take into consideration the terms of the Company’s agreements with customers, historical product returns, rebates or discounts taken, estimated levels of inventory in the distribution channel, the shelf life of the product and specific known market events, such as competitive pricing and new product introductions. The Company uses the most likely method in estimating product sales allowances. If actual future results vary from the Company’s estimates, the Company may need to adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment. The Company’s sales allowances include:

Product Returns—The Company allows customers to return product for credit with respect to that product within six months before and up to 12 months after its product expiration date. The Company estimates product returns and associated credit on NUCYNTA, Gralise, CAMBIA, Zipsor, Lazanda and products acquired from Zyla, INDOCIN, ZORVOLEX, VIVLODEX and OXAYDO. Estimates for returns are based on historical return trends by product or by return trends of similar products, taking into consideration the shelf life of the product at the time of shipment, shipment and prescription trends, estimated distribution channel inventory levels and consideration of the introduction of competitive products. The Company did not assume financial responsibility for returns of NUCYNTA previously sold by Janssen Pharma or Lazanda product previously sold by Archimedes Pharma US Inc. Under the Commercialization Agreement with Collegium for NUCYNTA, the divestiture of Lazanda to Slán and the divestiture of Gralise to Alvogen, the Company is only financially responsible for product returns for product that were sold by the Company, which are identified by specific lot numbers. Shelf lives, from the respective manufacture dates, for the Company’s products range from 24 months to 48 months.

Because of the shelf life of the Company’s products and its return policy of issuing credits with respect to product that is returned within six months before and up to 12 months after its product expiration date, there may be a significant period of time between when the product is shipped and when the Company issues credit on a returned product. Accordingly, the Company may have to adjust these estimates, which could have an effect on product sales and earnings in the period of adjustments.

Wholesaler and Pharmacy Discounts—The Company offers contractually determined discounts to certain wholesale distributors and specialty pharmacies that purchase directly from it. These discounts are either taken off invoice at the time of shipment or paid to the customer on a quarterly basis one to two months after the quarter in which product was shipped to the customer.

Prompt Pay Discounts—The Company offers cash discounts to its customers (generally 2% of the sales price) as an incentive for prompt payment. Based on the Company’s experience, the Company expects its customers to comply with the payment terms to earn the cash discount.

Patient Discount Programs—The Company offers patient discount co-pay assistance programs in which patients receive certain discounts off their prescriptions at participating retail and specialty pharmacies. The discounts are reimbursed by the Company to program administrators approximately one month after the prescriptions subject to the discount are filled.

Medicaid Rebates—The Company participates in Medicaid rebate programs, which provide assistance to certain low income patients based on each individual state’s guidelines regarding eligibility and services. Under the Medicaid rebate programs, the Company pays a rebate to each participating state, generally two to three months after the quarter in which prescriptions subject to the rebate are filled.

Chargebacks—The Company provides discounts to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration under an FSS contract with the Department of Veterans Affairs and 340B eligible entities. These federal and 340B entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back to the Company the difference between the current retail price and the price the federal entity paid for the product.

Managed Care Rebates—The Company offers discounts under contracts with certain managed care providers. The Company generally pays managed care rebates one to three months after the quarter in which prescriptions subject to the rebate are filled.

Medicare Part D Coverage Gap Rebates — The Company participates in the Medicare Part D Coverage Gap Discount Program under which it provides rebates on prescriptions that fall within the “donut hole” coverage gap. The Company
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generally pays Medicare Part D Coverage Gap rebates two to three months after the quarter in which prescriptions subject to the rebate are filled.

Royalty Revenue

For arrangements that include sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

The Company currently has the right to receive royalties based on sales of CAMBIA in Canada, which are recognized as revenue when the related sales occur as there are no continuing performance obligations by the Company under those agreements.

Milestones

For arrangements that include milestones, the Company recognizes such revenue using the most likely method. As part of adopting ASC 606, the Company evaluated whether the future milestones should have been included as part of the transaction price in periods before January 1, 2018. The Company concluded that because of development and regulatory risks at the time, it was probable that a significant revenue reversal could have occurred. At the end of each subsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment.

Leases

The Company adopted ASC 842, Leases (ASC 842), on January 1, 2019 using the modified retrospective approach with cumulative effect. There was no adjustment to the Company's opening balance of accumulated deficit resulting from the adoption of this guidance. In addition, the Company elected the package of practical expedients, which among other things, allowed for the carryforward of the historical lease classification. The Company did not elect the hindsight practical expedient to determine the reasonably certain lease term for existing leases. Prior to the adoption of ASC 842, the Company accounted for its operating leases in accordance with ASC 840. Under ASC 840, only capital leases were recognized on the balance sheet and therefore the Company’s operating leases were reflected in the financial statement footnotes. The adoption of ASC 842 did not materially affect the Company’s Condensed Consolidated Statements of Comprehensive Income.

The Company assesses contracts for lease arrangements at inception and, if applicable, upon any partial or full lease termination event. Operating right-of-use (ROU) assets and liabilities are recognized at the lease commencement date equal to the present value of future lease payments using the implicit, if readily available, or incremental borrowing rate based on the information readily available at the commencement date. ROU assets include any lease payments as of commencement and initial direct costs but exclude any lease incentives. Lease and non-lease components are generally accounted for separately and the Company recognizes operating lease expense straight-line over the term of the lease. Operating leases are included in other long term assets, other current liabilities, and other long term liabilities in the Condensed Consolidated Balance Sheet.

The Company accounts for operating leases with an initial term of 12 months or less on a straight-line basis over the lease term in the Condensed Consolidated Statements of Comprehensive Income.information.

Stock Based CompensationSplit

On May 18, 2021, the Company effected a 1-for-4 reverse stock split of its issued and outstanding common stock. The Company’s stock-based compensation generally includes stock options, restricted stock unit awards (RSUs), performance share unit awards (PSUs), and purchases under the Company’s employee stock purchase plan (ESPP). The Company accounts for forfeitures as they occur for each type of award. Stock-based compensation expense related to RSUs is based on the marketpar value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period.

The stock-based compensation expense related to PSUs is estimated at grant date based on the fair value of the award. The PSU awards are measured exclusively to the relative total shareholder return (TSR) performance, which is measured against the three-year TSR of a custom index of companies. The actual number of shares awarded is adjusted to between 0 and 200% of the target award amount based upon achievement in each of the three independent successive one-year tranches. TSR relative to peers is considered a market condition under applicable authoritative guidance. For PSUs granted with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo model, and
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expense is recognized ratably over the requisite service period regardless of whether or not the market condition is satisfied. The Monte Carlo valuation model considers a variety of potential future share prices for Assertio and our peer companies in a selected market index.

The Company uses the Black-Scholes option valuation model to determine the fair value of stock options and ESPP shares. The determination of the fair value of stock-based payment awards on the date of grant using an option valuation model is affected by our stock price as well as assumptions, which include the expected term of the award, the expected stock price volatility, risk-free interest rate and expected dividends over the expected term of the award. The Company uses historical option exercise data to estimate the expected term of the options. The Company estimates the volatility of our common stock price by using the historical volatility over the expected term of the options. The Company bases the risk-free interest rate on U.S. Treasury zero coupon issues with terms similar to the expected term of the options as of the date of grant. The Company doeswas not anticipate paying any cash dividends in the foreseeable future, and therefore, uses an expected dividend yield of zero in the option valuation model. Stock-based compensation expense related to the ESPP and options is recognized on a straight-line basis over its respective term.

Intangible and Long-Lived Assets

Intangible assets consist of purchased developed technology and trademarks that are accounted for as definite-lived intangible assets subject to amortization. The Company determines the fair value of acquired intangible assets as of the acquisition date. Discounted cash flow models are typically used in these valuations, which require the use of significant estimates and assumptions, including but not limited to, developing appropriate discount rates and estimating future cash flows from product sales and related expenses. The fair value recorded is amortized on a straight-line basis over the estimated useful life of the asset. The Company estimated the useful life of the assets by considering competition by products prescribed for the same indication, the likelihood and estimated future entry of non-generic and generic competition for the same or similar indication and other related factors. The Company evaluates purchased intangibles for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. The impairment loss is calculated as the excess of the carrying amount over the fair value. Estimating future cash flows and fair value related to an intangible asset involves significant estimates and assumptions. If the Company’s assumptions are not correct, there could be an impairment loss or, in the case of a change in the estimated useful life of the asset, a change in amortization expense.

The Company assess the recoverability of our long-lived assets, which include property and equipment and product rights whenever significant events or changes in circumstances indicate impairment may have occurred. If indicators of impairment exist, projected future undiscounted cash flows associated with the asset are compared to the carrying amount to determine whether the asset’s value is recoverable. Any resulting impairment is recorded as a reduction in the carrying value of the related asset and a charge to operating results.

Goodwill

Under the purchase method of accounting pursuant to ASC 805,Goodwill is calculated as the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. Goodwill, which is not tax-deductible, is recognized within other long-term assets, and is not amortized but subject to an annual review for impairment. Goodwill is tested for impairment at the reporting unit level at least annually or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts. A reporting unit is the same as, or one level below, an operating segment. The Company’s operations are currently comprised of a single reporting unit.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The Company adopted this standard on January 1, 2020 and updated its internal controls to include certain forward-looking considerations in the current process of developing and recognizing credit losses for in scope financial assets, which primarily included accounts receivable and a $3.5 million investment in a company engaged in medical research. ASC 326 had an immaterial impact to our allowance for credit losses reported in accounts receivable on our Condensed Consolidated Balance Sheet upon adoption. The investment is structured as a long-term loan receivable with a convertible feature and carried at amortized cost with accruing interest. To
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calculate the expected credit loss allowance, the Company utilized a probability-of-default method (PDM). This process estimates the probability of the loan being successfully paid back or converted into equity based on the ability of the investee to obtain FDA acceptance of its research.

As of September 30, 2020, the Company estimated an expected credit loss of approximately $1.9 million, which was recognized in Other (expense) income in the Company’s Condensed Consolidated Statement of Comprehensive Income in the first quarter of 2020 and is included in Investments, net in the Company’s Condensed Consolidated Balance Sheet. The Company’s expected credit losses can vary from period to period based on several factors, such as progress of the medical research and FDA submission, and overall economic environment and the ability of the investee to fund its operations. The primary factor that contributed to the provision for expected credit losses as of the second quarter of 2020 was an evaluation of probability of default to exist based on the outlook of the macro environment due to the COVID-19 pandemic and its impact to delay the FDA acceptance process combined with the investee’s ability to fund its operations and raise capital if required.

In June 2018, the FASB issued ASU 2018-18 Collaborative Arrangements (ASU 2018-18), which clarifies the interaction between ASC 808, Collaborative Arrangements (ASC 808)and ASC 606, Revenue from Contracts with Customers (ASC 606). The update clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. The Company adopted the standard as of January 1, 2020 and have applied modified retrospective transition method to the date of initial application of ASC 606. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Accounting for Cloud Computing Arrangements (Subtopic 350-40), which provides new guidance on the accounting for implementation, set-up, and other upfront costs incurred in a hosted cloud computing arrangement. Under the new guidance, entities will apply the same criteria for capitalizing implementation costs as they would for an internal-use software license arrangement. Effective January 1, 2020, the Company adopted the standard using the prospective approach to eligible costs incurred on or after the date of adoption. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 Fair Value Measurement Disclosure Framework (ASU 2018-03), which is part of a broader disclosure framework project by the FASB to improve the effectiveness of disclosures by more clearly communicating the information to the user. The Company adopted the standard as of January 1, 2020 and included these disclosures in the condensed consolidated financial statements. The additional elements of this release did not impact the Company's condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (ASU 2019-12): Simplifying the Accounting for Income Taxes which simplifies the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and by clarifying and amending existing guidance in order to improve consistent application of and simplify GAAP for other areas of Topic 740. ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. The Company early adopted the standard effective January 1, 2020. The new standard was applied to the presentation of the Company’s reacquisition of $19.5 million in equity component of the Company’s Convertible Notes,adjusted as a result of the private purchasereverse stock split. All common stock share and per-share data included in February 2020 and tender offer in April 2020.these financial statements have been retrospectively adjusted to reflect the effect of the reverse stock split for all periods presented.

Impact of COVID-19 on our Business


Following the outbreak of COVID-19 during early 2020, the Company’s priority was and remains the health and safety of its employees, their families, and the patients it serves. As a result, in March 2020, the Company initiated remote working arrangements and maintained flexible work arrangements for individuals, which continued through the remainder of 2020 and into 2021. In addition to the health and safety of its employees, the Company is focused on ensuring that it continues making its products accessible to the patients who need them. Because COVID-19 impacted the Company’s ability to see in-person providers who prescribe its products, the Company adapted its approach during 2020 and increased its virtual visits. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, the Company has experienced a decline and subsequent volatility in prescriptions associated with those elective procedures. The extent to which the Company’s operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak, actions by government authorities to contain the outbreak or treat its impact, the emergence of new COVID-19 variants and the related potential for new surges in infections, and the distribution, public acceptance and efficacy of COVID-19 vaccines including for emerging variants.


NOTE 2. ACQUISITIONSREVENUE
Business Combination
Zyla Life SciencesDisaggregated Revenue

On May 20, 2020, Assertio completed the Zyla Merger pursuant to the Agreement and Plan of Merger dated March 16, 2020. Upon consummation of the Zyla Merger, each issued and outstanding share of Zyla common stock converted into 2.5 shares of Assertio Holding’s common stock (the Exchange Ratio), and each outstanding option or warrant to purchase Zyla common stock converted into the right to purchase shares of Assertio’s common stock. The Company anticipates the Zyla Merger will capture operating and product portfolio synergies, accelerate revenue growth and create shareholder value.

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The following table reflects summary revenue, net for the acquisition date fair valuethree and six months ended June 30, 2021 and 2020 (in thousands): 
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Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Product sales, net:
INDOCIN products (1)
$13,075 $5,434 $27,673 $5,434
CAMBIA6,128 7,780 12,590 14,054
Zipsor2,581 3,535 4,803 5,866
SPRIX (1)
2,942 1,602 4,639 1,602
Other105 1,814 1,533 2,461
Total product sales, net24,831 20,165 51,238 29,417
Commercialization agreement revenue, net0 0 0 11,258
Royalties and milestone revenue542 452 975 859
Total revenues$25,373 $20,617 $52,213 $41,534
(1)Products acquired in connection with the consideration transferred with respect to theMay 20, 2020 Zyla Merger:Merger.
Product Sales, net:

Total number of Company ordinary shares issued25,478,539
Assertio share price as of May 20, 2020$0.90 
Fair value of common shares issued (in thousands)$22,931 
Fair value of warrants and stock options issued (in thousands) (1)
11,626
Taxes paid by the Company on behalf of Zyla (in thousands)529 
Total purchase consideration (in thousands)$35,086 

(1) Represents 4,972,365For the three and six months ended June 30, 2021, product sales primarily consisted of Zyla warrants outstanding as of May 20, 2020 at the Exchange Ratio or 12,430,913sales from INDOCIN Products, CAMBIA, Zipsor and SPRIX. The Company warrants.     The Company’s warrants were valued using the Company’s share price of $0.90 as of May 20,2020. As these shares are exercisable at any time at an exercise price of $0.0004 per sharebegan shipping and Assertio will issue replacement awardsrecognizing product sales for these shares, these shares have been determined to represent consideration transferred. In addition represents merger consideration portion of the fair value of Zyla outstanding stock options as of May 20, 2020 which were converted to Company stock options at the Exchange Ratio.

Costs incurred that were directly attributable to facilitating the close ofINDOCIN Products and SPRIX upon the Zyla Merger on May 20, 2020.
Other product sales includes product sales adjustments for previously divested products, including Gralise, which was divested in January 2020; and product sales for non-promoted products (OXAYDO and SOLUMATRIX) which were $6.6 million and were recognizedacquired from Zyla in May 2020.
The Company records contract liabilities in the first six monthsform of 2020. There were 0 costs incurred duringdeferred revenue resulting from prepayments from customers. The Company recorded contract liabilities of $0.3 million in the three months ended SeptemberJune 30, 2020. These costs were recorded to the Selling, general and administrative expenses2021 which are included in Other Current Liabilities on the Condensed Consolidated Statements of Comprehensive Income.Balance Sheet.

Pursuant to ASC 805, one of the companies in the transactions shall be designated as the acquirer for accounting purposes based on the evidence available. For accounting purposes, Assertio was treated as the acquiring entity. The Zyla Merger transaction was accounted for as a business combination under the acquisition method of accounting in accordance with ASC 805. Under this method, the acquisition was recorded by allocating the purchase price consideration to the tangible and intangible assets acquired and liabilities assumed from Zyla, based on the estimated fair values at the acquisition date. The excess of purchase price over the fair value of the acquired net assets was recorded as goodwill. The results of operations of this transaction have been included in the Company’s condensed consolidated financial statements from the date of acquisition.

The valuations performed in the second quarter of 2020 to assess the fair value of certain assets acquired and liabilities assumed were considered preliminary as a result of the short time period between the closing of the merger and the end of the second quarter of 2020. Accounting guidance provides that the allocation of the purchase price may be modified up to one year from the date of the merger as more information is obtained about the fair value of assets acquired and liabilities assumed. During the third quarter of 2020, certain modifications were made to preliminary valuation amounts primarily related to acquired inventory, plant, property and equipment, intangible assets, and contingent consideration resulting in a $5.1 million net decrease to goodwill. The preliminary amounts recognized are subject to further revision to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date. Any changes to the fair value assessments may affect the purchase price allocation and could potentially impact goodwill.





















