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 ~~SEPTEMBER 30, 2022~~MARCH 31, 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 ~~November 1, 2022~~May 5, 2023 was ~~48,293,613.~~55,664,293.

ASSERTIO HOLDINGS, INC.

FORM 10-Q FOR THE PERIOD ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

TABLE OF CONTENTS




PART I — FINANCIAL INFORMATION

Item 1.						Financial Statements (unaudited)

						Condensed Consolidated Balance Sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022

						Condensed Consolidated Statements of Comprehensive (Loss) Income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022

						Condensed Consolidated Statements of Shareholders’ Equity for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022

						Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~months ended~~ ~~September 30, 2022~~ March 31, 2023 and ~~2021~~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 3.						Exhibits

						Signatures

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


		(Unaudited)					(Unaudited)
		September 30, 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	$	64,826	$	36,810	Cash and cash equivalents	$	68,603	$	64,941

Accounts receivable, net	Accounts receivable, net	44,680		44,361		Accounts receivable, net	46,466		45,357
Inventories, net	Inventories, net	14,268		7,489		Inventories, net	16,226		13,696
Prepaid and other current assets	Prepaid and other current assets	2,720		14,838		Prepaid and other current assets	6,554		8,268
Total current assets	Total current assets	126,494		103,498		Total current assets	137,849		132,262
Property and equipment, net	Property and equipment, net	935		1,527		Property and equipment, net	544		744
Intangible assets, net	Intangible assets, net	191,617		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	4,298		5,468		Other long-term assets	2,600		2,709
Total assets	Total assets	$	323,344	$	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	$	8,374	$	6,685	Accounts payable	$	6,173	$	5,991
Accrued rebates, returns and discounts	Accrued rebates, returns and discounts	48,608		52,662		Accrued rebates, returns and discounts	52,313		49,426
Accrued liabilities	Accrued liabilities	10,992		14,699		Accrued liabilities	10,799		12,181

Long-term debt, current portion	Long-term debt, current portion	2,175		12,174		Long-term debt, current portion	470		470
Contingent consideration, current portion	Contingent consideration, current portion	10,900		14,500		Contingent consideration, current portion	24,458		26,300

Other current liabilities	Other current liabilities	11,247		34,299		Other current liabilities	332		948
Total current liabilities	Total current liabilities	92,296		135,019		Total current liabilities	94,545		95,316
Long-term debt	Long-term debt	65,982		61,319		Long-term debt	38,151		66,403
Contingent consideration	Contingent consideration	25,759		23,159		Contingent consideration	26,600		22,200
Other long-term liabilities	Other long-term liabilities	4,392		4,636		Other long-term liabilities	4,314		4,269
Total liabilities	Total liabilities	188,429		224,133		Total liabilities	163,610		188,188
Commitments and contingencies
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; 48,196,618 and 44,640,444 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.		5		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	543,064		531,636		Additional paid-in capital	573,744		545,321
Accumulated deficit	Accumulated deficit	(408,154)		(429,226)		Accumulated deficit	(323,085)		(319,601)

Total shareholders’ equity	Total shareholders’ equity	134,915		102,414		Total shareholders’ equity	250,664		225,725
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	323,344	$	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.

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share data)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Revenues:	Revenues:									Revenues:
Product sales, net	Product sales, net	$	34,279	$	25,997	$	105,258	$	77,271	Product sales, net	$	41,769	$	35,546
Royalties and milestones	Royalties and milestones	473		416		1,916		1,391		Royalties and milestones	697		992
Other revenue		(540)		(941)		(1,290)		(976)

Total revenues	Total revenues	34,212		25,472		105,884		77,686		Total revenues	42,466		36,538
Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of sales	Cost of sales	4,009		3,050		12,734		10,936		Cost of sales	5,467		4,195

Selling, general and administrative expenses	Selling, general and administrative expenses	11,900		9,013		33,084		41,377		Selling, general and administrative expenses	16,904		10,638
Fair value of contingent consideration	Fair value of contingent consideration	3,900		300		6,845		1,902		Fair value of contingent consideration	9,167		1,645
Amortization of intangible assets	Amortization of intangible assets	7,969		7,175		24,438		20,939		Amortization of intangible assets	6,284		8,501
Restructuring charges		—		—		—		1,089

Total costs and expenses	Total costs and expenses	27,778		19,538		77,101		76,243		Total costs and expenses	37,822		24,979
Income from operations	Income from operations	6,434		5,934		28,783		1,443		Income from operations	4,644		11,559
Other (expense) income:	Other (expense) income:									Other (expense) income:
Debt-related expenses										Debt-related expenses	(9,918)		—
Interest expense	Interest expense	(2,052)		(2,495)		(6,648)		(7,783)		Interest expense	(1,122)		(2,327)
Other gain	Other gain	2		344		453		747		Other gain	802		545
Total other expense										Total other expense	(10,238)		(1,782)
Net (loss) income before income taxes										Net (loss) income before income taxes	(5,594)		9,777
Income tax benefit (expense)										Income tax benefit (expense)	2,110		(713)
Net (loss) income and comprehensive (loss) income										Net (loss) income and comprehensive (loss) income	$	(3,484)	$	9,064

Total other expense		(2,050)		(2,151)		(6,195)		(7,036)
Net income (loss) before income taxes		4,384		3,783		22,588		(5,593)
Income tax expense		(210)		(46)		(1,516)		(294)
Net income (loss) and comprehensive income (loss)		$	4,174	$	3,737	$	21,072	$	(5,887)

Basic net income (loss) per share		$	0.09	$	0.08	$	0.45	$	(0.14)
Diluted net income (loss) per share		$	0.08	$	0.08	$	0.42	$	(0.14)
Shares used in computing basic net income (loss) per share		48,180		44,969		46,566		42,550
Shares used in computing diluted net income (loss) per share		57,386		45,055		50,470		42,550

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

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(Unaudited)

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
Issuance of common stock in connection with at-the-market program 2,464 1 7,019 — 7,020
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability 373 — (81) — (81)
Stock-based compensation — — 1,734 — 1,734
Net income and comprehensive income — — — 7,834 7,834
Balances at June 30, 2022 48,172 $ 5 $ 540,692 $ (412,328) $ 128,369
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability 25 — (28) — (28)
Stock-based compensation — — 2,400 — 2,400
Net income and comprehensive income — — — 4,174 4,174
Balances at September 30, 2022 48,197 $ 5 $ 543,064 $ (408,154) $ 134,915


	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 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, 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
Issuance of common stock upon exercise of options — — 193 — 193
Issuance of common stock under employee stock purchase plan 4 — — — —
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability 227 — (19) — (19)
Issuance of common stock upon exercise of warrant 845 — — — —
Stock split fractional shares settlement (18) — — — —
Stock-based compensation — — 957 — 957
Net loss and comprehensive loss — — — (14,169) (14,169)
Balances at June 30, 2021 44,494 $ 4 $ 529,831 $ (437,570) $ 92,265
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability 128 — (8) — (8)
Stock-based compensation — — 866 — 866
Net income and comprehensive income — — — 3,737 3,737
Balances at September 30, 2021 44,622 $ 4 $ 530,689 $ (433,833) $ 96,860
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2022
Operating Activities	Operating Activities					Operating Activities
Net income (loss)		$	21,072	$	(5,887)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Net (loss) income						Net (loss) income	$	(3,484)	$	9,064
Adjustments to reconcile net (loss) income to net cash from operating activities:						Adjustments to reconcile net (loss) income to net cash from operating activities:
Depreciation and amortization	Depreciation and amortization	25,033		21,698		Depreciation and amortization	6,484		8,699

Amortization of debt issuance costs and Royalty Rights	Amortization of debt issuance costs and Royalty Rights	128		159		Amortization of debt issuance costs and Royalty Rights	147		28
Recurring fair value measurement of assets and liabilities		6,845		1,902

Recurring fair value measurements of assets and liabilities						Recurring fair value measurements of assets and liabilities	9,167		1,645
Debt-related expenses						Debt-related expenses	9,918		—
Provisions for inventory and other assets						Provisions for inventory and other assets	1,072		31
Stock-based compensation	Stock-based compensation	5,116		2,596		Stock-based compensation	2,446		982
Provision for inventory and other assets		828		(86)

Deferred income taxes						Deferred income taxes	(1,367)		—
Changes in assets and liabilities, net of acquisition:	Changes in assets and liabilities, net of acquisition:					Changes in assets and liabilities, net of acquisition:
Accounts receivable	Accounts receivable	(319)		8,205		Accounts receivable	(1,109)		(4,561)
Inventories	Inventories	(7,607)		6,317		Inventories	(3,602)		(2,022)

Prepaid and other assets	Prepaid and other assets	13,288		5,777		Prepaid and other assets	1,824		9,845
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	(7,193)		(22,405)		Accounts payable and other accrued liabilities	(290)		(1,511)
Accrued rebates, returns and discounts	Accrued rebates, returns and discounts	(4,058)		(19,284)		Accrued rebates, returns and discounts	2,887		2,926
Interest payable	Interest payable	(1,232)		2,400		Interest payable	(1,376)		2,300
Net cash provided by operating activities	Net cash provided by operating activities	51,901		1,392		Net cash provided by operating activities	22,717		27,426
Investing Activities	Investing Activities					Investing Activities

