0001723128us-gaap:CommonClassAMember2018-05-04

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~~June 30, ~~2019~~

2020


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

For the transition period from to

Commission file number 001-38485

Amneal Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

(908) 947-3120

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	AMRX	New York Stock Exchange

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 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 ☒

As of ~~October~~July 31, ~~2019,~~2020, there were ~~134,095,850~~147,539,347 shares of Class A common stock outstanding and ~~165,004,323~~152,116,890 shares of Class B common stock outstanding, both with a par value of $0.01.

Amneal Pharmaceuticals, Inc.

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders' Equity ~~/ Members' Deficit~~

Notes to Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

4151

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

5631

Item 4.

Controls and Procedures

5263

PART II - OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

5466

Item 3.

Defaults Upon Senior Securities

5466

Item 4.

Mine Safety Disclosures

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and Amneal Pharmaceuticals, Inc.'s other publicly available documents contain "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Management and representatives of Amneal Pharmaceuticals, Inc. and its subsidiaries (the "Company") also may from time to time make forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts and reflect management’s assumptions, views, plans, objectives and projections about the future. Forward-looking statements may be identified by the use of words such as “plans,” “expects,” “will,” “anticipates,” “estimates” and other words of similar meaning in conjunction with, among other things: discussions of future operations; expected operating results and financial performance; impact of planned acquisitions and dispositions; the Company’s strategy for growth; product development; regulatory approvals; market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company's control. Additionally, many of these risks and uncertainties are, and may continue to be, amplified by the COVID-19 pandemic. Investors should realize that if underlying assumptions prove inaccurate, known or unknown risks or uncertainties materialize, or other factors or circumstances change, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements. Investors are therefore cautioned not to rely on these forward-looking statements.

Such risks and uncertainties include, but are not limited to:

•the impact of global economic conditions;

•the potential impact of the COVID-19 pandemic on our business, manufacturing, supply chain, financial results, financial condition, and planned capital expenditures and national and international economies;

•our ability to successfully develop, license, acquire and commercialize new products on a timely basis;

•our ability to obtain exclusive marketing rights for our products;

•the competition we face in the pharmaceutical industry from brand and generic drug product companies, and the impact of that competition on our ability to set prices;

•our ability to manage our growth through acquisitions and otherwise;

•our dependence on the sales of a limited number of products for a substantial portion of our total revenues;

•the risk of product liability and other claims against us by consumers and other third parties;

•risks related to changes in the regulatory environment, including United States federal and state laws related to healthcare fraud abuse and health information privacy and security and changes in such laws;

•changes to FDA product approval requirements;

•risks related to federal regulation of arrangements between manufacturers of branded and generic products;

•the impact of healthcare reform and changes in coverage and reimbursement levels by governmental authorities and other third-party payers;

•the continuing trend of consolidation of certain customer groups;

•our reliance on certain licenses to proprietary technologies from time to time;

•our dependence on third-party suppliers and distributors for raw materials for our products and certain finished goods;

•our dependence on third-party agreements for a portion of our product offerings;

•our ability to identify and make acquisitions of or investments in complementary businesses and products on advantageous terms;

•legal, regulatory and legislative efforts by our brand competitors to deter competition from our generic alternatives;

•the significant amount of resources we expend on research and development;

•our substantial amount of indebtedness and our ability to generate sufficient cash to service our indebtedness in the future, and the impact of interest rate fluctuations on such indebtedness;

•the high concentration of ownership of our Class A Common Stock and the fact that we are controlled by the Amneal Group; and

•risks related to the material weakness in internal controls over financial reporting regarding cash disbursements discussed in Part I, Item 4. "Controls and Procedures."

Investors also should carefully read our Annual Report on Form 10-K for the year ended December 31, 2019, including the section captioned “Risk Factors” for a description of certain risks that could, among other things, cause our actual results to differ materially from those expressed in our forward-looking statements, as supplemented by Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described herein and in our Annual Report to be a complete statement of all potential risks and uncertainties. The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

PART I - ~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Operations

(unaudited; in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net revenue

$
378,283

$
476,487

$
1,229,045

$
1,165,463

Cost of goods sold

267,717

268,567

873,841

634,653

Cost of goods sold impairment charges

56,132

7,815

112,441

7,815

Gross profit

54,434

200,105

242,763

522,995

Selling, general and administrative

63,797

75,486

215,514

156,610

Research and development

38,125

42,349

139,999

136,893

In-process research and development impairment charges

23,382

650

46,169

650

Charges (gains) related to legal matters, net

14,750

2,589

14,750

(411
)
Intellectual property legal development expenses

2,586

4,401

9,263

13,024

Acquisition, transaction-related and integration expenses

3,131

2,231

12,682

216,873

Restructuring and other charges

20,937

(2,156
)