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The following table reflects the initial and adjusted estimated preliminary fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Initial Preliminary Purchase Price Allocation to Fair ValueAdjustments to Purchase Price Allocation to Fair ValueAdjusted Preliminary Purchase Price Allocation to Fair Value
Cash$7,585 $— $7,585 
Accounts receivable23,133 — 23,133 
Inventories26,742 (12,481)14,261 
Property and equipment4,512 (3,016)1,496 
Intangible assets160,900 32,500 193,400 
Other assets9,629 (1,964)7,665 
Total identifiable assets acquired$232,501 $15,039 $247,540 
Accounts payable21,574 — 21,574 
Accrued rebates, returns and discounts33,254 — 33,254 
Other accrued liabilities15,434 0 15,434 
Contingent consideration (a)29,400 10,500 39,900 
Debt (b)111,900 (600)111,300 
Total liabilities assumed$211,562 $9,900 $221,462 
Net identifiable assets acquired20,939 5,139 26,078 
Goodwill (c)14,147 (5,139)9,008 
Net assets acquired$35,086 $— $35,086 

(a) Contingent consideration was recognized and measured at an estimated fair value as of the acquisition date. The contingent consideration liability assumed is the result of Zyla’s previous acquisition of INDOCIN. The liability assumed included contingent consideration related to royalties payable in the form of an earnout provision based on INDOCIN product revenue estimates and a probability assessment with respect to the likelihood of achieving the level of net sales that would trigger the contingent payment. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The key assumptions in determining the fair value are the discount rate and the probability assigned to the potential milestones being achieved. At each reporting date, the Company will subsequently re-measure the contingent consideration obligation to estimated fair value. Any changes in the fair value of contingent consideration will be recognized in operating expenses until the contingent consideration arrangement is settled.

(b) The fair value of acquired debt is comprised of the following (in thousands):

13% Senior Secured Note due 2024$95,000 
Royalty rights obligation3,300 
Promissory note3,000 
Credit agreement10,000 
$111,300 

Upon the Zyla Merger, the Company assumed and immediately paid off a $3.0 million promissory note. The promissory note was scheduled to mature on July 31, 2020. Additionally upon the Zyla Merger, the Company assumed and immediately paid off a $10.0 million credit agreement. The credit agreement was recognized by Zyla as a related party transaction as the lenders were also holders of a portion of the Zyla’s 13% Notes that were issued on January 31, 2019. The Credit Agreement was scheduled to mature on March 20, 2022. See Note 9, Debt, for further information regarding assumed Debt.

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(c) The Company recognized $9.0 million of goodwill which represents the fair value of assets net of the fair value of liabilities assumed in excess of consideration paid. Goodwill arising from the Zyla Merger is not expected to be deductible for tax purposes and is subject to material revision as the purchase price allocation is completed. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Zyla.

Stock-based Compensation Plan

On June 4, 2020, the Company filed a Registration Statement with the SEC to register the Zyla Life Sciences Amended and Restated 2019 Stock-Based Incentive Compensation Plan (the 2019 Zyla Plan). The 2019 Zyla Plan was assumed in connection with the Zyla Merger. Pursuant to the Zyla Merger Agreement, each outstanding Zyla stock option was cancelled and converted into a stock option to purchase the Company’s Common Stock on the same terms and conditions with (1) the number of shares of Company Common Stock subject to each such option equal to (i) the number of shares of the common stock subject to the option multiplied by (ii) the Merger Exchange Ratio, which was 2.5, rounded, if necessary, to the nearest whole share and (2) an exercise price per share (rounded to the nearest whole cent) equal to the original exercise price of the Zyla stock option divided by (B) the Exchange Ratio. This resulted in the issuance of 5.0 million options with an average fair market value of $0.62 per share value, of which $0.4 million was recognized as merger consideration. The term of Zyla options may not exceed 10 years from the date of grant. An option shall be exercisable on or after each vesting date in accordance with the terms set forth in the option agreement. The right to exercise an option generally vests over three years at the rate of at least 33% , by the end of the first year and then ratably in monthly installments over the remaining vesting period of the stock option.

Warrant Agreements

Upon the Zyla Merger, the Company assumed Zyla’s warrant agreements (the “Warrant Agreements”) with Iroko Pharmaceuticals, Inc. (“Iroko”) certain of Iroko’s affiliates and certain other parties entitled to receive shares of the Company’s common stock as consideration pursuant to Zyla’s prior agreements or in satisfaction of certain claims pursuant to the Zyla’s prior reorganization plan. The warrants are exercisable at any time at an exercise price of $0.0004 per share, subject to certain ownership limitations including, with respect to Iroko and its affiliates, that no such exercise may increase the aggregate ownership of the Company’s outstanding common stock of such parties above 49% of the number of shares of its common stock then outstanding for a period of 18 months. All of the Company’s outstanding warrants have similar terms whereas under no circumstance may the warrants be net-cash settled. As such, all warrants are equity-classified. See Note 14, Net Income (Loss) per Share.Pro Forma Information

Supplemental unaudited proforma information is based upon accounting estimates and judgments that the Company believes are reasonable. This supplemental unaudited pro forma financial information has been prepared for comparative purposes only, and is not necessarily indicative of what actual results would have occurred, or of results that may occur in the future. The following table reflects the pro forma consolidated total revenues andproduct sales, net loss for the periods presented,three and six months ended June 30, 2020, as if the acquisition of Zyla had occurred on January 1, 2019.2020, was $28.2 million and $56.5 million, respectively.

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Total revenues$33,965 $61,390 $101,492 $184,949 
Net loss$(11,122)$(23,102)$(36,053)$(120,254)


The unaudited proforma financial results for the three and nine months ended September 30, 2020 and September 30, 2019 reflect adjustments directly attributed to the business combination and the Company’s divestiture of NUCYNTA and Gralise. Additionally, the supplemental unaudited proforma information for the nine months ended September 30, 2019 was adjusted and excludes income of $115.2 million related to Zyla’s January 2019 Reorganization.

See Note 3, Commercialization Agreement Revenue,, for revenue for the period since the acquisition date to September 30, 2020 related to Zyla acquired products. As the Company operates as 1 operating entity, earnings of Zyla since the acquisition date are impractical to calculate separate from the consolidated company.
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NOTE 3. REVENUE net
 
Disaggregated Revenue
The following table reflects summary revenue, net for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Product sales, net:
CAMBIA$7,449 $8,135 $21,503 $23,701 
Zipsor3,395 3,273 9,261 9,028 
INDOCIN products(1)
13,773 0 19,207 0 
SPRIX Nasal Spray(1)
5,642 0 7,244 0 
Other(2)
4,00716,0946,46847,160
Total product sales, net34,266 27,502 63,683 79,889 
Commercialization agreement, net0 27,304 11,258 89,163 
Royalties and milestone revenue299 341 1,158 1,226 
Total revenues$34,565 $55,147 $76,099 $170,278 
(1)Products acquired in connection with Zyla Merger represent product sales, net for the period of May 20, 2020 through September 30, 2020.
(2)Includes product sales for Gralise, which was divested in January 2020; product sales adjustments for previously divested products NUCYNTA and Lazanda; and, product sales for non-promoted products Oxaydo and SOLUMATRIX, which were acquired from Zyla in May 2020.

Product Sales

For the three and nine months ended September 30, 2020, product sales primarily consisted of sales from CAMBIA, Zipsor, INDOCIN products, and SPRIX Nasal Spray. Product sales for the Company’s non-promoted products acquired upon the Zyla Merger were $3.4 million and $4.8 million for the three and nine months ended September 30, 2020. The Company began shipping and recognizing product sales for INDOCIN products, SPRIX Nasal Spray, and SOLUMATRIX products upon the Zyla Merger on May 20, 2020.

The Company completed the sale of Gralise to Alvogen on January 10, 2020, and therefore ceased recognizing product sales related to Gralise effective on the transaction close date. Product sales related to Gralise for the nine months ended September 30, 2020 were $0.4 million for sales reserve estimate adjustments related to sales recognized in prior periods . Product sales of Gralise for the three and nine months ended September 30, 2019 were $14.9 million and $46.0 million.

The Company ceased recognizing product salescommercialization revenue and related tocosts for NUCYNTA in January 2018 andeffective with the NUCYNTA Commercialization Agreement in February 2020 (see Commercialization Agreement below). The Company divested and ceased recognizing product sales related to Lazanda in November 2017. Product sales related to NUCYNTA and Lazanda during the period relate to sales reserve estimate adjustments related to sales recognized in prior periods. 

Commercialization Agreement
In December 2017, the Company and Collegium entered into the Commercialization Agreement (Commercialization Agreement), pursuant to which the Company granted Collegium the right to commercialize the NUCYNTA franchise of pain products in the U.S.  Pursuant to the Commercialization Agreement, Collegium assumed all commercialization responsibilities for the NUCYNTA franchise effective January 9, 2018, including sales and marketing. In November 2018 the Company entered into an amendment to the Commercialization Agreement (Commercialization Amendment). Prior to the November 2018 amendment, the consideration related to the license and facilitation services was fixed and recognized ratably over the contract term. Following the November 2018 amendment, the royalty payments represented variable consideration that are subject to the sales-based royalty exception for licenses of intellectual property and are recognized at the later of (i) when the
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subsequent product sales occur or (ii) the performance obligation, to which some or allclosing of the sales-based royalty has been allocated, has been satisfied.

In addition, the Company was responsible for royalty paymentstransaction to a third party related to sales of NUCYNTA. Prior to the November 2018 amendment, Collegium became primarily responsible for these royalties in connection with the Commercialization Agreement; however, a portion of these payments remained the responsibility of the Company. Following the November 2018 amendment, effective January 1, 2019, Collegium became responsible for the third-party royalty payments entirely. As the Company was not actively commercializing NUCYNTA, such royalties were recorded by the Company on a systematic basis in proportion to the underlying net product sales, subject to the sales-based royalty exemption for license of intellectual property, and were included as gross-to-net adjustments in the related revenue line in the Company’s Condensed Consolidated Statements of Comprehensive Income. Such amounts, over the course of the calendar year, had no net impact.

Effective February 13, 2020, the Company divestedsell its rights, title and interest in and to itsthe NUCYNTA franchise of products in the U.S. to Collegium.Collegium on February 13, 2020. In connection with the sale, the Commercialization Agreement terminated at closing with certain specified provisions of the Commercialization Agreement surviving in accordance with the terms of the purchase agreement. During the first quarter ofsix months ended June 30, 2020, the Company recognized net revenue from the Commercialization Agreement of $11.3 million. This included variable royalty revenue of $13.1 million offset by the amortization of the $1.8 million net contract asset in connection with the termination of the Commercialization Agreement as a result of the divestiture of NUCYNTA to Collegium.

Agreement.
For the three and nine months ended September 30, 2019, the Company recognized $2.9 million and $5.0 million, respectively, of net expense related to the third-party royalties which were paid by Collegium on behalf of Assertio. Collegium paid the full royalty owed to the third-party in 2019 and such amounts, over the course of the calendar year, had no net impact to the Company’s Condensed Consolidated Statement of Comprehensive Income.

Contract Assets
The following table reflects changes in the Company’s contract assets as of September 30, 2020 (in thousands):
 Balance as of  Balance as of
 December 31, 2019AdditionsDeductionsSeptember 30,
2020
Contract asset - Collegium, net1,896 0 (1,896)0 

The Collegium contract asset, net represented the conditional right to consideration for completed performance under the Commercialization Agreement arising from the transfer of inventory to Collegium on the date of closing of the agreement in January 2018 net of the contract liability of $10.0 million resulting from the upfront payment received and the $8.8 million of warrants received in connection with the Commercialization Amendment. In connection with the divestiture of NUCYNTA to Collegium the Company amortized the remaining balance of the contract asset in the first quarter of 2020.

Royalties and Milestone Revenue

In November 2010, the Company entered into a license agreement with Tribute Pharmaceuticals Canada Ltd. (now known as Nuvo Pharmaceuticals, Inc.) granting them the rights to commercially market CAMBIA in Canada. Nuvo independently contracts with manufacturers to produce a specific CAMBIA formulation in Canada. The Company receives royalties on net sales on a quarterly basis as well as certain one-time contingent milestone payments upon the occurrence of certain events. The Company recognized revenue related to CAMBIA in Canada $0.3of $0.5 million and $1.2$1.0 million respectively, for the three and ninesix months ended SeptemberJune 30, 2021, respectively, and $0.5 million and $0.9 million for the three and six months ended June 30, 2020, and 2019.respectively.
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NOTE 4.3. ACCOUNTS RECEIVABLES, NET
 
The following table reflects accounts receivables, net, as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands): 
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September 30,
2020		December 31, 2019 June 30,
2021		December 31, 2020
Receivables related to product sales, netReceivables related to product sales, net$38,502 $38,353 Receivables related to product sales, net$45,368 $40,784 
Receivables from CollegiumReceivables from Collegium0 4,104 Receivables from Collegium0 3,566 
OtherOther721 287 Other100 0 
Total accounts receivable, netTotal accounts receivable, net$39,223 $42,744 Total accounts receivable, net$45,468 $44,350 

As of SeptemberJune 30, 20202021 and December 31, 2019,2020, allowances for cash discounts for prompt payment were $1.3$0.9 million and $1.2$1.3 million, respectively.

NOTE 5.4.  INVENTORIES, NET
 
The following table reflects the components of inventory, net as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands): 
September 30,
2020		December 31, 2019 June 30,
2021		December 31, 2020
Raw materialsRaw materials$206 $1,065 Raw materials$884 $1,136 
Work-in-processWork-in-process3,451 426 Work-in-process252 1,340 
Finished goodsFinished goods9,812 1,921 Finished goods5,481 9,236 
TotalTotal$13,469 $3,412 Total$6,617 $11,712 
    
As of SeptemberJune 30, 20202021 and December 31, 2019,2020, inventory reserves were $0.1$2.5 million and $0.4$2.3 million, respectively.



NOTE 6.5. PROPERTY AND EQUIPMENT, NET
 
The following table reflects property and equipment, net as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands): 

September 30,
2020		December 31, 2019June 30,
2021		December 31, 2020
Furniture and office equipmentFurniture and office equipment$2,802 $2,557 Furniture and office equipment$2,680 $2,680 
Machinery and equipment0 2,731 
Laboratory equipmentLaboratory equipment221 221 Laboratory equipment20 20 
Leasehold improvementsLeasehold improvements11,320 9,858 Leasehold improvements10,523 10,523 
14,343 15,367 13,223 13,223 
Less: Accumulated depreciation and amortizationLess: Accumulated depreciation and amortization(10,570)(11,870)Less: Accumulated depreciation and amortization(11,308)(10,786)
Property and equipment, netProperty and equipment, net$3,773 $3,497 Property and equipment, net$1,915 $2,437 
 
Depreciation expense was $0.6$0.3 million and $0.3$0.5 million for the three and six months ended SeptemberJune 30, 2020 and 2019,2021, respectively, and $1.2$0.4 million and $0.9$0.7 million for the ninethree and six months ended SeptemberJune 30, 2020, respectively. Depreciation expense is recognized in Selling, general and 2019, respectively. Decreaseadministrative expense in machinery and equipment during the nine months ended September 30, 2020 related to the write offCompany’s Condensed Consolidated Statements of fully depreciated assets no longer in use.Comprehensive Income.
    

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NOTE 7.6.  INTANGIBLE ASSETS AND GOODWILL
 
The following table reflects the gross carrying amounts and net book values of intangible assets and goodwill as of SeptemberJune 30, 20202021 and December 31, 20192020 (dollar amounts in thousands): 

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September 30, 2020December 31, 2019 June 30, 2021December 31, 2020
Remaining Useful Life
(In years)		Gross Carrying AmountAccumulated AmortizationNet Book ValueGross Carrying AmountAccumulated AmortizationImpairmentNet Book ValueRemaining Useful Life
 (In years)		Gross Carrying AmountAccumulated AmortizationNet Book ValueGross Carrying AmountAccumulated AmortizationNet Book Value
Products rights:Products rights:Products rights:
INDOCININDOCIN11.6$154,100 $(4,602)$149,498 $0 $0 $0 $0 INDOCIN10.9$154,100 $(14,233)$139,867 $154,100 $(7,812)$146,288 
SPRIXSPRIX6.639,000 (1,996)37,004 0 0 0 0 SPRIX5.939,000 (6,175)32,825 39,000 (3,389)35,611 
CAMBIACAMBIA3.251,360 (34,879)16,481 51,360 (31,027)0 20,333 CAMBIA1.551,360 (39,435)11,925 51,360 (36,163)15,197 
ZipsorZipsor1.527,250 (23,797)3,453 27,250 (22,044)0 5,206 ZipsorLess than 1 year27,250 (25,550)1,700 27,250 (24,381)2,869 
OxaydoOxaydoLess than 1 year300 (108)192 0 0 0 0 Oxaydo—300 (300)0 300 (183)117 
NUCYNTA—0 0 0 1,019,978 (455,192)(189,790)374,996 
Total Intangible AssetsTotal Intangible Assets$272,010 $(65,382)$206,628 $1,098,588 $(508,263)$(189,790)$400,535 Total Intangible Assets$272,010 $(85,692)$186,318 $272,010 $(71,928)$200,082 
Goodwill$9,008 $— $9,008 $0 $— $— $0 

Amortization expense was $5.6$7.2 million and $18.2$13.8 million for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and $25.4$4.9 million and $76.3$12.7 million for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively.
In connection with the Zyla Merger, the Company acquired identified intangible assets comprised of definite-lived product rights for INDOCIN, SPRIX Nasal Spray, and OXAYDO which are amortized on a straight-line basis over their respective estimated useful lives of 11.6 years, 6.6 years and less than one year. The respective fair values were determined to be $154.1 million, $39.0 million, and $0.3 million, as of the Zyla Merger date of May 20, 2020 (see Note 2, Acquisitions).

In addition, the Company recognized $9.0 million of goodwill related to the fair value of the underlying net tangible and identifiable intangible assets net of liabilities resulting from the Zyla Merger. Refer to “Note 2. Acquisitions” for additional details.

In February 2020, the Company divested its remaining rights, title and interest in and to the NUCYNTAfranchise of products from the Company. The Company derecognized the remaining carrying value of $369.1 million of the NUCYNTA product rights in the first quarter of 2020.