Purchase of Sympazan						Purchase of Sympazan	(105)		—
Purchase of Otrexup	Purchase of Otrexup	(16,889)		—		Purchase of Otrexup	—		(404)

Net cash used in investing activities	Net cash used in investing activities	(16,889)		—		Net cash used in investing activities	(105)		(404)
Financing Activities	Financing Activities					Financing Activities
Proceeds from issuance of 2027 Convertible Notes		65,916		—
Payments in connection with 2021 Convertible Notes		—		(335)
Payment in connection with 2024 Senior Notes		(70,750)		(4,750)

Payment in settlement of convertible debt inducement						Payment in settlement of convertible debt inducement	(10,500)		—
Payment of direct transaction costs related to convertible debt inducement						Payment of direct transaction costs related to convertible debt inducement	(1,119)		—
Payment of contingent consideration	Payment of contingent consideration	(7,845)		(2,495)		Payment of contingent consideration	(6,609)		(1,845)

Payment of Royalty Rights		(630)		(510)
Proceeds from issuance of common stock		7,020		44,861
Proceeds from exercise of stock options		—		193

Shares withheld for payment of employee's withholding tax liability		(707)		(416)
Net cash (used in) provided by financing activities		(6,996)		36,548
Payment of taxes related to net share settlement of equity awards						Payment of taxes related to net share settlement of equity awards	(722)		(598)
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	28,016		37,940		Net increase in cash and cash equivalents	3,662		24,579
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	36,810		20,786		Cash and cash equivalents at beginning of year	64,941		36,810
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	64,826	$	58,726	Cash and cash equivalents at end of period	$	68,603	$	61,389

Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information					Supplemental Disclosure of Cash Flow Information
Net cash refunded for income taxes		$	(7,822)	$	—
Net cash paid (refunded) for income taxes						Net cash paid (refunded) for income taxes	$	29	$	(8,360)
Cash paid for interest	Cash paid for interest	$	7,752	$	5,216	Cash paid for interest	$	2,351	$	—

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

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 ~~and nine~~ months ended ~~September 30, 2022~~March 31, 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.

~~Reclassifications~~

~~During the first quarter of 2022, the Company made certain reclassifications within Selling, general and administrative expenses related to changes in the fair value~~ of contingent considerations. These fair value adjustments were reclassified from Selling, 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 and nine months ended September 30, 2021. The reclassifications were made to separately state~~ ~~changes in the fair value of contingent considerations from Selling, general and administrative expenses.~~ ~~Prior period results were recast to conform with these changes, and resulted in a decrease to~~ ~~Selling, general and administrative expenses~~ ~~and an equal and offsetting increase to~~ ~~Fair value of contingent consideration~~ of $0.3 million and $1.9 million for the three and nine months ended September 30, 2021, respectively. Total cost and expenses and Income (loss) 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 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 paid 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~~
~~Cash paid in May 2022~~	~~16,021~~
~~Deferred cash payment due in December 2022~~	~~10,000~~
~~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~~	~~44,086~~
~~Total assets acquired~~	$	~~45,499~~

The Otrexup product rights will be amortized over an 8 year period. As of September 30, 2022 and December 31, 2021 deferred cash payable to Antares were $10.0 million and $26.0 million, respectively, and were recorded in Other current liabilities in the Company’s Condensed Consolidated Balance Sheet.

NOTE 3.2. REVENUE

Disaggregated Revenue

The following table reflects summary revenue, net for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Product sales, net:	Product sales, net:									Product sales, net:
INDOCIN products	INDOCIN products	$	21,869	$	14,541	$	66,067	$	42,214	INDOCIN products	$	30,346	$	21,357
Otrexup										Otrexup	2,822		3,078
Sympazan										Sympazan	2,502		—
SPRIX										SPRIX	1,889		1,766
CAMBIA	CAMBIA	5,808		5,038		17,464		17,628		CAMBIA	2,264		5,473
Otrexup		3,004		—		8,699		—
Zipsor	Zipsor	259		1,999		2,704		6,802		Zipsor	1,150		2,228
SPRIX		2,455		2,272		6,437		6,911
Other products	Other products	884		2,147		3,887		3,716		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		34,279		25,997		105,258		77,271

Royalties and milestone revenue		473		416		1,916		1,391
Other revenue		(540)		(941)		(1,290)		(976)
Total revenues	Total revenues	$	34,212	$	25,472	$	105,884	$	77,686	Total revenues	$	42,466	$	36,538

Product Sales, net:

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ product sales primarily consisted of sales from INDOCIN ~~Products, CAMBIA,~~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 products 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 $1.5 million~~ for each of the three ~~and nine~~ months ended ~~September 30, 2022, respectively~~March 31, 2023 and ~~$0.4 million and $1.4 million for the three and nine months ended September 30, 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 ~~nine~~three months ended ~~September 30,~~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 September 30, 2022, contract liabilities were $0.2 million.~~

~~Other Revenue~~

NOTE 4.3. ACCOUNTS RECEIVABLES, NET

~~The following table reflects accounts receivables, net, as~~As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021 (in thousands):~~

September 30, 2022 December 31, 2021
Receivables related to product sales, net $ 42,061 $ 43,753
Other 2,619 608
Total accounts receivable, net $ 44,680 $ 44,361

As2022, accounts receivable, net, of ~~September 30, 2022~~$46.5 million and ~~December 31, 2021,~~$45.4 million, respectively, consisted entirely of receivables related to product sales, net of allowances for cash discounts for prompt payment ~~were~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	1,755	$	1,242	Raw materials	$	921	$	1,367
Work-in-process	Work-in-process	2,556		823		Work-in-process	1,677		2,735
Finished goods	Finished goods	9,957		5,424		Finished goods	13,628		9,594
Total Inventories, net	Total Inventories, net	$	14,268	$	7,489	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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company recorded inventory ~~reserves were $2.0~~write-downs of $2.4 million and ~~$3.7~~$2.8 million, respectively.

NOTE 6.5. PROPERTY AND EQUIPMENT, NET

The following table reflects property and equipment, net as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Furniture and office equipment	Furniture and office equipment	$	2,353	$	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
		12,160		13,276			4,673		4,677
Less: Accumulated depreciation	Less: Accumulated depreciation	(11,225)		(11,749)		Less: Accumulated depreciation	(4,129)		(3,933)
Property and equipment, net	Property and equipment, net	$	935	$	1,527	Property and equipment, net	$	544	$	744

Depreciation expense was $0.2 million ~~and $0.6 million~~ for each of the three ~~and nine~~ months ended ~~September 30, 2022, respectively~~March 31, 2023 and ~~$0.2 million and $0.8 million for the three and nine months ended September 30, 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (dollar amounts in thousands):


		September 30, 2022					December 31, 2021								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				Remaining Useful Life (In years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Products rights:	Products rights:															Products rights:
INDOCIN	INDOCIN	9.6	$	154,100	$	(30,285)	$	123,815	$	154,100	$	(20,654)	$	133,446		INDOCIN	9.1	$	154,100	$	(36,705)	$	117,395	$	154,100	$	(33,495)	$	120,605
CAMBIA		0.3	51,360		(49,372)		1,988		51,360		(43,410)		7,950
Otrexup	Otrexup	7.2	44,086		(4,133)		39,953		44,086		—		44,086			Otrexup	6.7	44,086		(6,888)		$	37,198	44,086		(5,511)		38,575
Sympazan																Sympazan	11.6	14,550		(505)		$	14,045	14,550		(202)		14,348
SPRIX	SPRIX	4.6	39,000		(13,139)		25,861		39,000		(8,960)		30,040			SPRIX	4.1	39,000		(15,926)		$	23,074	39,000		(14,532)		24,468
Zipsor		0.0	27,250		(27,250)		—		27,250		(26,718)		532
Total Intangible Assets	Total Intangible Assets		$	315,796	$	(124,179)	$	191,617	$	315,796	$	(99,742)	$	216,054		Total Intangible Assets		$	251,736	$	(60,024)	$	191,712	$	251,736	$	(53,740)	$	197,996

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

119

Amortization expense was $8.0 million and $24.4 million for the three and nine months ended September 30, 2022, respectively, and $7.2 million and $20.9 million for the three and nine months ended September 30, 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) $ 7,969
2023 23,924
2024 23,924
2025 23,924
2026 23,924
Thereafter 87,952
Total $ 191,617

We evaluate long-lived assets, including property and equipment and acquired intangible assets consisting of product rights, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. As of September 30, 2022, we determined that there was an indicator of impairment present based on our market capitalization as of September 30, 2022 compared to our carrying value. After grouping the long-lived assets, including purchased developed technology and trademarks, at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other assets and liabilities, we estimated the future net undiscounted cash flows expected to be generated from the use of the long-lived asset group and its eventual disposition. We then compared the estimated undiscounted cash flows to the carrying amount of the long-lived asset group. Based on this test, we determined that the estimated undiscounted cash flows were in excess of the carrying amount of the long-lived asset group and, accordingly, the long-lived asset group is fully recoverable.