29,933

42,309

Operating (loss) income

(112,274
)

74,555

(225,547
)

(42,953
)
Other income (expense):

Interest expense, net

(42,209
)

(43,018
)

(129,376
)

(100,691
)
Foreign exchange loss, net

(12,531
)

(5,137
)

(9,684
)

(22,518
)
Loss on extinguishment of debt

—

—

—

(19,667
)
(Loss) gain on sale of international businesses, net

—

(2,812
)

6,930

(2,812
)
Gain from reduction of tax receivable agreement liability

192,844

—

192,844

—

Other income (expense), net

446

(1,014
)

1,702

725

Total other income (expense), net

138,550

(51,981
)

62,416

(144,963
)
Income (loss) before income taxes

26,276

22,574

(163,131
)

(187,916
)
Provision for (benefit from) income taxes

389,668

5,109

375,539

(6,943
)
Net (loss) income

(363,392
)

17,465

(538,670
)

(180,973
)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-
   Combination

—

—

—

148,806

Less: Net loss (income) attributable to non-controlling interests

98,386

(10,577
)

208,881

21,191

Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before
   accretion of redeemable non-controlling interest

(265,006
)

6,888

(329,789
)

(10,976
)
Accretion of redeemable non-controlling interest

—

64

—

(1,176
)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.

$
(265,006
)

$
6,952

$
(329,789
)

$
(12,152
)
Net (loss) income per share attributable to Amneal
   Pharmaceuticals, Inc.'s common stockholders:

Class A and Class B-1 basic

$
(2.03
)

$
0.05

$
(2.56
)

$
(0.10
)
Class A and Class B-1 diluted

$
(2.03
)

$
0.05

$
(2.56
)

$
(0.10
)
Weighted-average common shares outstanding:

Class A and Class B-1 basic

130,729

127,247

128,822

127,196

Class A and Class B-1 diluted

130,729

128,222

128,822

127,196


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net revenue	$	464,662	$	404,642	$	963,195	$	850,762
Cost of goods sold	319,666		296,381		633,244		606,124
Cost of goods sold impairment charges	759		3,012		2,215		56,309
Gross profit	144,237		105,249		327,736		188,329
Selling, general and administrative	80,944		67,281		158,920		151,717
Research and development	45,572		48,016		81,951		101,874
In-process research and development impairment charges	—		—		960		22,787
Intellectual property legal development expenses	3,550		2,511		4,820		6,677
Acquisition, transaction-related and integration expenses	1,787		3,519		4,362		9,551
Charges related to legal matters, net	1,300		—		5,800		—
Restructuring and other charges	333		2,835		2,381		8,996
Operating income (loss)	10,751		(18,913)		68,542		(113,273)
Other (expense) income:
Interest expense, net	(36,669)		(43,886)		(76,568)		(87,167)
Foreign exchange gain (loss), net	3,466		8,311		(1,715)		2,847
Gain (loss) on sale of international businesses, net	123		(1,888)		123		6,930
Other income, net	571		149		1,204		1,256
Total other expense, net	(32,509)		(37,314)		(76,956)		(76,134)
Loss before income taxes	(21,758)		(56,227)		(8,414)		(189,407)
Provision for (benefit from) income taxes	2,186		(5,701)		(105,987)		(14,129)
Net (loss) income	(23,944)		(50,526)		97,573		(175,278)
Less: Net loss attributable to non-controlling interests	11,948		33,624		5,498		110,495
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(11,996)	$	(16,902)	$	103,071	$	(64,783)
Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:
Class A and Class B-1 basic	$	(0.08)	$	(0.13)	$	0.70	$	(0.51)
Class A and Class B-1 diluted	$	(0.08)	$	(0.13)	$	0.69	$	(0.51)
Weighted-average common shares outstanding:
Class A and Class B-1 basic	147,392		128,016		147,286		127,852
Class A and Class B-1 diluted	147,392		128,016		148,309		127,852

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

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Comprehensive (Loss) Income

(unaudited; in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Net (loss) income

$
(363,392
)

$
17,465

$
(538,670
)

$
(180,973
)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre-
   Combination

—

—

—

148,806

Less: Net loss (income) attributable to non-controlling interests

98,386

(10,577
)

208,881

21,191

Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before
   accretion of redeemable non-controlling interest

(265,006
)

6,888

(329,789
)

(10,976
)
Accretion of redeemable non-controlling interest

—

64

—

(1,176
)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.