The following table reflects future amortization expensesexpense the Company expects for its intangible assets (in thousands): 
Year Ending December 31,Year Ending December 31,Estimated Amortization ExpenseYear Ending December 31,Estimated Amortization Expense
2020 (remainder)$6,547 
202126,004 
2021 (remainder)2021 (remainder)$14,351 
2022202224,081 202226,895 
2023202323,337 202318,412 
2024202418,413 202418,413 
2025202518,413 
ThereafterThereafter108,246 Thereafter89,834 
TotalTotal$206,628 Total$186,318 

NOTE 7.  OTHER LONG-TERM ASSETS
The following table reflects other long-term assets as of June 30, 2021 and December 31, 2020 (in thousands): 

 June 30,
2021		December 31, 2020
Investment, net$1,579 $1,579 
Operating lease right-of-use assets1,054 1,955 
Deposits952 1,936 
Other850 1,031 
Total other long-term assets$4,435 $6,501 

Investment consists of the Company’s $3.5 million investment in a company engaged in medical research. This investment is structured as a long-term loan receivable with a convertible feature and is valued at amortized cost. As a result of the Company’s adoption of ASU 2016-13 Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020, the Company estimated an expected credit loss of approximately $1.9 million on its investment, which was recognized in Other (expense) income in the Company’s Condensed Consolidated Statement of Comprehensive Income in the first quarter of 2020. To calculate the expected credit loss allowance, the Company utilized a probability-of-default method (PDM). This process estimates the probability of the loan being successfully paid back
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or converted into equity based on the ability of the investee to obtain FDA acceptance of its research. The Company’s expected credit losses can vary from period to period based on several factors, such as progress of the medical research and FDA submission, and overall economic environment and the ability of the investee to fund its operations. As of June 30, 2021, the Company continues to assess an estimated $1.9 million expected credit loss on its investment based on evaluation of probability of default that exist.


NOTE 8.  ACCRUED LIABILITIES
 
The following table reflects accrued liabilities as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands): 

September 30,
2020		December 31, 2019 June 30,
2021		December 31, 2020
Accrued compensationAccrued compensation$9,495 $6,188 Accrued compensation$2,122 $5,498 
Accrued consent fees4,500 0 
Accrued restructuring costsAccrued restructuring costs2,947 3,763 Accrued restructuring costs2,197 8,744 
Other accrued liabilitiesOther accrued liabilities16,120 8,997 Other accrued liabilities18,548 12,829 
Total accrued liabilitiesTotal accrued liabilities$33,062 $18,948 Total accrued liabilities$22,867 $27,071 
 


NOTE 9.  DEBT
 
The following table reflects the Company’s debt as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands):

September 30, 2020December 31, 2019
13% Senior Secured Note due 2024$85,000 $0 
2.50% Convertible Notes due 2021335 145,000 
5.00% Convertible Notes due 2024(2)
0 120,000 
Royalty rights obligation(3)
2,931 0 
Senior Notes(4)
0 162,500 
Total principal amount88,266 427,500 
Unamortized debt discounts(20)(70,699)
Unamortized debt issuance costs(1)(5,543)
Carrying value88,245 351,258 
Less: current portion of long-term debt(11,010)(80,000)
Net, long-term debt$77,235 $271,258 

(1) In connection with the Zyla Merger on May 20, 2020, the Company assumed the obligations of Zyla under its Existing Indenture, and Assertio and                     the other subsidiaries of the Company (other than Depo DR) became guarantors of Zyla's 13% Senior Secured Notes due 2024.
(2) 2024 Notes settled and retired as of June 30, 2020.
(3) In connection with the Zyla Merger on May 20, 2020, the Company assumed the obligations of Zyla under its royalty rights agreement with each holder of its Secured Notes.
(4) During the first quarter of 2020, the Company repaid in full the outstanding aggregate principal amount of senior secured notes (Senior Notes)
June 30, 2021December 31, 2020
13% Senior Secured Notes due 2024
$75,500 $80,250 
Royalty rights obligation3,138 3,533 
2.50% Convertible Notes due 2021335 335 
Total principal amount78,973 84,118 
Unamortized debt discounts0 (16)
Carrying value78,973 84,102 
Less: current portion of long-term debt(12,222)(11,942)
Net, long-term debt$66,751 $72,160 


13% Senior Secured Notes due 2024

In accordance with the Zyla Merger, Assertio assumed $95.0 million aggregate principal amount of 13% senior secured notes due 2024 (the Secured Notes) issued pursuant to an indenture (the Existing Indenture) entered into on January 31, 2019, by and among Zyla Life Sciences, the guarantors party thereto (the Guarantors) and Wilmington Savings Fund Society, FSB (as successor to U.S. Bank National Association), as trustee and collateral agent (the Trustee). The Secured Notes were issued in 2 series: $50.0 million of Series A-1 Notes and $45.0 million of Series A-2 Notes. The Secured Notes are reported within current portion of long-term debt and long-term debt on the Condensed Consolidated Balance Sheets. The fair value of assumed debt has been measured based on preliminary estimates using assumptions that management believes are reasonable, and based on information that is currently available.

As of May 20, 2020, the Existing Indenture was modified by a Supplemental Indenture (the Supplemental Indenture and the Existing Indenture, asso modified, the Indenture), pursuant to which Assertio (the Issuer) assumed the obligations as issuer of the Secured Notes and the subsidiaries of Assertio became guarantors of the Secured Notes. The Supplemental Indenture, among other things, provides for certain amendments to the restrictive covenants in the Indenture.
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Interest on the Secured Notes accrues at a rate of 13% per annum and is payable semi-annually in arrears on May 1 and November 1 of each year (each, a Payment Date). The Existing Indenture also requires amortization payments of outstanding principal on the Secured Notes equal to 10% perannum of the issued principal amount, payable semi-annually on each Payment DateDate.

The Secured Notes are senior secured obligations of the Issuer and are secured by a lien on substantially all assets of the Issuer and the guarantors. The stated maturity date of the Secured Notes is January 31, 2024. Upon the occurrence of a Change
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of Control, subject to certain conditions (as defined in the Existing Indenture), holders of the Secured Notes may require the Issuer to repurchase for cash all or part of their Secured Notes at a repurchase price equal to 100% of the principal amount of the Secured Notes to be repurchased, plus accrued and unpaid interest to the date of repurchase.

The IssuerCompany may redeem the Secured Notes at its option, in whole or in part from time to time, at a redemption price equal to 100% of the principal amount of the Secured Notes being redeemed, plus accrued and unpaid interest, if any, through the redemption date. No sinking fund is provided for the Secured Notes.

Pursuant to the Supplemental Indenture, Assertio and its restricted subsidiaries must also comply with certain covenants, including limitations on the issuance of debt; the issuance of preferred and/or disqualified stock; the payment of dividends and other restricted payments; the prepayment, redemption or repurchase of subordinated debt; mergers, amalgamations or consolidations; engaging in certain transactions with affiliates; and the making of investments. In addition, the Issuer must maintain a minimum level of consolidated liquidity, based on unrestricted cash on hand and availability under any revolving credit facility, equal to the greater of (1) the quotient of the outstanding principal amount of the Secured Notes divided by 9.5 and (2) $7.5 million. The Company was in compliance with its covenants with respect to the Secured Notes as of June 30, 2021.

On July 31, 2020, theThe Company voluntarily redeemed $10.0 million of aggregate principal plus accrued interest on itshad Senior Secured Notes due 2024.obligations of $75.5 million as of June 30, 2021, with $9.5 million classified as current and $66.0 million classified as non-current debt in the Company’s Condensed Consolidated Balance Sheets.

Royalty Rights Obligation

In accordance with the Zyla Merger, the Company assumed a royalty rights agreements (the Royalty Rights) with each of the holders of its Secured Notes pursuant to which the Company will pay the holders of the Secured Notes an aggregate 1.5% royalty on Net Sales (as defined in the Existing Indenture) through December 31, 2022.

The Royalty Rights were determined to be a freestanding element with respect to the Secured Notes and the Company is accounting for the Royalty Rights obligation relating to future royalties as a debt instrument.

The Company has Royalty Rights obligations of $2.9$3.1 million as of SeptemberJune 30, 2020,2021, with $1.2$2.4 million classified as current and $1.7$0.7 million classified as non-current debt in the Company’s Condensed Consolidated Balance Sheets.

The accounting for the Royalty Rights requires the Company to make certain estimates and assumptions about the future net sales. The estimates of the magnitude and timing of net sales are subject to significant variability due to the extended time period associated with the financing transaction and are thus subject to significant uncertainty.

Senior Notes
On April 2, 2015, the Company issued $575.0 million aggregate principal amount of senior secured notes (the Senior Notes) for aggregate gross proceeds of approximately $562.0 million pursuant to a Note Purchase Agreement dated March 12, 2015 (Note Purchase Agreement), among the Company and Deerfield Private Design Fund III, L.P., Deerfield Partners, L.P., Deerfield International Master Fund, L.P., Deerfield Special Situations Fund, L.P., Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., BioPharma Secured Investments III Holdings Cayman LP, Inteligo Bank Ltd. and Phemus Corporation (collectively, the Purchasers) and Deerfield Private Design Fund III, L.P., as collateral agent. The Company used $550.0 million of the net proceeds received upon the sale of the Senior Notes to fund a portion of the Purchase Price paid to Janssen Pharma in connection with the NUCYNTA acquisition.
The Senior Notes had a maturity date of April 14, 2021 (unless earlier prepaid or repurchased), were secured by substantially all of the assets of the Company and any subsidiary guarantors, and bore interest at the rate equal to the lesser of (i) 9.75% over the three month London Inter-Bank Offer Rate (LIBOR), subject to a floor of 1.0% and (ii) 11.95% (through the third anniversary of the purchase date) and 12.95% (thereafter). The interest rate was determined at the first business day of each fiscal quarter, commencing with the first such date following April 2, 2015. The interest rate for the three months ended September 30, 2020 and 2019 was 11.65% and 12.54%, respectively.


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As of February 2020, the Company had repaid in full all outstanding indebtedness, and terminated all commitments and obligations, under its Note Purchase Agreement. The Company used proceeds from the sale of Gralise and NUCYNTA to repay the outstanding principal of $162.5 million. In addition, the Company paid approximately $4.9 million and $4.4 million in prepayment premiums and accrued exit fees, respectively, plus accrued but unpaid interest. In connection with the termination of the Note Purchase Agreement, the Company was released from all security interests, liens and encumbrances under the Note Purchase Agreement.  
    
Convertible Notes

2.50% Convertible Senior Notes Due 2021
 
On September 9, 2014, the Company issued $345.0 million aggregate principal amount of 2.50%. Convertible Senior Notes Due 2021 (the 2021 Notes) which. The 2021 Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture dated September 9, 2014, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee), and mature on September 1, 2021, andunless earlier converted, redeemed, or repurchased. The 2021 Notes bear interest at the rate of 2.50% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2015.

On August 13, 2019, the Company exchanged (the Convertible Note Exchange) $200.0 million aggregate principal amount of the 2021 Notes for a combination of (a) its new $120.0 million aggregate principal amount of 5.0% Convertible Senior Notes due August 15, 2024 (the 2024 Notes), (b) an aggregate cash payment of $30.0 million, and (c) an aggregate of 15.8 million shares of the Company’s common stock. The Company did not receive any cash proceeds from the issuance of the 2024 Notes or the issuance of the shares of its common stock. Upon completion of the Convertible Note Exchange, the aggregate principal amount of the 2021 Notes was reduced by $200.0 million to $145.0 million, the unamortized debt discount and debt issuance costs was reduced by $26.1 million to $18.9 million and the carrying amount of the equity component was reduced by $6.2 million to $112.8 million.

On February 19, 2020, the Company entered into separate, privately negotiated purchase agreements (Purchase Agreements) with a limited number of holders of the Company’s currently outstanding 2021 Notes and 2024 Notes. The Company used proceeds from the sale of Gralise and NUCYNTA to repurchase $102.5 million aggregate principal amount of 2021 Notes for a cash payment plus accrued but unpaid interest. The repurchase of the 2021 Notes was accounted for in accordance with ASC 470-50, Debt Modifications and Extinguishments (ASC 470-50). During the first quarter 2020, the Company recognized a $10.3 million loss on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2021 Notes just prior to the repurchase plus transaction costs. The Company also recognized reacquisition of $0.3 million in additional paid-in capital related to the equity component of the 2021 Notes based on the excess of the fair value of total considerations provided against the fair value of the 2021 Notes just prior to the repurchase.

Notes. On April 8, 2020, the Company completed its public tender offers to purchase the 2021 Notes for cash$42.1 million in an amount equal to $995.00 per $1,000aggregate principal amount (exclusive of accrued and unpaid interest) from each registered holder of theoutstanding 2021 Notes. As a result of the tender offer, a total of $42.1December 31, 2020 and June 30, 2021, only $0.3 million in aggregate principal amount of the 2021 Notes were properly tenderedoutstanding and purchased by the Company. The tender offer of the 2021 Notes was accounted for in accordance with ASC 470-50. During the second quarter of 2020, the Company recognized a $3.9 million loss on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2021 Notes just prior to the tender offer plus transaction costs.

As a result of the February 2020 repurchase and the April 2020 tender offer transactions, the aggregate principal amount of the 2021 Notes was reduced to $0.3 million and the unamortized debt discount and debt issuance costs eliminated as of June 30, 2020. Based on the Company’s intention to settle in cash the total remaining outstanding aggregate principal of 2021 Notes, the liability component of the 2021 Notes iswere classified as part of current portion of long-term debt on the Company’s Condensed Consolidated Balance SheetSheets.
On or after March 1, 2021 to the close of business on the second scheduled trading day immediately preceding the maturity date, the holders of the 2021 Convertible Notes may convert all or any portion of their notes, in multiples of 1,000 principal amount, at the option of the holder. The initial conversion rate of 12.9963 shares of common stock per 1,000 principal amount of Convertible Notes is equivalent to a conversion price of approximately $76.96 per share of common stock. Upon conversion, the Company will pay or deliver, as of September 30, 2020.

The closing priceappropriate, cash, shares of the Company’s common stock did not exceed 130%or a combination of cash and shares of the $19.24Company’s common stock, at the Company’s election. If the conversion price,obligation is satisfied solely in
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cash or through payment and delivery of a combination of cash and shares, the amount of cash and shares, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for the required period during the three and nine months ended Septembereach trading day in a 40 trading day observation period. As of June 30, 2020. As a result,2021, none of the remaining 2021 Notes were not convertible as of September 30, 2020.had been converted.

5.00% Convertible Senior Notes Due 2024

On August 13, 2019, as part of the Convertible Note Exchange, the Company issued $120.0 million aggregate principal of Convertible Senior Notes Due
2024 Notes which mature on August 14,(the 2024 and bear interest at a rate of 5.0%, payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.


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Notes). On February 19, 2020, the Company entered into separate, privately negotiated purchase agreements (Purchase Agreements) with a limited number of holders of the Company’s currently outstanding 20212024 Notes and 2024 Notes. The Company used proceeds from the sale of Gralise and NUCYNTA to repurchase $85.5 million aggregate principal amount of 2024 Notes for a cash payment plus accrued but unpaid interest. The repurchase of the 2024 Notes was accounted for in accordance with ASC 470-50. During the first quarter 2020, the Company recognized a $21.3 million loss on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2024 Notes just prior to the repurchase plus transaction costs. The Company also recognized reacquisition of $16.8 million in additional paid-in capital related to the equity component of the 2024 Notes based on the excess of the fair value of total considerations provided against the fair value of the 2024 Notes just prior to the repurchase.

Notes. On April 8, 2020, the Company completed its public tender offers to purchase the 2024 Notes for cash in an amount equal to $995.00 per $1,000 principal amount (exclusive of accrued and unpaid interest) from each registered holder of the 2024 Notes. As a result of the tender offer, a total ofremaining $34.5 million in aggregate principal amount outstanding 2024 Notes. As of December 31, 2020 there were 0 outstanding aggregate principal amount of the 2024 Notes were properly tendered and purchased by the Company. The tender offer of the 2024 Notes was accounted for in accordance with ASC 470-50. During the second quarter of 2020, the Company recognized a $12.4 million loss on debt extinguishment, which represented the difference between the carrying value and the fair value of the 2024 Notes just prior to the tender offer plus transaction costs. The Company also recognized reacquisition of $2.7 million in additional paid-in capital related to the equity component of the 2024 Notes based on the excess of the fair value of total considerations provided against the fair value of the 2021 Notes just prior to the repurchase.Notes.

AsSenior Secured Notes

On April 2, 2015, the Company issued $575 million aggregate principal amount of senior secured notes pursuant to a result ofNote Purchase Agreement dated March 12, 2015 (Note Purchase Agreement). On February 13, 2020, the February 2020 repurchase and the April 2020 tender offer transactions, the 2024 Notes were settled and retiredCompany repaid in full with no principal amountall outstanding indebtedness, and the unamortized debt discountterminated all commitments and debt issuance costs remaining as of September 30, 2020.     obligations, under its Note Purchase Agreement.

Interest Expense

Debt discount debt issuance costs and royalty rights are amortized as interest expense using the effective interest method. The following table reflects debt related interest expense, net included in the UnauditedInterest expense in the Company’s Condensed Consolidated Statements of OperationsComprehensive Income for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Stated coupon interestStated coupon interest$2,938 $7,976 $7,714 $27,096 Stated coupon interest$2,557 $1,476 $5,170 $4,778 
Amortization of debt discount, debt issuance costs and royalty rights (Non-cash)103 5,870 5,614 18,090 
Other interest expense026082
Amortization of debt discount, and royalty rightsAmortization of debt discount, and royalty rights48 125 1185,511
Total interest expenseTotal interest expense$3,041$13,872$13,328$45,268Total interest expense$2,605$1,601$5,288$10,289


NOTE 10.  STOCK-BASED COMPENSATION
    
The Company’s stock-based compensation generally includes stock options, restricted stock units (RSUs), performance share units (PSUs), and purchases under the Company’s ESPP.employee stock purchase program (ESPP).

