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 MARCH 31, ~~2022~~2023

☐ 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)


Delaware			85-0598378
(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

ASRT

The 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 May ~~1, 2022~~5, 2023 was ~~45,433,479.~~55,664,293.

ASSERTIO HOLDINGS, INC.

FORM 10-Q FOR THE PERIOD ENDED MARCH 31, ~~2022~~2023

TABLE OF CONTENTS




PART I — FINANCIAL INFORMATION

Item 1.						Financial Statements (unaudited)

						Condensed Consolidated Balance Sheets at March 31, ~~2022 (unaudited)~~2023 and December 31, ~~2021~~2022

						Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months endedMarch 31, ~~2022~~2023 and ~~2021 (unaudited)~~2022

						Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, ~~2022~~2023 and ~~2021 (unaudited)~~2022

						Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021 (unaudited)~~2022

						Notes to Condensed Consolidated Financial Statements

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

Item 3.						Quantitative and Qualitative Disclosures About Market Risk

Item 4.						Controls and Procedures

PART II — OTHER INFORMATION

Item 1.						Legal Proceedings

Item 1A.						Risk Factors

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

Item 6.3.						Exhibits

						Signatures

~~Table of Content~~

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share ~~and per~~ data)


		(Unaudited)					(Unaudited)
		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	61,389	$	36,810	Cash and cash equivalents	$	68,603	$	64,941

Accounts receivable, net	Accounts receivable, net	48,923		44,361		Accounts receivable, net	46,466		45,357
Inventories, net	Inventories, net	9,480		7,489		Inventories, net	16,226		13,696
Prepaid and other current assets	Prepaid and other current assets	5,323		14,838		Prepaid and other current assets	6,554		8,268
Total current assets	Total current assets	125,115		103,498		Total current assets	137,849		132,262
Property and equipment, net	Property and equipment, net	1,329		1,527		Property and equipment, net	544		744
Intangible assets, net	Intangible assets, net	207,554		216,054		Intangible assets, net	191,712		197,996

Deferred tax asset						Deferred tax asset	81,569		80,202
Other long-term assets	Other long-term assets	5,137		5,468		Other long-term assets	2,600		2,709
Total assets	Total assets	$	339,135	$	326,547	Total assets	$	414,274	$	413,913
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	8,523	$	6,685	Accounts payable	$	6,173	$	5,991
Accrued rebates, returns and discounts	Accrued rebates, returns and discounts	55,588		52,662		Accrued rebates, returns and discounts	52,313		49,426
Accrued liabilities	Accrued liabilities	15,386		14,699		Accrued liabilities	10,799		12,181

Long-term debt, current portion	Long-term debt, current portion	12,271		12,174		Long-term debt, current portion	470		470
Contingent consideration, current portion	Contingent consideration, current portion	14,600		14,500		Contingent consideration, current portion	24,458		26,300

Other current liabilities	Other current liabilities	32,159		34,299		Other current liabilities	332		948
Total current liabilities	Total current liabilities	138,527		135,019		Total current liabilities	94,545		95,316
Long-term debt	Long-term debt	61,250		61,319		Long-term debt	38,151		66,403
Contingent consideration	Contingent consideration	22,859		23,159		Contingent consideration	26,600		22,200
Other long-term liabilities	Other long-term liabilities	4,637		4,636		Other long-term liabilities	4,314		4,269
Total liabilities	Total liabilities	227,273		224,133		Total liabilities	163,610		188,188
Commitments and contingencies		0		0
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, $0.0001 par value, 200,000,000 shares authorized; 45,335,426 and 44,640,444 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.		4		4
Common stock, $0.0001 par value, 200,000,000 shares authorized; 55,661,866 and 48,319,838 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.						Common stock, $0.0001 par value, 200,000,000 shares authorized; 55,661,866 and 48,319,838 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.	5		5
Additional paid-in capital	Additional paid-in capital	532,020		531,636		Additional paid-in capital	573,744		545,321
Accumulated deficit	Accumulated deficit	(420,162)		(429,226)		Accumulated deficit	(323,085)		(319,601)

Total shareholders’ equity	Total shareholders’ equity	111,862		102,414		Total shareholders’ equity	250,664		225,725
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	339,135	$	326,547	Total liabilities and shareholders' equity	$	414,274	$	413,913

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

~~Table of Content~~

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share data)

(Unaudited)

Three Months Ended March 31,
2022 2021
Revenues:
Product sales, net $ 35,546 $ 26,027
Royalties and milestones 992 434
Other revenue — 378
Total revenues 36,538 26,839
Costs and expenses:
Cost of sales 4,195 3,966
Selling, general and administrative expenses 10,638 8,324
Fair value of contingent consideration 1,645 (594)
Amortization of intangible assets 8,501 6,547
Restructuring charges — 1,089
Total costs and expenses 24,979 19,332
Income from operations 11,559 7,507
Other (expense) income:
Interest expense (2,327) (2,684)
Other gain 545 269
Total other expense (1,782) (2,415)
Net income before income taxes 9,777 5,092
Income tax expense (713) (548)
Net income and Comprehensive income $ 9,064 $ 4,544
Basic net income per share $ 0.20 $ 0.12
Diluted net income per share $ 0.20 $ 0.12
Shares used in computing basic net income per share 45,204 37,824
Shares used in computing diluted net income per share 46,127 38,480


	Three Months Ended March 31,
	2023		2022
Revenues:
Product sales, net	$	41,769	$	35,546
Royalties and milestones	697		992

Total revenues	42,466		36,538
Costs and expenses:
Cost of sales	5,467		4,195
Selling, general and administrative expenses	16,904		10,638
Fair value of contingent consideration	9,167		1,645
Amortization of intangible assets	6,284		8,501

Total costs and expenses	37,822		24,979
Income from operations	4,644		11,559
Other (expense) income:
Debt-related expenses	(9,918)		—
Interest expense	(1,122)		(2,327)
Other gain	802		545
Total other expense	(10,238)		(1,782)
Net (loss) income before income taxes	(5,594)		9,777
Income tax benefit (expense)	2,110		(713)
Net (loss) income and comprehensive (loss) income	$	(3,484)	$	9,064

Basic net (loss) income per share	$	(0.07)	$	0.20
Diluted net (loss) income per share	$	(0.07)	$	0.20
Shares used in computing basic net (loss) income per share	51,005		45,204
Shares used in computing diluted net (loss) income per share	51,005		46,127

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

~~Table of Content~~

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(Unaudited)

Common Stock Additional
Paid-In
Capital* Accumulated
Earnings
(Deficit) Shareholders’
Equity
Shares* Amount*
Balances at December 31, 2021 44,640 $ 4 $ 531,636 $ (429,226) $ 102,414
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability 307 — (598) — (598)
Issuance of common stock upon exercise of warrant 388 — — — —
Stock-based compensation — — 982 — 982
Net income and comprehensive income — — — 9,064 9,064
Balances at March 31, 2022 45,335 $ 4 $ 532,020 $ (420,162) $ 111,862


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Shareholders’ Equity
	Shares	Amount
Balances at December 31, 2022	48,320	$	5	$	545,321	$	(319,601)	$	225,725


Induced exchange of convertible notes (See Note 9)	6,990	—		26,699		—		26,699

Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	352	—		(722)		—		(722)


Stock-based compensation	—	—		2,446		—		2,446


Net loss and comprehensive loss	—	—		—		(3,484)		(3,484)
Balances at March 31, 2023	55,662	$	5	$	573,744	$	(323,085)	$	250,664

Common Stock Additional
Paid-In
Capital* Accumulated
Earnings
(Deficit) Shareholders’
Equity
Shares* Amount*
Balances at December 31, 2020 28,392 $ 3 $ 483,456 $ (427,945) $ 55,514
Issuance of common stock upon exercise of options 73 — — — —
Issuance of common stock in connection with stock offerings 14,400 1 44,860 — 44,861
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability 211 — (388) — (388)
Issuance of common stock in conjunction with vesting of performance stock units 13 — — — —
Issuance of common stock upon exercise of warrant 347 — — — —
Stock-based compensation — — 772 — 772
Net income and comprehensive income — — — 4,544 4,544
Balances at March 31, 2021 43,436 $ 4 $ 528,700 $ (423,401) $ 105,303

~~(*) Adjusted to reflect the~~ ~~1-for-4 reverse stock split effected on May 18, 2021.~~


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Shareholders’ Equity
	Shares	Amount
Balances at December 31, 2021	44,640	$	4	$	531,636	$	(429,226)	$	102,414




Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	307	—		(598)		—		(598)

Issuance of common stock upon exercise of warrant	388	—		—		—		—
Stock-based compensation	—	—		982		—		982


Net income and comprehensive income	—	—		—		9,064		9,064
Balances at March 31, 2022	45,335	$	4	$	532,020	$	(420,162)	$	111,862

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

~~Table of Content~~

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

Three Months Ended March 31,
2022 2021
Operating Activities
Net income $ 9,064 $ 4,544
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 8,699 6,812
Amortization of debt discount, debt issuance costs and royalty rights 28 70
Recurring fair value measurement of assets and liabilities 1,645 (593)
Stock-based compensation 982 772
Provision for inventory and other assets 31 151
Changes in assets and liabilities, net of acquisition:
Accounts receivable (4,561) 5,109
Inventories (2,022) 2,631
Prepaid and other assets 9,845 3,395
Accounts payable and other accrued liabilities (1,511) (16,749)
Accrued rebates, returns and discounts 2,926 (12,978)
Interest payable 2,300 2,610
Net cash provided by (used in) operating activities 27,426 (4,226)
Investing Activities
Purchase of Otrexup (404) —
Net cash used in investing activities (404) —
Financing Activities
Payment of contingent consideration (1,845) —
Proceeds from issuance of common stock — 44,861
Shares withheld for payment of employee's withholding tax liability (598) (388)
Net cash (used in) provided by financing activities (2,443) 44,473
Net increase in cash and cash equivalents 24,579 40,247
Cash and cash equivalents at beginning of year 36,810 20,786
Cash and cash equivalents at end of period $ 61,389 $ 61,033
Supplemental Disclosure of Cash Flow Information
Net cash paid (refunded) for income taxes $ (8,360) $ —
Cash paid for interest $ — $ —


	Three Months Ended March 31,
	2023		2022
Operating Activities
Net (loss) income	$	(3,484)	$	9,064
Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization	6,484		8,699
Amortization of debt issuance costs and Royalty Rights	147		28
Recurring fair value measurements of assets and liabilities	9,167		1,645
Debt-related expenses	9,918		—
Provisions for inventory and other assets	1,072		31
Stock-based compensation	2,446		982
Deferred income taxes	(1,367)		—
Changes in assets and liabilities, net of acquisition:
Accounts receivable	(1,109)		(4,561)
Inventories	(3,602)		(2,022)
Prepaid and other assets	1,824		9,845
Accounts payable and other accrued liabilities	(290)		(1,511)
Accrued rebates, returns and discounts	2,887		2,926
Interest payable	(1,376)		2,300
Net cash provided by operating activities	22,717		27,426
Investing Activities

Purchase of Sympazan	(105)		—
Purchase of Otrexup	—		(404)
Net cash used in investing activities	(105)		(404)
Financing Activities

Payment in settlement of convertible debt inducement	(10,500)		—
Payment of direct transaction costs related to convertible debt inducement	(1,119)		—
Payment of contingent consideration	(6,609)		(1,845)




Payment of taxes related to net share settlement of equity awards	(722)		(598)
Net cash used in financing activities	(18,950)		(2,443)
Net increase in cash and cash equivalents	3,662		24,579
Cash and cash equivalents at beginning of year	64,941		36,810
Cash and cash equivalents at end of period	$	68,603	$	61,389

Supplemental Disclosure of Cash Flow Information
Net cash paid (refunded) for income taxes	$	29	$	(8,360)
Cash paid for interest	$	2,351	$	—

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

~~Table of Content~~

ASSERTIO HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

In May 2020, Assertio Therapeutics, Inc. implemented a holding company reorganization through which Assertio Therapeutics, Inc. became a subsidiary of Assertio Holdings, Inc. (the “Assertio Reorganization”) and, subsequently, Assertio Holdings, Inc. merged with Zyla Life Sciences (“Zyla”) in a transaction we refer to as the “Zyla Merger.” Unless otherwise noted or required by context, use of “Assertio,” “Company,” “we,” “our” and “us” refer to Assertio Holdings, Inc. and/or its applicable subsidiary or subsidiaries.

Assertio is a specialty pharmaceutical company offering differentiated products to patients utilizing a non-personal promotional model. The Company’s primary marketed products include INDOCIN® (indomethacin) Suppositories, INDOCIN® (indomethacin) Oral Suspension, Otrexup® (methotrexate) injection for subcutaneous use, Sympazan® (clobazam) oral film, SPRIX® (ketorolac tromethamine) Nasal Spray, CAMBIA® (diclofenac potassium for oral solution), and Zipsor® (diclofenac potassium) Liquid filled capsules.

Other commercially available products include OXAYDO® (oxycodone HCI, USP) tablets for oral use only —CII.

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)~~(“SEC”) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by United States (“U.S.”) generally accepted accounting principles ~~(U.S. GAAP)~~(“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. The results for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of results to be expected for the entire year ending December 31, ~~2022~~2023 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, ~~2021~~2022 included in Assertio Holdings, Inc.’s Annual Report on Form 10-K filed with the SEC on March ~~10, 2022~~8, 2023 (the ~~2021~~“2022 Form ~~10-K)~~10-K”). The Condensed Consolidated Balance Sheet as of December 31, ~~2021~~2022 has been derived from the audited financial statements at that date, as filed in the Company’s ~~2021~~2022 Form 10-K.