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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 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	262		735		Operating lease right-of-use assets	$	107	$	137
Prepaid asset and deposits	Prepaid asset and deposits	1,760		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	$	4,298	$	5,468	Total other long-term assets	$	2,600	$	2,709

~~Investment, net 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 accounted as a long-term loan receivable and is valued at amortized cost. As of ~~September 30,~~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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Accrued compensation	Accrued compensation	$	2,295	$	4,122	Accrued compensation	$	602	$	3,117
Accrued restructuring costs		137		828

Other accrued liabilities	Other accrued liabilities	7,755		8,062		Other accrued liabilities	9,587		6,561
Interest payable	Interest payable	455		1,687		Interest payable	217		1,593
Income tax payable		350		—
Accrued royalties						Accrued royalties	393		910
Total accrued liabilities	Total accrued liabilities	$	10,992	$	14,699	Total accrued liabilities	$	10,799	$	12,181

NOTE ~~10.~~9. DEBT

The following table reflects the Company’s debt as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

September 30, 2022 December 31, 2021
6.5% Senior Convertible Notes due 2027 $ 70,000 $ —
13% Senior Secured Notes due 2024
— 70,750
Royalty rights obligation 2,175 2,743
Total principal amount 72,175 73,493
Unamortized debt issuance costs (4,018) —
Less: current portion of long-term debt (2,175) (12,174)
Net, long-term debt $ 65,982 $ 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

6.5% Convertible Senior Notes due 2027

On August 22, 2022, Assertio entered into a purchase agreement (the “Purchase Agreement”), with U.S. Bank Trust Company ~~(the “Trustee”),~~ as the ~~Trustee~~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 of 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”) and $3.0 million in associated interest payments pursuant to privately negotiated exchange agreements entered into concurrently with the pricing of the offering of 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 the 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 reported in Debt-related expensesin the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2023. The induced conversion expense represents the fair value of the consideration transferred in the Convertible Note Exchange in excess of the fair value of common stock issuable under the original terms of the 2027 Convertible Notes. Additionally, approximately $1.6 million of unamortized issuance costs related to the Exchanged Notes were recognized as Additional paid-in capital in the Company’s Condensed Consolidated Balance Sheets.

The terms of the 2027 Convertible Notes are governed by ~~the Indenture~~an indenture dated August 25, 2022 (the ~~“Indenture”~~“2027 Convertible Note Indenture”). The terms of the 2027 Convertible Notes allow for conversion into ~~Common Stock,~~the Company’s common stock, cash, or a combination of cash and ~~Common Stock,~~common stock, at the Company’s election only, at an initial conversion rate of 244.2003 shares of the Company’s ~~Common Stock~~common stock per $1,000 principal amount (equal to an initial ~~Conversion Price~~conversion price of approximately $4.09 per share), subject to adjustments specified in the 2027 Convertible Note Indenture (the “Conversion Rate”). The 2027 Convertible Notes will mature on September 1, 2027, unless earlier repurchased or converted.

The 2027 Convertible Notes ~~bears~~bear interest from August 25, 2022 at a rate of 6.5% per annum payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2023.

Pursuant to the terms of the 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 the Company’s properties or assets. The Company was in compliance with its covenants with respect to the 2027 Convertible Notes as of ~~September 30, 2022.~~

March 31, 2023.

1311

The Company incurred approximately $4.0 million in issuance costs including legal fees, accounting service fees, printing fees, and trustee fees associated with the Notes. The issuance costs were recognized as a discount to the 2027 Convertible Notes and are amortized over the term of the 2027 Convertible Notes using the effective interest method. The effective interest rate for the period is 7.8%.

The following table reflects the carrying balance of the 2027 Convertible Notes as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


	~~September 30, 2022~~		~~December 31, 2021~~
~~Principal balance~~	$	~~70,000~~	$	—
~~Unamortized debt issuance costs~~	~~(4,018)~~		—
~~Convertible note payable, net~~	$	~~65,982~~	$	—


	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 ~~September 30, 2022,~~March 31, 2023, the Company ~~amortized~~amortized $0.1 million of the ~~debt~~debt discount on the 2027 Convertible ~~Notes.~~Notes, and $1.6 million of unamortized issuance costs related to the Exchanged Notes were recognized as Additional paid-in capital.

The Company determined that an embedded conversion feature included in the 2027 Convertible Notes required bifurcation from the host contract and to be recognized as a separate derivative liability carried at fair value. The estimated fair value of the derivative liability, which represents a Level 3 valuation, was $0.3 million as of both March 31, 2023 and December 31, 2022, and 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 ~~either~~ clearly and closely related to the debt host and did not require bifurcation as a derivative liability, or the fair value of the bifurcated features was immaterial to the Company’s financial statements.

~~13% Senior Secured Notes due 2024~~

In accordance with the Zyla Merger, Assertio assumed $95.0 million aggregate principal amount of 13% senior secured notes due 2024 (the 2024 Secured Notes) issued pursuant to an indenture (the Existing Indenture) entered into on January 31, 2019, by and among Zyla Life Sciences, the guarantors party thereto (the Guarantors) and Wilmington Savings Fund Society, FSB (as successor to U.S. Bank National Association), as trustee and collateral agent (the Trustee). The 2024 Secured Notes were issued in two series: $50.0 million of Series A-1 Notes and $45.0 million of Series A-2 Notes.

The Company used the net proceeds from the 2027 Convertible Note Offering to repurchase $59.0 million aggregate principal amount of its 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 Note Offering. The 2024 Secured Notes were derecognized upon extinguishment with no gain or loss recognized, as no unamortized cost remained at time of extinguishment. Assertio expects to use the remaining net proceeds of the 2027 Convertible Note Offering for general corporate purposes. As of September 30, 2022 there were no outstanding aggregate principal amounts of the 2024 Secured Notes.

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 2024 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 2024 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.~~

~~The Company~~ has no further Royalty Rights obligations ~~of $2.2 million and $2.7 million as of September 30, 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

Royalty Rights and debt issuance cost are amortized as interest expense using the effective interest method. The following table reflects ~~debt related~~debt-related interest included in Interest expense in the Company’s Condensed Consolidated Statements of Comprehensive (Loss) Income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Interest payable on 2027 Convertible Notes $ 456 $ — $ 456 $ —
Interest paid on 2024 Secured Notes 1,516 2,454 6,064 7,618
Amortization of debt issuance costs and Royalty Rights 80 41 128 159
Other — — — 6
Total interest expense $ 2,052 $ 2,495 $ 6,648 $ 7,783


	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 time-based ~~stock options and~~ restricted stock units ~~(RSUs)~~(“RSU”) and options, as well as performance-based ~~stock options~~RSUs and ~~RSUs.~~options.

For the three ~~and nine~~ months ending ~~September 30,~~March 31, 2023 and 2022, stock-based compensation of $2.4 million ~~and $5.1 million, respectively, and for the three and nine months ending September 30, 2021, $0.9 million and $2.6~~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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 the Company granted ~~1.5~~0.5 million RSUs at a weighted-average fair market value of ~~$2.54~~$5.15 per share, ~~1.0~~and 0.6 million options at a weighted-average fair market value of ~~$2.28~~$4.39 per ~~share, and collectively 2.0 million performance-based stock options and RSUs at a weighted-average fair value per unit was $2.02.~~share.

NOTE ~~12.~~11. LEASES

As of ~~September 30, 2022,~~March 31, 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 one 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. During the ~~first quarter of~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


			Three Months Ended September 30,				Nine Months Ended September 30,						Three Months Ended March 31,
		Financial Statement Classification	2022		2021		2022		2021			Financial Statement Classification	2023		2022
Operating lease cost	Operating lease cost	Selling, general and administrative expenses	$	39	$	54	$	118	$	256	Operating lease cost	Selling, general and administrative expenses	$	39	$	40
Operating lease cost	Operating lease cost	Other gain	148		148		444		443		Operating lease cost	Other gain	—		148
Total lease cost	Total lease cost		$	187	$	202	$	562	$	699	Total lease cost		$	39	$	188

Sublease Income	Sublease Income	Other gain	$	168	$	347	$	1,111	$	1,040	Sublease Income	Other gain	$	—	$	775

The following table reflects supplemental cash flow information related to leases for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases $ 533 $ 667 $ 1,593 $ 2,129


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

The following table reflects supplemental balance sheet information related to leases as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


		Financial Statement Classification	September 30, 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	$	673	$	1,978	Current operating lease liabilities	Other current liabilities	$	306	$	401
Noncurrent operating lease liabilities		Other long-term liabilities	105		397

Total lease liabilities	Total lease liabilities		$	778	$	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. The Company ~~has~~ agreed to purchase a minimum number of batches of SPRIX ~~annually~~per calendar year from JHS over the term of the Jubilant HollisterStier Agreement. Total commitments to JHS through the period ending July 30, 2022 have been met, and total commitments through the period ending July 30, 2023 are 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 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.

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 ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021~~2022, the Company had a legal contingency accrual of approximately $3.2 ~~million and $3.4 million, respectively.~~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.

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 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, two individuals who formerly served as its chief executive officer and president, and its former chief financial officer, thereby concluding this matter. The action (~~Huang~~(Huang v. Depomed et al., No. 4:17-cv-4830-JST, N.D. Cal.) alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 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 contended that the conduct supporting the alleged violations affected the value of ~~Company~~Company’s common stock and was seeking damages and other relief.