The following table reflects stock-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Comprehensive Income for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):.

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Cost of salesCost of sales$2 $28 $43 $78 Cost of sales$0$18 $0 $41 
Research and development expenseResearch and development expense18 165 261 514 Research and development expense080 0 243 
Selling, general and administrative expenseSelling, general and administrative expense1,491 2,811 5,735 7,748 Selling, general and administrative expense9572,496 1,729 4,244 
Restructuring chargesRestructuring charges0 0 999 0 Restructuring charges0999 0 999 
TotalTotal$1,511 $3,004 $7,038 $8,340 Total$957$3,593 $1,729 5,527 

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During the ninesix months ended SeptemberJune 30, 20202021 the Company granted 6.31.7 million RSUs at an average fair market value of $0.96$3.54 per share and 5.4 million options at an average fair market value of $0.53 per share, which includes 5.0 million in options granted as part of the Zyla Merger.share.


NOTE 11.  LEASES

TheAs of June 30, 2021, the Company has non-cancelable operating leases for its offices and laboratory facility, automobiles used by its sales force,certain office equipment. The Company has the right to renew the term of the Lake Forest lease for 1 period of five years, provided that written notice
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is made to the Landlord no later than twelve months prior to the expiration of the initial term of the lease which is on December 31, 2023. In connection with the Zyla Merger, the Company assumed an operating lease for offices in Wayne, Pennsylvania. The Wayne, Pennsylvania office lease terminates in 2022 and certain operating leases for office equipment.

will not be renewed. The Company relocated its corporate headquarters from Newark, California to Lake Forest, Illinois in 2018 and subsequently entered into 2two subleases which,
together, account for the entirety of the Newark facility. Each sublease contained abated rent periods resulting in reduced operating lease cash flows through May 2019. Operating lease costs and sublease income related to the Newark facility are accounted for in Other gain (loss) in the Condensed Consolidated Statements of Comprehensive Income. The Company has the right to renew the term of the Lake Forest lease for 1 period of five years, provided that written notice is made to the Landlord no later than twelve months prior to the expiration of the initial term of the Lease. In connection with the Zyla Merger, the Company assumed an operating lease for offices in Wayne, Pennsylvania and operating leases for automobiles used by its sales force.

The following table reflects lease expense for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
Financial Statement Classification2020201920202019Financial Statement Classification2021202020212020
Operating lease costOperating lease costSelling, general and administrative expenses$424 $175 $797 $540 Operating lease costSelling, general and administrative expenses$91 $216 $202 $373 
Operating lease costOperating lease costOther gain (loss)148 148 443 443 Operating lease costOther gain (loss), net148 147 295 295 
Total lease costTotal lease cost$572 $323 $1,240 $983 Total lease cost$239 $363 $497 $668 
Sublease IncomeSublease IncomeOther gain (loss)$347 $362 $1,040 $1,085 Sublease IncomeOther gain (loss), net$347 $346 $693 $693 
The following table reflects supplemental cash flow information related to leases for the three and six ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases697 606 1,462 1,224 
The following table reflects supplemental balance sheet information related to leases as of June 30, 2021 and December 31, 2020 (in thousands):
Financial Statement ClassificationJune 30,
2021		December 31,
2020
Liabilities
Current operating lease liabilitiesOther current liabilities$2,340 $2,683 
Noncurrent operating lease liabilitiesOther long-term liabilities1,290 2,815 
Total lease liabilities$3,630 $5,498 


NOTE 12.  COMMITMENTS AND CONTINGENCIES

Cosette Pharmaceuticals Supply Agreement

Pursuant to the Zyla Merger, the Company assumed a Collaborative License, Exclusive Manufacture and Global Supply Agreement with Cosette Pharmaceuticals, Inc. (formerly G&W Laboratories, Inc.) (the “Supply Agreement”) for the manufacture and supply of INDOCIN Suppositories to Zyla for commercial distribution in the United States. The Company is obligated to purchase all of its requirements for INDOCIN Suppositories from Cosette Pharmaceuticals, Inc., and are required to meet minimum purchase requirements for the calendar year 2020. The term of the Supply Agreement extends through July 31, 2023, and there are no minimum requirements in any of the other subsequent years. Total commitments to Cosette Pharmaceuticals, Inc are $6.5 million in 2020.

Catalent Pharma Solutions Commercial Supply Agreement

Pursuant to the Zyla Merger, the Company assumed a Commercial Supply Agreement (“CSA”) with Catalent Pharma Solutions (“Catalent”) for the manufacture of certain specified products. Based on the CSA, the Company is obligated to purchase certain minimum amounts of manufacturing and product maintenance services on an annual basis for the term of the contract (“Minimum Requirement”) through September 2021. Total commitments to Catalent, which have been fulfilled as of the nine months ended September 30, 2020, are $1.0 million through the period ending September 2021.

Jubilant HollisterStier Manufacturing and Supply Agreement

Pursuant to the Zyla Merger, the Company assumed a Manufacturing and Supply Agreement (the “Agreement”) with Jubilant HollisterStier LLC (“JHS”) pursuant to which the Company engaged JHS to provide certain services related to the manufacture and supply of SPRIX® (ketorolac tromethamine) Nasal SpraySPRIX for the Company’s commercial use. Under the Agreement, JHS will be responsible for supplying a minimum of 75% of the Company’s annual requirements of SPRIX through July 30, 2022. The Company

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has agreed to purchase a minimum number of batches of SPRIX per calendar year from JHS over the term of the Agreement. Total commitments to JHS are $2.9approximately $1.8 million through the period ending July 30, 2022.2022 and are expected to be met.

Cosette Pharmaceuticals Supply Agreement
Pursuant to the Zyla Merger, the Company assumed the following rightsa Collaborative License, Exclusive Manufacture and obligations.

PurchaseGlobal Supply Agreement with IrokoCosette Pharmaceuticals, Inc.

(formerly G&W Laboratories, Inc.) (the “Supply Agreement”) for the manufacture and supply of INDOCIN Suppositories to Zyla for commercial distribution in the United States. On October 30, 2018, ZylaJuly 9, 2021, the Company and Cosette entered into a Purchase Agreement with Iroko pursuant to which, upon the terms and subjectAmendment No. 3 to the conditions set forth therein, Zyla acquired certain assetsSupply Agreement, to among other things, extend the expiration date of the Supply Agreement from July 31, 2023 to July 9, 2028. The Company is obligated to purchase all of its requirements for INDOCIN Suppositories from Cosette Pharmaceuticals, Inc., and rightsis required to meet minimum purchase
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requirements each calendar year during the extended term of the agreement. Total commitments to inCosette are approximately $6.3 million annually through the Purchase Agreement asend of the “Transferred Assets,” and assumed certain liabilities of Iroko, referred to in the Purchase Agreement as the “Assumed Liabilities,” including assets related to Iroko’s marketed products, the SOLUMATRIX products under the iCeutica License Agreement and the INDOCIN products. In September 2020, the Company terminated its iCeutica License related to SOLUMATRIX technology and certain other rights of iCeutica. The Iroko Products Acquisition was completed by Zyla on January 31, 2019.

contract term.

Legal Matters
General
The Company is currently involved in various lawsuits, claims, investigations and other legal proceedings that arise in the ordinary course of business. The Company recognizes a loss contingency provision in its financial statements when it concludes that a contingent liability is probable, and the amount thereof is estimable. Costs associated with our involvement in legal proceedings are expensed as incurred. Based upon the status of the cases described below, management’s assessments of the likelihood of damages, and the advice of counsel, the Company recognized a loss contingency provision of $11.3 million in the three and six months ended June 30, 2021. Amounts accrued for legal contingencies are based on management’s best estimate of a loss and often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. The Company will continue to monitor each matter and adjust accruals as might be warranted based on new information and further developments in accordance with ASC 450-20- 25. For matters discussed below for which a loss is not probable, or a probable loss cannot be reasonably estimated, no liability has been recorded. Legal expenses are recorded in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive Income and the related accruals are recorded in Accrued Liabilities in the Company’s Condensed Consolidated Balance Sheets.

Other than matters that we have disclosed below, the Company may from time to time become party to actions, claims, suits, investigations or proceedings arising from the ordinary course of its business, including actions with respect to intellectual property claims, breach of contract claims, labor and employment claims and other matters. The Company may also become party to further litigation in federal and state courts relating to opioid drugs. Although actions, claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, other than the matters set forth below, the Company is not currently involved in any matters that the Company believes may have a material adverse effect on its business, results of operations or financial condition. However, regardless of the outcome, litigation can have an adverse impact on the Company because of associated cost and diversion of management time.


Glumetza Antitrust Litigation
Antitrust class actions and related direct antitrust actions have been filed in the Northern District of California against the Company and several other defendants relating to theour former drug Glumetza®. The named class representatives in the currently pending actions include Meijer, Inc., Bi-Lo, LLC, Winn-Dixie Logistics, Inc., City of Providence, and KPH Healthcare Services, Inc. These class representatives seek to represent a putative class of direct purchasers of Glumetza. In addition, several retailers, including CVS Pharmacy, Inc., Rite Aid Corporation, Walgreen Co., the Kroger Co., the Albertsons Companies, Inc., H-E-B, L.P., and Hy-Vee, Inc., have filed substantially similar direct antitrust claims based on alleged assignments of claims from direct purchaser wholesalers. On December 23, 2019, the Company filed a motion to dismiss all claims in the actions. That motion was heard by the District Court on February 20, 2020. On March 5, 2020 the District Court issued an order denying the motion to dismiss. However, based on the order on the motion, claims previously filed by a putative class of end payor plaintiffs were voluntarily dismissed.

On July 30, 2020, Humana Inc. also filed a complaint against the Company in the Northern District of California alleging similar claims related to Glumetza®. On February 2, 2021, the District Court dismissed Humana’s state-law antitrust claims, but permitted Humana to proceed on its federal claims. On February 8, 2021, Humana refiled those state-law claims against the Company and several other defendants in the Superior Court for the State of California in the County of Alameda.

These antitrust cases arise out of a Settlement and License Agreement (the Settlement) that the Company, Santarus, Inc. (Santarus) and Lupin Limited (Lupin) entered into in February 2012 that resolved patent infringement litigation filed by the Company against Lupin regarding Lupin’s Abbreviated New Drug Application for generic 500 mg and 1000 mg tablets of Glumetza. The antitrust plaintiffs allege, among other things, that the Settlement violated the antitrust laws because it allegedly included a “reverse payment” that caused Lupin to delay its entry in the market with a generic version of Glumetza. The alleged “reverse payment” is an alleged commitment on the part of the settling parties not to launch an authorized generic version of Glumetza for a certain period. The antitrust plaintiffs allege that the Company and its co-defendants, which include Lupin as well as Bausch Health (the alleged successor in interest to Santarus) are liable for damages under the antitrust laws for overcharges that the antitrust plaintiffs allege they paid when they purchased the branded version of Glumetza® due to delayed generic entry. Plaintiffs seek treble damages for alleged past harm, attorneys’ fees and costs.
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FactIn the federal litigation, fact and expert discovery hashave now closed, and the parties are currently conducting expert discovery.court heard summary judgment arguments on April 22, 2021. On May 6, 2021, the court denied all motions for summary judgment. The federal court granted class certification in the direct purchaser action on August 15, 2020. In the event that the federal case proceeds to trial, that trial is expected to occur on or about October 2021. With respect to the newly-filed Humana case in California state court, the Company and other defendants filed a motion to dismiss all claims in the action on April 16, 2021. The Company intends to defend itself vigorously in these matters. A liability for this matter has been recorded in the financial statements.

Securities Class Action Lawsuit and Related Matters

On August 23, 2017, the Company, 2 individuals who formerly served as its chief executive officer and president, and its former chief financial officer were named as defendants in a purported federal securities law class action filed in the U.S. District Court for the Northern District of California (the District Court). The action (Huang v. Depomed et al., No. 4:17-cv-4830-JST, N.D. Cal.) alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 relating to certain prior disclosures of the Company about its business, compliance, and operational policies and practices concerning the sales and marketing of its opioid products and contends that the conduct supporting the alleged violations affected the value of Company common stock and is seeking damages and other relief. In an amended complaint filed on February 6, 2018, the lead plaintiff (referred to in its pleadings as the Depomed Investor Group), which seeks to represent a class consisting of all purchasers of Company common stock between July 29, 2015 and August 7, 2017, asserted the same claims arising out of the same and similar disclosures against the Company and the same individuals as were involved

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in the original complaint. The Company and the individuals filed a motion to dismiss the amended complaint on April 9, 2018. On March 18, 2019, the District Court granted the motion to dismiss without prejudice, and the plaintiffs filed a second amended complaint on May 2, 2019. The second amended complaint asserted the same claims arising out of the same and similar disclosures against the Company and the same individuals as were involved in the original complaint. The Company and the individuals filed a motion to dismiss the second amended complaint on June 17, 2019, and the District Court granted that motion with prejudice on March 11, 2020. On April 9, 2020, the plaintiffs filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit. Plaintiffs-appellants filedThe parties completed their opening briefbriefing of the appeal on September 23, 2020, and defendants-appellees filed their response on October 23,December 14, 2020. On March 1, 2021, the court granted the parties’ joint motion to stay the appeal pending settlement discussions. On July 30, 2021, the Company reached an agreement to settle the matter subject to District Court approval. The Company believes thatparties are in the action is without merit and intends to contest it vigorously.process of seeking preliminary District Court approval.

In addition, 5 shareholder derivative actions were filed on behalf of the Company against its officers and directors for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of the federal securities laws. The claims arise out of the same factual allegations as the purported federal securities class action described above. The first derivative action was filed in the Superior Court of California, Alameda County on September 29, 2017 (Singh v. Higgins et al., RG17877280). The second and third actions were filed in the Northern District of California on November 10, 2017 (Solak v. Higgins et al., No. 3:17-cv-6546-JST) and November 15, 2017 (Ross v. Fogarty et al., No. 3:17-cv-6592- JST). The fourth action was filed in the District of Delaware on December 21, 2018 (Lutz v. Higgins et al, No. 18-2044-CFC). The fifth derivative action was filed in the Superior Court of California, Alameda County on January 28, 2019 (Youse v. Higgins et al, No. HG19004409). On December 7, 2017, the plaintiffs in Solak v. Higgins, et al. voluntarily dismissed the action. On July 12, 2019, the Singh and Youse actions were consolidated, and these plaintiffs have indicated that they intend to file an amended consolidated complaint.consolidated. All of the derivative actions were stayed pending the resolution of the class action, and the stays have been extended pending the resolution of the appeal. On July 30, 2021, the Company reached an agreement to settle these matters subject to court approval.The Company believes thatparties are in the process of seeking preliminary court approval. A liability for these actions are without meritmatters and intends to contest them vigorously.the securities law class action described in the preceding paragraph has been recorded in the financial statements.

Opioid-Related Request and Subpoenas

As a result of the greater public awareness of the public health issue of opioid abuse, there has been increased scrutiny of, and investigation into, the commercial practices of opioid manufacturers generally by federal, state, and local regulatory and governmental agencies. In March 2017, the CompanyCompany’s subsidiary Assertio Therapeutics, Inc. (Assertio Therapeutics) received a letter from then-Sen. Claire McCaskill (D-MO), the then-Ranking Member on the U.S. Senate Committee on Homeland Security and Governmental Affairs, requesting certain information from the Company regarding itsAssertio Therapeutics’ historical commercialization of opioid products. The CompanyAssertio Therapeutics voluntarily furnished information responsive to Sen. McCaskill’s request. Since 2017, the CompanyAssertio Therapeutics has received and responded to subpoenas from the U.S. Department of Justice (DOJ) seeking documents and information regarding its historical sales and marketing of opioid products. The CompanyAssertio Therapeutics has also received and responded to subpoenas or civil investigative demands focused on its historical promotion and sales of Lazanda, NUCYNTA, and NUCYNTA ER from various state attorneys general seeking documents and information regarding the Company’s
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Assertio Therapeutics’ historical sales and marketing of opioid products. In addition, the CompanyAssertio Therapeutics received and responded to a subpoena from the State of California Department of Insurance (CDI) seeking information relating to its historical sales and marketing of Lazanda. The CDI subpoena also seeks information on Gralise, a non-opioid product formerly in the Company’sAssertio Therapeutics’ portfolio. In addition, the CompanyAssertio Therapeutics received and responded to a subpoena from the New York Department of Financial Services seeking information relating to its historical sales and marketing of opioid products. The Company also from time to time receives and complies with subpoenas from governmental authorities related to investigations primarily focused on third parties, including healthcare practitioners. The CompanyAssertio Therapeutics is cooperating with the foregoing governmental investigations and inquiries.