~~Stock Split~~

On May 18, 2021, the Company effected a 1-for-4 reverse stock split of its issued and outstanding common stock. The par value of the common stock was not adjusted as a result of the reverse stock split. All common stock share and per-share data included in these financial statements have been retrospectively adjusted to reflect the effect of the reverse stock split for all periods presented.

~~Reclassifications~~

During the third quarter of 2021, the Company made certain reclassifications within Total revenues related to product sales adjustments for previously divested products. Product sales adjustments for previously divested products were reclassified from Product sales, net to Other revenue on the Condensed Consolidated Statements of Comprehensive Income, which impacted previously reported amounts for the three months ended March 31, 2021. The reclassifications were made so the line-item Product sales, net would reflect net sales of the Company’s current commercialized products. Prior period results were recast to conform with these changes, and resulted in an increase to Other revenue and an equal and offsetting decrease to Product sales of $0.4 million for the three months ended March 31, 2021. Total net revenue as previously reported remains unchanged.

During the first quarter of 2022, the Company made certain reclassifications within Sales, general, and administrative expenses related to changes in the fair value of contingent considerations. These fair value adjustments were reclassified from Sales, general, and administrative expenses to Fair value of contingent consideration on the Condensed Consolidated Statements of Comprehensive Income, which impacted previously reported amounts for the ~~three months ended March 31, 2021. The reclassifications were made to separately state~~ ~~changes in the fair value of contingent considerations from sales, general, and administrative expenses.~~ ~~Prior period results were recast to conform with these changes, and resulted in an increase to~~ ~~Sales, general, and administrative Expenses~~ ~~and an equal and offsetting decrease to~~ ~~Fair value of contingent consideration~~ ~~of $0.6 million for the three months ended March 31, 2021. Total cost and expenses and Income from operations as previously reported remains unchanged.~~

~~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. Because COVID-19 impacted the Company’s ability to see in person providers who prescribe our products, the Company transformed its commercial approach during 2020 and increased virtual visits, ultimately eliminating its in-person sales force in favor of a digital sales strategy. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, the Company has

~~Table of Content~~

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 actions by government authorities to contain the outbreak, the emergence of new COVID-19 variants and the related potential for new surges in infections and the impacts of increases in virtual physician visits on prescriber behavior. For example, although many public health restrictions have eased, future surges could result in additional restrictions or other factors that may contribute to decreases in elective procedures. The impact of the pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact its liquidity. The Company does not yet know the full extent of potential delays or impacts on its business, financing or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which it relies, including suppliers and distributors.

NOTE 2. ~~ACQUISITIONS~~

~~Otrexup Acquisition~~

On December 15, 2021, the Company, through a newly-formed subsidiary, Otter Pharmaceuticals, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Antares Pharma, Inc. (“Antares”), and concurrently consummated the transaction. Pursuant to the terms of the Purchase Agreement, the Company acquired Antares’ rights, title and interest in and to Otrexup, including certain related assets, intellectual property, contracts, and product inventory for (i) $18.0 million in cash paid at closing, (ii) $16.0 million in cash payable on May 31, 2022 and (iii) and $10.0 million in cash payable on December 15, 2022.

~~The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of Otrexup (in thousands):~~


~~Cash paid to Antares at closing~~	$	~~18,000~~
~~Deferred cash payment due in May and December 2022~~	~~26,021~~
~~Transaction costs~~	~~1,478~~
~~Total purchase price of assets acquired~~	$	~~45,499~~

The acquisition of Otrexup has been accounted for as an asset acquisition in accordance with FASB ASC 805-50. The Company accounted for the acquisition of Otrexup as an asset acquisition because substantially all of the fair value of the assets acquired is concentrated in a single asset, the Otrexup product rights. The Otrexup products rights consist of certain patents and trademarks, at-market contracts and regulatory approvals, customer lists, marketing assets, and other records, and are considered a single asset as they are inextricably linked. ASC 805-10-55-5A includes a screen test, which provides that if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the assets acquired are not considered to be a business. As an asset acquisition, the cost to acquire the group of assets, including transaction costs, is allocated to the individual assets acquired or liabilities assumed based on their relative fair values. The relative fair values of identifiable assets from the acquisition of Otrexup are based on estimates of fair value using assumptions that the Company believes is reasonable.

~~The following table summarizes the fair value of assets acquired in the acquisition of Otrexup (in thousands):~~


~~Inventories~~	$	~~1,413~~
~~Intangible assets (Otrexup product rights)~~	~~44,086~~
~~Total assets acquired~~	$	~~45,499~~

The Otrexup product rights will be amortized over an 8 year period. As of December 31, 2021 and March 31, 2022, deferred cash payable to Antares of $26.0 million is recorded in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

~~NOTE 3.~~ REVENUE

Disaggregated Revenue

~~Table of Content~~

The following table reflects summary revenue, net for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Product sales, net:	Product sales, net:						Product sales, net:
INDOCIN products	INDOCIN products	$	21,357	$	14,597		INDOCIN products	$	30,346	$	21,357
Otrexup							Otrexup	2,822		3,078
Sympazan							Sympazan	2,502		—
SPRIX							SPRIX	1,889		1,766
CAMBIA	CAMBIA	5,473		6,462			CAMBIA	2,264		5,473
Otrexup		3,078		—
Zipsor	Zipsor	2,228		2,222			Zipsor	1,150		2,228
SPRIX		1,766		1,697
Other products	Other products	1,644		1,049			Other products	796		1,644
Total product sales, net							Total product sales, net	41,769		35,546
Royalties and milestone revenue							Royalties and milestone revenue	697		992

Total product sales, net		35,546		26,027

Royalties and milestone revenue		992		434
Other revenue		—		378
Total revenues	Total revenues	$	36,538	$	26,839		Total revenues	$	42,466	$	36,538

Product Sales, net:

For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, product sales primarily consisted of sales from INDOCIN ~~Products, CAMBIA, Zipsor~~products, Otrexup, SPRIX and ~~SPRIX.~~CAMBIA. The Company acquired ~~Otrexup in December 2021~~Sympazan and began shipping and recognizing its product sales in October 2022.

Other product sales for ~~Otrexup in January 2022.~~

~~Other product net sales~~the three months ended March 31, 2023 primarily include product sales for non-promoted products ~~(OXAYDO and SOLUMATRIX)~~(OXAYDO). The Company ceased SOLUMATRIX sales beginning in July 2022.

Royalties and Milestone Revenue

In November 2010, the Company entered into a license agreement ~~with Tribute Pharmaceuticals Canada Ltd. (now known as Miravo Pharmaceuticals)~~ granting ~~them~~the counterparty the rights to commercially market CAMBIA in Canada. ~~Miravo~~The counterparty to the license agreement 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 of $0.5 million ~~and $0.4 million~~ for each of the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022.

The Company records contract liabilities in the form of deferred revenue resulting from prepayments from customers in Other current liabilities onin the Company’s Condensed Consolidated Balance Sheets. As of March 31, 2023 and December 31, ~~2021,~~2022, contract liabilities were ~~$0.3 million.~~zero and $0.2 million, respectively. For the three months ended March 31, 2023 and 2022, the Company ~~recorded an additional $0.3~~recognized $0.2 million ~~in contract liabilities~~ and ~~recognized~~ $0.5 million, respectively, as Milestone revenue associated with the completion of certain service milestones. ~~As of March 31, 2022, contract liabilities were $0.1 million.~~

~~Other Revenue~~

Other revenue consists of sales adjustments for previously divested products, which includes adjustments to reserves for product sales allowances (gross-to-net sales allowances) and can result in reductions to total revenue during the period. Sales adjustments for previously divested products primarily include Gralise, Nucynta and Lazanda.

NOTE 4.3. ACCOUNTS RECEIVABLES, NET

~~The following table reflects accounts receivables, net, as of March 31, 2022 and December 31, 2021 (in thousands):~~

March 31,
2022 December 31, 2021
Receivables related to product sales, net $ 47,112 $ 43,753
Other 1,811 608
Total accounts receivable, net $ 48,923 $ 44,361

~~Table of Content~~

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, accounts receivable, net, of $46.5 million and $45.4 million, respectively, consisted entirely of receivables related to product sales, net of allowances for cash discounts for prompt payment ~~were $0.9~~of $1.0 million and $0.9 million, respectively.

NOTE 5.4. INVENTORIES, NET

The following table reflects the components of inventory, net as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	1,358	$	1,242	Raw materials	$	921	$	1,367
Work-in-process	Work-in-process	1,176		823		Work-in-process	1,677		2,735
Finished goods	Finished goods	6,946		5,424		Finished goods	13,628		9,594
Total		$	9,480	$	7,489
Total Inventories, net						Total Inventories, net	$	16,226	$	13,696

The Company writes down the value of inventory for potentially excess or obsolete inventories based on an analysis of inventory on hand and projected demand. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company recorded inventory ~~reserves were $3.7 million.~~write-downs of $2.4 million and $2.8 million, respectively.

NOTE 6.5. PROPERTY AND EQUIPMENT, NET

The following table reflects property and equipment, net as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Furniture and office equipment	Furniture and office equipment	$	2,733	$	2,733	Furniture and office equipment	$	1,708	$	1,712
Laboratory equipment	Laboratory equipment	20		20		Laboratory equipment	20		20
Leasehold improvements	Leasehold improvements	9,787		10,523		Leasehold improvements	2,945		2,945
		12,540		13,276			4,673		4,677
Less: Accumulated depreciation	Less: Accumulated depreciation	(11,211)		(11,749)		Less: Accumulated depreciation	(4,129)		(3,933)
Property and equipment, net	Property and equipment, net	$	1,329	$	1,527	Property and equipment, net	$	544	$	744

Depreciation expense was $0.2 million ~~and $0.3 million~~ for each of the three months ended March 31, ~~2022~~2023 and ~~2021, respectively.~~2022. Depreciation expense is recognized in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income.

NOTE 7.6. INTANGIBLE ASSETS

The following table reflects the gross carrying amounts and net book values of intangible assets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (dollar amounts in thousands):

March 31, 2022 December 31, 2021
Remaining Useful Life
(In years) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value
Products rights:
INDOCIN 10.1 $ 154,100 $ (23,864) $ 130,236 $ 154,100 $ (20,654) $ 133,446
Otrexup 7.7 44,086 (1,377) 42,709 44,086 — 44,086
SPRIX 5.1 39,000 (10,354) 28,646 39,000 (8,960) 30,040
CAMBIA 0.8 51,360 (45,397) 5,963 51,360 (43,410) 7,950
Zipsor 0.0 27,250 (27,250) — 27,250 (26,718) 532
Oxaydo 0.0 300 (300) — 300 (300) —
Total Intangible Assets $ 316,096 $ (108,542) $ 207,554 $ 316,096 $ (100,042) $ 216,054

~~Table of Content~~


		March 31, 2023				December 31, 2022
	Remaining Useful Life (In years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Products rights:
INDOCIN	9.1	$	154,100	$	(36,705)	$	117,395	$	154,100	$	(33,495)	$	120,605
Otrexup	6.7	44,086		(6,888)		$	37,198	44,086		(5,511)		38,575
Sympazan	11.6	14,550		(505)		$	14,045	14,550		(202)		14,348
SPRIX	4.1	39,000		(15,926)		$	23,074	39,000		(14,532)		24,468
Total Intangible Assets		$	251,736	$	(60,024)	$	191,712	$	251,736	$	(53,740)	$	197,996

Amortization expense was ~~$8.5~~$6.3 million and ~~$6.5~~$8.5 million for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

The following table reflects future amortization expense the Company expects for its intangible assets (in thousands):

Year Ending December 31, Estimated Amortization Expense
2022 (remainder) $ 23,906
2023 23,924
2024 23,924
2025 23,924
2026 23,924
Thereafter 87,952
Total $ 207,554


Year Ending December 31,	Estimated Amortization Expense
2023 (remainder)	18,852
2024	25,136
2025	25,136
2026	25,136
2027	21,747
Thereafter	75,705
Total	$	191,712

NOTE 8.7. OTHER LONG-TERM ASSETS

The following table reflects other long-term assets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Investment, net		$	1,579	$	1,579
Operating lease right-of-use assets	Operating lease right-of-use assets	586		735		Operating lease right-of-use assets	$	107	$	137
Prepaid asset and deposits	Prepaid asset and deposits	2,275		2,456		Prepaid asset and deposits	1,518		1,607
Other	Other	697		698		Other	975		965
Total other long-term assets	Total other long-term assets	$	5,137	$	5,468	Total other long-term assets	$	2,600	$	2,709

~~Investment consists of~~Other includes the Company’s investment in NES Therapeutic, Inc. ~~(NES)~~(“NES”). In August 2018, the Company entered into a Convertible Secured Note Purchase Agreement ~~(Note Agreement)~~(the “Note Agreement”) with NES. Pursuant the terms of the Note Agreement, the Company purchased a $3.0 million aggregate principal Convertible Secured Promissory Note ~~(NES Note) for $3.0 million~~(the “NES Note”) which accrues interest annually at a rate of 10% onfor total consideration of $3.0 million, ~~principal,~~ with both the aggregate principal and accrued interest due at maturity on August 2, 2024. Pursuant to the Note Agreement, the NES Note is convertible into equity based on (i) ~~FDA~~U.S. Food and Drug Administration (“FDA”) acceptance of the ~~NDA,~~New Drug Application (“NDA”), (ii) initiation of any required clinical trials by NES, or (iii) a qualified financing event by ~~NES.~~NES, as defined in the Note Agreement. This investment is ~~structured~~accounted as a long-term loan receivable ~~with a convertible feature~~ and is valued at amortized cost. As of March 31, 2023 and December 31, 2022, the Company ~~continues to assess~~ has assessed an estimated ~~$1.9~~$3.5 million ~~expected~~expected credit loss on its investment based on its evaluation of probability of default that exists. The expected credit loss recognized in each period represents the entire aggregate principal amount and outstanding interest incurred on the NES Note as of both March 31, 2023 and December 31, 2022.