Additionally, on December 14, 2021, the Superior Court of California, Alameda County, issued a final order approving the settlement of the 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,thereby concluding these matters. The claims in the shareholder derivative actions arose out of the same factual allegations as the purported federal securities class action described above.

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 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 ~~one~~six such ~~case.~~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 and Assertio Holdings intend to defend 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.

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 the U.S. District Court for the Northern District of California (Case No. 3:21-cv-06642). Assertio Therapeutics was 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. 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 Settlement Agreement, the parties settled and 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 ~~Income.~~(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 is~~parties are in ~~the early stages.~~discovery. Trial is set for February 2, 2024.

Indemnification Dispute with Collegium Pharmaceutical, Inc.

On May 24, 2022, Assertio Therapeutics filed an action in the Superior Court of Delaware against Collegium Pharmaceutical, Inc. ~~(Collegium)~~(“Collegium”) seeking indemnification ~~in excess of $1.8 million~~ for Collegium’s breach of an asset purchase agreement related to Assertio Therapeutics’ former product, ~~Nucynta.~~NUCYNTA. Assertio Therapeutics ~~alleges~~alleged that Collegium agreed to assume certain liabilities associated with customer returns of ~~Nucynta~~NUCYNTA products sold by Collegium, but that Collegium ~~has~~ failed to honor that agreement. On July 14, 2022, Collegium answered the complaint asserting as a defense that, among other things, the Superior Court of 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.

~~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.

~~The following table reflects total expenses related to restructuring activities recognized within the Condensed Consolidated Statement of Comprehensive Income as restructuring costs (in thousands):~~

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 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 September 30, 2022 (in thousands):~~

Employee compensation costs Total
Balance as of December 31, 2021 $ 828 $ 828
Cash paid (340) (340)
Balance as of March 31, 2022 $ 488 $ 488
Cash paid (150) (150)
Balance as of June 30, 2022 $ 338 $ 338
Cash paid (201) (201)
Balance as of September 30, 2022 $ 137 $ 137

NOTE ~~15.~~13. SHAREHOLDERS EQUITY

Exchanged Convertible Notes

Related to the Convertible Note Exchange (see Note 9, Debt), the Company paid an aggregate of $10.5 million in cash and issued an aggregate of approximately 7.0 million shares of its common stock in the transactions. The 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

~~On December 17, 2021, the~~The Company ~~entered into~~is party to a ~~Sales Agreement~~sales agreement with Roth Capital Partners, LLC ~~(Roth)~~(“Roth”) as sales agent to sell shares of the Company’s common stock, from time to time, through an at-the-market ~~(ATM)~~(“ATM”) offering program

having an aggregate offering price of up to $25.0 million. As a result of ~~September 30, 2022,~~the issuance of the 2027 Convertible Notes (See Note 9, Debt), the Company has determined to suspend use of its ATM offering program. Prior to suspending the ATM offering program, 2,463,637 shares ~~have~~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 $7.0 million. ~~As a result of the issuance of the 2027 Convertible Notes (See Note 10. Debt), the Company has determined to suspend use of its ATM offering program.~~

~~Equity Raise~~

On February 9, 2021, the Company completed a registered direct offering with certain institutional investors and accredited investors to sell 5,650,000 shares of our common stock at a purchase price of $2.48 per share. The gross proceeds from the offering were approximately $14.0 million. After placement agent fees and other offering expenses payable by the Company, Assertio received net proceeds of approximately $13.1 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. 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.

During the three months ~~. All~~ended March 31, 2022, 0.4 million warrants were exercised, and 0.4 million 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~~.

~~During the nine months ended September 30, 2022 and 2021, zero and 392,095 warrants, respectively, were exercised, and zero and 387,802~~ common shares, ~~respectively,~~ were issued by the Company. ~~As of September 30,~~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 zero and 392,095 unexercised shares of common stock issuable upon the exercise of warrants as of September 30, 2022 and 2021, respectively.

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 ~~and options to purchase stock~~ are considered to be potential common shares and are only included in the calculation of diluted net (loss) income per share when their effect is dilutive. The 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. Under the if-converted method, the Company assumes ~~the 2027 Convertible Notes were~~any convertible debt outstanding was converted at the beginning of each period ~~presented.~~presented when the effect is dilutive. As a result, interest expense and any ~~adjustments recognized in net~~other income ~~for~~statement impact associated with the 2027 Convertible Notes, net of tax, is added back to net income used in the diluted earnings per share calculation. ~~Additionally,~~As the ~~diluted shares used~~Company was in a net loss position for the three months ended March 31, 2023, the Company’s potentially dilutive stock-based awards and convertible debt were not included in the computation of diluted ~~earnings~~net (loss) income per share, ~~calculation includes the dilution effect of the 2027 Convertible Notes.~~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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands, except for per share amounts):

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Basic net income per share
Net income (loss) $ 4,174 $ 3,737 $ 21,072 $ (5,887)
Weighted-average common shares and warrants outstanding 48,180 44,969 46,566 42,550
Basic net income (loss) per share $ 0.09 $ 0.08 $ 0.45 $ (0.14)
Diluted net income per share
Net income (loss) $ 4,174 $ 3,737 $ 21,072 $ (5,887)
Add: Interest Expense on convertible debt, net of tax 497 — 487 —
Adjusted Net income (loss) 4,671 3,737 21,559 (5,887)
Weighted-average common shares and share equivalents outstanding 48,180 44,969 46,566 42,550
Add: effect of dilutive stock-based awards and equivalents 1,960 86 1,462 —
Add: effect of dilutive convertible debt under if-converted method 7,246 — 2,442 —
Denominator for diluted income per share 57,386 45,055 50,470 42,550
Diluted net income (loss) per share $ 0.08 $ 0.08 $ 0.42 $ (0.14)


	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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
2021 Convertible Notes — 3 — 4
Stock-based awards and equivalents 2,983 2,297 1,329 2,725
Total potentially dilutive common shares 2,983 2,300 1,329 2,729


	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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):


September 30, 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	$	—	$	—	$	10,900	$	10,900	Short-term contingent consideration	Contingent consideration, current portion	$	—	$	—	$	24,458	$	24,458
Long-term contingent consideration	Long-term contingent consideration	Contingent consideration	—		—		25,759		25,759		Long-term contingent consideration	Contingent consideration	—		—		26,600		26,600
Derivative liability											Derivative liability	Long-term debt	—		—		252		252
Total	Total		$	—	$	—	$	36,659	$	36,659	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

22Cash 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.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, the Company recognized an expense of ~~$3.9~~$9.2 million and ~~$6.8~~$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. ~~For the three and nine months ended September 30, 2021, the Company recognized an expense of $0.3 million and $1.9 million, respectively, for the change in fair value of contingent consideration.~~ 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 ~~September 30, 2022~~March 31, 2023 included revenue volatility of ~~30%~~40%, discount rate of 8.5%, credit spread of ~~4.0%~~4.2% and updated projections of future INDOCIN Product revenues.

~~Contingent consideration related to CAMBIA was $0.2 million as of September 30, 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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Fair value, beginning of the period	Fair value, beginning of the period	$	36,759	$	37,659	$	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	3,900		300		6,845		1,902		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	(4,000)		—		(7,845)		(2,495)		Cash payment related to contingent consideration	(6,609)		(1,845)
Fair value, end of the period	Fair value, end of the period	$	36,659	$	37,959	$	36,659	$	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 cost of each approximates its fair value. On August 22, 2022, the Company ~~estimates~~issued the 2027 Convertible Notes. As of March 31, 2023, the estimated fair value of the 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 estimated the fair value of its ~~convertible notes~~2027 Convertible Notes as of March 31, 2023 and December 31, 2022 based on a market approach which represents a Level 2 valuation. ~~The estimated fair value of the 2027 Convertible Notes, which the Company issued on August 22, 2022, was approximately $64.3 million (par value $70.0 million) as of September 30, 2022.~~

~~There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and nine months ended September 30, 2022.~~

NOTE ~~18.~~16. INCOME TAXES

~~As of September 30,~~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 $0.3 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 on the weight of available evidence, the Company recorded a valuation allowance against the majority of its net deferred tax assets. However, given the current earnings trend, sufficient positive evidence may become available for the Company to release all or a portion of the valuation allowance within twelve months. The exact timing and amount of the valuation allowance releases are subject to change based on the level of profitability achieved in future periods. The Company ~~will continue~~continues to assess the realizability of its deferred tax assets on a quarterly basis. 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 future benefits for the associated deferred tax assets is uncertain.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company recorded an income tax ~~expense~~benefit of ~~$1.5~~$2.1 million. The difference between the income tax ~~expense~~benefit of ~~$1.5~~$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. ~~At September 30, 2022,~~As of March 31, 2023, the Company did not have significant accrued interest and penalties associated with unrecognized tax benefits.

~~During the first quarter of 2022, the Company received a refund of $8.3 million for the carryback of net operating losses under the Cares Act.~~

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The tax legislation includes a new book-minimum tax on certain large corporations, an excise tax on stock buybacks, and tax incentives to address climate change mitigation and clean energy. The Company considered the income tax accounting implications of the IRA legislation to the Company’s income tax provision calculation for the period ended September 30, 2022 and determined that the impact was not significant.