Multidistrict Opioid Litigation
A number of pharmaceutical manufacturers, distributors and other industry participants have been named in numerous lawsuits around the country brought by various groups of plaintiffs, including city and county governments, hospitals, individuals and others. In general, the lawsuits assert claims arising from defendants’ manufacturing, distributing, marketing and promoting of FDA-approved opioid drugs. The specific legal theories asserted vary from case to case, but most of the lawsuits generally include federal andand/or state statutory claims, as well as claims arising under state common law. Plaintiffs seek various forms of damages, injunctive and other relief and attorneys’ fees and costs.
For such cases filed in or removed to federal court, the Judicial Panel on Multi-District Litigation issued an order in December 2017, establishing a Multi-District Litigation court (MDL Court) in the Northern District of Ohio (In re National Prescription Opiate Litigation, Case No. 1:17-MD-2804). Since that time, more than 20002,000 such cases that were originally filed in U.S. District Courts, or removed to federal court from state court, have been filed in or transferred to the MDL Court. The CompanyAssertio Therapeutics is currently involved in a subset of the lawsuits that have been transferred to the MDL Court. The Company is also involvedfiled in other federal lawsuits that have not yet beenor transferred to the MDL Court pending a determination, as well as one additional federal lawsuit in the Eastern District of whether those lawsuits
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should proceed in state or other originating court.. Plaintiffs may file additional lawsuits in which the Company may be named. Plaintiffs in the pending federal cases involving the Company include individuals,individuals; county, municipal and municipalother governmental entities,entities; employee benefit plans, health insurance providers and other payors; hospitals, health clinics and other health insurance providerscare providers; Native American tribes; and non-profit organizations who assert, for themselves and in some cases for a putative class, federal and state statutory claims and state common law claims, such as conspiracy, nuisance, fraud, negligence, gross negligence, negligent and intentional infliction of emotional distress, deceptive trade practices, and products liability claims (defective design/failure to warn). In these cases, plaintiffs seek a variety of forms of relief, including actual damages to compensate for alleged personal injuries and for alleged past and future costs such as to provide care and services to persons with opioid-related addiction or related conditions, injunctive relief, including to prohibit alleged deceptive marketing practices and abate an alleged nuisance, establishment of a compensation fund, establishment of medical monitoring programs, disgorgement of profits, punitive and statutory treble damages, and attorneys’ fees and costs. No trial date has been set in any of these lawsuits, which are at an early stage of proceedings. The Company intends to defend itself vigorously in these matters.

State Opioid Litigation

Related to the cases in the MDL Court noted above, there have been hundreds of similar lawsuits filed in state courts around the country, in which various groups of plaintiffs assert opioid-drug related claims against similar groups of defendants. The CompanyAssertio Therapeutics is currently named in a subset of those cases, including cases in Alabama, Arkansas, Mississippi, Missouri, Nevada, Pennsylvania, Texas and Utah. Plaintiffs may file additional lawsuits in which the CompanyAssertio Therapeutics may be named. In the pending cases involving the Company,Assertio Therapeutics, plaintiffs are asserting state common law and statutory claims against the defendants similar in nature to the claims asserted in the MDL cases. Plaintiffs are seeking past and futureactual damages, disgorgement of profits, injunctive relief, punitive and statutory treble damages, and attorneys’ fees and costs. No trial dateThe state lawsuits in which Assertio Therapeutics has been set in any of these lawsuits, whichserved are generally each at an early stage of proceedings (discovery in one case has commenced and is scheduled to conclude December 31, 2021).proceedings. The Company intends to defend itself vigorously in these matters.
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Insurance Litigation

On January 15, 2019, the Company was named as a defendant in a declaratory judgment action filed by Navigators Specialty Insurance Company (Navigators) in the U.S. District Court for the Northern District of California (Case No. 3:19-cv-255). Navigators is the Company’s primary product liability insurer. Navigators iswas seeking declaratory judgment that opioid litigation claims noticed by the Company (as further described above under “Multidistrict Opioid Litigation” and “State Opioid Litigation”) are not covered by the Company’s life sciences liability policies with Navigators. TheOn February 3, 2021, the Company entered into a Confidential Settlement Agreement and Mutual Release with Navigators to resolve the declaratory judgment action and the Company’s counterclaims. Pursuant to the Settlement Agreement, the parties settled and the coverage action was dismissed without prejudice.

During the first quarter of 2021, the Company received $5.0 million in insurance reimbursement for previous opioid-related spend, which was recognized within Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income.

On July 16, 2021, the Company filed a counterclaim on February 28, 2019. Navigators filed an answer on April 11, 2019.complaint for declaratory relief against one of its excess products liability insurers, Lloyd’s of London Newline Syndicate 1218 and related entities (Newline), in the Superior Court of the State of California for the County of Alameda. The litigationCompany is ongoing. Summaryseeking a declaratory judgment briefing, which will determine whether Navigatorsthat Newline has a duty to defend the Company inor, alternatively, to reimburse the underlyingCompany’s attorneys’ fees and other defense costs for opioid litigation was completed atclaims noticed by the end of October 2020. The Company expects to receive a ruling in 2021.Company.

CAMBIA® ANDA Litigation

On July 16, 2020, the Company and APR Applied Pharma Research SA (APR), received notice from Patrin Pharma Inc. (Patrin) advising that Patrin had filed an Abbreviated New Drug Application (ANDA) seeking to market a generic version of CAMBIA® 50 mg prior to the expiration of U.S. patents in June 2026 as listed in the FDA “Orange Book” for CAMBIA (Orange Book Patents). The Orange Book Patents are licensed to the Company by APR. On August 27, 2020, the Company and APR filed a lawsuit against Patrin in the U.S. District Court for the Northern District of Illinois, Eastern Division, seeking an injunction to prevent approval of the Patrin ANDA. The lawsuit alleges that Patrin has infringed the Orange Book Patents by filing an ANDA with a Paragraph IV Certification seeking approval from the FDA to market a generic version of CAMBIA prior to the expiration of the patents. The commencement of the patent infringement suit stays or bars the FDA from approving Patrin’s ANDA for 30 months or until an earlier district court decision that each of the patents is invalid or not infringed. On September 18, 2020, Patrin filed its answer including affirmative defenses and counterclaims. On October 9, 2020, the Company and APR filed an answer to Patrin’s counterclaims. Trial has not yet been scheduled inOn January 21, 2021, the action. Thecourt stayed all case deadlines pending settlement discussions between the parties. On March 8, 2021, the Company intends to vigorously enforce its intellectual property rights, but cannot predictentered into a confidential settlement agreement with Patrin. On March 10, 2021, the outcomeCourt granted the parties’ agreed motion for entry of thisJudgment and Order of Permanent Injunction. This settlement concludes all ongoing ANDA litigation.

General

The Company cannot reasonably predict the outcome of the legal proceedings described above, nor can the Company estimate the amount of loss, range of loss or other adverse consequence, if any, that may result from these proceedings or the amount of any gain in the event the Company prevails in litigation involving a claim for damages. As such the Company is not currently able to estimate the impact of the above litigation on its financial position or results of operations.

The Company may from time to time become party to actions, claims, suits, investigations or proceedings arising from the ordinary course of its business, including actions with respect to intellectual property claims, breach of contract claims,

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labor and employment claims and other matters. The Company may also become party to further litigation in federal and state courts relating to opioid drugs. Although actions, claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, other than the matters set forth above, the Company is not currently involved in any matters that the Company believes may have a material adverse effect on its business, results of operations or financial condition. However, regardless of the outcome, litigation can have an adverse impact on the Company because of associated cost and diversion of management time.

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NOTE 13.  RESTRUCTURING CHARGES
The Company continually evaluates its operations to identify opportunities to streamline operations and optimize operating efficiencies as an anticipation to changes in the business environment.

    On December 15, 2020, the Company announced the December 2020 Plan which was designed to substantially reduce the Company’s operating footprint through the reduction of its staff at our headquarters office and remote sales force. The Company substantially completed the workforce reduction in the first quarter of 2021.

In November 2019, the Company announced an acceleration of cost-saving initiatives that included a decision to discontinue its relationship with its contract sales organization, a reduction in the use of certain outside vendors and consultants, and the reorganization of certain functions resulting in a reduction of staff at its headquarters office and remote positions during the fourth quarter of 2019. As a result, $3.9 million of severance and benefits costs for the reduction of staff were recognized during the year ended December 31, 2019. The 2019 cost-saving initiative was substantially complete as of December 31, 2019.

In April 2020, the Company executed a limited reduction to its sales force due to the impact of COVID-19 on its ability to see in-person providers who prescribe our products. As a result, $0.6 million of severance and benefits costs was recognized, and the initiative completed during the second quarter of 2020.

Subsequent to the Zyla Merger in May 2020, the Company began implementing reorganization plans of its workforce and other restructuring activities to realize the synergies of the Zyla Merger and to re-align resources to strategic areas and drive growth.growth (Zyla Merger Reorganization). The reorganization plan primarily focused on reduction of staff atCompany completed the Company’s headquarters offices. As a result, $5.1 million of severancerestructuring activities in 2020 and benefitsdoes not expect to incur significant costs $1.0 million of stock-based compensation expense associated with equity modifications for certain executives and $0.1 million of other exit costs were recognized as restructuring cost duringrelated to the nine months ended September 30, 2020.
Zyla Merger Reorganization in 2021.

    The following table reflects total expenses related to restructuring activities recognized within the Condensed
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Consolidated Statement of Comprehensive Income as restructuring costs for the three and nine months ended September 30, 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Employee compensation costs$0 $5,435 $876 $5,435 
Equity compensation costs0 999 0 999 
Other exit costs0 85 213 85 
Total restructuring costs$0 $6,519 $1,089 $6,519 

Three Months Ended September 30,Nine Months Ended September 30,
20202020
Employee compensation costs$260 $5,695 
Equity compensation costs0 999 
Other exit costs8 93 
Total restructuring costs$268 $6,787 


The following table reflects cash activity relating to the Company’s accrued restructurerestructuring cost as of SeptemberJune 30, 20202021 (in thousands):
 Employee compensation costsOther exit costsTotal
Balance as of December 31, 2019$3,763 $0 $3,763 
Cash paid(2,431)0 (2,431)
Balance as of March 31, 2020$1,332 $0 $1,332 
Net accrual additions5,435 85 5,520 
Cash paid(1,484)(85)(1,569)
Balance at June 30, 2020$5,283 $0 $5,283 
Net accrual additions260 8 268 
Cash paid(2,596)(8)(2,604)
Balance as of September 30, 2020$2,947 $0 $2,947 
 Employee compensation costsOther exit costsTotal
Balance as of December 31, 2020$8,744 $0 $8,744 
Restructuring charges876 213 1,089 
Cash paid(5,879)(213)(6,092)
Balance as of March 31, 2021$3,741 $0 $3,741 
Cash paid(1,544)0 (1,544)
Balance as of June 30, 2021$2,197 $0 $2,197 
 
As of September 30, 2020, the remaining accrued restructuring liability balance of $2.9 million related to Zyla Merger restructuring activities and was classified as accrued liabilities in the Condensed Consolidated Balance Sheet.



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NOTE 14.  NET INCOME (LOSS) PER SHARE

Basic net (loss) income per share is calculated by dividing the net (loss) income by the weighted-average number of shares of common stock outstanding during the period. Upon consummation of the Zyla Merger in May 2020, the Company inherited outstanding Zyla warrants to purchase Zyla common stock, which were converted into the right to purchase shares of Assertio’s common stock. As these warrants are exercisable at any time at an exercise price of $0.0016 per share, they represent contingently issuable shares and therefore are included in the number of outstanding shares used for the computation of basic income per share. There were 392,095 unexercised shares of common stock issuable upon the exercise of warrants as of June 30, 2021.

Diluted net (loss) income per share is calculated by dividing the net (loss) income by the weighted-average number of shares of common stock outstanding during the period, plus potentially dilutive common shares, consisting of stock options, awards, and equivalents and convertible debt. The 12,430,913 shares of common stock issuable upon the exercise of warrants are included in the number of outstanding shares used for the computation of basic and diluted loss per share (see Note 2, Acquisitions). The Company uses the treasury-stock method to compute diluted earnings per share with respect to its stock options and equivalents. The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt. For purposes of this calculation, options to purchase stock are considered to be potential common shares and are only included in the calculation of diluted net (loss) income per share when their effect is dilutive.

The following table reflects the calculation of basic and diluted earnings per common share for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands, except for per share amounts):
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 Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Basic net income (loss) per share  
Net (loss) income$(14,169)$(34,499)$(9,625)$6,731 
Weighted average common shares and warrants outstanding44,706 24,640 41,321 22,459 
Basic net (loss) income per share$(0.32)$(1.40)$(0.23)$0.30 
Diluted net income (loss) per share
Net (loss) income$(14,169)$(34,499)$(9,625)$6,731 
Weighted average common shares and share equivalents outstanding44,706 24,640 41,321 22,459 
Add: effect of dilutive stock options, awards, and equivalents0 0 0 100 
Diluted net (loss) income per share$(0.32)$(1.40)$(0.23)$0.30 

 Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Basic net income (loss) per share  
Net (loss) income$(10,522)$3,331 $(3,791)$(24,575)
Weighted average common shares and warrants outstanding119,564 72,747 99,832 67,332 
Basic net (loss) income per share$(0.09)$0.05 $(0.04)$(0.36)
Diluted net income (loss) per share
Net (loss) income$(10,522)$3,331 $(3,791)$(24,575)
Weighted average common shares and warrants outstanding119,564 72,747 99,832 67,332 
Add: effect of dilutive stock options, awards, and equivalents0 0 0 0 
Denominator for diluted income (loss) per share119,564 72,747 99,832 67,332 
Diluted net (loss) income per share$(0.09)$0.05 $(0.04)$(0.36)
The following table reflects outstanding potentially dilutive common shares that are not included in the computation of diluted net income (loss) per share, because to do so would be anti-dilutive, for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
2.5% Convertible Notes debt 20214 59 4 671 
5.0% Convertible Notes debt 20240 276 0 3,435 
Stock options, awards and equivalents2,924 2,625 2,899 1,957 
Total potentially dilutive common shares2,928 2,960 2,903 6,063 

 Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
2.5% Convertible Notes debt 202117 12,313 1,789 16,038 
5.0% Convertible Notes debt 20240 20,262 9,125 6,828 
Stock options, awards and equivalents12,253 6,718 9,911 6,618 
Total potentially dilutive common shares12,270 39,293 20,825 29,484 

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NOTE 15.  FAIR VALUE

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

•Level 1: Quoted prices in active markets for identical assets or liabilities.
•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table reflects the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of SeptemberJune 30, 20202021 and December 31, 20192020 (in thousands):

September 30, 2020Financial Statement ClassificationLevel 1Level 2Level 3Total
Assets:
Money market fundsCash and cash equivalents$77 $0 $0 $77 
Total$77 $0 $0 $77 
June 30, 2021June 30, 2021Financial Statement ClassificationLevel 1Level 2Level 3Total
Liabilities:Liabilities:Liabilities:
Short-term contingent considerationShort-term contingent considerationContingent consideration, current portion$0 $0 $6,475 $6,475 Short-term contingent considerationContingent consideration, current portion$0 $0 $6,850 $6,850 
Long-term contingent considerationLong-term contingent considerationContingent consideration0 0 35,188 35,188 Long-term contingent considerationContingent consideration0 0 30,809 30,809 
TotalTotal$0 $0 $41,663 $41,663 Total$0 $0 $37,659 $37,659 

December 31, 2019Financial Statement ClassificationLevel 1Level 2Level 3Total
December 31, 2020December 31, 2020Financial Statement ClassificationLevel 1Level 2Level 3Total
Assets:Assets:Assets:
Collegium warrantsInvestments$0 $9,629 $0 $9,629 
Money market fundsMoney market fundsCash and cash equivalents$77 $0 $0 $77 
TotalTotal$0 $9,629 $0 $9,629 Total$77 $0 $0 $77 
Liabilities:Liabilities:Liabilities:
Contingent considerationContingent consideration liability$0 $0 $168 $168 
Short-term contingent considerationShort-term contingent considerationContingent consideration, current portion$0 $0 $6,776 $6,776 
Long-term contingent considerationLong-term contingent considerationContingent consideration0 0 31,776 31,776 
TotalTotal$0 $0 $168 $168 Total$0 $0 $38,552 $38,552 
    
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Cash equivalents consisted of money market funds with overnight liquidity and no stated maturities. The Company classified cash equivalents as Level 1, due to their short-term maturity, and measured the fair value based on quoted prices in active markets for identical assets.

Pursuant to the May 2020 Zyla Merger, the Company assumed a contingent consideration obligation which is measured at fair value. The contingent consideration fair value represents the estimated fair value of the royalty payments (Royalty Consideration) owed by the Company to Iroko. The Company has obligations to make contingent payment consideration payments for future royalties to Iroko based upon annual INDOCIN productProduct net sales over $20.0 million. The Company recorded the fair value of these contingent liabilities, based on the likelihood of contingent earn-out payments. The earn-out payments are subsequently remeasured to fair value each reporting date. The Company classified the acquisition-related contingent consideration liabilities to be settled in cash as Level 3, due to the lack of relevant observable inputs and market activity. Changes in assumptions described above could have an impact on the payout of contingent consideration. As of SeptemberJune 30, 2020, the balance of assumed2021, INDOCIN Product contingent consideration from the Zyla Merger was $41.7$37.5 million with $6.5$6.9 million classified as short-term and $35.2$30.6 million classified as long-term Contingent Consideration,contingent consideration, respectively, in the Condensed Consolidated Balance Sheet.

During the three and six months ended June 30, 2021 the Company recognized a charge of $2.2 million and $1.6 million, respectively, for the change in fair value of contingent consideration, which was recognized in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive Income. The fair value of the contingent consideration at the Zyla Merger date wasis determined using an option pricing model under the income approach based on estimated INDOCIN product revenues over 10 years,through January 2029 and discounted to present value at a rate of 10.0%.value. The fair value of the contingent consideration is remeasured each reporting period, with changessignificant assumptions used in the fair value

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resulting from a change in the underlying inputs are recognized in operating expenses until the contingent consideration arrangement is settled. The valuation inputs utilized to estimate the fair value of the contingent consideration as of SeptemberJune 30, 20202021 included a weighted average costrevenue volatility of capital40.0%, discount rate of 10.5%7.0%, credit spread of 5.2% and updated projections of future INDOCIN Product revenues. Changes in the fair value of contingent consideration resulting from the passage of time are recorded within change in fair value of contingent consideration on the Condensed Consolidated Statement of Comprehensive Income, until the contingent consideration is settled.

The fair valueContingent consideration related to CAMBIA was $0.2 million as of the warrants to purchase Collegium’s common stock was calculated using the Black-Scholes option pricing model. As of the first quarter of 2020, the significant inputs included the fair value of Collegium’s common stock of $16.33, an expected term of 2.61 yearsJune 30, 2021 and a risk-free rate of 0.27%. The expected term was based on the remaining contractual period of 2.61 years, and the volatility was determined using Collegium’s historical common stock volatility over the expected term.