NOTE 9.8. ACCRUED LIABILITIES

The following table reflects accrued liabilities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accrued compensation	Accrued compensation	$	1,985	$	4,122	Accrued compensation	$	602	$	3,117
Accrued restructuring costs		488		828

Other accrued liabilities	Other accrued liabilities	8,641		8,062		Other accrued liabilities	9,587		6,561
Interest payable	Interest payable	3,986		1,687		Interest payable	217		1,593
Income tax payable		286		—
Accrued royalties						Accrued royalties	393		910
Total accrued liabilities	Total accrued liabilities	$	15,386	$	14,699	Total accrued liabilities	$	10,799	$	12,181

~~NOTE 10. DEBT~~

1110

~~Table of Content~~

NOTE 9. DEBT

The following table reflects the Company’s debt as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

March 31, 2022 December 31, 2021
13% Senior Secured Notes due 2024
$ 70,750 $ 70,750
Royalty rights obligation 2,771 2,743
Total principal amount 73,521 73,493
Less: current portion of long-term debt (12,271) (12,174)
Net, long-term debt $ 61,250 $ 61,319


	March 31, 2023		December 31, 2022
6.5% Convertible Senior Secured Notes due 2027	$	40,000	$	70,000
Royalty Rights obligation	470		470
Total principal amount	40,470		70,470
Plus: derivative liability for embedded conversion feature	252		252
Less: unamortized debt issuance costs	(2,101)		(3,849)
Carrying value	38,621		66,873
Less: current portion of long-term debt	(470)		(470)
Long-term debt, net	$	38,151	$	66,403

~~13%~~6.5% Convertible Senior ~~Secured~~ Notes due ~~2024~~2027

~~In accordance~~On August 22, 2022, Assertio entered into a purchase agreement (the “Purchase Agreement”), with U.S. Bank Trust Company as the ~~Zyla Merger, Assertio assumed $95.0~~trustee (the “2027 Convertible Note Trustee”) of the initial purchasers (the “Initial Purchasers”) to issue $60.0 million in aggregate principal amount of 6.5% Convertible Senior Notes due 2027 (the “2027 Convertible Notes”). Under the Purchase Agreement, the Initial Purchasers were also granted an overallotment option to purchase up to an additional $10.0 million aggregate principal amount of the 2027 Convertible Notes solely to cover overallotment (the “Overallotment Option”) within a 13-day period from the date the initial 2027 Convertible Notes were issued. On August 24, 2022, the Initial Purchasers exercised the Overallotment Option in full for the $10.0 million aggregate principal of additional 2027 Convertible Notes. The 2027 Convertible Notes are senior unsecured obligations of the Company.

The Company used the net proceeds from the issuance of the 2027 Convertible Notes to repurchase $59.0 million aggregate principal amount of its outstanding 13% senior secured notes due 2024 assumed in accordance with the Zyla Merger (the “2024 Secured ~~Notes) issued~~Notes”) and $3.0 million in associated interest payments pursuant to ~~an indenture (the Existing Indenture)~~privately negotiated exchange agreements entered into ~~on January 31, 2019, by and among Zyla Life Sciences,~~concurrently with 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 millionpricing of ~~Series A-1 Notes and $45.0 million~~the offering of ~~Series A-2~~the 2027 Convertible Notes.

On February 27, 2023, the Company completed a privately negotiated exchange of $30.0 million principal amount of the 2027 Convertible Notes (the “Convertible Note Exchange”). Pursuant to the Convertible Note Exchange, 6,990,000 shares of the Company’s common stock, plus an additional $10.5 million in cash, were issued in a partial settlement of the 2027 Convertible Notes (the “Exchanged Notes”). As a result of ~~May 20, 2020,~~ the ~~Existing Indenture was modified by a Supplemental Indenture (the Supplem~~Convertible Note Exchange, the Company recorded an induced conversion expense of approximately $8.8 million and direct transaction costs of approximately $1.1 million, the total of which is reporte~~ental Indenture and the Existing Indenture, as~~d in Debt-related expenses ~~so modified,~~in the ~~Indenture), pursuant to which Assertio (the Issuer) assumed~~Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income for the ~~obligations as issuer~~three months ended March 31, 2023. The induced conversion expense represents the fair value of the ~~Secured Notes and~~consideration transferred in the ~~subsidiaries of Assertio became guarantors~~Convertible Note Exchange in excess of the ~~Secured~~fair value of common stock issuable under the original terms of the 2027 Convertible Notes. ~~The Supplemental Indenture, among other things, provides for certain amendments~~Additionally, approximately $1.6 million of unamortized issuance costs related to the ~~restrictive covenants~~Exchanged Notes were recognized as Additional paid-in capital in ~~the Indenture.~~

~~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).~~ t~~The Existing Indenture also requires payments of outstanding principal on the Secured Notes equal to~~ ~~10%~~ ~~perannum of the issued principal amount, payable semi-annually on each Payment Date.~~he Company’s Condensed Consolidated Balance Sheets.

The ~~Secured~~terms of the 2027 Convertible Notes are ~~senior secured obligations~~governed by an indenture dated August 25, 2022 (the “2027 Convertible Note Indenture”). The terms of the ~~Issuer~~2027 Convertible Notes allow for conversion into the Company’s common stock, cash, or a combination of cash and ~~are secured by a lien on substantially all assets~~common stock, at the Company’s election only, at an initial conversion rate of 244.2003 shares of the ~~Issuer and the guarantors. The stated maturity date~~Company’s common stock per $1,000 principal amount (equal to an initial conversion price of ~~the Secured Notes is January 31, 2024. Upon the occurrence of a Change of Control,~~approximately $4.09 per share), subject to ~~certain conditions (as defined~~adjustments specified in the ~~Existing Indenture), holders of the Secured~~2027 Convertible Note Indenture (the “Conversion Rate”). The 2027 Convertible Notes ~~may require the Issuer to repurchase for cash all~~will mature on September 1, 2027, unless earlier repurchased 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.~~converted.

The ~~Company may redeem the Secured~~2027 Convertible Notes ~~at its option, in whole or in part~~bear interest from ~~time to time,~~August 25, 2022 at a ~~redemption price equal to 100%~~rate of ~~the principal amount~~6.5% per annum payable semiannually in arrears on March 1 and September 1 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.~~each year, beginning on March 1, 2023.

Pursuant to the ~~Supplemental~~terms of the Indenture, ~~Assertio~~the Company and its restricted subsidiaries must ~~also~~ comply with certain covenants, including ~~limitations on the issuance~~mergers, consolidations, and divestitures; guarantees of ~~debt; the~~debt by subsidiaries; issuance of preferred and/or disqualified stock; and liens on the ~~payment of dividends and other restricted payments; the prepayment, redemption~~Company’s properties 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.assets. The Company was in compliance with its covenants with respect to the ~~Secured~~2027 Convertible Notes as of March 31, ~~2022.~~2023.

The following table reflects the carrying balance of the 2027 Convertible Notes as of March 31, 2023 and December 31, 2022 (in thousands):


	March 31, 2023		December 31, 2022
Principal balance	$	40,000	$	70,000
Derivative liability for embedded conversion feature	252		252
Unamortized debt issuance costs	(2,101)		(3,849)
Carrying balance	$	38,151	$	66,403

The debt issuance costs incurred related to the 2027 Convertible Notes are recognized as a debt discount and are being amortized as interest expense over the term of the 2027 Convertible Notes using the effective interest method with an effective interest rate determined to be 7.8%. During the three months ended March 31, 2023, the Company amortized $0.1 million of the debt discount on the 2027 Convertible Notes, and $1.6 million of unamortized issuance costs related to the Exchanged Notes were recognized as Additional paid-in capital.

The Company ~~had Senior Secured~~determined that an embedded conversion feature included in the 2027 Convertible Notes ~~obligations~~required bifurcation from the host contract and to be recognized as a separate derivative liability carried at fair value. The estimated fair value of ~~$70.8~~the derivative liability, which represents a Level 3 valuation, was $0.3 million as of both March 31, 2023 and December 31, ~~2021~~2022, and ~~March 31, 2022, with $9.5 million~~ ~~classified~~was determined using a binomial lattice model using certain assumptions and consideration of an increased conversion ratio on the underlying convertible notes that could result from the occurrence of certain events. All of the other embedded features of the 2027 Convertible Notes were clearly and closely related to the debt host and did not require bifurcation as ~~current and $61.3 million classified as non-current debt in~~a derivative liability, or the fair value of the bifurcated features was immaterial to the Company’s ~~Condensed Consolidated Balance Sheets.~~financial statements.

Royalty Rights Obligation

In accordance with the Zyla Merger, the Company assumed a royalty rights ~~agreements~~agreement (the ~~Royalty Rights)~~“Royalty Rights”) with each of the holders of its 2024 Secured Notes pursuant to which the ~~Company will~~Company agreed to pay ~~the holders of the Secured Notes~~ an aggregate 1.5% royalty on Net Sales (as defined in the ~~Existing Indenture)~~indenture governing the 2027 Secured Notes) through December 31, 2022. The Royalty Rights ~~were determined to be a freestanding element with respect to the Secured Notes~~terminated on December 31, 2022 and the Company ~~is accounting for the Royalty Rights obligation relating to future royalties as a debt instrument.~~

~~Table of Content~~

~~The Company~~ has no further Royalty Rights obligations ~~of $2.8 million and $2.7 million as of March 31, 2022 and December 31, 2021, respectively, which are classified as 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~~on net sales ~~are subject~~subsequent to ~~significant variability due to the extended time period associated with the financing transaction and are thus subject to significant uncertainty.~~that date.

Interest Expense

~~Debt discount~~Royalty Rights and ~~royalty rights~~debt issuance cost are amortized as interest expense using the effective interest method. The following table reflects ~~debt related~~debt-related interest included in ~~the~~ Interest expense in the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three Months Ended March 31,
2022 2021
Stated coupon interest $ 2,299 $ 2,614
Amortization of debt discount and royalty rights 28 70
Total interest expense $ 2,327 $ 2,684


	Three Months Ended March 31,
	2023		2022
Interest on 2027 Convertible Notes	$	975	$	—
Interest on 2024 Secured Notes	—		2,299
Amortization of Royalty Rights(1)	—		28
Amortization of debt issuance costs	147		—
Total interest expense	$	1,122	$	2,327

(1)As a result of the extinguishment of the Royalty Rights obligation in the fourth quarter of 2022, there will be no additional amortization expense recognized in future periods.

NOTE ~~11.~~10. STOCK-BASED COMPENSATION

The Company’s stock-based compensation generally includes ~~stock options,~~time-based restricted stock units ~~(RSUs)~~(“RSU”) and ~~performance share units (PSUs).~~options, as well as performance-based RSUs and options.

For the three months ending March 31, ~~2022~~2023 and ~~2021,~~2022, stock-based compensation of ~~$1.0~~$2.4 million ~~and $0.8~~and $1.0 million, respectively, was recognized in Selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income.

During the three months ended March 31, ~~2022~~2023 the Company granted ~~0.1~~0.5 million RSUs at ~~an average~~a weighted-average fair market value of ~~$2.59~~$5.15 per share, and 0.6 million options at a weighted-average fair market value of $4.39 per share.

NOTE ~~12.~~11. LEASES

As of March 31, ~~2022,~~2023, the Company has a non-cancelable operating ~~leases~~lease for its ~~offices~~corporate office, which is located in Lake Forest, Illinois (the “Lake Forest Lease”). On May 1, 2023, the Company amended the Lake Forest Lease to reduce the size of leased premises and ~~certain office equipment. The Company has the right to renew~~extend 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 which is on~~through December 31, ~~2023.~~2030. In ~~connection~~connection with the Zyla Merger, the Company assumed an operating lease for offices in Wayne, Pennsylvania, which terminated in February 2022.

Prior to the Company’s corporate headquarters relocation in 2018, the Company had leased its previous corporate office in Newark, California (the ~~Newark lease) which will terminate~~“Newark Lease”), which terminated at the end of November ~~2022 and will not be renewed.~~2022. The Newark lease ~~is currently~~was partially subleased through the lease ~~term.~~ term of November 2022. Operating lease costs and sublease income related to the Newark facility are accounted for in Other gain ~~(loss)~~ in the ~~Condensed~~Company’s Consolidated Statements of Comprehensive (Loss) Income. ~~For~~During the three months ended March 31, 2022, the Company recognized a gain of $0.6 million from the early termination and settlement of a Newark facility sublease.