NOTE ~~19.~~17. SUBSEQUENT EVENTS

On ~~October 27, 2022,~~April 25, 2023, the Company entered into an Agreement and Plan of 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 ~~announced~~stockholders will own approximately 65% of the ~~closing~~combined company, and Spectrum stockholders will own approximately 35% of the combined company, on a ~~transaction to acquire an exclusive license for Sympazan® (clobazam) oral film from Aquestive Therapeutics, Inc. (Aquestive).~~ fully diluted basis.

Under the terms of the ~~definitive agreement, the Company acquired an exclusive license~~Merger Agreement, at closing, Spectrum stockholders will receive a fixed exchange ratio of 0.1783 shares of Assertio common stock for ~~the Sympazan intellectual property from Aquestive for~~each share of Spectrum common stock they own, implying an upfront ~~payment~~value of ~~$9.0 million.~~$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 also entered into a long-term supply agreement with Aquestive for Sympazan. Additionally, Aquestive will continue to prosecute an existing patent application that could extend patent coverage to as late as 2039. Upon patent allowance, Assertio will pay a $6.0 million milestone payment and ~~royalties to Aquestive.~~Spectrum stockholders and the satisfaction of customary closing conditions.

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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.~~patients utilizing a non-personal promotional model. Our commercial portfolio of branded products focuses on three areas: neurology, ~~hospital,~~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 ~~form~~ and oral solution of indomethacin used both in ~~the hospital as well as in the~~hospitals and out-patient ~~setting.~~settings. Both products are nonsteroidal anti-inflammatory drug (NSAID), ~~approved~~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,~~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®~~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,~~August 22, 2022, we ~~through a newly-formed subsidiary, Otter Pharmaceuticals, LLC,~~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 ~~an Asset Purchase Agreement~~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 ~~“Purchase Agreement”~~“Convertible Note Exchange”) ~~with Antares Pharma, Inc. (“Antares”), and concurrently consummated the Otrexup transaction.~~. Pursuant to the ~~terms~~Convertible Note Exchange, 6,990,000 shares 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~~Company’s common stock, plus an additional $10.5 million in cash, ~~paid at closing, (ii) $16.0 million~~were issued in ~~cash paid~~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 ~~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 and2027 Convertible Notes.

2523

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 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

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 products we acquire, as well as delays, challenges and expenses, and unexpected costs associated with integrating and operating 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 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;

•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 ~~in our Quarterly Report~~Exchange Commission on March 8, 2023 (the “2022 Form ~~10-Q for the three months ended March 31, 2022 and June 30, 2022, respectively.~~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.

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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
Product sales, net:	Product sales, net:									Product sales, net:
INDOCIN products	INDOCIN products	$	21,869	$	14,541	$	66,067	$	42,214	INDOCIN products	$	30,346	$	21,357
Otrexup										Otrexup	2,822		3,078
Sympazan										Sympazan	2,502		—
SPRIX										SPRIX	1,889		1,766
CAMBIA	CAMBIA	5,808		5,038		17,464		17,628		CAMBIA	2,264		5,473
Otrexup		3,004		—		8,699		—
Zipsor	Zipsor	259		1,999		2,704		6,802		Zipsor	1,150		2,228
SPRIX		2,455		2,272		6,437		6,911
Other products	Other products	884		2,147		3,887		3,716		Other products	796		1,644
Total product sales, net	Total product sales, net	34,279		25,997		105,258		77,271		Total product sales, net	41,769		35,546

Royalties and milestone revenue	Royalties and milestone revenue	473		416		1,916		1,391		Royalties and milestone revenue	697		992
Other revenue		(540)		(941)		(1,290)		(976)
Total revenues	Total revenues	$	34,212	$	25,472	$	105,884	$	77,686	Total revenues	$	42,466	$	36,538

Product ~~Sales,~~sales, net

For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, product sales primarily consisted of sales from INDOCIN ~~Products, CAMBIA,~~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 net product sales increased $9.0 million from $21.4 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 ~~increased $7.3~~to $30.3 million ~~from $14.5 million to $21.9 million and $23.9 million from $42.2 million to $66.1 million, respectively, as compared to~~for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to favorable net pricing as a result of ~~increase in gross price~~volume mix shift to more profitable channels.

Otrexup net product sales decreased $0.3 million from $3.1 million for the three months ended March 31, 2022 to $2.8 million for the three months ended March 31, 2023, primarily due to unfavorable payor mix.

SPRIX net product sales increased $0.1 million from $1.8 million for the three months ended March 31, 2022 to $1.9 million for the three months ended March 31, 2023, primarily due to higher volume and favorable ~~impact of lower returns, partially offset by lower volume.~~payor mix.

CAMBIA net product sales decreased $3.2 million from $5.5 million for the three months ended ~~September 30,~~March 31, 2022 ~~increased $0.8~~to $2.3 million ~~from $5.0 million to $5.8 million as compared to the same period in 2021 primarily due to favorable payor mix partially offset by lower volume. CAMBIAnet product sales~~ for the ~~nine~~three months ended ~~September 30, 2022 decreased $0.1 million from $17.6 million to $17.5 million as compared to the same period in 2021~~March 31, 2023, primarily due to lower volume ~~partially offset by favorable payor mix. Certain~~as certain parties who ~~have~~previously entered into settlement agreements with us ~~will be able~~began to market generic versions of ~~Cambia starting~~CAMBIA in 2023.

Zipsor net product sales decreased $1.1 million from $2.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 ~~decreased $1.7~~to $1.2 million ~~from $2.0 million to $0.3 million and $4.1 million from $6.8 million to $2.7 million, respectively, as compared to~~for the ~~same period in 2021 primarily due~~three months ended March 31, 2023, primarily due to lower volume, ~~and unfavorable payor mix~~ as certain parties who previously entered into settlement agreements with us began to market generic versions of Zipsor in 2022.

SPRIX net product sales for the three months ended September 30, 2022 increased $0.2 million from $2.3 million to $2.5 million as compared to the same period in 2021 primarily due to higher volume partially offset by unfavorable payor mix. SPRIX net product sales for the nine months ended September 30, 2022 decreased $0.5 million from $6.9 million to $6.4 million as compared to the same period in 2021 primarily due to unfavorable payor mix partially offset by higher volume.

Other net product sales include product sales for non-promoted products ~~(OXAYDO and SOLUMATRIX) which were acquired from Zyla in May 2020. In September 2020, we terminated our iCeutica License and as a result no longer manufacture products using~~(OXAYDO). We ceased SOLUMATRIX ~~technology and ceased~~ sales beginning in July 2022.

The increase in total product sales, net, for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023, also reflects a decrease year over year in the amounts charged as a 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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~the Company~~we recognized $0.5 ~~million and $1.5~~ million of revenue related to CAMBIA in ~~Canada, respectively. During the~~

~~three and nine months ended September 30, 2021, we recognized $0.4 million and $1.4 million of revenue related to CAMBIA in Canada, respectively.~~Canada.

During the ~~nine~~three months ended ~~months ended September 30,~~March 31, 2023 and 2022, we recognized $0.2 million and $0.5 million, respectively, of Milestone revenue associated with the completion of certain service milestones.

~~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 resulted in a revenue reduction of $0.5 million and $1.3 million for the three and nine months ended September 30, 2022, respectively, and revenue reduction of $0.9 million and $1.0 million for the three and nine months ended September 30, 2021, respectively.

Cost of Sales (excluding amortization of intangible assets)

Cost of sales increased ~~$1.0~~$1.3 million from ~~$3.1~~$4.2 million ~~to $4.0 million during~~for the three months ended ~~September 30,~~March 31, 2022 ~~and increased $1.8~~to $5.5 million ~~from $10.9 million to $12.7 million during~~for the ~~nine~~three months ended ~~September 30, 2022, respectively, as compared to the same period in 2021~~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 acquired and began shipping in October 2022, partially offset by the impact of ~~higher net sales and~~ product mix.

For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, there was no impact to cost of sales related to amortization of inventory step-up related to acquired inventories sold. For the nine months ended September 30, 2022 and 2021~~ cost of sales included ~~$0.7~~$0.2 million and ~~$0.6~~$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 ~~$2.9~~$6.3 million from ~~$9.0 million to $11.9~~$10.6 million for the three months ended ~~September 30,~~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 pending merger with Spectrum Pharmaceuticals, Inc., which was announced on April 25, 2023 (see “Note 17 of the accompanying Condensed Consolidated Financial Statements), (ii) an increase of $1.5 million in ~~stock~~stock-based compensation expense, ~~$1.0~~(iii) $1.3 million ~~in provision benefit recognized in third quarter~~ of ~~2021 not repeating in 2022,~~higher selling and ~~remaining~~marketing expenses for prior acquired products, and (iv) an $0.8 million increase ~~is due to general operating expenses.~~

Selling, general, and administrative expenses decreased $8.3 million from $41.4 million to $33.1 million for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to $11.3 million in loss contingency provisions recognized in second quarter of 2021 that are not repeating in 2022, decrease of approximately $2.5 million in general operating expenses as a result of prior restructuring events, partially offset by a net increase of $3.0 million as a result of the $5.0 million gain for insurance reimbursement in the first quarter of 2021 compared to $2.0 million gain for insurance reimbursement in second quarter of 2022, and an increase of $2.5 million in stock co~~mpensation expense~~.expenses.