(265,006
)

6,952

(329,789
)

(12,152
)
Other comprehensive income (loss):

Foreign currency translation adjustments

Foreign currency translation adjustments arising during the period

4,997

(7,939
)

4,014

(8,964
)
Less: Reclassification of foreign currency translation adjustment
   included in net loss

—

—

3,413

—

Foreign currency translation adjustments, net

4,997

(7,939
)

7,427

(8,964
)
Less: Other comprehensive income attributable to Amneal
   Pharmaceuticals LLC pre-Combination

—

—

—

(1,721
)
Less: Other comprehensive (income) loss attributable to non-controlling
   interests

(2,813
)

4,555

(4,207
)

6,131

Other comprehensive income (loss) attributable to Amneal
   Pharmaceuticals, Inc.

2,184

(3,384
)

3,220

(4,554
)
Comprehensive (loss) income attributable to Amneal
   Pharmaceuticals, Inc.

$
(262,822
)

$
3,568

$
(326,569
)

$
(16,706
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net (loss) income	$	(23,944)	$	(50,526)	$	97,573	$	(175,278)
Less: Net loss attributable to non-controlling interests	11,948		33,624		5,498		110,495
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	(11,996)		(16,902)		103,071		(64,783)
Other comprehensive (loss) income:
Foreign currency translation adjustments:
Foreign currency translation adjustments arising during the period	(2,967)		(6,219)		(8,102)		(983)
Less: Reclassification of foreign currency translation adjustment included in net loss	—		40		—		3,413
Foreign currency translation adjustments, net	(2,967)		(6,179)		(8,102)		2,430
Unrealized loss on cash flow hedge, net of tax	(9,774)		—		(72,432)		—
Less: Other comprehensive loss (income) attributable to non-controlling interests	6,471		3,533		40,927		(1,394)
Other comprehensive (loss) income attributable to Amneal Pharmaceuticals, Inc.	(6,270)		(2,646)		(39,607)		1,036
Comprehensive (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(18,266)	$	(19,548)	$	63,464	$	(63,747)

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

Amneal Pharmaceuticals, Inc.

Consolidated Balance Sheets

(unaudited; in thousands)