The following table reflects lease expense and income for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

~~Table of Content~~


			Three Months Ended March 31,					Three Months Ended March 31,
		Financial Statement Classification	2022		2021			Financial Statement Classification	2023		2022
Operating lease cost	Operating lease cost	Selling, general and administrative expenses	$	40	$	111	Operating lease cost	Selling, general and administrative expenses	$	39	$	40
Operating lease cost	Operating lease cost	Other gain	148		148		Operating lease cost	Other gain	—		148
Total lease cost	Total lease cost		$	188	$	259	Total lease cost		$	39	$	188

Sublease Income	Sublease Income	Other gain	$	775	$	347	Sublease Income	Other gain	$	—	$	775

The following table reflects supplemental cash flow information related to leases for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Cash paid for amounts included in measurement of liabilities:	Cash paid for amounts included in measurement of liabilities:						Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	530	$	766		Operating cash flows from operating leases	$	104	$	530

The following table reflects supplemental balance sheet information related to leases as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		Financial Statement Classification	March 31, 2022		December 31, 2021			Financial Statement Classification	March 31, 2023		December 31, 2022

Liabilities	Liabilities						Liabilities
Current operating lease liabilities	Current operating lease liabilities	Other current liabilities	$	1,487	$	1,978	Current operating lease liabilities	Other current liabilities	$	306	$	401
Noncurrent operating lease liabilities		Other long-term liabilities	303		397

Total lease liabilities	Total lease liabilities		$	1,790	$	2,375	Total lease liabilities		$	306	$	401

NOTE ~~13.~~12. COMMITMENTS AND CONTINGENCIES

Jubilant HollisterStier Manufacturing and Supply Agreement

Pursuant to the Zyla Merger, the Company assumed a Manufacturing and Supply Agreement (the ~~“Agreement”~~“Jubilant HollisterStier 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 for the Company’s commercial use. Under the Jubilant HollisterStier Agreement, JHS ~~will be~~is responsible for supplying a minimum of 75% of the Company’s annual requirements of ~~SPRIX through July 30, 2022.~~SPRIX. The Company ~~has~~ agreed to purchase a minimum number of batches of SPRIX per calendar year from JHS over the term of the Jubilant HollisterStier Agreement. Total commitments to JHS ~~are approximately $0.4 million~~ through the period ending July 30, 2022 have been met, and total commitments through the period ending July 30, 2023 are ~~expected to be met.~~approximately $1.1 million.

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~~“Cosette Supply Agreement”) for the manufacture and supply of INDOCIN Suppositories to Zyla for commercial distribution in the United States. On July 9, 2021, the Company and Cosette entered into Amendment No. 3 to the Cosette Supply Agreement, to among other things, extend the expiration date of the Cosette Supply Agreement from July 31, 20232023 to July 9, 2028. The Company is obligated to purchase all of its requirements for INDOCIN Suppositories from Cosette Pharmaceuticals, Inc., and is required to meet minimum purchase requirements each calendar year during the extended term of the ~~agreement.~~Cosette Supply Agreement. Total commitments to Cosette under the Cosette Supply Agreement are approximately $6.3 million annually through the end of the contract term.

Antares Supply Agreement

In connection with the Otrexup acquisition, the Company entered into a ~~Supply Agreement~~supply agreement with Antares pursuant to which Antares will manufacture and supply the finished Otrexup ~~products.~~products (the “Antares Supply Agreement”). Under the Antares Supply Agreement, the Company has

~~Table of Content~~

agreed to annual minimum purchase obligations from Antares, which approximate $2.0 million annually. The Antares Supply Agreement has an initial term through December 2031 with renewal terms beyond.

~~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. Amounts accrued for legal contingencies are based on management’s best estimate of a loss based upon the status of the cases described below, assessments of the likelihood of damages, and the advice of counsel 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. As of both March 31, ~~2022~~2023 and December 31, ~~2021~~2022, the Company had a legal contingency accrual of approximately ~~$4.2 million and $3.4 million, respectively.~~$3.2 million. The Company ~~will continue~~continues to monitor each matter and adjust accruals as warranted based on new information and further developments in accordance with ASC ~~450-20- 25.~~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~~Provisions for loss contingencies are recorded in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income and the related accruals are recorded in Accrued ~~Liabilities~~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, cash flows 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 were filed in the Northern District of California against the Company and several other defendants relating to our former drug ~~Glumetza~~®Glumetza®. The plaintiffs sought 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. (the “Retailer Plaintiffs”), filed substantially similar direct purchaser antitrust claims.

On July 30, 2020, Humana Inc. also filed a complaint against the Company and several other defendants in federal court in the Northern District of California alleging similar claims related to Glumetza. The claims asserted by Humana in its federal case were ultimately withdrawn, and analogous claims were instead asserted by Humana in an action it filed in California state court on February 8, 2021, and subsequently amended in September 2021. Additionally, on April 5, 2022, Health Care Service Corporation (“HCSC”) filed a complaint against the Company and the same other defendants in California state court alleging similar claims related to Glumetza.

These antitrust cases arise out of a Settlement and License Agreement (the ~~Settlement)~~“Settlement”) that the Company, Santarus, Inc. ~~(Santarus)~~(“Santarus”) and Lupin Limited ~~(Lupin)~~(“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.

On September 14, 2021, the Retailer Plaintiffs voluntarily dismissed all claims against the Company pursuant to a settlement agreement with the Company in return for $3.15 million. On February 3, 2022, the Court issued its final order approving a settlement of the direct purchaser class plaintiffs’ claims against the Company in return for $3.85 million.

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With respect to the ~~Humana lawsuit that is continuing in~~ California state court lawsuits, on November 24, 2021, the state court granted in part and denied in part a demurrer by the ~~defendants.~~defendants in the Humana action. That case iswas consolidated in November 2022 with the HCSC action for pre-trial and trial purposes. These California state cases are now ~~moving to~~in the midst of discovery, and trial is scheduled for ~~August 25, 2023.~~January 2024.

The Company intends to defend itself vigorously in the ~~Humana~~consolidated California state court ~~lawsuit, and the more recently filed HCSC lawsuit~~.lawsuits. A liability for this matter has been recorded in the financial statements.

Securities Class Action Lawsuit and Related Matters

On August ~~23, 2017,~~28, 2022, the U.S. District Court for the Northern District of California issued a final order approving the settlement of a purported federal securities law class action that was pending against the Company, 2two 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).~~thereby concluding this matter. The action (~~Huang~~(Huang v. Depomed et al., No. 4:17-cv-4830-JST, N.D. Cal.) ~~alleges~~alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 ~~relating~~related to certain prior disclosures of the Company about its business, compliance, and operational policies and practices concerning the sales and marketing of its former opioid products and ~~contends~~contended that the conduct supporting the alleged violations affected the value of ~~Company~~Company’s common stock and iswas 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 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. The parties completed their briefing of the appeal

Additionally, on 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~~Superior Court ~~approval. On August 13, 2021, the plaintiffs filed an unopposed motion for preliminary approval~~ of ~~the settlement with the District Court. On March 21, 2022, the District Court~~California, Alameda County, issued ana final order ~~preliminarily~~ approving the settlement ~~which remains subject to final approval by~~of the ~~District Court. The final settlement hearing is scheduled for July 28, 2022.A liability for this matter has been recorded in the financial statements.~~

~~In addition, 5~~ shareholder derivative actions that 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.~~laws, thereby concluding these matters. The claims ~~arise~~in the shareholder derivative actions arose 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. 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. ~~On August 6, 2021, plaintiffs in the consolidated~~ ~~Singh~~/~~Youse~~ derivative action filed an unopposed motion for preliminary approval of the settlement with the Superior Court of California, Alameda County. On October 19, 2021, the Superior Court held a hearing regarding the preliminary approval motion and, on October 28, 2021 and December 14, 2021, respectively, the Superior Court issued its preliminary and final orders approving the settlement.

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 Company’s subsidiary Assertio Therapeutics, Inc. ~~(Assertio Therapeutics)~~ (“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 regarding Assertio Therapeutics’ historical commercialization of opioid products. Assertio Therapeutics voluntarily furnished information responsive to Sen. McCaskill’s request. Since 2017, Assertio Therapeutics has received and responded to subpoenas from the U.S. Department of Justice ~~(DOJ)~~(“DOJ”) seeking documents and information regarding its historical sales and marketing of opioid products. Assertio 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 Assertio Therapeutics’ historical sales and marketing of opioid products. In addition, Assertio Therapeutics received and

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responded to a subpoena from the State of California Department of Insurance ~~(CDI)~~(“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 Assertio Therapeutics’ portfolio. In addition, Assertio 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. Assertio Therapeutics also from time to time receives and complies with subpoenas from governmental authorities related to investigations primarily focused on third parties, including healthcare practitioners. Assertio Therapeutics is cooperating with the foregoing governmental investigations and inquiries.

In July 2022, the Company became aware that the DOJ issued a press release stating that it had settled claims against a physician whom the DOJ alleged had received payments for paid speaking and consulting work from two pharmaceutical companies, including Depomed, Inc. (now known as Assertio Therapeutics), in exchange for prescribing certain of the companies’ respective products. As part of the settlement, the physician did not admit liability for such claims and the press release stated that there has been no determination of any liability for such claims. The Company denies any wrongdoing and disputes DOJ’s characterization of the payments from Depomed.

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 the lawsuits generally include federal and/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)~~(“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 2,000 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. Assertio Therapeutics is currently involved in a subset of the lawsuits that have been filed in or transferred to the MDL Court. Assertio Holdings has also been named in six such cases. In April 2022, the Judicial Panel on Multi-District Litigation issued an order stating that it would no longer transfer new opioid cases to the MDL Court. Since that time, Assertio Therapeutics has been named in two federal lawsuits outside of the MDL Court (in the Northern District of Georgia, and Southern District of Florida, respectively). Plaintiffs may file additional lawsuits in which Assertio Therapeutics or Assertio Holdings may be named. Plaintiffs in the pending federal cases involving Assertio Therapeutics or Assertio Holdings include individuals; county, municipal and other governmental entities; employee benefit plans, health insurance providers and other payors; hospitals, health clinics and other health care 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. Assertio Therapeutics ~~intends~~and Assertio Holdings intend to defend ~~itself~~themselves 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. Assertio Therapeutics is currently named in a subset of those cases, including cases in Delaware, Missouri, Nevada, New York, Pennsylvania, Texas and Utah. Assertio Holdings is named as a defendant in one of these cases in Pennsylvania. Plaintiffs may

file additional lawsuits in which Assertio Therapeutics or Assertio Holdings may be named. In the pending cases involving Assertio Therapeutics or Assertio Holdings, 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 actual damages, disgorgement of profits, injunctive relief, punitive and statutory treble damages, and attorneys’ fees and costs. The state lawsuits in which Assertio Therapeutics or Assertio Holdings has been served are generally each at an early stage of proceedings. Assertio Therapeutics ~~intends~~and Assertio Holdings intend to defend ~~itself~~themselves vigorously in these matters.

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Insurance Litigation

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

During the first quarter of 2021, Assertio Therapeutics received $5.0 million in insurance reimbursement for previous opioid-related spend, which was recognized within Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Comprehensive Income. (Loss) for the year ended December 31, 2021.

On July 16, 2021, Assertio Therapeutics filed a complaint for declaratory relief against one of its excess products liability insurers, Lloyd’s of London Newline Syndicate 1218 and related entities ~~(Newline)~~(“Newline”), in the Superior Court of the State of California for the County of Alameda. Newline removed the case to ~~federal court, and it is currently pending in~~ the U.S. District Court for the Northern District of California (Case No. 3:21-cv-06642). Assertio Therapeutics iswas seeking a declaratory judgment that Newline has a duty to defend Assertio Therapeutics or, alternatively, to reimburse Assertio Therapeutics’ attorneys’ fees and other defense costs for opioid litigation claims noticed by Assertio Therapeutics. ~~The litigation is in~~On May 18, 2022, Assertio Therapeutics entered into a Confidential Settlement Agreement and Mutual Release with Newline to resolve Assertio Therapeutics’ declaratory judgment action. Pursuant to the ~~early stages of discovery~~Settlement Agreement, the parties settled and ~~trial has been scheduled for May 2023.~~the coverage action was dismissed with prejudice.

During the second quarter of 2022, Assertio Therapeutics received $2.0 million in insurance reimbursement for previous opioid-related spend, which was recognized within Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income for the year ended December 31, 2022.

On April 1, 2022, Assertio Therapeutics filed a complaint for negligence and breach of fiduciary duty against its former insurance broker, Woodruff-Sawyer & Co. (“Woodruff”), in the Superior Court of the State of California for the County of Alameda (Case No. 22CV009380).Assertio Therapeutics is seeking to recover its damages caused by Woodruff’s negligence and breaches of its fiduciary duties in connection with negotiating and procuring products liability insurance coverage for Assertio Therapeutics.The ~~litigation~~parties are in discovery. Trial is ~~in the early stages, and trial has not yet been set.~~set for February 2, 2024.

~~NOTE 14. 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.Indemnification Dispute with Collegium Pharmaceutical, Inc.

~~The following table reflects total expenses~~On May 24, 2022, Assertio Therapeutics filed an action in the Superior Court of Delaware against Collegium Pharmaceutical, Inc. (“Collegium”) seeking indemnification for Collegium’s breach of an asset purchase agreement related to ~~restructuring activities recognized within~~Assertio Therapeutics’ former product, NUCYNTA. Assertio Therapeutics alleged that Collegium agreed to assume certain liabilities associated with customer returns of NUCYNTA products sold by Collegium, but that Collegium failed to honor that agreement. On July 14, 2022, Collegium answered the ~~Condensed Consolidated Statement~~complaint asserting as a defense that, among other things, the Superior Court of ~~Comprehensive Income as restructuring costs (in thousands):~~Delaware does not have jurisdiction over all aspects of the action because Collegium contends that a portion of the dispute is subject to the alternative dispute resolution procedures under a different agreement. On July 18, 2022, Assertio Therapeutics moved to strike that defense, and on August 8, 2022 in opposition to the motion to strike, Collegium filed a cross-motion to stay the case. Assertio Therapeutics filed its opposition to Collegium’s cross-motion to stay on August 19, 2022. After oral argument on September 20, 2022, the Court granted in part Assertio Therapeutics’ motion to strike and denied in full Collegium’s cross-motion to stay. On January 5, 2023, Assertio Therapeutics voluntarily dismissed all claims against Collegium pursuant to a settlement agreement with Collegium in return for $2.9 million.