Fair value of contingent consideration

Fair value of contingent consideration increased ~~by $3.6~~$7.5 million from ~~$0.3 million to $3.9 million and increased by $4.9 million from $1.9 million to $6.8~~$1.6 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 ~~respectively, as 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 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 ~~September 30, 2022~~March 31, 2023 included revenue volatility of ~~30%~~40%, discount rate of 8.5%, credit spread of ~~4.0%~~4.2% and updated projections of future INDOCIN Product revenues.

Intangible Assets

The following table reflects amortization of intangible assets for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Amortization of intangible assets - INDOCIN $ 3,210 $ 3,210 $ 9,631 $ 9,631
Amortization of intangible assets - SPRIX 1,393 1,393 4,179 4,179
Amortization of intangible assets - CAMBIA 1,988 1,988 5,963 5,259
Amortization of intangible assets - Otrexup 1,378 — 4,133 —
Amortization of intangible assets - Zipsor — 584 532 1,752
Amortization of intangible assets - Oxaydo — — — 118
Total $ 7,969 $ 7,175 $ 24,438 $ 20,939


	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 ~~increased $0.8~~decreased $2.2 million from ~~$7.2~~$8.5 million ~~to $8.0 million during~~for the three months ended ~~September 30,~~March 31, 2022 ~~and increased $3.5~~to $6.3 million ~~from $20.9 million to $24.4 million during~~for the ~~nine~~three months ended ~~September 30, 2022, respectively, as compared to the same period in 2021~~March 31, 2023, primarily due to ~~acquired Otrexup product rights~~the full amortization of CAMBIA intangible assets in ~~December 2021~~the fourth quarter of 2022 and the full amortization of Zipsor ~~and Oxaydo.~~

~~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 reductionintangible assets in the first quarter of ~~2021.~~

~~For~~2022, partially offset by additional amortization of the three and nine months ended September 30, 2022 there were no restructuring charges incurred. For the three and nine months ended September 30, 2021 restructuring charges incurred were zero and $1.1 million, respectively.Sympazan product rights acquired in October 2022.

Other (Expense) Income

The following table reflects other expense (income) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

Debt-related expenses										Debt-related expenses	$	(9,918)	$	—
Interest expense	Interest expense	$	(2,052)	$	(2,495)	$	(6,648)	$	(7,783)	Interest expense	(1,122)		(2,327)

Other gain	Other gain	2		344		453		747		Other gain	802		545

Total other expense	Total other expense	$	(2,050)	$	(2,151)	$	(6,195)	$	(7,036)	Total other expense	$	(10,238)	$	(1,782)

Other expense ~~decreased~~increased by ~~$0.1~~$8.5 million from ~~expense of $2.2 million to expense of $2.1~~$1.8 million for the three months ended ~~September 30,~~March 31, 2022 ~~and decreased by $0.8 million from expense of $7.0 million~~ to ~~an expense of $6.2~~$10.2 million for the ~~nine~~three months ended ~~months ended September 30, 2022, respectively, as compared to the same period in 2021~~March 31, 2023, primarily due to debt-related expenses incurred in the current year, partially offset by lower interest ~~expense.~~expense and increase in other gain.

~~Sublease income offset by sublease~~Debt-related expenses consist of an induced conversion expense ~~is recorded in Other gain within~~of approximately $8.8 million and direct transaction costs of approximately $1.1 million incurred as a result of the ~~above table. For~~$30.0 million Convertible Note Exchange during the ~~nine~~three months ended ~~months ended September 30, 2022, a gain~~March 31, 2023, as described in Note 9 of ~~$0.6 million was recognized from~~ the ~~early termination and settlement of a Newark facility sublease.~~accompanying Condensed Consolidated Financial Statements.

The following table reflects interest expense for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


	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)

Three Months Ended September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Interest payable on 2027 Convertible Notes $ 522 $ — $ 522 $ —
Interest paid on 2024 Secured Notes 1,516 2,454 6,064 7,618
Amortization of debt discounts and Royalty Rights 14 41 62 159
Other — — — 6
Total interest expense $ 2,052 $ 2,495 $ 6,648 $ 7,783
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 ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, total interest expense decreased ~~$0.4~~$1.2 million ~~and decreased~~from $2.3 million for the three months ended March 31, 2022 to $1.1 million ~~respectively, as compared to~~for the ~~same period in 2021~~three months ended March 31, 2023, primarily due to ~~the impact~~ lower amounts

of ~~the principal payments~~interest incurred on ~~the 2024 Secured Notes during the period.~~debt outstanding. On August 22, 2022, we issued $70.0 million in aggregate principal amount of 6.5% Convertible Senior Notes due ~~2027 (the 2027 Convertible Notes).~~2027. We used the net proceeds from the 2027 Convertible ~~Note Offering~~Notes issuance to repurchase the remaining $59.0 million aggregate principal amount of our ~~outstanding~~ 2024 Secured ~~Notes.~~Notes, which were outstanding during the 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

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, we recorded an income tax benefit of 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.

In the three months ended March 31, 2022, we recorded an income tax expense of approximately ~~$0.2~~$0.7 million, ~~and $1.5 million, respectively,~~ which represents an effective tax rate of ~~4.8% and 6.7%, respectively.~~7.3%. The difference between income tax expense of ~~$0.2 million and $1.5~~$0.7 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022, ~~respectively,~~ and 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.~~

In the three and nine months ended September 30, 2021, we recorded an income tax expense of approximately $0.1 million and $0.3 million, respectively, which represents an effective tax rate of 1.2% and 5.3%, respectively. The difference between income tax expense of $0.1 million and $0.3 million for the three and nine months ended September 30, 2021, respectively, and tax at thefederal 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 ~~September 30, 2022,~~March 31, 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 August 22, 2022, we issued $70.0 million aggregate principal amount of ~~6.5%~~2027 Convertible ~~Senior~~ Notes ~~Due 2027~~ which mature on September 1, 2027 and bear interest at ~~the~~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 ~~Note Offering~~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 ~~Note Offering.~~Notes. We expect to use the remaining net proceeds offrom the 2027 Convertible ~~Note Offering~~Notes for general corporate purposes.

On ~~December 17, 2021,~~February 27, 2023, we ~~entered into~~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)~~(“Roth”) as sales agent to sell ~~shares~~shares of our common stock, from time to time, through an at-the-market ~~(ATM)~~(“ATM”) offering program having an aggregate offering price of up to $25.0 million. As a result of ~~September 30, 2021,~~the issuance of the 2027 Convertible Notes, we suspended use of the ATM offering program. Prior to our suspension of the ATM offering program, 2,463,637 shares ~~have~~of our common stock had been issued and settled at an average price of $3.02, through which we received gross proceeds of $7.4 million, and net proceeds after commission and fees of $7.0 million. ~~In connection with the 2027 Convertible Notes (See Note 10. Debt) the company has determined to suspend use of its ATM offering program.~~

On February 9, 2021, we completed a registered direct offering with certain institutional investors and accredited investors to sell 5,650,000 shares of our common stock at a purchase price of $2.48 per share. The gross proceeds from the offering were approximately $14.0 million. After placement agent fees, we received net proceeds of approximately $13.1 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. 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 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 ~~nine~~three months ended ~~months ended September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2022		2021			2023		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	51,901	$	1,392	Net cash provided by operating activities	$	22,717	$	27,426
Net cash used in investing activities	Net cash used in investing activities	(16,889)		—		Net cash used in investing activities	(105)		(404)
Net cash (used in) provided by financing activities		(6,996)		36,548
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	$	28,016	$	37,940	Net increase in cash and cash equivalents	$	3,662	$	24,579

Cash Flows from Operating Activities

Cash provided by operating activities was ~~$51.9~~$22.7 million ~~during~~for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$1.4~~$27.4 million in the same period in ~~2021. The increase of $50.5 million in cash provided from operating activities is~~2022, primarily due to ~~combination of~~unfavorable working capital cash flows compared to last year, partially offset by higher net income excluding non-cash ~~items and favorable working capital cash flows.~~ items.

For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net ~~income~~loss was ~~$21.1~~$3.5 million compared to a net ~~loss~~income of ~~$5.9~~$9.1 million for the same period in ~~2021.~~2022. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, adjustments for non-cash items contributed approximately ~~$11.7~~$16.5 million more to operating cash flows compared to the same period in ~~2021~~2022, primarily due to ~~higher amortization expense~~debt-related expenses and higher expense for recurring fair value measurement of contingent consideration. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net working capital ~~contributed~~cash used in operations of approximately ~~$11.9~~$1.7 million ~~more to operating~~was $8.6 million lower than net working capital cash ~~flows compared to~~generated by operations of approximately $7.0 million in the same period in ~~2021~~2022, primarily due to ~~less cash used in the settlement of accrued rebates, returns and discounts due to impact of sales product mix as well as timing of settlement,~~ receipt of $8.3 million inone-time tax refund in the first quarter of 2022, ~~and~~partially offset by increased cash used for inventory due to the timing of ~~inventory~~ purchases and ~~receipts and accounts receivable settlement.~~receipts.