In May 2020, the Company sold the Collegium warrants for an aggregate purchase price of $6.0 million to Armistice Capital Mater Fund, Ltd. As a result, the Company derecognized the remaining carrying value of $6.5 million of the financial asset and recognized a net loss of approximately $0.5 million, recorded within other gain (loss) on the Condensed Consolidated Statement of Comprehensive Income, in the second quarter of 2020.

The carrying value of the Company’s debt for the period ended SeptemberJune 30, 20202021 approximates its fair value. When determining the estimated fair value of the Company’s debt, the Company uses a commonly accepted valuation methodology and market-based risk measurements that are indirectly observable, such as credit risk. 
 
There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and ninesix months ended SeptemberJune 30, 2020 and 2019.2021.


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NOTE 16.  INCOME TAXES
 
As of SeptemberJune 30, 2020,2021, the Company’s net deferred tax assets are fully offset by a valuation allowance. The valuation allowance is determined in accordance with the provisions of ASC 740, Income Taxes,, which require an assessment of both negative and positive evidence when measuring the need for a valuation allowance. Based on the weight of available evidence, the Company recorded a full valuation allowance against the Company’sits net deferred tax assets beginning in the fourth quarter of 2016 and continues to provide a full valuation allowance against the its net deferred tax assets in subsequent quarters. The Company reassesses the need for a valuation allowance on a quarterly basis. If it is determined that a portion or all of the valuation allowance is not required, it will generally be a benefit to the income tax provision in the period such determination is made.

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a massive tax-and-spending package intended to provide additional economic relief to address the impact of the COVID-19 pandemic. The CARES Act, among other business tax provisions, included legislative changes and updates to IRC sections 172, 163(j), and 168, resulting in impacting net operating losses (NOLs), interest disallowance, and depreciation for qualified improvement property. The Company considered the income tax accounting implications from CARES Act to the Company’s income tax provision calculation for the period ended September 30, 2020. Prior to the enactment of the CARES Act, federal NOLs generated after December 31, 2017 could not be carried back and had an unlimited carryforward period, although subject to a utilization limitation of 80% of the taxable income in each future tax year. Upon the enactment of the CARES Act, federal NOLs generated in tax years 2018, 2019, and 2020 can now be carried back to the previous five tax years without taxable income limitation. The Company generated federal NOLs for the years 2015 through 2017, and reported taxable income for the tax years 2018 (pursuant to the as-filed federal income tax return) and 2019 (pursuant to the financial statements filed for the year ended December 31, 2019). As the Company is forecasting a federal taxable loss for the tax year ending December 31, 2020, the Company is intending to carryback the resulting federal NOL to tax years 2018 and 2019 to offset taxable income (and federal taxes paid) for those two tax years.

For the ninesix months ended SeptemberJune 30, 2020,2021, the Company recorded an income taxes benefitexpense of approximately $6.4 million, which represents an effective tax rate of 62.7%.$0.2 million. The difference between the income tax benefitexpense of $6.4$0.2 million and the tax at the statutory rate of 21.0% to date on current year operations is principally due to the partial release of valuation allowance recorded againstrelated to the beginning ofcurrent year movement in deferred tax asset for the NOL carryback to the 2018 and 2019 tax years now permitted by the CARES Act.

For the nine months ended September 30, 2019, the Company recorded a benefit from income taxes of $0.4 million, which represents an effective tax rate of 1.5%. The difference between the income tax benefit of $0.4 million and the tax at the statutory rate of 21.0% on 2019 operations is principally due to the change in valuation allowance, the release in the Financial Accounting Standards Board Interpretation No. 48 (FIN 48) liability due to the lapsing of the statute of limitations, and tax benefits being recorded as a result of income recorded in other components of income.assets.

    The Company files income tax returns in the United States federal jurisdiction and in various states, and the tax returns filed for the years 19972007 through 20172020 and the applicable statutes of limitation have not expired with respect to those returns. Because of NOLs and unutilized R&D credits, substantially all of the Company’s tax years remain open to examination. The Company previously exhausted all the federal research and development credit in the 2018 tax return. Althoughreturn, but the NOL carryback from CARES Act will result in making R&D creditcredits utilized in 2018 available for future use, the percentage of unrecognized tax benefit against the R&D credit remains reserved, and the rest will be offset by valuation allowance. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense by the Company. At SeptemberJune 30, 20202021 the Company did not have significant accrued minimal interest and no penalties associated with unrecognized tax benefits.


NOTE 17. DISPOSITIONS
Sale of Gralise

On December 12, 2019, the Company entered into an Asset Purchase Agreement with Golf Acquiror LLC, an affiliate of Alvogen, Inc. (Alvogen) to divest its rights, title and interest in and to Gralise, including certain related assets, to Alvogen. The transaction subsequently closed on January 10, 2020. At closing, the Company received $78.6 million, including a $75.0 million base purchase price and a preliminary positive inventory adjustment equal to $3.6 million. In addition, the Company was entitled to receive 75% of Alvogen’s first $70.0 million of Gralise net sales after closing, a total of $52.5 million, as contingent consideration. Alvogen has also assumed, pursuant to the terms of the Asset Purchase Agreement, certain contracts,

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liabilities and obligations of the Company relating to Gralise, including those related to manufacturing and supply, post-market commitments and clinical development costs.

On June 3, 2020 Alvogen agreed to and disbursed the contingent consideration due to satisfy its remaining obligations to the Company pursuant to the Asset Purchase Agreement. As consideration for the early disbursement, the Company agreed to reduce the total payments due from Alvogen by $0.9 million, which was recognized as an adjustment to the gain on the sale of Gralise of the Condensed Consolidated Statement of Comprehensive Income during the second quarter of 2020. During the nine month ended September 30, 2020, the Company collected a total of $51.6 million from Alvogen which settle the $52.5 million in contingent consideration receivable for the sale of Gralise.

Pursuant to ASC 205-20, Presentation of Financial Statements— Discontinued Operations, Gralise did not meet the criteria of a discontinued operation as it was not considered a component of an entity that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Company, nor did it represent a strategic shift of the Company. The Company accounted for the divestiture under ASC 610-20 Other Income - Derecognition of Nonfinancial Assets. During the first quarter of 2020, the Company recognized a gain of $127.5 million in Other income on the Company’s Condensed Consolidated Statements of Comprehensive Income composed of the $78.6 million in upfront consideration received and $52.5 million in contingent consideration deemed to be probable, net of $3.6 million in inventory transferred. In addition, the Company recognized co-promotion service income of approximately $1.3 million and Co-promotion services were completed as of the first quarter of 2020.

Termination of Slán Agreements

On November 7, 2017, the Company entered into an agreement with Slán Medicinal Holdings Limited (Slán) under which it (i) acquired from Slán certain rights to market the specialty drug, long-acting cosyntropin in the U.S. and (ii) divested to Slán all of its rights to Lazanda® (fentanyl) Nasal Spray CII. As consideration for this acquisition, the Company provided the seller all of the rights and obligations, as defined under the arrangement, associated with Lazanda and together with $5.0 million in cash to Slán.

As outlined in the Slán Agreements, each party would support the development, including clinical development, of the licensed product and efforts to obtain regulatory approval of the initial NDA. Subsequent to approval of the initial NDA, Assertio and Slán would share in the net sales of long-acting cosyntropin for a 10.0-year period (after which time the product will revert back to Slán). As of December 31, 2019, the Company had $2.0 million of reimbursable development expenses in Prepaid and other current assets on the Company’s Condensed Consolidated Balance Sheet.

On February 6, 2020, the Company entered into an amended agreement with Eolas Pharma Teoranta (Eolas), an affiliate of Slán. Pursuant to the amendment the license granted to the Company for the commercialization of long-acting cosyntropin was terminated and the Company received $2.0 million in settlement for the receivable for reimbursable development expenses. Additionally, the Company may receive up to $10.0 million in future payments based upon commercial sales of long-acting cosyntropin if Eolas successfully obtains regulatory approval for and commercializes the product.

Sale of NUCYNTA

On February 6, 2020, the Company entered into a Purchase Agreement with Collegium, to divest its remaining rights, title and interest in and to the NUCYNTAfranchise of products from the Company, and assumed certain contracts, liabilities and obligations of the Company relating to the NUCYNTA products, including those related to manufacturing and supply, post-market commitments and clinical development costs. The transaction subsequently closed on February 13, 2020.

The Company received $367.9 million in net proceeds, which consisted of $375.0 million in base purchase price, plus $6.0 million in preliminary positive inventory value and less $13.1 million for royalties paid to the Company by Collegium between January 1, 2020 and February 11, 2020 pursuant to the Final Commercialization Agreement Payment Value of the Asset Purchase Agreement. In connection with the sale, the Company entered into a third-party consent agreement which requires 2 lump sum payments of $4.5 million each payable in 2021 and 2022 subject to Collegium achieving certain net sales in 2020 and 2021, respectively.

Since January 9, 2018, Collegium has been responsible for the commercialization of NUCYNTA in the U.S., including sales and marketing, and the Company received royalties based on certain net sales thresholds, in accordance with the Commercialization Agreement. The Commercialization Agreement terminated at closing with certain specified provisions of the Commercialization Agreement surviving in accordance with the terms of the Purchase Agreement.

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Pursuant to ASC 205-20, the divestiture of NUCYNTA did not meet the criteria of a discontinued operation as it was not considered a strategic shift. The Company accounted for the divestiture under ASC 610-20 Other Income - Derecognition of Nonfinancial Assets. During the first quarter of 2020, the Company recognized a net loss of $15.8 million in Other income which was comprised of the $367.9 million in consideration received less the $369.1 million carrying value of the NUCYNTA intangible derecognized, $5.6 million in net book value of inventory transferred, and $9.0 million in accrued third-party consent fees. During the second quarter of 2020, the Company received $1.0 million in net proceeds from Collegium for settlement of expense reimbursement pursuant to the Purchase Agreement which was recognized as a gain in Other income.


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

Statements made in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q that are not statements of historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). We have based these forward-looking statements on our current expectations and projections about future events. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements include, but are not necessarily limited to, those relating to:

•the potential impacts of disasters, acts of terrorism or global pandemics, including the ongoing COVID-19 pandemic, on the Company’sour liquidity, capital resources, operations and business and those of the third parties on which it relies,we rely, including suppliers and distributors;

•our ability to execute and achieve the expense savings expected from our restructuring plan announced in December 2020, which is designed to further reduce our cost base and right size the organization, as well as delays, challenges and expenses, and unexpected costs associated with executing the restructuring plan;

•our ability to achieve the growth prospects and synergies expected from our merger with Zyla Life Sciences, as well as delays, challenges and expenses, and unexpected costs associated with integrating and operating the combined company’s businesses;

•our ability to successfully pursue business development, strategic partnerships, and investment opportunities to build and grow for the future;

•the commercial success and market acceptance of our products;

•the coverage of our products by payors and pharmacy benefit managers;

•the entry of generics for any of our products;

•the outcome of our opioid-related investigations, our opioid-related litigation brought by state and local governmental entities and private parties, and ourrelated claims for insurance antitrustcoverage, and other disputes and litigation, and the costs and expenses associated therewith;

•any additional patent infringement or other litigation, investigation or proceeding that may be instituted related to us or anythe outcome of our antitrust litigation relating to our former drug Glumetza®;

•our ability to obtain and maintain intellectual property protection for our products product candidates or products we may acquire;and operate our business without infringing the intellectual property rights of others;

•our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

•our ability to generate sufficient cash flow from our business to make payments on our indebtedness, our ability to restructure or refinance our indebtedness, if necessary, and our compliance with the terms and conditions of the agreements governing our indebtedness;indebtedness;

•our common stock regainingmaintaining compliance with Nasdaq’s minimum closing bid requirement of at least $1.00 per share;

•our and our collaborative partners’ compliance or non-compliance with legal and regulatory requirements related to the development or promotion of pharmaceutical products in the U.S.;

•our plans to acquire, in-license or co-promote other products, and/or acquire companies;

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•the timing and results of our and our collaborative partners’ research and development efforts including clinical studies relating to our and our collaborative partners’any future product candidates;

•our ability to raise additional capital, if necessary;

•our ability to successfully develop and execute our sales, marketing and marketing strategies;non-personal and digital promotion strategies, including developing relationships with customers, physicians, payors and other constituencies;

•variations in revenues obtained from commercialization and collaborative agreements, including contingent milestone payments, royalties, license fees and other contract revenues, including non-recurring revenues, and the accounting treatment with respect thereto;

•our collaborative partners’counterparties’ compliance or non-compliance with their obligations under our collaboration agreements; and

•our ability to attract and retain key executive leadership.

Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described and incorporated by reference in the “RISK FACTORS” section and elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020 and in our Quarterly ReportsReport on Form 10-Q for the three months ended March 31, 2020 and June 30, 2020, respectively, and in the joint proxy statement/prospectus included in the registration statement on Form S-4 filed with the SEC on April 20, 2020. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of us. Furthermore, such forward-looking statements speak only as of the date of this report.2021. Except as required by law, we assume no obligation to update any forward-

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lookingforward-looking statement publicly, or to revise any forward-looking statement to reflect events or developments occurring after the date of this Quarterly Report on Form 10-Q, even if new information becomes available in the future.

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COMPANY OVERVIEW

On May 20, 2020, we completed a Merger (the Zyla Merger) with Zyla Life Sciences (Zyla) pursuant to the Agreement and Plan of Merger (Merger Agreement) dated March 16, 2020. Prior to the Zyla Merger, pursuant to the Merger Agreement, we completed a corporate reorganization whereby Assertio Holdings, Inc. (Assertio or the Company) became the parent company ofwholly-owned Assertio Therapeutics, Inc. and is deemed successor issuer to Assertio Therapeutics, Inc. under applicable securities laws. Additionally, the Company assumed Assertio Therapeutics, Inc’s listing on Nasdaq under the symbol "ASRT." Accordingly, Assertio Therapeutics, Inc. and Zyla are both wholly-owned subsidiaries of the Company. Unless otherwise noted or required by context, we use “Assertio” to refer to Assertio Reorganization and Assertio Holdings, Inc. following the Assertio Reorganization.

We are a commercial pharmaceutical company offering differentiated products to patients. Our commercial portfolio of branded products focuses on three areas: neurology; hospital;neurology, hospital, and pain and inflammation. We have built our commercial portfolio through a combination of increased opportunities with existing products, as well as through the acquisition or licensing of additional approved products. Our objective is to diversify beyond our current portfolio, which is composed of prescription nonsteroidal anti-inflammatory drugs.

Our primary marketed products are:

    
SPRIX® Nasal Spray (ketorolac)
A nonsteroidal anti-inflammatory drug (NSAID) indicated in adult patients for the short term (up to five days) management of moderate to moderately severe pain that requires analgesia at the opioid level.
CAMBIA® (diclofenac potassium for oral solution)
A prescription medicine used to treat migraine attacks in adults. It does not prevent or lessen the number of migraines one has, and it is not for other types of headaches. It contains diclofenac potassium, an NSAID.
INDOCIN® (indomethacin) Suppositories

INDOCIN® (indomethacin) Oral Suspension
A suppository form and oral solution of indomethacin, a nonsteroidal anti-inflammatory drug (NSAID), approved for:
•Moderate to severe rheumatoid arthritis including acute flares of chronic disease
•Moderate to severe ankylosing spondylitis
•Moderate to severe osteoarthritis
•Acute painful shoulder (bursitis and/or tendinitis)
•Acute gouty arthritis
CAMBIA® (diclofenac potassium for oral solution)A prescription medicine used to treat migraine attacks in adults. CAMBIA does not prevent or lessen the number of migraines one has, and it is not for other types of headaches. It contains diclofenac potassium, a non-steroidal anti-inflammatory drug (NSAID).
ZIPSORSPRIX® (ketorolac tromethamine) Nasal Spray
A prescription NSAID indicated in adult patients for the short term (up to five days) management of moderate to moderately severe pain that requires analgesia at the opioid level.
Zipsor® (diclofenac potassium) Liquid filled capsules)capsules
A prescription NSAID used for relief of mild-to-moderate pain in adults (18 years of age and older)

Commercial Excellence

Our commercial success depends on the people, the process and the opportunity. We believe the following key elements enable us to beOther commercially successful:

•Leadership with a proven track record of successful results;
•A salesforce optimized with effective field-based representatives;
•Experience in key elements of commercialization (market access, patient services, distribution, brand, analytics, market research, salesforce optimization);
•Data-driven targeting to optimize efficiencies; and,
•Impactful brand promiseavailable products include OXAYDO® (oxycodone HCI, USP) tablets for physicians and patients by reducing hassle for the physicians and improving patient accessibility through patient access programs.

We believe that our current products will enable us to take advantage of the trend toward non-opioid pain and inflammation products and that our commercial capabilities will enable us to seamlessly expand our product offerings.

Strategy

Our goal is to grow through:

•Commercial execution by leveraging our commercial excellence to grow our net product sales;
•Cost controls and efficiencies by capturing synergies to support our growth; and,

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•Product acquisitions and business combinations.

oral use only —CII.
Impact of COVID-19 on our Business
    Following the outbreak of COVID-19 during early 2020, our priority was and remains the health and safety of our employees, their families, and their families.the patients we serve. As a result, in March 2020, we initiated remote working arrangements. Since we were permitted to re-open operation of our facilities in June 2020, we have invited our employees to return to work in our facilities. However, we maintain aarrangements and maintained flexible work arrangementarrangements for individuals, as needed.which continued through the remainder of 2020 and into 2021. In addition to the health and safety of our employees, we are focused on ensuring that we continue making our products accessible to the patients who need them. Because COVID-19 impacted our ability to see in-person providers who prescribe our products, we adapted our approach during 2020 and increased our virtual visits, as well as executed a limited reduction-in-force of our sales force. Duevisits. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, we have experienced a decline and subsequent volatility in prescriptions associated with those elective procedures.