Three Months Ended March 31,
2022 2021
Employee compensation costs $ — $ 876
Other exit costs — 213
Total restructuring costs $ — $ 1,089

~~The following table reflects cash activity relating to the Company’s accrued restructuring cost as of December 31, 2021 and March 31, 2022 (in thousands):~~

Employee compensation costs Other exit costs Total
Balance as of December 31, 2021 $ 828 $ — $ 828
Cash paid (340) — (340)
Balance as of March 31, 2022 $ 488 $ — $ 488

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NOTE ~~15.~~13. SHAREHOLDERS EQUITY

~~Equity Raise~~Exchanged Convertible Notes

~~On February~~Related to the Convertible Note Exchange (see Note 9, ~~2021,~~ Debt), the Company ~~completed a registered direct offering with certain institutional investors~~paid an aggregate of $10.5 million in cash and ~~accredited investors to sell 5,650,000~~issued an aggregate of approximately 7.0 million shares of ~~our~~its common stock ~~at a purchase price of $2.48 per share on a post stock split basis.~~in the transactions. The ~~gross~~Company did not receive any cash proceeds from the issuance of the shares of its common stock but recognized additional paid-in capital of $28.3 million during the three months ended March 31, 2023 related to the common stock share issuance, net of approximately $1.6 million of unamortized issuance costs related to the Exchanged Notes.

At-The-Market Program

The Company is party to a sales agreement with Roth Capital Partners, LLC (“Roth”) as sales agent to sell shares of the Company’s common stock, from time to time, through an at-the-market (“ATM”) offering ~~were approximately $14.0~~program having an aggregate offering price of up to $25.0 million. ~~After placement agent fees and other offering expenses payable by~~As a result of the issuance of the 2027 Convertible Notes (See Note 9, Debt), the Company ~~Assertio~~has determined to suspend use of its ATM offering program. Prior to suspending the ATM offering program, 2,463,637 shares had been issued and settled at an average price of $3.02, through which the Company received gross proceeds of $7.4 million, and net proceeds after commission and fees of ~~approximately $13.1~~$7.0 million. On February 12, 2021, the Company completed a registered direct offering with certain institutional investors and accredited investors to sell 8,750,000 shares of our common stock at a purchase price of $3.92 per share on a post stock split basis. The gross proceeds from the offering were approximately $34.3 million. After placement agent fees and other offering expenses payable by the Company, Assertio received net proceeds of approximately $32.2 million. The Company intends to use proceeds from both offerings for general corporate purposes, including general working capital.

Warrant Agreements

Upon the Zyla Merger, the Company assumed Zyla’s outstanding ~~Warrant Agreements~~warrants which ~~provides~~provided the holder the right to receive shares of the Company’s common stock. The warrants ~~are~~were exercisable at any time at an exercise price of $0.0016 per share, subject to certain ownership limitations including, with respect to Iroko Pharmaceuticals, Inc. 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~~.months.

During the three months ended March 31, 2022, 0.4 million warrants were exercised, and 0.4 million of the Company’s common shares, were issued by the Company. ~~As of~~Subsequent to these warrant exercises in the three months ended March 31, 2022, there ~~were~~were no ~~outstanding~~outstanding warrants remaining.

NOTE ~~16.~~14. NET (LOSS) INCOME 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 December 31, 2021, all of which were exercised in the three months ended March 31, 2022.

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,~~stock-based awards and equivalents, and convertible debt. For purposes of this calculation, stock-based awards and convertible debt 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 Company uses the treasury-stock method to compute diluted earnings per share with respect to its ~~stock options~~stock-based awards and equivalents. The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt. ~~For purposes~~Under the if-converted method, the Company assumes any convertible debt outstanding was converted at the beginning of ~~this calculation, options~~each period presented when the effect is dilutive. As a result, interest expense and any other income statement impact associated with the 2027 Convertible Notes, net of tax, is added back to ~~purchase stock are considered to be potential common shares~~net income used in the diluted earnings per share calculation. As the Company was in a net loss position for the three months ended March 31, 2023, the Company’s potentially dilutive stock-based awards and ~~are only~~convertible debt were not included in the ~~calculation~~computation of diluted net (loss) income per share, ~~when their effect is dilutive.~~because to do so would be anti-dilutive.

The following table reflects the calculation of basic and diluted earnings per common share for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands, except for per share amounts):

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Three Months Ended March 31,
2022 2021
Basic net income per share
Net income $ 9,064 $ 4,544
Weighted average common shares and warrants outstanding 45,204 37,824
Basic net income per share $ 0.20 $ 0.12
Diluted net income per share
Net income $ 9,064 $ 4,544
Weighted average common shares and share equivalents outstanding 45,204 37,824
Add: effect of dilutive stock options, awards, and equivalents 923 656
Diluted net income per share $ 0.20 $ 0.12


	Three Months Ended March 31,
	2023		2022
Basic net (loss) income per share
Net (loss) income	$	(3,484)	$	9,064
Weighted-average common shares outstanding	51,005		45,204
Basic net (loss) income per share	$	(0.07)	$	0.20

Diluted net income per share
Net (loss) income	$	(3,484)	$	9,064


Weighted-average common shares and share equivalents outstanding	51,005		45,204
Add: effect of dilutive stock-based awards and equivalents	—		923

Denominator for diluted net (loss) income per share	51,005		46,127
Diluted net (loss) income per share	$	(0.07)	$	0.20

The following table reflects outstanding potentially dilutive common shares that are not included in the computation of diluted net (loss) income per share, because to do so would be anti-dilutive, for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three Months Ended March 31,
2022 2021
2.5% Convertible Notes debt 2021 — 4
Stock options, awards and equivalents 1,215 1,536
Total potentially dilutive common shares 1,215 1,540


	Three Months Ended March 31,
	2023	2022
Convertible notes	14,489	—
Stock-based awards and equivalents	8,271	1,215
Total potentially dilutive common shares	22,760	1,215

NOTE ~~17.~~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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


March 31, 2022		Financial Statement Classification	Level 1		Level 2		Level 3		Total
March 31, 2023											March 31, 2023	Financial Statement Classification	Level 1		Level 2		Level 3		Total
Assets:											Assets:
Commercial paper											Commercial paper	Cash and cash equivalents	$	—	$	8,973	$	—	$	8,973

U.S. Government agencies											U.S. Government agencies	Cash and cash equivalents	—		38,341		—		38,341
Money market funds											Money market funds	Cash and cash equivalents	15,982		—		—		15,982
Total											Total		$	15,982	$	47,314	$	—	$	63,296
Liabilities:	Liabilities:										Liabilities:
Short-term contingent consideration	Short-term contingent consideration	Contingent consideration, current portion	$	—	$	—	$	14,600	$	14,600	Short-term contingent consideration	Contingent consideration, current portion	$	—	$	—	$	24,458	$	24,458
Long-term contingent consideration	Long-term contingent consideration	Contingent consideration	—		—		22,859		22,859		Long-term contingent consideration	Contingent consideration	—		—		26,600		26,600
Derivative liability											Derivative liability	Long-term debt	—		—		252		252
Total	Total		$	—	$	—	$	37,459	$	37,459	Total		$	—	$	—	$	51,310	$	51,310


December 31, 2021		Financial Statement Classification	Level 1		Level 2		Level 3		Total

December 31, 2022											December 31, 2022	Financial Statement Classification	Level 1		Level 2		Level 3		Total
Assets:											Assets:
Commercial paper											Commercial paper	Cash and cash equivalents	$	—	$	4,983	$	—	$	4,983
U.S. Treasuries											U.S. Treasuries	Cash and cash equivalents	—		3,981		—		3,981
U.S. Government agencies											U.S. Government agencies	Cash and cash equivalents	—		10,937		—		10,937
Money market funds											Money market funds	Cash and cash equivalents	38,478		—		—		38,478
Total											Total		$	38,478	$	19,901	$	—	$	58,379
Liabilities:	Liabilities:										Liabilities:
Short-term contingent consideration	Short-term contingent consideration	Contingent consideration, current portion	$	—	$	—	$	14,500	$	14,500	Short-term contingent consideration	Contingent consideration, current portion	$	—	$	—	$	26,300	$	26,300
Long-term contingent consideration	Long-term contingent consideration	Contingent consideration	—		—		23,159		23,159		Long-term contingent consideration	Contingent consideration	—		—		22,200		22,200
Derivative liability											Derivative liability	Long-term debt	—		—		252		252
Total	Total		$	—	$	—	$	37,659	$	37,659	Total		$	—	$	—	$	48,752	$	48,752

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity date of purchase of three months or less to be cash equivalents. The Company invests its cash in money market funds and marketable securities including U.S. Treasury and government agency securities, commercial paper, and higher quality debt securities of financial and commercial institutions. The Company classified money market funds as Level 1, due to their short-term maturity, and measured the fair value based on quoted prices in active markets for identical assets. The Company classified commercial paper, U.S. Treasury and government agency securities as Level 2, as the inputs used to value these instruments are directly observable or can be corroborated by observable market data for substantially the full term of the assets.

Contingent Consideration Obligation

Pursuant to the ~~May 2020~~ Zyla Merger, the Company assumed a contingent consideration obligation which is measured at fair value. The Company has obligations to make contingent consideration payments for future royalties to ~~Iroko~~an affiliate of CR Group L.P. based upon annual INDOCIN ~~Product~~product net sales over $20.0 million at a 20% royalty through January 2029. 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. As of March 31, 2023 and December 31, 2022, INDOCIN product contingent consideration was $51.1 million and $48.5 million, respectively, with $24.5 million and $26.3 million classified as short-term and $26.6 million and $22.2 million classified as long-term contingent consideration, respectively, in the Company’s Condensed Consolidated Balance Sheets.

~~Table of Content~~

During the three months ended March 31, ~~2022~~2023 and ~~March 31, 2021,~~2022, the Company recognized an expense of ~~$1.6~~$9.2 million and ~~a benefit of $0.6~~$1.6 million, respectively, for the change in fair value of contingent consideration, which was recognized in Fair value of contingent consideration onin the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income. The fair value of the contingent consideration is determined using an option pricing model under the income approach based on estimated INDOCIN product revenues through January 2029 and discounted to present value. The significant assumptions used in the calculation of the fair value as of March 31, ~~2022~~2023 included revenue volatility of ~~35%~~40%, discount rate of ~~7.5%~~8.5%, credit spread of ~~6.3%~~4.2% and updated projections of future INDOCIN Product revenues.

~~Contingent consideration related to CAMBIA was $0.2 million as of March 31, 2022 and December 31, 2021.~~

The following table summarizes changes in fair value of the contingent consideration that ~~are~~is measured on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Fair value, beginning of the period	Fair value, beginning of the period	$	37,659	$	38,552		Fair value, beginning of the period	$	48,500	$	37,659
Change in fair value of contingent consideration recorded within costs and expenses	Change in fair value of contingent consideration recorded within costs and expenses	1,645		(593)			Change in fair value of contingent consideration recorded within costs and expenses	9,167		1,645
Cash payment related to contingent consideration	Cash payment related to contingent consideration	(1,845)		—			Cash payment related to contingent consideration	(6,609)		(1,845)
Fair value, end of the period	Fair value, end of the period	$	37,459	$	37,959		Fair value, end of the period	$	51,058	$	37,459

Financial Instruments Not Required to be Remeasured at Fair Value

The Company’s other financial assets and liabilities, including trade accounts receivable and accounts payable, are not remeasured to fair value, as the carrying ~~value~~cost of ~~the Company’s debt for the period ended March 31, 2022~~each approximates its fair value. ~~When determining~~On August 22, 2022, the Company issued the 2027 Convertible Notes. As of March 31, 2023, the estimated fair value of the ~~Company’s debt,~~2027 Convertible Notes, excluding the bifurcated embedded conversion option, was approximately $69.4 million, compared to a par value of $40.0 million. As of December 31, 2022, the estimated fair value of the 2027 Convertible Notes, excluding the bifurcated embedded conversion option, was approximately $92.5 million, compared to a par value of $70.0 million. 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~~estimated the fair value ~~hierarchy during the three months ended~~of its 2027 Convertible Notes as of March 31, ~~2022.~~2023 and December 31, 2022 based on a market approach which represents a Level 2 valuation.

NOTE ~~18.~~16. INCOME TAXES

~~As of March~~During the year ended December 31, 2022, the ~~Company’s~~Company reversed a majority of its previously recorded valuation allowances against the net deferred tax ~~assets are fully offset by a valuation allowance, with the exception of a deferred tax liability of $0.2 million for certain separate filing state jurisdictions.~~asset (“DTA”). 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~~The exact timing and amount of the valuation allowance releases are subject to change based on the ~~weight~~level of ~~available evidence,~~profitability achieved in future periods. The Company continues to assess the ~~Company recorded a valuation allowance against the majority~~realizability of its ~~net~~ deferred tax ~~assets. The Company reassesses the need for a valuation allowance~~assets on a quarterly basis. ~~If it is determined that a portion or all~~As part of its valuation allowance assessment, the Company primarily relied on its projected availability of future taxable income from pre-tax income forecasts and reversing taxable temporary differences. As of March 31, 2023, the Company estimates to retain $11.1 million of valuation allowance for the year ending December 31, 2023, because realization of the ~~valuation allowance~~future benefits for the associated deferred tax assets is ~~not required, it will generally be a benefit to the income tax provision in the period such determination is made.~~uncertain.

For the three months ended March 31, ~~2022,~~2023, the Company recorded an income tax ~~expense~~benefit of ~~$0.7~~$2.1 million. The difference between the income tax ~~expense~~benefit of ~~$0.7~~$2.1 million and the tax at the federal statutory rate of 21.0% to date on current year operations is principally due to ~~the~~state taxes, disallowed officer’s compensation, and capital expenses, offset by a partial ~~release~~reversal of previously recorded valuation ~~allowance related to the current year movement in deferred tax assets.~~allowance.