Cash Flows from Investing Activities

Cash used in investing activities for the ~~nine~~three months ended months ended ~~September 30, 2022~~March 31, 2023 was ~~$16.9~~$0.1 million, which 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 ~~nine~~three months ended ~~September~~ March 31, 2022 was $0.4 million, which was entirely composed of cash paid for the transaction costs incurred with the acquisition of Otrexup.

30 ~~2021.~~

Cash Flows from Financing Activities

Cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$7.0~~$19.0 million, which primarily consisted of ~~$70.8~~(i) $10.5 million in ~~principal~~cash payments onand $1.1 million of direct transaction cost payments made in connection with the ~~2024 Secured Notes and $7.8~~Convertible Note Exchange, (ii) a $6.6 million payment for contingent consideration, ~~partially offset by $7.0 million~~and (iii) cash used for employees’ withholding tax liability on stock award releases. Cash used in ~~cash proceeds from the ATM program and $65.9 million in cash proceeds from the issuance of 2027 Convertible Notes. Cash provided by~~ financing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$36.5~~$2.4 million, which primarily consisted of ~~$44.9 million proceeds from the registered direct offerings in February 2021, partially offset by $4.8 million in principal payments on the 2024 Secured Notes and $2.5~~a $1.8 million payment for contingent ~~consideration.~~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 ~~September 30,~~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.

Changes in Internal Controls over Financial Reporting

There were no significant changes in our internal controls over financial reporting during the three months ended ~~September 30, 2022~~March 31, 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.

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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 ~~(i)~~ our Annual Report on Form 10-K for the year ended December 31, ~~2021; and (ii) our Quarterly Report on Form 10-Q for the three months ended June 30,~~ 2022. Except as set forth below, there have been no material changes to our risk factors since our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~three months~~year ended ~~June 30,~~December 31, 2022. In addition to other information in this report, the following risk ~~factors (together~~factor, together with the ~~risk factors in our Annual Report on Form 10-K for the year ended December 31, 2021~~risks and ~~our Quarterly Report on Form 10-Q for the three months ended June 30, 2022)~~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~~including those

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set forth ~~below)~~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.

~~We have no patent protection for~~Our ability to complete the ~~INDOCIN Products~~pending merger with Spectrum Pharmaceuticals, Inc. (“Spectrum”) is subject to closing conditions, including approval by our and ~~Zyla recently began~~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 ~~face competition for INDOCIN suppositories from a 503B outsourcing facility (commonly referred to as a 503B compounder).Zipsor began to face generic competition earlier this year, and Cambia may face generic competition starting in 2023. If we face competition with generic and/~~be delayed or ~~compounded versions of our marketed products, our revenues will be adversely affected.~~not completed.

~~Under~~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 ~~Federal Food, Drug,~~Merger Agreement. These include, among others, issuing shares of our common stock to Spectrum stockholders, approval by our and ~~Cosmetic Act (FDCA),~~Spectrum’s stockholders, the ~~FDA~~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 ~~approve an abbreviated new drug application (“ANDA”) for~~be given that the required consents and approvals will be obtained or that the closing conditions will be satisfied in a ~~generic version~~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 ~~a branded drug without~~ the ~~ANDA applicant undertaking the clinical testing necessary~~benefits that we expect to ~~obtain approval to market a new drug.~~achieve. In ~~place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating~~addition, we can provide no assurance that its product has the same active ingredient(s) and is bioequivalent to the branded product, in addition to any data necessary to establish that any difference in strength, dosage, form, inactive ingredients or delivery mechanism doesthese conditions will not result in ~~different safety~~the delay or ~~efficacy profiles, as compared to the reference drug.~~

There are no patents covering the INDOCIN Products (which accounted for 55% of our revenue in 2021), which means that a generic drug company could introduce a generic for these drugs at any time. In addition, we are aware of other drug companies that have had interactions with regulatory agencies including FDA relating to indomethacin, which could indicate the development of one or more INDOCIN Product generics or other formulations of indomethacin. Furthermore, a 503B outsourcing facility (commonly referred to as a 503B compounder) recently began compounding 100 mg indomethacin suppositories in violation of certain provisionsabandonment of the FDCA, including, among others, Section 505 approval requirements for new drugs and labeling requirements related to adequate directions for use. For a 503B compounder to qualify for exemptions from these requirements, the 503B compounder must meet certain conditions set forth in Section 503BProposed Merger. The occurrence of the FDCA, including (1) using only bulk drug substances (i.e., indomethacin) that appear on a list identifying the bulk substances for which FDA has determined that there is clinical need to use in compounding or that the drug product compounded from a bulk drug substance appears on FDA’s drug shortage list; and (2) compounding a drug product that is not “essentially a copy” of an FDA-approved product. We believe that the 503B compounder compounding 100 mg indomethacin suppositories does not meet these conditions as indomethacin is not on FDA’s list of bulk substances for which there is a clinical need and INDOCIN suppositories are not on FDA’s drug shortage list; and we believe that the 100 mg indomethacin suppositories being compounded are “essentially a copy” of Zyla’s FDA-approved INDOCIN suppositories. As a result, Zyla currently faces competition for INDOCIN suppositories from an unlawful compounder and could face generic competition at any time for the INDOCIN Products. Although Zyla is vigorously pursuing remedies against the unlawful compounder, we cannot guarantee that Zyla will be successful in causing it to discontinue sales of its unapproved indomethacin suppository product.

With respect to Cambia and Zipsor (which accounted for 23% and 9% of our revenue in 2021, respectively), we have entered into settlement agreements with generic drug companies, under which generic versions of these products can be marketed beginning in 2023 and 2022, respectively. As a result, we began to face generic competition for Zipsor earlier this year and expect to face generic competition in the near term for Cambia.

Any introduction of one or more generic versions of our products, as well as sales of indomethacin suppositories by compounders, would harm our business, financial condition and results of operations. The filing of the ANDAs described above, or any other ANDA or similar application in respect to any of our products, as well as sales of indomethacin suppositories by compounders,events could have ~~an adverse impact on our stock price. Moreover, if the patents covering Otrexup (which expire in 2031) are not upheld in litigation or if~~ a ~~generic competitor is found not to infringe these patents, the resulting generic competition for Otrexup would have a further~~ material adverse effect on our ~~business, financial condition and results of operations.~~

~~The market price of our common stock historically has been volatile. Our~~ results of operations ~~have and may continue to fluctuate and affect our stock price~~ and the trading price of our ~~6.50% Convertible Senior Notes due 2027 (the “2027 Convertible Notes”).~~

The trading price of our common stock has been, and is likely to continue to be, volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Factors affecting our operating results and that could adversely affect our stock price include:

•~~the degree of commercial success and market acceptance of our products;~~

•~~the entry and sales of generics or other products competitive with any of our products;~~

•the outcome of opioid-related investigations, opioid-related litigation and related claims for negligence and breach of fiduciary duty against our former insurance broker, and other disputes and litigation, and the costs and expenses associated therewith;

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•filings and other regulatory or governmental actions, investigations or proceedings related to our products and any future product candidates and those of our commercialization and collaborative partners;

•~~developments concerning proprietary rights, including patents, infringement allegations, inter parties review proceedings and litigation matters;~~

•~~legal and regulatory developments in the U.S.;~~

•~~actions taken by industry stakeholders affecting the market for our products;~~

•~~our ability to generate sufficient cash flow from our business to make payments on our indebtedness;~~

•~~our and our commercialization and collaborative partners’ compliance or noncompliance with legal and regulatory requirements and with obligations under our collaborative agreements;~~

•~~our ability to successfully develop and execute our digital and non-personal sales and marketing strategies;~~

•our plans to acquire, in-license or co-promote other products or compounds or acquire or combine with other companies, and our degree of success in realizing the intended advantages of, and mitigating any risks associated with, any such transactions;

•~~adverse events related to our products, including recalls;~~

•~~interruptions of manufacturing or supply, or other manufacture or supply difficulties;~~

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

•~~adverse events or circumstances related to our peer companies or our industry or the markets for our products;~~

•~~adoption of new technologies by us or our competitors;~~

•~~our compliance with the terms and conditions of the agreements governing our indebtedness;~~

•~~sales of large blocks of our common stock; and~~

•variations in our operating results, earnings per share, cash flows from operating activities, deferred revenue, and other financial metrics and non-financial metrics, and how those results are measured, presented and compare to our financial and operating projections and analyst expectations.

As a result of these and other such factors, our stock price may continue to be volatile and investors may be unable to sell their shares at a price equal to, or above, the price paid. Any significant drops in our stock price could give rise to shareholder lawsuits, which are costly and time-consuming to defend against and which may adversely affect our ability to raise capital while the suits are pending, even if the suits are ultimately resolved in our favor.

In addition, if the market for pharmaceutical stocks or the stock market in general experiences uneven investor confidence, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition. For example, if one or more securities or industry analysts downgrades our stock or publishes an inaccurate research report about our company, the market price for our common stock would likely decline. The market price of our common stock might also decline in reaction to events that affect other companies within, or outside, our industry even if these events do not directly affect us.