We implemented a restructuring plan in December 2020 which, we believe, allows our business to continue to provide our differentiated products to patients and better positions ourselves for future success. We believe that we are prepared with sufficient product inventory, technology to facilitate virtual office visitsand/or digital communications, and operations prepared to adapt our work environment as needed. The extent to which our operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak, and actions by government authorities to contain the outbreak or treat its impact.

Our Promoted Product Portfolio

SPRIX Nasal Spray

SPRIX (ketorolac tromethamine) Nasal Spray is an NSAID indicatedimpact, the emergence of new COVID-19 variants and the related potential for new surges in adult patientsinfections, and the distribution, public acceptance and efficacy of COVID-19 vaccines including for the short-term (up to five days) management of moderate to moderately severe pain that requires analgesia at the opioid level. This non-narcotic provides patients with moderate to moderately severe short-term pain a form of ketorolac that is absorbed rapidly but does not require an injection administered by a healthcare provider (HCP). A range of specialists prescribe SPRIX for various uses. Urologists, podiatrists, orthopedic surgeons, neurologists, women’s health providers and other specialists may use SPRIX Nasal Spray for post-surgery acute-pain management. Formulated as a Nasal Spray, SPRIX Nasal Spray is rapidly absorbed through the nasal mucosa, achieving peak blood levels as fast as an intramuscular injection of ketorolac. SPRIX Nasal Spray has been studied in patients with moderate to moderately severe pain. SPRIX Nasal Spray has demonstrated a 26% to 34% reduction in morphine use by patients over a 48-hour period in a post-operative setting as compared with placebo. Pursuant to the Zyla Merger, we acquired SPRIX Nasal Spray.

CAMBIA

CAMBIA (Diclofenac Potassium for Oral Solution) is a NSAID indicated for the acute treatment of migraine attacks with or without aura in adults 18 years of age or older. We acquired CAMBIA in December 2013 from Nautilus Neurosciences, Inc. (Nautilus).

INDOCIN Products

Pursuant to the Zyla Merger, we acquired two forms of INDOCIN (indomethacin), an oral solution and a suppository. Both products are approved for moderate to severe rheumatoid arthritis including acute flares of chronic disease, moderate to severe ankylosing spondylitis, moderate to severe osteoarthritis, acute painful shoulder (bursitis and/or tendinitis) and acute gouty arthritis. INDOCIN is used in the hospital as well as in the out-patient setting.
Zipsor Liquid Filled Capsules

Zipsor (Diclofenac Potassium) is an NSAID indicated for relief of mild to moderate acute pain in adults. Zipsor uses proprietary ProSorb® delivery technology to deliver a finely dispersed, rapidly absorbed formulation of diclofenac. We acquired Zipsor in June 2012 from Xanodyne Pharmaceuticals, Inc. (Xanodyne).emerging variations.

Segment Information

We manage our business within one reportable segment. Segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. To date, substantially all of revenues from product sales are related to sales in the U.S.



CRITICAL ACCOUNTING POLICIES

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Critical accounting policies are those that require significant judgment and/or estimates by management at the time that the financial statements are prepared such that materially different results might have been reported if other assumptions
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had been made. We consider certain accounting policies related to revenue recognition, accrued liabilities and use of estimates to be critical policies. These estimates form the basis for making judgments about the carrying value of assets and liabilities. We believe there have been no significant changes in our critical accounting policies and significant judgements and estimates since we filed our Annual Report on Form 10-K for the year ended December 31, 20192020 filed with the SEC on March 10,12, 2021 (the 2020 (the 2019 Form 10-K), other than as noted below. The description ofsee ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Critical Accounting Policies and Estimates in our critical accounting policies is incorporated herein by reference to our 20192020 Form 10-K.10-K for further information.

Acquisitions

We account for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at date of acquisition at their respective fair values. The fair value of the consideration paid, including contingent consideration, is assigned to the underlying net assets of the acquired business based on their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Significant judgments are used in determining the estimated fair values assigned to the assets acquired and liabilities assumed and in determining estimates of useful lives of long-lived assets. Fair value determinations and useful life estimates are based on, among other factors, estimates of expected future net cash flows, estimates of appropriate discount rates used to present value expected future net cash flows, the assessment of each asset’s life cycle, and the impact of competitive trends on each asset’s life cycle and other factors. These judgments can materially impact the estimates used to allocate acquisition date fair values to assets acquired and liabilities assumed and the resulting timing and amounts charged to, or recognized in current and future operating results. For these and other reasons, actual results may vary significantly from estimated results.

Any changes in the fair value of contingent consideration resulting from a change in the underlying inputs is recognized in operating expenses until the contingent consideration arrangement is settled. Changes in the fair value of contingent consideration resulting from the passage of time are recorded within interest expense until the contingent consideration is settled.

If the acquired net assets do not constitute a business under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and no goodwill is recognized. In an asset acquisition, the amount allocated to acquired in-process research and development (IPR&D) with no alternative future use is charged to expense at the acquisition date.

Goodwill

Under the purchase method of accounting pursuant to ASC 805, Business Combinations, Goodwill is calculated as the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. Goodwill, which is not tax-deductible, is recognized within other long-term assets, and is not amortized but subject to an annual review for impairment. Goodwill is tested for impairment at the reporting unit level at least annually or when a triggering event occurs that could indicate a potential impairment by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that the fair value of net assets are below their carrying amounts. A reporting unit is the same as, or one level below, an operating segment. Our operations are currently comprised of a single reporting unit.

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RESULTS OF OPERATIONS
Revenues
The following table reflects total revenues, net for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20202019202020192021202020212020
Product sales, net:Product sales, net:Product sales, net:
INDOCIN products (1)
INDOCIN products (1)
$13,075 $5,434 $27,673 $5,434 
CAMBIACAMBIA$7,449 $8,135 $21,503 $23,701 CAMBIA6,128 7,780 12,590 14,054 
ZipsorZipsor3,395 3,273 9,261 9,028 Zipsor2,581 3,535 4,803 5,866 
INDOCIN products(1)
13,773 — 19,207 — 
SPRIX Nasal Spray(1)
5,642 — 7,244 — 
SPRIX (1)
SPRIX (1)
2,942 1,602 4,639 1,602 
Other (2)
Other (2)
4,007 16,094 6,468 47,160 
Other (2)
105 1,814 1,533 2,461 
Total product sales, netTotal product sales, net34,266 27,502 63,683 79,889 Total product sales, net24,831 20,165 51,238 29,417 
Commercialization agreement, net— 27,304 11,258 89,163 
Commercialization agreement revenue, netCommercialization agreement revenue, net— — — 11,258 
Royalties and milestone revenueRoyalties and milestone revenue299 341 1,158 1,226 Royalties and milestone revenue542 452 975 859 
Total revenuesTotal revenues$34,565 $55,147 $76,099 $170,278 Total revenues$25,373 $20,617 $52,213 $41,534 
(1)Products acquired in connection with Zyla Merger represent product sales, net for the period of May 20, 2020 through SeptemberZyla Merger.
Product Sales, net
For the three and six months ended June 30, 2020.
(2) Includes2021, product sales primarily consisted of sales from INDOCIN Products, CAMBIA, Zipsor and SPRIX. We began shipping and recognizing product sales for Gralise, which was divested in January 2020; product sales adjustments for previously divested products NUCYNTAINDOCIN Products and Lazanda; and, product sales for non-promoted products Oxaydo and SOLUMATRIX.
Product SalesSPRIX upon the Zyla Merger on May 20, 2020.
CAMBIA net product sales for the three and ninesix months ended SeptemberJune 30, 2020 and 20192021 decreased $0.7$1.7 million from $7.8 million to $6.1 million and $2.2$1.5 million respectively, as comparedfrom $14.1 million to the same periods in 2019,$12.6 million, respectively, primarily due to lower volume.volume partially offset by favorable payor mix.
Zipsor net product sales for the three and ninesix months ended SeptemberJune 30, 2020 increased $0.12021 decreased $1.0 million from $3.5 million to $3.4$2.6 million and $0.2$1.1 million from $5.9 million to $9.3$4.8 million, respectively, primarily due to the effect of prior year results being negatively impactedlower volume partially offset by short-datedfavorable payor mix.
Other product sales returns offset by increased patient discount programsincludes product sales adjustments for previously divested products, including Gralise, which was divested in the current year.
We began shippingJanuary 2020; and recognizing product sales for INDOCINnon-promoted products SPRIX Nasal Spray,(OXAYDO and SOLUMATRIXSOLUMATRIX) which were acquired from Zyla in May 2020. Product sales for our non-promoted products uponwere $0.5 million and $1.6 million, respectively, for the Zyla Merger on May 20, 2020.

three and six months ended June 30, 2021. In September 2020, we terminated our iCeutica License which allowed us to utilize certain technology and intellectual property related to iCeutica’s SOLUMATRIX technology and certain other rights of iCeutica. The intellectual property related to SOLUMATRIX technology will no longer be used by us and weas a result will no longer manufacture products using the SOLUMATRIX technology. Product sales adjustments for previously divested products include adjustments to recorded sales reserve estimates.

Commercialization Agreement Revenue, net

We ceased recording product salesrecognizing commercialization revenue and related costs for GraliseNUCYNTA effective the closing of the transaction to divest ourits rights, title and interest in and to Gralisethe NUCYNTA franchise to AlvogenCollegium on January 10,February 13, 2020. Product sales forDuring the three and ninesix months ended SeptemberJune 30, 2020, reflect sales through January 10, 2020.

We ceased recording product sales and related costs for NUCYNTA after commencingwe recognized net revenue from the Commercialization Agreement with Collegium on January 8, 2018. Product sales for the three and nine months ended September 30, 2020 and the same period in 2019 reflect adjustments made for previously recorded sales reserve estimates.

We ceased recording revenues and related costs associated with Lazanda after we divested the product to Slán in November 2017. Product sales for the three and nine months ended September 30, 2020 and 2019 reflect adjustments made for previously recorded sales reserve estimates.

We ceased recording Commercialization agreement revenues after we divested our rights, title and interest to the NUCYNTA franchise of products to Collegium in February 2020.

$11.3 million. This

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included variable royalty revenue of $13.1 million partially offset by the amortization of the $1.8 million net contract asset in connection with the termination of the Commercialization Agreement.
Royalties & Milestones

In November 2010, we entered into a license agreement with Tribute Pharmaceuticals Canada Ltd. (now known as Nuvo Pharmaceuticals, Inc.) granting them the rights to commercially market CAMBIA in Canada. We receive royalties on net sales as well as certain one-time contingent milestone payments. During the three and ninesix months ended SeptemberJune 30, 2020, and 2019,2021, the Company recognized $0.3$0.5 million and $1.2$1.0 million respectively, of revenue related to CAMBIA in Canada.Canada, respectively. During the three and six ended June 30, 2020, the Company recognized $0.5 million and $0.9 million of revenue related to CAMBIA in Canada, respectively.

Cost of Sales (excluding amortization of intangible assets)

Cost of sales consists of costs of the active pharmaceutical ingredient, contract manufacturing and packaging costs, royalties payable to third parties, inventory write downs, a product quality testing, internal employee costs related to the manufacturing process, distribution costs and shipping costs related to our product sales. Cost of sales excludes the amortization of intangible assets described separately below under “Intangible Assets.” Fair value of inventories acquired with the Zyla Merger include an inventory step-up in the value of inventories. The inventory step-up value is amortized as the related inventory is sold and included in cost of sales.
Cost of sales increased $4.2decreased $1.3 million from $2.2$5.2 million to $6.5$3.9 million during the three months ended SeptemberJune 30, 2020 and increased $6.2 million from $6.9 million to $13.1 million for the nine months ended September 30, 20202021 as compared to the same period in 2019. The increase in both 2020 periods was primarily due to Zyla-related product costshigher Zyla Merger related inventory step-up expense in the second quarter of 2020 not repeating in the current period partially offset by lower cost of sales for Zyla products in the second quarter 2020 based on timing of Zyla Merger on May 20, 2020.

Cost of sales increased $1.2 million from $6.6 million to $7.9 million during the six months ended June 30, 2021 as compared to the same period in 2020 primarily due to higher cost of sales for Zyla products in the current period based on timing of Zyla Merger on May 20, 2020, partially offset by an lower cost of sales as a result of the Gralise and NUCYNTA divestituresdivestiture in the first quarter of 2020. 2020 and lower Zyla Merger related inventory step-up expense in current period.

The three and ninesix months ended SeptemberJune 30, 2021 cost of sales included $0.3 million and $0.6 million, respectively, of amortization of inventory step-up related to Zyla acquired inventories sold. The three and six months ended June 30, 2020 cost of sales included $0.5$2.4 million and $2.9$2.4 million, respectively, of amortization of inventory step-up related to Zyla acquired inventories sold.

Research and Development Expenses

Our research and development expenses include salaries, clinical trial costs, consultant fees, supplies, manufacturing costs for research and development programs and allocations of corporate costs. It is difficult to predict the scope and magnitude of future research and development expenses for our product candidates in research and development, as it is difficult to determine the nature, timing and extent of clinical trials and studies and the FDA’s requirements for a particular drug. As potential products proceed through the development process, each step is typically more extensive, and therefore more expensive, than the previous step. Therefore, success in development generally results in increasing expenditures until actual product approval.

Research and development expense decreased $0.2$1.6 million from $1.5$1.6 million to zero for the three months ended SeptemberJune 30, 20202021 and decreased $2.7 million from $2.7 million to $1.3 millionzero for the threesix months ended SeptemberJune 30, 2019 and decreased $0.5 million from $4.5 million for2021 as compared to the nine months ended September 30,same period in 2020 to $4.0 million for the nine months ended September 30, 2019 primarily due to lower clinicalthe completion of all material research and manufacturingdevelopment activities in 2020. As a result of the December 2020 restructuring plan, we do not expect to incur significant research and development costs due to the divestiture of Gralise and NUCYNTA.in 2021.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses decreased $1.9 million from $28.1 million to $26.2 million for the three months ended June 30, 2021 primarily consistdue to lower employee costs in 2021 as a result of personnel, contract personnel, marketing and promotion expenses associated with our commercial products, personnel expenses to support our administrative and operating activities, facility costs, and professional expenses, such as legal fees.prior restructuring plans partially offset by additional expense for loss contingency provision recognized in the current period.

Selling, general, and administrative expenses decreased $10.4$21.5 million from $36.1$55.4 million to $25.7$34.0 million for the threesix months ended SeptemberJune 30, 20202021, as compared to the same period in 20192020 primarily due to one-time transaction costs in 2020 not repeating, lower employee costs in 2021 as a result of prior period expenses impacted by the $10.1 million loss on disposalrestructuring plans, receipt of equipment which did not occurinsurance reimbursement in the current period. Selling, general, and administrative expenses decreased $4.7 million from $85.9 million to $81.2 million for the nine months ended September 30, 2020 as compared to the same periods in 2019. The decrease in the period was primarily due to the $10.1 million loss on disposal of equipment recorded in the thirdfirst quarter of 20192021 for previous opioid-related expenses, partially offset by transaction-related costs associated withadditional expense for loss contingency provision recognized in the Zyla Merger.

In connection with the Multidistrict Opioid Litigation, the State Opioid Litigation and the Opioid-Related Requests and Subpoenas described in “Note 12. Commitments and Contingencies - Legal Matters”second quarter of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, we expect to incur additional costs and expenses related to our ongoing opioid-related litigation and investigations, which may be significant and which may increase in future periods.2021.

Intangible Assets


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The following table reflects amortization of intangible assets for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Amortization of intangible assets - INDOCIN$2,661 $— $4,601 $— 
Amortization of intangible assets - SPRIX1,048  1,996  
Amortization of intangible assets - CAMBIA1,284 1,284 3,852 3,852 
Amortization of intangible assets - Zipsor584 584 1,753 1,753 
Amortization of intangible assets - Oxaydo10 — 108 — 
Amortization of intangible assets - NUCYNTA— 23,576 5,927 70,726 
Total$5,587 $25,444 $18,237 $76,331 
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Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Amortization of intangible assets - INDOCIN$3,210 $1,941 $6,420 $1,941 
Amortization of intangible assets - SPRIX1,393 948 2,786 948 
Amortization of intangible assets - CAMBIA1,988 1,284 3,272 2,568 
Amortization of intangible assets - Zipsor584 585 1,168 1,169 
Amortization of intangible assets - Oxaydo43 97 118 97 
Amortization of intangible assets - NUCYNTA— — — 5,927 
Total$7,218 $4,855 $13,764 $12,650 
 
Amortization expense during the three months ended June 30, 2021 increased $2.4 million from $4.9 million to $7.2 million as compared to the same period in 2020 primarily due to the timing of Zyla Merger in May 2020, where we acquired product rights for INDOCIN Products, SPRIX, and OXAYDO which are being amortized on a straight-line basis over their respective estimated useful lives.

Amortization expense during the three and ninesix months ended SeptemberJune 30, 2020 decreased2021 increased $1.1 million from $12.7 million to $13.8 million as compared to the same periodsperiod in 20192020 primarily due to the timing of Zyla Merger in May 2020 partially offset by the February 2020 divestiture of our rights, title and interest to the NUCYNTA franchise of products to Collegium. As a result, we derecognized the remaining carrying value of the NUCYNTA product rights and ceased recognizing related amortization.

In connection with the Zyla Merger, we acquired identified intangible assets comprised of definite-lived product rights for INDOCIN, SPRIX Nasal Spray, and Oxaydo which are being amortized on a straight-line basis over their respective estimated useful lives of 11.6 years, 6.6 years and less than one year. The respective fair values were determined to be $154.1 million, $39.0 million, and $0.3 million, as of the Zyla Merger date of May 20, 2020.