The Company files income tax returns in the United States federal jurisdiction and in various states, and the tax returns filed for the years 2007 through ~~2020~~2021 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. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense by the Company. AtAs of March 31, ~~2022~~2023, the Company did not have significant accrued interest and penalties associated with unrecognized tax benefits.

~~During the quarter ended March 31, 2022, the Company received a refund of $8.4 million for the carryback of net operating losses under the Cares Act.~~

~~Table~~

NOTE 17. SUBSEQUENT EVENTS

On April 25, 2023, the Company entered into an Agreement and Plan of ~~Content~~Merger (the “Merger Agreement”) with Spectrum Pharmaceuticals, Inc. (“Spectrum”), a commercial stage biopharmaceutical company focused on novel and targeted oncology products, in an all-stock and contingent value rights (“CVR”) transaction. The Merger Agreement provides that, subject to the terms and conditions set forth therein, Assertio stockholders will own approximately 65% of the combined company, and Spectrum stockholders will own approximately 35% of the combined company, on a fully diluted basis.

Under the terms of the Merger Agreement, at closing, Spectrum stockholders will receive a fixed exchange ratio of 0.1783 shares of Assertio common stock for each share of Spectrum common stock they own, implying an upfront value of $1.14 per Spectrum share (approximately $248 million) based on Assertio’s stock price on April 24, 2023, and an initial 65% premium to Spectrum’s closing price on such date. Additionally, Spectrum stockholders will receive one CVR per Spectrum share entitling them to receive up to an additional $0.20 per share in total (approximately $43 million), payable in cash or stock at Assertio's election, for $1.34 (approximately $291 million), a total potential premium of 94%. Subject to adjustments, each CVR shall represent the right to receive $0.10 payable upon ROLVEDON net sales (less certain deductions) achieving $175 million during the calendar year ending December 31, 2024, and $0.10 payable upon ROLVEDON net sales (less certain deductions) achieving $225 million during the calendar year ending December 31, 2025.

The Merger Agreement, which has been approved by the boards of directors of both companies, is expected to close in the third quarter of 2023, subject to approval by Assertio and Spectrum stockholders and the satisfaction of customary closing conditions.

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

COMPANY OVERVIEW

We are a commercial pharmaceutical company offering differentiated products to patients utilizing a non-personal promotional model. Our commercial portfolio of branded products focuses on three areas: neurology, rheumatology, 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 primary marketed products are:


INDOCIN® (indomethacin) Suppositories			A suppository and oral solution of indomethacin used both in hospitals and out-patient settings. Both products are nonsteroidal anti-inflammatory drug (NSAID), indicated for:
			• Moderate to severe rheumatoid arthritis including acute flares of chronic disease
			• Moderate to severe ankylosing spondylitis
INDOCIN® (indomethacin) Oral Suspension			• Moderate to severe osteoarthritis
			• Acute painful shoulder (bursitis and/or tendinitis)
			• Acute gouty arthritis
Otrexup® (methotrexate) injection for subcutaneous use			A once weekly single-dose auto-injector containing a prescription medicine, methotrexate. Otrexup is a folate analog metabolic inhibitor indicated for the:
			• Management of patients with severe, active rheumatoid arthritis (RA) and polyarticular juvenile idiopathic arthritis (pJIA), who are intolerant of or had an inadequate response to first-line therapy.
			• Symptomatic control of severe, recalcitrant, disabling psoriasis in adults who are not adequately responsive to other forms of therapy.
Sympazan® (clobazam) oral film			A benzodiazepine indicated for the adjunctive treatment of seizures associated with Lennox-Gastaut Syndrome (LGS) in patients aged two years of age or older . Sympazan is the only product to offer clobazam in a convenient film with PharmFilm® technology. Sympazan is taken without water or liquid, adheres to the tongue, and dissolves to deliver clobazam.
SPRIX® (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 an opioid level. SPRIX is a non-narcotic nasal spray that 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.
CAMBIA® (diclofenac potassium for oral solution)			A prescription NSAID indicated for the acute treatment of migraine attacks with or without aura in adults 18 years of age or older. CAMBIA can help patients with migraine pain, nausea, photophobia (sensitivity to light), and phonophobia (sensitivity to sound). CAMBIA is not a pill; it is a powder, and combining CAMBIA with water activates the medicine in a unique way.
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). Zipsor uses proprietary ProSorb�� delivery technology to deliver a finely dispersed, rapid and consistently absorbed formulation of diclofenac.

Other commercially available products include OXAYDO® (oxycodone HCI, USP) tablets for oral use only —CII.

On August 22, 2022, we issued $70.0 million aggregate principal amount of Convertible Senior Notes which mature on September 1, 2027 and bear interest at the rate of 6.5% per annum, payable semi-annually in arrears on March 1 and September 1 of each year beginning March 1, 2023 (the “2027 Convertible Notes”). We used the net proceeds from the 2027 Convertible Notes to repurchase the remaining $59.0 million aggregate principal amount of our outstanding 13.0% Senior Secured Notes due 2024 (the “2024 Secured Notes”) and $3.0 million in associated interest payment pursuant to privately negotiated exchange agreements entered into concurrently with the pricing of the 2027 Convertible Notes. We expect to use the remaining net proceeds from the 2027 Convertible Notes for general corporate purposes.

On February 27, 2023, we completed a privately negotiated exchange of $30.0 million principal amount of the 2027 Convertible Notes (the “Convertible Note Exchange”). Pursuant to the Convertible Note Exchange, 6,990,000 shares of the Company’s common stock, plus an additional $10.5 million in cash, were issued in a partial settlement of the 2027 Convertible Notes (the “Exchanged Notes”). Refer to Note 9 of the accompanying Condensed Consolidated Financial Statements for additional information on the 2027 Convertible Notes.

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.

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)~~“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”~~“may,” “seek,” “estimate,” “could,” “might,” “should,” “goal,” “target,” “project,” “approximate”, “potential,” “opportunity,” “pursue,” “strategy,” “prospective” 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 commercial success and market acceptance of our products, including the coverage of our products by payors and pharmacy benefit managers;

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

•the entry and sales of generics of our products (including the INDOCIN products which are not patent protected and may face generic competition at any time) and/or other products competitive with any of our ~~products;~~products (including compounded indomethacin suppositories that a 503B compounder recently began selling in what we believe to be violation of certain provisions of the Food, Drug and Cosmetic Act and which compete with our INDOCIN suppositories);

•our ability to successfully execute our business strategy, business development, strategic partnerships, and investment opportunities to build and grow for the ~~future;~~future, including through product acquisitions, commercialization agreements, licensing or technology agreements, equity investments, and business combinations;

•our ability to achieve the expected financial performance from ~~our product Otrexup~~® ~~(methotrexate), which~~products we ~~recently acquired from Antares Pharma, Inc.,~~acquire, as well as delays, challenges and expenses, and unexpected costs associated with integrating and operating ~~the Otrexup business;~~newly-acquired products;

•our expectations regarding industry trends, including pricing pressures and managed healthcare practices;

•our ability to attract and retain key executive leadership;

•the potential impacts of the ~~ongoing~~ COVID-19 pandemic or future outbreaks, including volatility in prescriptions associated with elective procedures, on our liquidity, capital resources, operations and business and those of the third parties on which we rely, including suppliers and distributors;

•the ability of our third-party manufacturers to manufacture adequate quantities of commercially salable inventory and active pharmaceutical ingredients for each of our products, and our ability to maintain our supply chain, which relies on single-source ~~suppliers, in the face of global challenges such as the COVID-19 pandemic;~~suppliers;

•the outcome of, and our intentions with respect to, any litigation or investigations, including antitrust litigation, opioid-related investigations, opioid-related litigation and related claims for negligence and breach of fiduciary duty against our former insurance ~~coverage,~~broker, and other disputes and litigation, and the costs and expenses associated therewith;

•our compliance or non-compliance with, or being subject to, legal and regulatory requirements related to the development or promotion of pharmaceutical products in the United States (“U.S.”);

•our ability to obtain and maintain intellectual property protection for our products and operate our business without infringing the intellectual property rights of others;

•our ability to generate sufficient cash flow from our business to fund operations and 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;

•our ability to raise additional capital or refinance our debt, if necessary;

•our intentions or expectations regarding the use of available funds and any future earnings or the use of net proceeds from securities offerings;

•our commitments and estimates regarding future obligations, contingent consideration obligations and other expenses, future revenues, capital requirements and needs for additional financing;

•our counterparties’ compliance or non-compliance with their obligations under our agreements;

~~Table of Content~~

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

•the timing, cost and results of any future research and development efforts including potential clinical studies relating to any future product candidates;

•the estimation, projection or availability of net operating losses or credit carryforwards; and

•our common stock maintaining compliance with ~~Nasdaq’s~~The Nasdaq Capital Market’s minimum closing bid requirement of at least $1.00 per share.

This document also contains statements about our agreement and plan of merger with Spectrum Pharmaceuticals, Inc. (“Spectrum”), whereby we agreed to acquire Spectrum (the “Proposed Merger”). Many factors could cause actual results to differ materially from these forward-looking statements with respect to the Proposed Merger, including (1) the completion of the Proposed Merger on anticipated terms and timing, including obtaining shareholder approvals, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the new combined company’s operations and other conditions to the completion of the Proposed Merger; (2) the risk that the conditions to the closing of the Proposed Merger are not satisfied, including the risk that required approvals for the Proposed Merger from our or Spectrum’s stockholders are not obtained; (3) the occurrence of any event, change or other circumstances that either could give rise to the right of one or both of us or Spectrum to terminate the merger agreement; (4) the risk of litigation relating to the Proposed Merger; (5) uncertainties as to the timing of the consummation of the Proposed Merger and the ability of each party to consummate the Proposed Merger; (6) risks related to disruption of management time from ongoing business operations due to the Proposed Merger; (7) unexpected costs, charges or expenses resulting from the Proposed Merger; (8) our and Spectrum’s ability to retain and hire key personnel; (9) competitive responses to the Proposed Merger and the impact of competitive services; (10) certain restrictions during the pendency of the Proposed Merger that may impact our or Spectrum’s ability to pursue certain business opportunities or strategic transactions; (11) potential adverse changes to business relationships resulting from the announcement or completion of the Proposed Merger; (12) the combined company’s ability to achieve the growth prospects and synergies expected from the Proposed Merger, as well as delays, challenges and expenses associated with integrating the combined company’s existing businesses; (13) negative effects of this announcement or the consummation of the Proposed Merger on the market price of our or Spectrum’s common stock, credit ratings and operating results; and (14) legislative, regulatory and economic developments, including changing business conditions in the industries in which we and Spectrum operate. These risks, as well as other risks associated with the Proposed Merger, will be more fully discussed in the joint proxy statement/prospectus that will be included in the registration statement on Form S-4 that will be filed with the U.S. Securities and Exchange Commission in connection with the Proposed Merger. While the list of factors presented here is, and the list of factors to be presented in the registration statement on Form S-4 are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties.Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.

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, and in our Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2021.~~2022 filed with the Securities and Exchange Commission on March 8, 2023 (the “2022 Form 10-K”). Except as required by law, we assume no obligation to update any forward-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.

~~Table of Content~~

~~COMPANY OVERVIEW~~

We are a commercial pharmaceutical company offering differentiated products to patients. Our commercial portfolio of branded products focuses on three areas: 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 primary marketed products are:


~~INDOCIN~~® ~~(indomethacin) Suppositories~~			~~A suppository form and oral solution of indomethacin used in the hospital as well as in the out-patient setting. Both products are nonsteroidal anti-inflammatory drug (NSAID), approved for:~~
			~~• Moderate to severe rheumatoid arthritis including acute flares of chronic disease~~
			~~• Moderate to severe ankylosing spondylitis~~
~~INDOCIN~~® ~~(indomethacin) Oral Suspension~~			~~• Moderate to severe osteoarthritis~~
			~~• Acute painful shoulder (bursitis and/or tendinitis)~~
			~~• Acute gouty arthritis~~
~~CAMBIA~~® ~~(diclofenac potassium for oral solution)~~			A prescription NSAID indicated for the acute treatment of migraine attacks with or without aura in adults 18 years of age or older. CAMBIA can help patients with migraine pain, nausea, photophobia (sensitivity to light), and phonophobia (sensitivity to sound). CAMBIA is not a pill, it is a powder, and combining CAMBIA with water activates the medicine in a unique way.
~~Otrexup~~® ~~(methotrexate)~~ ~~injection for subcutaneous use~~			~~A once weekly single-dose auto-injector containing a prescription medicine, methotrexate. Methotrexate is used to:~~
			• Treat certain adults with severe, active rheumatoid arthritis, and children with active polyarticular juvenile idiopathic arthritis (pJIA), after treatment with other medicines including non-steroidal anti-inflammatory drugs (NSAIDS) have been used and did not work well.
			~~• Control the symptoms of severe, resistant, disabling psoriasis in adults when other types of treatment have been used and did not work well.~~
~~SPRIX~~® ~~(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. SPRIX is a non-narcotic nasal spray 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).
~~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). Zipsor uses proprietary ProSorb® delivery technology to deliver a finely dispersed, rapid and consistently absorbed formulation of diclofenac.