A decrease in the market price of our common stock would likely adversely impact the trading price of the 2027 Convertible Notes. The market price of our common stock could also be affected by possible sales of our common stock by investors who view the 2027 Convertible Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that we expect to develop involving our common stock. ~~This trading activity could, in turn, affect the trading price of the 2027 Convertible Notes.~~

~~Our common stock may be delisted from the Nasdaq Capital Market if we are unable to maintain compliance with Nasdaq's continued listing standards.~~

Our common stock is listed on the Nasdaq Capital Market. There are a number of continued listing requirements that we must satisfy in order to maintain our listing on The Nasdaq Capital Market, including the requirement to maintain a minimum bid price of at least $1.00 (the “Bid Price Rule”). If a deficiency with respect to this requirement continues for a period of 30 consecutive business days, Nasdaq may require us to satisfy a minimum bid price per share of our common stock of at least $1.00 for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that we have demonstrated an ability to maintain long-term compliance with the Bid Price Rule. Although we are currently in compliance with the Bid Price Rule, we have been unable to comply with this rule in the past and for periods in 2021 our continued listing on the Nasdaq Capital Market required the grant of a grace period from Nasdaq and

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the implementation of a one-for-four reverse stock split. If we fail to comply with the Bid Price Rule in the future, there can be no assurance that we will be granted such grace periods or that we will be able to receive the necessary shareholder approval to implement an additional reverse stock split. In particular, we may encounter difficulties obtaining such shareholder approval due to our heavily retail investor shareholder base, which may also affect our ability to obtain shareholder approval of other significant corporate actions.

Any delisting of our common stock would likely adversely affect the market liquidity and market price of our common stock and our ability to obtain financing for the continuation of our operations and/or result in the loss of confidence by investors.

If we were delisted from The Nasdaq Capital Market, it would constitute a “fundamental change” under the 2027 Convertible Notes, which would require us to offer to repurchase the 2027 Convertible Notes and would allow the holders of the 2027 Convertible Notes to convert their 2027 Convertible Notes into our common stock at an increased conversion rate, which would make conversion of the 2027 Convertible Notes more dilutive.

Conversions of the 2027 Convertible Notes or future sales of our common stock or equity-linked securities in the public market could lower the market price for our common stock and adversely impact the trading price of the 2027 Convertible Notes.

In 2022, we issued the 2027 Convertible Notes, and in the future, we may sell additional shares of our common stock or equity-linked securities to raise capital. A substantial number of shares of our common stock is reserved for issuance upon the exercise of restricted stock units and stock options, and upon conversion of the 2027 Convertible Notes. We cannot predict the effect if any, that conversions of the 2027 Convertible Notes or of any future issuances of common stock or equity-linked securities, may have on the market price for our common stock. The issuance and sale or conversion of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of the 2027 Convertible Notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.

Our failure to generate sufficient cash flow from our business to make payments on our debt would adversely affect our business, financial condition and results of operations. Our indebtedness could limit our ability to incur additional debt to fund our operations.

We have significant indebtedness under the 2027 Convertible Notes. Holders of the 2027 Convertible Notes will have the right to require us to repurchase their 2027 Convertible Notes for cash upon the occurrence a “fundamental change” as defined in the indenture for the 2027 Convertible Notes and we may elect to settle all or a portion of the conversion obligation of the 2027 Convertible Notes in cash. Our ability to make scheduled payments of the principal of, to pay interest on, to offer to repurchase the 2027 Convertible Notes upon a fundamental change as defined in the indenture for the 2027 Convertible Notes, or to refinance the 2027 Convertible Notes and any additional debt obligations we may incur depends on our future performance, which is subject to economic, financial, competitive and other factors that may be beyond our control. If we are unable to generate the necessary cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Any failure to generate sufficient cash flow to satisfy our obligations under the 2027 Convertible Notes or any future indebtedness could lead to a default under the 2027 Convertible Notes or such indebtedness.

The indenture for the 2027 Convertible Notes contains covenants limiting our ability in the future to secure our or our subsidiaries’ assets or have our subsidiaries issue guarantees without equally and ratably securing or guaranteeing the 2027 Convertible Notes. These covenants may make it more difficult for us to incur indebtedness to fund our operations on attractive terms or at all.

We may seek to refinance all or a portion of our outstanding indebtedness in the future. Any such refinancing would depend on the capital markets and business and financial conditions at the time, which could affect our ability to obtain attractive terms if or when desired or at all.

~~In addition, our significant indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences to our business. For example, it could:~~

•~~make it more difficult for us to meet our payment and other obligations under our indebtedness;~~

•~~result in other events of default under our indebtedness, which events of default could result in all of our debt becoming immediately due and payable;~~

•~~make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;~~

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•limit our ability to borrow additional amounts for working capital and other general corporate purposes, including funding possible acquisitions of, or investments in, new and complementary businesses, products and technologies, which is a key element of our corporate strategy;

•require the dedication of a substantial portion of our cash flow from operations to service our indebtedness, thereby reducing the amount of our cashflow available for other purposes, including working capital, business development activities, any future clinical trials and/or research and development, capital expenditures and other general corporate purposes;

•~~limit our flexibility in planning for, or reacting to, changes in our business and our industry; and~~

•~~put us at a disadvantage compared to our competitors who have less debt.~~

Any of these factors can adversely affect our business, financial condition and results of operations. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.

The accounting method for the 2027 Convertible Notes or changes in the accounting method for convertible debt securities that may be settled in cash, such as the 2027 Convertible Notes, could have a material effect on our reported financial results.

If holders do not convert their 2027 Convertible Notes, we could be required under applicable accounting rules to classify all or a portion of the outstanding principal of the 2027 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity must separately account for the liability and equity components of convertible debt instruments (such as the 2027 Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the 2027 Convertible Notes is that the equity component would be required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at issuance, and the value of the equity component would be treated as a discount for purposes of accounting for the debt component of the 2027 Convertible Notes. In addition, under certain circumstances, convertible debt instruments (such as the 2027 Convertible Notes) that may be settled entirely or partly in cash may be accounted for utilizing the treasury stock method for earnings per share purposes, the effect of which is that the shares issuable upon conversion of the 2027 Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the 2027 Convertible Notes exceeds their principal amount.

However, in August 2020, the FASB published an accounting standards update (ASU) 2020-06 (“ASU 2020-06”), which amends these accounting standards by reducing the number of accounting models for convertible instruments and limiting instances of separate accounting for the debt and equity or a derivative component of the convertible debt instruments. ASU 2020-06 also will no longer allow for earnings per share purposes the use of the treasury stock method for convertible instruments and instead require application of the “if-converted” method. Under that method, diluted earnings per share will generally be calculated assuming that all the 2027 Convertible Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive, which could adversely affect our diluted earnings per share. However, if the principal amount of the convertible debt instrument being converted is required to be paid in cash and only the excess is permitted to be settled in shares, the if-converted method will produce a similar result as the treasury stock method prior to the adoption of ASU 2020-06 for such convertible debt instrument. These amendments have become effective for public companies for fiscal years beginning after December 15, 2021. As a result, we do not expect to bifurcate the equity and debt components of the 2027 Convertible Notes on our consolidated balance sheet and expect to apply the if-converted method to calculate the impact of the 2027 Convertible Notes on our diluted earnings per share.

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.

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

(b) Average Price Paid per Share
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1, 2022 - July 31, 2022 6,190 $2.65 N/A N/A
August 1,2022 - August 31, 2022 6,287 $1.90 N/A N/A
September 1,2022- September 30,2022 — — N/A N/A
Total 12,477 $2.27

(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.

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ITEM 3. EXHIBITS


~~4.5~~10.1						~~Indenture, dated as~~Form of ~~August 25, 2022, between Assertio Holdings, Inc. and U.S. Bank Trust Company, National Association, as trustee~~Convertible Notes Exchange Agreement (incorporated by reference to Exhibit ~~4.1~~10.1 to the Company’s Current Report on Form 8-K filed on ~~August 25, 2022)~~

~~4.6~~						~~Form of 6.50% Convertible Senior Notes due 2027 (included~~ ~~as Exhibit A~~ ~~in Exhibit 4.5) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 25, 2022)~~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

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SIGNATURES

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


Date: ~~November 8, 2022~~May 9, 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

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	September 30, 2022		December 31, 2021
Receivables related to product sales, net	$	42,061	$	43,753
Other	2,619		608

Total accounts receivable, net	$	44,680	$	44,361


Year Ending December 31,	Estimated Amortization Expense
2022 (remainder)	$	7,969
2023	23,924
2024	23,924
2025	23,924
2026	23,924
Thereafter	87,952

Total	$	191,617


	September 30, 2022		December 31, 2021
6.5% Senior Convertible Notes due 2027	$	70,000	$	—
13% Senior Secured Notes due 2024	—		70,750

Royalty rights obligation	2,175		2,743
Total principal amount	72,175		73,493
Unamortized debt issuance costs	(4,018)		—
Less: current portion of long-term debt	(2,175)		(12,174)
Net, long-term debt	$	65,982	$	61,319


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

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


Cash paid	(150)		(150)
Balance as of June 30, 2022	$	338	$	338
Cash paid	(201)		(201)
Balance as of September 30, 2022	$	137	$	137