Restructuring Charges

We continually evaluate our operations to identify opportunities to streamline operations and optimize operating efficiencies as an anticipation to changes in the business environment.

In November 2019,On December 15, 2020, we announced an accelerationthe December 2020 Plan which was designed to substantially reduce the Company’s operating footprint through the reduction of cost-saving initiatives that included a decision to discontinue our relationship with our contract sales organization, a reduction in the use of certain outside vendors and consultants, and the reorganization of certain functions resulting in a reduction ofits staff at our headquarters office and remote positions duringsales force. We substantially completed the fourthworkforce reduction in the first quarter of 2019. As a result, $3.9 million of severance and benefits costs for the reduction of staff were recognized during the year ended December 31, 2019. The 2019 cost-saving initiative was substantially complete as of December 31, 2019.2021.

In April 2020, we executed a limited reduction to our sales force due to the impact of COVID-19 on our ability to see in-person providers who prescribe our products. As a result, $0.6 million of severance and benefits costs was recognized during the second quarter of 2020. This initiative was completed during the second quarter of 2020.

Subsequent to the Zyla Merger in May 2020, we began implementing reorganization plans of our workforce and other restructuring activities to realize the synergies of the Zyla Merger and to re-align resources to strategic areas and drive growth. The reorganization plan primarily focused on reduction of staff at our headquarter offices. As a result, $5.7 million of severancegrowth (Zyla Merger Reorganization). We completed the restructuring activities in 2020 and benefitsdo not expect to incur significant costs and $1.0 million of stock-based compensation expense associated with equity modifications for certain executives was recognized as restructuring cost during the nine months ended September 30, 2020. Costs related to the Zyla Merger reorganization were substantially recognized as ofReorganization in 2021.

For the three and six months ended June 30, 2020.2021 restructuring charges and one-time termination costs incurred were zero and $1.1 million, respectively. The restructuring charges cost and one-time termination costs incurred for the three and six months ended June 30, 2020 were $6.5 million and $6.5 million, respectively.

Other (Expense) Income (Expense)

The following table reflects other (expense) income and expense for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(Loss) Gain on sale of Gralise$— $(850)$— $126,655 
Loss on extinguishment of convertible notes— (16,272)— (47,880)
Gain (Loss) on sale of NUCYNTA— 1,006 — (14,749)
Change in fair value of Collegium warrants— (484)— (3,629)
Interest expense(2,605)(1,604)(5,288)(10,278)
Loss on prepayment of Senior Notes— — — (8,233)
Other gain (loss)137 (15)403 (195)
Total other (expense) income$(2,468)$(18,219)$(4,885)$41,691

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 Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Gain on Sale of Gralise$— $— $126,655 $— 
(Loss) Gain on extinguishment of convertible notes— 26,385 (47,880)26,385 
Loss on sale of NUCYNTA— — (14,749)— 
Interest expense(3,050)(13,872)(13,328)(45,268)
Change in fair value of contingent consideration(1,861)— (1,861)— 
Loss on prepayment of Senior Notes— — (8,233)— 
Other gain (loss)253 (764)(3,571)(2,613)
Total other (expense) income$(4,658)$11,749$37,033$(21,496)

Other (expense) income (expense) changed by $16.4$15.8 million from other incomeexpense of $11.7$18.2 million to other expense of $4.7$2.5 million for the three months ended SeptemberJune 30, 20202021 and changed $46.6 million from other income of $41.7 million to other expense of $4.9 million for the six months ended June 30, 2021, respectively, as compared to the same period in 20192020 primarily due to the $26.4 million gain on extinguishment of debt, in connection with the Convertible Note Exchange, realized in 2019 offset by lower interest expense as a result of debt settlements in the first quarter of 2020.

Other income (expense) changed by $58.5 million from other expense of $21.5 million to other income of $37.0 million for the nine months ended September 30, 2020 as compared to the same period in 2019 primarily due to the currentprior year (loss) gain on the sale of Gralise, offset by thegain (loss) on sale of NUCYNTA, loss on debt extinguishment as a result of the repurchase and tender offer of the 2021 and 2024 Notes, settlement of the Senior Notes, loss on the sale of NUCYNTA, and unfavorable change in fair value of contingent consideration, partiallyCollegium warrants not repeating. Sublease income offset by lower interestsublease expense as a result ofis recorded in Other gain (loss) within the debt settlements in the first quarter of 2020.above table.

The following table reflects interest expense for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Interest payable on Senior Notes$— $5,736 $1,648 $20,544 
Interest payable on Convertible Notes2 2,240 1,725 6,552 
Amortization of debt discount, debt issuance costs and royalty rights (Non-cash)103 5,870 5,614 18,090 
Interest payable on 13% Senior Secured Note due 20242,936—4,341—
Other926 — 82 
Total interest expense$3,050 $13,872 $13,328 $45,268 
For the three months ended September 30, 2020, total interest expense decreased $10.8 million due to lower interest expense as a result of the settlement of the remaining principal of our Senior Notes and the repurchase of a of the remaining 2021 and 2024 Notes in April 2020.
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Interest payable on 13% Senior Secured Notes due 2024$2,557$1,407$—$1,407
Interest payable on Senior Notes——5,1641,648
Interest payable on Convertible Notes—6961,723
Amortization of debt discounts, and royalty rights481251185,511
Other—3—(11)
Total interest expense$2,605$1,604$5,288$10,278

For the ninethree and six months ended SeptemberJune 30, 2020,2021, total interest expense increased $1.0 million, and decreased $31.9$5.0 million, respectively, primarily due to lower interest expense as a result of the settlement of the remaining principal of our Senior Notes and the repurchase of a portion of our 2021 and 2014 Notes in the firstsecond quarter of 2020 partially offset by interest expense associated with 13% Senior Secured Notes assumed from the Zyla Merger in May 2020.

Income Tax Provision

For the ninethree and six months ended SeptemberJune 30, 2020, the Company2021, we recorded an income taxestax benefit of approximately $6.4$0.3 million and income tax expense of approximately $0.2 million, respectively, which represents an effective tax rate of 62.7%.2.1% and (2.6)%, respectively. The difference between the income tax benefit of $6.4$0.3 million and income tax expenses of $0.2 million for the three and six months ended June 30, 2021, respectively, and the tax at the statutory rate of 21.0% to date on current yearperiod operations is principally due to the partial release of valuation allowance related to the current year movement in deferred tax assets.

In the three and six months ended June 30, 2020, we recorded an income tax benefit of approximately $9.5 million and $7.4 million, respectively, that represents an effective tax rate of 21.5% and 1071.3%, respectively. The difference between income tax benefit of $9.5 million and income tax benefit of $7.4 million for the three and six months ended June 30, 2020, respectively, and the tax at the statutory rate of 21.0% was principally due to the valuation allowance recorded against the beginning of year deferred tax asset forrelated the net operating loss (NOL)NOL carryback to the 2018 and 2019 tax years now permitted by the CARES Act.

For the nine months ended September 30, 2019, we recorded a benefit from income taxes of $0.4 million, which represents an effective tax rate of 1.5%. The difference between the income tax benefit of $0.4 million and the tax at the

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statutory rate of 21.0% on current year operations is principally due to the change in valuation allowance, the release in the Financial Accounting Standards Board Interpretation No. 48 (FIN 48) liability due to the lapsing of the statute of limitations, and tax benefits being recorded as a result of income recorded in other components of income.


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents decreased $7.4 million from $42.1 million to $34.7 million during the nine months ended September 30, 2020. The decrease is mainly attributable to cash used to settle $459.5 million of outstanding debt offset by cash proceeds of $369.0 million and $130.3 million received from the sales of NUCYNTA and Gralise, respectively, and cash used for operations of $59.6 million.

Historically and through December 31, 2019,June 30, 2021, we have financed our productoperations and business development efforts and operations primarily from product sales, private and public sales of equity securities, including convertible debt securities, the proceeds of secured borrowings, the sale of rights to future royalties and milestones, to PDL, upfront license, milestone and termination fees from collaborative and license partners.

In April 2015,On February 9, 2021, we issued $575.0 million aggregate principal amount of senior secured notes (Senior Notes) for aggregate gross proceeds of approximately $562.0 million. In connectioncompleted a registered direct offering with the divestiture of Gralisecertain institutional investors and NUCYNTA we used proceedsaccredited investors to repay the outstanding principal of $171.8 million as of December 31, 2019 and as a result the Company had repaid in full all outstanding indebtedness, and terminated all commitments and obligations, under its Note Purchase Agreement as of March 31, 2020. In connection with the termination of the Note Purchase Agreement, the Company was released from all security interests, liens and encumbrances under the Note Purchase Agreement. We were in compliance with our covenants with respect to the Senior Notes through the period of the effective payoff on February 13, 2020.

In September 2014, we issued $345.0 million aggregate principal amount of convertible notes due 2021 (the 2021 Notes) resulting in net proceeds to us of $334.2 million. In August 2019, we exchanged $200.0 million aggregate principal amount of the 2021 Notes for a combination of (a) its new $120.0 million aggregate principal amount of 5.00% Convertible Senior Notes due August 15, 2024 (the 2024 Notes), (b) an aggregate cash payment of $30.0 million, and (c) an aggregate of 15.8 millionsell 22,600,000 shares of our common stock. We did not receive any cashstock at a purchase price of $0.62 per share. The gross proceeds from the issuanceoffering were approximately $14.0 million. After placement agent fees, we received net proceeds of the 2024 Notes or the issuance of theapproximately $13.1 million. On February 12, 2021, we completed a registered direct offering with certain institutional investors and accredited investors to sell 35,000,000 shares of our common stock. On February 19, 2020, the Company utilizedstock at a purchase price of $0.98 per share. The gross proceeds from the saleoffering were approximately $34.3 million. After placement agent fees, we received net proceeds of Gralise and NUCYNTAapproximately $32.2 million. We also incurred $0.5 million direct incremental cost to repurchase approximately $188.0 million aggregate principal amountcomplete both registered direct offerings. We intend to use proceeds from both offerings for general corporate purposes, including general working capital.
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Table of 2021 Notes and 2024 Notes. On March 11, 2020, the Company initiated a tender offer to repurchase any and all of the Company’s remaining $77.0 million of combined outstanding 2021 Notes and 2024 Notes. On April 8, 2020, upon close of the tender offer, the Company repurchased substantially all of the remaining outstanding $77.0 million aggregate principal amount of 2021 Notes and 2024 Notes, with only $0.3 million of 2021 Notes remaining as of September 30, 2020.Content

On July 31, 2020, we voluntarily redeemed $10.0 million of aggregate principal plus accrued interest on our Secured Notes due 2024. Additionally upon the Zyla Merger, we assumed and immediately paid off a $3.0 million promissory note and a $10.0 million credit agreement.

We may incur operating losses in future years. We believe that our existing cash will be sufficient to fund our operations for the next twelve months from the date of this filing. We base this expectation on our current operating plan, which may change as a result of many factors.
 
Our cash needs may vary materially from our current expectations because of numerous factors, including:

•acquisitions or licenses of complementary businesses, products, technologies or companies;
•sales of our marketed products;
•expenditures related to our commercialization of our products;
•milestone and royalty revenue we receive under our collaborative development arrangements;
•interest and principal payments on our current and future indebtedness;
•financial terms of definitive license agreements or other commercial agreements we may enter intointo;
•changes in the focus and direction of our business strategy and/or research and development programs;
•potential expenses relating to ongoing litigation matters, including relating to Glumetza and ourAssertio Therapeutics’ prior opioid product franchise for which we have not accrued any reserves due to an inability to estimate the magnitude and/or probability of such expenses;expenses, and former drug Glumetza; and
•effects of the COVID-19 pandemic on our operations.


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The inability to raise any additional capital that may be required to fund our future operations or product acquisitions and strategic transactions which we may pursue could have a material adverse effect on our company.

The following table reflects summarized cash flow activities for the ninesix months ended SeptemberJune 30, 20202021 and 20192020 (in thousands):
 Nine Months Ended September 30,
20202019
Net cash (used in) provided by operating activities$(59,590)$82,620 
Net cash provided by (used in) investing activities512,801 (1,526)
Net cash used in financing activities(460,581)(137,862)
Net decrease in cash and cash equivalents$(7,370)$(56,768)
 Six Months Ended June 30,
20212020
Net cash used in operating activities$(3,262)$(45,159)
Net cash provided by investing activities— 512,802 
Net cash provided by (used in) financing activities36,904 (450,347)
Net increase in cash and cash equivalents$33,642 $17,296 

Cash Flows from Operating Activities

The decreaseCash used in operating cash flowsactivities was $3.3 million during the ninesix months ended SeptemberJune 30, 20202021 compared to $45.2 million in the same period in 20192020. The decrease in cash used from operating activities is primarily due to thecombination of lower net income offset by lower non-cash adjustments and favorable working capital cash used in operations after impact of adjustments to reconcile net (loss) and changes in the working capital. Cash usage during the nine months ended September 30, 2020 included certain one-time costs including $6.6 million of severance and restructuring related payments and costs incurred that were directly attributable to facilitating the close of the Zyla Merger. Additionally, the 2019 period includes receipt of $32.0 million from the Purdue settlement in January 2019.flows.

Cash Flows from Investing Activities

NetThere was no cash provided by (used in)flow activity from investing activities increased duringfor the ninesix months ended SeptemberJune 30, 2021. Cash provided from investing activities for the six months ended June 30, 2020 compared to the same period in 2019 primarily due to the $369.0was $512.8 million, and $130.3 million inwhich included cash consideration received for the sales of NUCYNTA, Gralise and Gralise, respectively. Net cash provided by investing activities during the nine months ended September 30, 2020 also included $7.6 million ofCollegium warrants as well as cash acquired from thein Zyla Merger and $6.0 million of proceeds from the sale of investments.Merger.

Cash Flows from Financing Activities

Net cashCash provided by financing activities for the six months ended June 30, 2021 was $36.9 million, which primarily consisted of proceeds from the registered direct offerings in February 2021 partially offset by payments of our debt as well as contingent consideration. Cash used in financing activities increased duringfor the ninesix months ended SeptemberJune 30, 2020 compared to the same period in 2019was $450.3 million, which was primarily due to the settlement of the $171.8 million of our Senior Notes and the repurchase of $264.7 million of our outstanding 2021 Notes and 2024 Notes. In addition, financing activities during the nine months ended September 30, 2020 include repayment in full of our revolver and promissory notes of $13.0 million, and the voluntary redemption of $10.0 million of our 13% Senior Secured Notes due 2024

Off-Balance Sheet Arrangement

There were no off-balance sheet arrangements during the quarter ended SeptemberJune 30, 2020.






2021.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective.

We review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis to improve our controls and procedures over time and to correct any deficiencies that we may discover in the future. Our goal is to ensure that our senior management has timely access to all material financial and non-financial information concerning our business. While we believe the present design of our disclosure controls and procedures is effective to achieve our goal, future events affecting our business may cause us to significantly modify our disclosure controls and procedures

Changes in Internal Controls over Financial Reporting

During the first quarter of 2021, we finalized the process of integrating our acquisition of Zyla’s operations in our internal control environment. There were no other significant changes in our internal controls over financial reporting during the ninesix months ended SeptemberJune 30, 20202021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.





PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
For a description of our material pending legal proceedings, see “Note 12. Commitments and Contingencies - Legal Matters” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A.    RISK FACTORS

We are subject to various risks and uncertainties that could have a material impact on our business, results of operations and financial condition, including those hereby incorporated by reference from: (i)from Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019; (ii) “Chapter I — The Merger” — “Risk Factors” in the joint proxy statement/prospectus included in the registration statement on Form S-4 filed with the SEC on April 20, 2020; and (iii) Part II, Item 1A, “Risk Factors” in our Quarterly Reports on Form 10-Q for the three months ended March 31, 2020 and June 30, 2020, respectively.2020. There have been no material changes to our risk factors since our QuarterlyAnnual Report on Form 10-Q10-K for the three monthsyear ended June 30,December 31, 2020. In addition to other information in this report, the risk factors referenced above should be considered carefully in evaluating an investment in our securities. If any of these risks or uncertainties actually occurs, our business, results of operations or financial condition would be materially and adversely affected. The risks and uncertainties referenced above are not the only ones facing us. Additional risks and uncertainties of which we are unaware or that we currently deem immaterial may also become important factors that may harm our business, results of operations and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The CompanyWe did not sellrepurchase any equity securitiesshares of the Company’s common stock during the period covered by this Quarterly Report, that were not registeredexcept for shares surrendered to us, as reflected in the following table, to satisfy tax withholding obligations in connection with the vesting of equity awards.
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(a)
Total Number of Shares (or Units) Purchased (1)

(b) Average Price Paid per Share
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2021 -
April 30, 2021		4,645$2.53N/AN/A
May 1, 2021 -
May 31, 2021		7,762$1.65N/AN/A
June 1, 2021 -
June 30, 2021		——N/AN/A
Total12,407$1.98

(1) Consists of shares withheld to pay employees’ tax liability in connection with the vesting of equity awards granted under the Securities Act, except as previously disclosed in our Current Reports on Form8-K.

stock-based compensation plans. These shares may be deemed to be “issuer purchases” of shares.


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ITEM 6. EXHIBITS
31.1
31.2
32.1*
32.2*
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(†)    Confidential treatment granted (or certain portions omitted pursuant to the SEC’s rules regarding the redaction of confidential information)

(*)    Furnished herewith

(^)    All exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish the omitted exhibits and schedules to the SEC upon request by the SEC.

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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.
 
Date: November 6, 2020August 5, 2021ASSERTIO HOLDINGS, INC.
/s/ Todd N. Smith
Todd N. Smith
President and Chief Executive Officer
  
 /s/ Daniel A. Peisert
 Daniel A. Peisert
 President and Chief Executive Officer
/s/ Paul Schwichtenberg
Paul Schwichtenberg
Senior Vice President and Chief Financial Officer
/s/ Ajay Patel
Ajay Patel
Senior Vice President and Chief Accounting Officer

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