~~Other commercially available products include OXAYDO® (oxycodone HCI, USP) tablets for oral use only —CII.~~

On December 15, 2021, we, through a newly-formed subsidiary, Otter Pharmaceuticals, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Antares Pharma, Inc. (“Antares”), and concurrently consummated the Otrexup transaction. Pursuant to the terms of the Purchase Agreement, we acquired Antares’ rights, title and interest in and to Otrexup, including certain related assets, intellectual property, contracts, and product inventory for (i) $18.0 million in cash paid at closing, (ii) $16.0 million in cash payable on May 31, 2022 and (iii) and $10.0 million in cash payable on December 15, 2022.

~~Impact of COVID-19 on our Business~~

Following the outbreak of COVID-19 in early 2020, our priority was and remains the health and safety of our employees, their families, and the patients we serve. Because COVID-19 impacted our ability to see in-person providers who prescribe our products, we transformed our commercial approach during 2020 and increased virtual visits, ultimately eliminating our in-person sales force in favor a digital sales strategy. 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. 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 actions by government authorities to contain the outbreak, the emergence of new COVID-19 variants and the related potential for new surges in infections and the impacts of increases in virtual physician visits on prescriber behavior. For example, although many public health restrictions have eased, future surges could result in additional restrictions or other factors that may contribute to decreases in elective procedures. The impact of the pandemic on the global financial markets

~~Table of Content~~

may reduce our ability to access capital, which could negatively impact our liquidity. We do not yet know the full extent of potential delays or impacts on our business, financing or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely, including suppliers and distributors.

~~Segment Information~~

CRITICAL ACCOUNTING POLICIES

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 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~~2022 Form ~~10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022 (the 2021 Form 10-K), see~~10-K. See ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Critical Accounting Policies and Estimates in our ~~2021~~2022 Form 10-K for further information.

RESULTS OF OPERATIONS

Revenues

The following table reflects total revenues, net for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Product sales, net:	Product sales, net:						Product sales, net:
INDOCIN products	INDOCIN products	$	21,357	$	14,597		INDOCIN products	$	30,346	$	21,357
Otrexup							Otrexup	2,822		3,078
Sympazan							Sympazan	2,502		—
SPRIX							SPRIX	1,889		1,766
CAMBIA	CAMBIA	5,473		6,462			CAMBIA	2,264		5,473
Otrexup		3,078		—
Zipsor	Zipsor	2,228		2,222			Zipsor	1,150		2,228
SPRIX		1,766		1,697
Other products	Other products	1,644		1,049			Other products	796		1,644
Total product sales, net	Total product sales, net	35,546		26,027			Total product sales, net	41,769		35,546

Royalties and milestone revenue	Royalties and milestone revenue	992		434			Royalties and milestone revenue	697		992
Other revenue		—		378
Total revenues	Total revenues	$	36,538	$	26,839		Total revenues	$	42,466	$	36,538

Product ~~Sales,~~sales, net

For the three months ended March 31, ~~2022,~~2023, product sales primarily consisted of sales from INDOCIN ~~Products, CAMBIA, Zipsor~~products, Otrexup, Sympazan and ~~SPRIX. The Company~~CAMBIA. We acquired ~~Otrexup in December 2021~~Sympazan and began shipping and recognizing its product sales ~~for Otrexup~~ in ~~January~~October 2022.

INDOCIN ~~products~~net product sales increased $9.0 million from $21.4 million for the three months ended March 31, 2022 ~~increased $6.8~~to $30.3 million ~~from $14.6 million to $21.4 million as compared to~~for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to ~~higher price partially offset by lower~~favorable net pricing as a result of volume ~~and unfavorable payor mix.~~mix shift to more profitable channels.

~~CAMBIA~~Otrexup net product sales decreased $0.3 million from $3.1 million for the three months ended March 31, 2022 ~~decreased $1.0~~to $2.8 million ~~from $6.5 million to $5.5 million as compared to~~for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to ~~lower volume partially offset by favorable~~unfavorable payor mix.

~~Table of Content~~

~~Zipsor~~SPRIX net product sales increased $0.1 million from $1.8 million for the three months ended March 31, 2022 ~~were unchanged at $2.2~~to $1.9 million ~~as compared~~for the three months ended March 31, 2023, primarily due to ~~the same period in 2021. Certain parties who have entered into settlement agreements with us are able to market generic versions of Zipsor starting in 2022.~~higher volume and favorable payor mix.

~~SPRIX~~ CAMBIAnet product sales decreased $3.2 million from $5.5 million for the three months ended March 31, 2022 ~~increased $0.1~~to $2.3 million ~~from $1.7 million to $1.8 million as compared to~~for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to lower volume ~~partially offset by favorable payor mix.~~as certain parties who previously entered into settlement agreements with us began to market generic versions of CAMBIA in 2023.

Zipsornet product sales decreased $1.1 million from $2.2 million for the three months ended March 31, 2022 to $1.2 million for the three months ended March 31, 2023, primarily due to lower volume, as certain parties who previously entered into settlement agreements with us began to market generic versions of Zipsor in 2022.

Other ~~products~~ net product sales include product sales for non-promoted products ~~(OXAYDO and SOLUMATRIX) which were acquired from Zyla~~(OXAYDO). We ceased SOLUMATRIX sales beginning in ~~May 2020. In September 2020, we terminated our iCeutica License and~~July 2022.

The increase in total product sales, net, for the three months ended March 31, 2023, also reflects a decrease year over year in the amounts charged as a ~~result no longer manufacture products using SOLUMATRIX technology.~~reduction to revenue for sales and return allowances, discounts, chargebacks, and rebates, which is attributed to changes in product mix and, specifically, a higher concentration of INDOCIN Products that typically require lower levels of product sales allowances relative to our other products.

Royalties & ~~Milestones~~Milestone revenue

In November 2010, we entered into a license agreement ~~with Tribute Pharmaceuticals Canada Ltd. (now known as Miravo Pharmaceuticals)~~ granting ~~them~~the counterparty the rights to commercially market CAMBIA in Canada. We receive royalties on net sales as well as certain one-time contingent milestone payments. During each of the three months ended March 31, 2023 and 2022, ~~and March 31, 2021, the Company~~we recognized $0.5 ~~million and $0.4~~ million of revenue related to CAMBIA in ~~Canada, respectively.~~Canada.

During the three months ended March 31, 2023 and 2022, we recognized $0.2 million and $0.5 million, inrespectively, of Milestone revenue associated with the completion of certain service milestones.

~~Other Revenue~~

Other revenue consists of sales adjustments for previously divested products. Sales adjustments for previously divested products primarily include Gralise, Nucynta and Lazanda and were zero and $0.4 million for the three months ended March 31, 2022 and 2021, respectively.

Cost of Sales (excluding amortization of intangible assets)

Cost of sales increased ~~$0.2~~$1.3 million from ~~$4.0 million to~~ $4.2 million ~~during~~for the three months ended March 31, 2022 ~~as compared~~ to $5.5 million for the ~~same period in 2021. Cost~~three months ended March 31, 2023, primarily due to a $1.0 million charge for obsolete inventory and $0.6 million of additional cost of sales from Sympazan, which was ~~impacted by higher net sales~~acquired and ~~slightly higher inventory step-up amortization expense, which were~~began shipping in October 2022, partially offset by ~~favorability from~~the impact of product mix.

For the three months ended March 31, ~~2022~~2023 and ~~2021~~2022, cost of sales included ~~$0.4~~$0.2 million and ~~$0.2~~$0.4 million, respectively, of amortization of inventory step-up related to acquired inventories sold.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses increased ~~$2.3~~$6.3 million from ~~$8.3 million to~~ $10.6 million for the three months ended March 31, 2022 ~~compared~~ to $16.9 million for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to (i) an increase of $2.4 million related to costs, primarily legal and professional fees, associated with the ~~benefit~~pending merger with Spectrum Pharmaceuticals, Inc., which was announced on April 25, 2023 (see “Note 17 of ~~$5.0~~the accompanying Condensed Consolidated Financial Statements), (ii) an increase of $1.5 million in ~~insurance reimbursement~~stock-based compensation expense, (iii) $1.3 million of higher selling and marketing expenses for prior acquired products, and (iv) an $0.8 million increase in ~~2021 for previous opioid-related expense not repeating, partially offset by lower expenses as a result of prior restructuring plans.~~general operating expenses.

Fair value of contingent consideration

Fair value of contingent consideration increased ~~in expense by $2.2~~$7.5 million from ~~a benefit of $0.6 million to an expense of~~ $1.6 million ~~for the~~ for the three months ended March 31, 2022 ~~compared~~ to $9.2 million for the ~~same period in 2021.~~three months ended March 31, 2023. The fair value of the contingent consideration is remeasured each reporting period, with changes in the fair value resulting from ~~a change~~changes in the underlying inputs being recognized in operating expenses until the contingent consideration arrangement is settled. The fair value of the contingent consideration is determined using an option pricing model under the income approach based on estimated INDOCIN product revenues through January 2029, and discounted to present value. The significant assumptions used in the calculation of the fair value as of March 31, 2023 included revenue volatility of 40%, discount rate of 8.5%, credit spread of 4.2% and updated projections of future INDOCIN Product revenues.

Intangible Assets

The following table reflects amortization of intangible assets for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

~~Table of Content~~

Three Months Ended March 31,
2022 2021
Amortization of intangible assets - INDOCIN $ 3,210 $ 3,210
Amortization of intangible assets - SPRIX 1,394 1,393
Amortization of intangible assets - CAMBIA 1,988 1,284
Amortization of intangible assets - Otrexup 1,377 —
Amortization of intangible assets - Zipsor 532 584
Amortization of intangible assets - Oxaydo — 76
Total $ 8,501 $ 6,547


	Three Months Ended March 31,
	2023		2022
Amortization of intangible assets—INDOCIN	$	3,210	$	3,210
Amortization of intangible assets—Otrexup	1,377		1,377
Amortization of intangible assets—Sympazan	303		—
Amortization of intangible assets—SPRIX	1,394		1,394
Amortization of intangible assets—CAMBIA	—		1,988
Amortization of intangible assets—Zipsor	—		532
Total	$	6,284	$	8,501

Amortization expense ~~during~~decreased $2.2 million from $8.5 million for the three months ended March 31, 2022 ~~increased $2.0~~to $6.3 million ~~from $6.5 million to $8.5 million as compared to the same period in 2021 primarily due to acquired Otrexup product rights in December 2021.~~

~~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.~~

On December 15, 2020, we 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. We substantially completed the workforce reduction in the first quarter of 2021.

~~For~~for the three months ended March 31, 2023, primarily due to the full amortization of CAMBIA intangible assets in the fourth quarter of 2022 and ~~2021 restructuring charges incurred were zero and $1.1 million, respectively.~~the full amortization of Zipsor intangible assets in the first quarter of 2022, partially offset by additional amortization of the Sympazan product rights acquired in October 2022.

Other ~~Expense~~(Expense) Income

The following table reflects other expense (income) for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022

Debt-related expenses							Debt-related expenses	$	(9,918)	$	—
Interest expense	Interest expense	$	(2,327)	$	(2,684)		Interest expense	(1,122)		(2,327)

Other gain	Other gain	545		269			Other gain	802		545

Total other expense	Total other expense	$	(1,782)	$	(2,415)		Total other expense	$	(10,238)	$	(1,782)

Other expense ~~decreased~~increased by ~~$0.6~~$8.5 million from ~~expense of $2.4 million to expense of~~ $1.8 million for the three months ended March 31, 2022 ~~as compared~~ to $10.2 million for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to debt-related expenses incurred in the current year, partially offset by lower interest expense and increase in other gain.

Debt-related expenses consist of an induced conversion expense of approximately $8.8 million and direct transaction costs of approximately $1.1 million incurred as a ~~gain~~result of ~~$0.6~~the $30.0 million ~~from~~ Convertible Note Exchange during the ~~early termination and settlement~~three months ended March 31, 2023, as described in Note 9 of ~~a Newark facility sublease. Sublease income offset by sublease expense is recorded in Other gain within~~ the ~~above table.~~accompanying Condensed Consolidated Financial Statements.

The following table reflects interest expense for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Three Months Ended March 31,
2022 2021
Interest payable on 13% Senior Secured Notes due 2024 $ 2,299 $ 2,608
Interest payable on Convertible Notes — 6
Amortization of debt discounts, and royalty rights 28 70
Total interest expense $ 2,327 $ 2,684


	Three Months Ended March 31,
	2023		2022
Interest payable on 2027 Convertible Notes	$	975	$	—
Interest paid on 2024 Secured Notes	—		2,299
Amortization of Royalty Rights(1)	—		28
Amortization of debt issuance costs	147		—
Total interest expense	$	1,122	$	2,327

(1)As a result of the extinguishment of the Royalty Rights obligation during the fourth quarter of 2022, there will be no additional amortization expense recognized in future periods. Refer to Note 9 of the accompanying Condensed Consolidated Financial Statements for additional information on the Royalty Rights obligation.

For the three months ended March 31, ~~2022,~~2023, total interest expense decreased ~~$0.4~~$1.2 million ~~as compared~~from $2.3 million for the three months ended March 31, 2022 to $1.1 million for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to lower amounts

of interest incurred on debt outstanding. On August 22, 2022, we issued $70.0 million in aggregate principal amount of 6.5% Convertible Senior Notes due 2027. We used the ~~impact~~net proceeds from the 2027 Convertible Notes issuance to repurchase the remaining $59.0 million aggregate principal amount of ~~the principal payments of the 13% Senior~~our 2024 Secured Notes, which were outstanding during the ~~period.~~three months ended March 31, 2022, and carried a higher interest rate.

For the three months ended March 31, 2023, other gain increased $0.3 million from $0.5 million for the three months ended March 31, 2022 to $0.8 million for the three months ended March 31, 2023, primarily due to higher interest income, partially offset by a gain of $0.6 million from the early termination and settlement of a Newark facility sublease during the three months ended March 31, 2022 not repeating.

Income Tax Provision

~~Table~~For the three months ended March 31, 2023, we recorded an income tax benefit of ~~Content~~

approximately $2.1 million, which represents an effective tax rate of 37.7%. The difference between income tax benefit of $2.1 million for the three months ended March 31, 2023, and tax at the federal statutory rate of 21.0% is principally due to state taxes, disallowed officer’s compensation, and capital expenses offset by a partial reversal of previously recorded valuation allowance.

~~For~~In the three months ended March 31, 2022, we recorded an income tax expense of approximately $0.7 million, which represents an effective tax rate of 7.3%. The difference between ~~the~~ income tax expense of $0.7 million ~~and the tax at the statutory rate of 21.0% is principally due to the partial release of valuation allowance related to the current year movement in the deferred tax assets.~~

Infor the three months ended March 31, ~~2021, we recorded an income tax expense of approximately $0.5 million, which represents an effective tax rate of 10.8%. The difference between the income tax expense of $0.5 million~~2022, and ~~the~~ tax at the federal statutory rate of 21.0% was principally due to the partial release of valuation allowance related to the movement in deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

Historically and through March 31, ~~2022,~~2023, we have financed our operations and business development efforts 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, upfront license, milestone and fees from collaborative and license partners.

On ~~December 17, 2021,~~August 22, 2022, we issued $70.0 million aggregate principal amount of 2027 Convertible Notes which mature on September 1, 2027 and bear interest at a rate of 6.5% per annum, payable semi-annually in arrears on March 1 and September 1 of each year beginning March 1, 2023. We used the net proceeds from the 2027 Convertible Notes to repurchase the remaining $59.0 million aggregate principal amount of our outstanding 2024 Secured Notes and $3.0 million in associated interest payment pursuant to privately negotiated exchange agreements entered into concurrently with the pricing of the 2027 Convertible Notes. We expect to use the remaining net proceeds from the 2027 Convertible Notes for general corporate purposes.

On February 27, 2023, we completed the Convertible Note Exchange pursuant to which we exchanged $30.0 million principal amount of our 2027 Convertible Notes for 6,990,000 shares of the Company’s common stock, plus an additional $10.5 million in cash. As a ~~Sales Agreement~~result of the Convertible Note Exchange, we recorded a non-cash induced conversion expense of approximately $8.8 million and direct transaction costs of approximately $1.1 million. As a result of the Convertible Note Exchange, we expect our cash interest expense in future periods to decrease in accordance with the decrease in the aggregate principal amount of the 2027 Convertible Notes outstanding.

The terms of the 2027 Convertible Notes are governed by an indenture dated August 25, 2022 (the “2027 Convertible Note Indenture”). Pursuant to the terms of the 2027 Convertible Note Indenture, the Company and its restricted subsidiaries must comply with certain covenants, including mergers, consolidations, and divestitures; guarantees of debt by subsidiaries; issuance of preferred and/or disqualified stock; and liens on our properties or assets. We are in compliance with our covenants with respect to the 2027 Convertible Notes as of March 31, 2023.

We are party to a sales agreement with Roth Capital Partners, LLC (“Roth”) as sales agent to sell ~~shares~~shares of our common stock, from time to time, through an ~~“at-the-market offering”~~at-the-market (“ATM”) offering program having an aggregate offering price of up to $25.0 million. ~~Roth will be entitled to aggregate compensation equal to 3.0%~~As a result of the ~~gross sales price~~issuance of the ~~shares sold through it pursuant~~2027 Convertible Notes, we suspended use of the ATM offering program. Prior to our suspension of the ~~Sales Agreement. As of March 31, 2021, we have not settled any shares under this program.~~

~~On February 9, 2021, we completed a registered direct~~ATM offering ~~with certain institutional investors and accredited investors to sell 5,650,000~~program, 2,463,637 shares of our common stock had been issued and settled at ~~a purchase~~an average price of ~~$2.48 per share on a post stock split basis. The~~$3.02, through which we received gross proceeds ~~from the offering were approximately $14.0 million. After placement agent fees, we received~~of $7.4 million, and net proceeds after commission and fees of ~~approximately $13.1~~$7.0 million. On February 12, 2021, we completed a registered direct offering with certain institutional investors and accredited investors to sell 8,750,000 shares of our common stock at a purchase price of $3.92 per share on a post stock split basis. The gross proceeds from the offering were approximately $34.3 million. After placement agent fees, we received net proceeds of approximately $32.2 million. We also incurred $0.5 million direct incremental cost to complete both registered direct offerings. We intend to use proceeds from both offerings for general corporate purposes, including general working capital.

~~We may incur operating losses in future years.~~ We believe that our existing cash will be sufficient to fund our operations and make the required payments under our debt agreements due 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;

•declines in 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 ~~into~~into;

•changes in the focus and direction of our business strategy and/or research and development programs;

•potential expenses relating to any litigation matters, including relating to Assertio 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, and former drug Glumetza;

•expenditures related to future clinical trial costs; and

•effects of the COVID-19 pandemic on our operations.

The inability to raise any additional capital that may be required to fund our future operations, payments due under our debt agreements, or product acquisitions and strategic transactions which we may pursue could have a material adverse effect on the Company.

As previously disclosed, during the year ended December 31, 2022, a total of one million performance-based RSUs were granted to our ~~company.~~executive officers under our 2014 Omnibus Incentive Plan, as amended. Upon vesting in the second quarter of 2023, our compensation committee may elect to settle all or a portion of the performance-based RSUs in cash based on their fair market value.

The following table reflects summarized cash flow activities for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands):

~~Table of Content~~


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2021
Net cash provided by (used in) operating activities		$	27,426	$	(4,226)
Net cash provided by operating activities						Net cash provided by operating activities	$	22,717	$	27,426
Net cash used in investing activities	Net cash used in investing activities	(404)		—		Net cash used in investing activities	(105)		(404)
Net cash (used in) provided by financing activities		(2,443)		44,473
Net cash used in financing activities						Net cash used in financing activities	(18,950)		(2,443)
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	$	24,579	$	40,247	Net increase in cash and cash equivalents	$	3,662	$	24,579

Cash Flows from Operating Activities

Cash provided by operating activities was ~~$27.4~~$22.7 million ~~during~~for the three months ended March 31, ~~2022~~2023 compared to ~~cash used of $4.2~~$27.4 million in the same period in ~~2021. The increase in cash provided from operating activities is~~2022, primarily due to ~~combination of higher net income and favorable~~unfavorable working capital cash flows ~~which included~~compared to last year, partially offset by higher net income excluding non-cash items.

For the three months ended March 31, 2023, net loss was $3.5 million compared to net income of $9.1 million for the same period in 2022. For the three months ended March 31, 2023, adjustments for non-cash items contributed approximately $16.5 million more to operating cash flows compared to the same period in 2022, primarily due to debt-related expenses and higher expense for recurring fair value measurement of contingent consideration. For the three months ended March 31, 2023, net working capital cash used in operations of approximately $1.7 million was $8.6 million lower than net working capital cash generated by operations of approximately $7.0 million in the same period in 2022, primarily due to receipt of ~~$8.4~~$8.3 million one-time tax refund in ~~tax refund.~~the first quarter of 2022, partially offset by increased cash used for inventory due to the timing of purchases and receipts.

Cash Flows from Investing Activities

Cash used in investing activities for the three months ended months ended March 31, ~~2022~~2023 was ~~0.4~~$0.1 million, which ~~included~~was entirely composed of cash paid ~~in relation to~~for the ~~purchase~~transaction costs incurred with the acquisition of ~~Otrexup. There was no cash flow activity from~~Sympazan. Cash used in investing activities for the three months ended March 31, ~~2021.~~2022 was $0.4 million, which was entirely composed of cash paid for the transaction costs incurred with the acquisition of Otrexup.

Cash Flows from Financing Activities

Cash used in financing activities for the three months ended March 31, ~~2022~~2023 was ~~$2.4~~$19.0 million, which primarily consisted of (i) $10.5 million in cash payments and $1.1 million of direct transaction cost payments made in connection with the Convertible Note Exchange, (ii) a $6.6 million payment for contingent consideration, and ~~employee’s~~(iii) cash used for employees’ withholding tax ~~liability.~~liability on stock award releases. Cash ~~provided by~~used in financing activities for the three months ended March 31, ~~2021~~2022 was ~~$44.5~~$2.4 million, which primarily consisted of ~~proceeds from the registered direct offerings in February 2021.~~a $1.8 million payment for contingent consideration and cash used for employees’ withholding tax liability on stock award releases.

~~Off-Balance Sheet Arrangement~~Contractual Obligations

~~There~~Our principal material cash requirements consist of obligations related to our debt, our contingent consideration obligation, payments for rebates, returns and discounts, non-cancelable contractual obligations for our purchase commitments, and a non-cancelable lease for our office space. There were no ~~off-balance sheet arrangements during~~material changes to our material cash requirements from contractual or other obligations outside the ~~quarter~~ordinary course of business or due to other factors since our Annual Report on Form 10-K for the year ended ~~March~~December 31, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Not applicable~~We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and therefore are not required to provide the information called for by this Item 3.

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~~procedures.

Changes in Internal Controls over Financial Reporting

There were no significant changes in our internal controls over financial reporting during the three months ended March 31, ~~2022~~2023 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~~PROCEEDINGS

For a description of our material pending legal proceedings, see “Note ~~13.~~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.

Table of Contents

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 Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021. There~~2022. Except as set forth below, there have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. In addition to other information in this report, the following risk ~~factors~~factor, together with the risks and uncertainties 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, including those set forth below, 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.

Our ability to complete the pending merger with Spectrum Pharmaceuticals, Inc. (“Spectrum”) is subject to closing conditions, including approval by our and Spectrum’s stockholders and the receipt of consents and approvals from governmental authorities, which may impose conditions that could adversely affect us or cause the merger to be delayed or not completed.

On April 24, 2023, we entered into an agreement and plan of merger (the “Merger Agreement”) with Spectrum, whereby we agreed to acquire Spectrum (the “Proposed Merger”). The Proposed Merger is subject to a number of closing conditions as specified in the Merger Agreement. These include, among others, issuing shares of our common stock to Spectrum stockholders, approval by our and Spectrum’s stockholders, the receipt of approvals under certain competition laws and the absence of governmental restraints or prohibitions preventing the consummation of the Proposed Merger. No assurance can be given that the required consents and approvals will be obtained or that the closing conditions will be satisfied in a timely manner or at all. Any delay in completing the Proposed Merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve. In addition, we can provide no assurance that these conditions will not result in the delay or abandonment of the Proposed Merger. The occurrence of any of these events could have a material adverse effect on our results of operations and the trading price of our common stock.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not repurchase any shares of the Company’s common stock during the period covered by this Quarterly Report, except for shares surrendered to us, as reflected in the following table, to satisfy tax withholding obligations in connection with the vesting of equity awards.

(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
January 1, 2022 - January 31, 2022 2,827 $2.18 N/A N/A
February 1, 2022 - February 28, 2022 304,828 $1.92 N/A N/A
March 1, 2022 - March 31, 2022 8,257 $0.74 N/A N/A
Total 315,912 $1.89

(a)

Total Number of Shares (or Units) Purchased (1)

(b) Average Price Paid per Share

(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs

January 1, 2023 - January 31, 2023

5,368

$4.13

N/A

February 1, 2023 - February 28, 2023

153,937

$4.44

N/A

March 1, 2023- March 31, 2023

2,893

$6.21

N/A

Total

162,198

$4.45

(1) Consists of shares withheld to pay employees’ tax liability in connection with the vesting of ~~equity awards~~restricted stock units granted under our stock-based compensation plans. These shares may be deemed to be “issuer purchases” of shares.

3032

Table of Contents

ITEM 6.3. EXHIBITS


10.1						Form of Convertible Notes Exchange Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 23, 2023)

31.1						Certification pursuant to Rule 13a-14(a) and 15d-14(a) under the Exchange Act

31.2						Certification pursuant to Rule 13a-14(a) and 15d-14(a) under the Exchange Act

32.1*						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2*						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS						Inline 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.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(*) Furnished herewith

3133

Table of Contents

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: May 9, ~~2022~~2023			ASSERTIO HOLDINGS, INC.

			/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

3234


	Common Stock			Additional Paid-In Capital*		Accumulated Earnings (Deficit)		Shareholders’ Equity
	Shares*	Amount*
Balances at December 31, 2021	44,640	$	4	$	531,636	$	(429,226)	$	102,414




Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	307	—		(598)		—		(598)

Issuance of common stock upon exercise of warrant	388	—		—		—		—
Stock-based compensation	—	—		982		—		982


Net income and comprehensive income	—	—		—		9,064		9,064
Balances at March 31, 2022	45,335	$	4	$	532,020	$	(420,162)	$	111,862


	March 31, 2022		December 31, 2021
Receivables related to product sales, net	$	47,112	$	43,753
Other	1,811		608

Total accounts receivable, net	$	48,923	$	44,361


Year Ending December 31,	Estimated Amortization Expense
2022 (remainder)	$	23,906
2023	23,924
2024	23,924
2025	23,924
2026	23,924
Thereafter	87,952

Total	$	207,554


	March 31, 2022		December 31, 2021
13% Senior Secured Notes due 2024	$	70,750	$	70,750

Royalty rights obligation	2,771		2,743
Total principal amount	73,521		73,493
Less: current portion of long-term debt	(12,271)		(12,174)
Net, long-term debt	$	61,250	$	61,319


	Employee compensation costs		Other exit costs		Total
Balance as of December 31, 2021	$	828	$	—	$	828

Cash paid	(340)		—		(340)
Balance as of March 31, 2022	$	488	$	—	$	488