	September 30, 2019			December 31, 2018				June 30, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	212,738		$	213,394		Cash and cash equivalents	$	266,143	$	151,197
Restricted cash		4,320			5,385		Restricted cash	2,129		1,625
Trade accounts receivable, net		518,109			481,495		Trade accounts receivable, net	582,734		604,390
Inventories		401,827			457,219		Inventories	443,956		381,067
Prepaid expenses and other current assets		66,699			128,321		Prepaid expenses and other current assets	184,748		70,164
Related party receivables		2,138			830		Related party receivables	1,164		1,767
Total current assets		1,205,831			1,286,644		Total current assets	1,480,874		1,210,210
Property, plant and equipment, net		490,712			544,146		Property, plant and equipment, net	460,528		477,997
Goodwill		419,671			426,226		Goodwill	527,475		419,504
Intangible assets, net		1,435,801			1,654,969		Intangible assets, net	1,423,826		1,382,753
Deferred tax asset, net		—			373,159
Operating lease right-of-use assets		56,455			—		Operating lease right-of-use assets	49,159		53,344
Operating lease right-of-use assets - related party		14,930			—		Operating lease right-of-use assets - related party	26,183		16,528
Financing lease right-of-use assets - related party		61,936			—		Financing lease right-of-use assets - related party	59,980		61,284
Other assets		18,607			67,592		Other assets	28,731		44,270
Total assets	$	3,703,943		$	4,352,736		Total assets	$	4,056,756	$	3,665,890
Liabilities and Stockholders' Equity							Liabilities and Stockholders' Equity
Current liabilities:							Current liabilities:
Accounts payable and accrued expenses	$	495,857		$	514,440		Accounts payable and accrued expenses	$	599,489	$	507,483
Current portion of long-term debt, net		21,468			21,449		Current portion of long-term debt, net	29,756		21,479
Current portion of operating lease liabilities		13,467			—		Current portion of operating lease liabilities	12,512		11,874
Current portion of operating and financing lease liabilities - related party		3,353			—		Current portion of operating and financing lease liabilities - related party	3,807		3,601
Related party payables		765			17,695
Current portion of financing obligation - related party		—			266
Current portion of note payable - related party							Current portion of note payable - related party	1,000		—
Related party payable - short term							Related party payable - short term	8,455		5,969
Total current liabilities		534,910			553,850		Total current liabilities	655,019		550,406
Long-term debt, net		2,614,412			2,630,598		Long-term debt, net	2,764,578		2,609,046
Deferred income taxes		—			1,178
Liabilities under tax receivable agreement		—			192,884
Note payable - related party							Note payable - related party	35,661		—
Operating lease liabilities		44,375			—		Operating lease liabilities	38,591		43,135
Operating lease liabilities - related party		14,271			—		Operating lease liabilities - related party	24,478		15,469
Financing lease liabilities - related party		61,719			—		Financing lease liabilities - related party	60,782		61,463
Financing obligation - related party		—			39,083
Other liabilities		38,532			38,780
Related party payable - long term							Related party payable - long term	479		—
Other long-term liabilities							Other long-term liabilities	93,772		39,583
Total long-term liabilities		2,773,309			2,902,523		Total long-term liabilities	3,018,341		2,768,696
Commitments and contingencies (Notes 5, 11 and 13)
Commitments and contingencies (Notes 5 and 17)							Commitments and contingencies (Notes 5 and 17)
Redeemable non-controlling interests							Redeemable non-controlling interests	12,380		—
Stockholders' Equity							Stockholders' Equity
Preferred stock, $0.01 par value, 2,000 shares authorized; none issued at both September 30, 2019 and December 31, 2018		—			—
Class A common stock, $0.01 par value, 900,000 shares authorized at both September 30, 2019 and December 31, 2018; 134,090 and 115,047 shares issued at September 30, 2019 and December 31, 2018, respectively		1,340			1,151
Class B common stock, $0.01 par value, 300,000 shares authorized at both September 30, 2019 and December 31, 2018; 165,005 and 171,261 shares issued at September 30, 2019 and December 31, 2018 respectively		1,651			1,713
Class B-1 common stock, $0.01 par value, 18,000 shares authorized at both September 30, 2019 and December 31, 2018; no and 12,329 shares issued at September 30, 2019 and December 31, 2018, respectively		—			123
Preferred stock, $0.01 par value, 2,000 shares authorized; NaN issued at both June 30, 2020 and December 31, 2019							Preferred stock, $0.01 par value, 2,000 shares authorized; NaN issued at both June 30, 2020 and December 31, 2019	—		—
Class A common stock, $0.01 par value, 900,000 shares authorized at both June 30, 2020 and December 31, 2019; 147,493 and 147,070 shares issued at June 30, 2020 and December 31, 2019, respectively							Class A common stock, $0.01 par value, 900,000 shares authorized at both June 30, 2020 and December 31, 2019; 147,493 and 147,070 shares issued at June 30, 2020 and December 31, 2019, respectively	1,474		1,470
Class B common stock, $0.01 par value, 300,000 shares authorized at both June 30, 2020 and December 31, 2019; 152,117 issued at both June 30, 2020 and December 31, 2019							Class B common stock, $0.01 par value, 300,000 shares authorized at both June 30, 2020 and December 31, 2019; 152,117 issued at both June 30, 2020 and December 31, 2019	1,522		1,522
Additional paid-in capital		565,641			530,438		Additional paid-in capital	617,504		606,966
Stockholders' accumulated deficit		(345,752	)		(20,920	)	Stockholders' accumulated deficit	(274,809)		(377,880)
Accumulated other comprehensive loss		(4,879	)		(7,755	)	Accumulated other comprehensive loss	(39,696)		(68)
Total Amneal Pharmaceuticals, Inc. stockholders' equity		218,001			504,750		Total Amneal Pharmaceuticals, Inc. stockholders' equity	305,995		232,010
Non-controlling interests		177,723			391,613		Non-controlling interests	65,021		114,778
Total stockholders' equity		395,724			896,363		Total stockholders' equity	371,016		346,788
Total liabilities and stockholders' equity	$	3,703,943		$	4,352,736		Total liabilities and stockholders' equity	$	4,056,756	$	3,665,890

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

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(unaudited; in thousands)


	Nine Months Ended September 30,							Six Months Ended June 30,
	2019			2018				2020		2019
Cash flows from operating activities:							Cash flows from operating activities:
Net loss	$	(538,670	)	$	(180,973	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain from reduction of tax receivable agreement liability		(192,884	)		—
Net income (loss)							Net income (loss)	$	97,573	$	(175,278)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:							Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		152,932			89,910		Depreciation and amortization	116,155		99,574
Amortization of Levothyroxine Transition Agreement asset		36,393			—		Amortization of Levothyroxine Transition Agreement asset	—		36,393
Unrealized foreign currency loss		10,552			21,560
Amortization of debt issuance costs		4,849			4,220
Loss on extinguishment of debt		—			19,667
(Gain) loss on sale of international businesses, net		(6,930	)		2,812
Unrealized foreign currency loss (gain)							Unrealized foreign currency loss (gain)	1,251		(3,695)
Amortization of debt issuance costs and discount							Amortization of debt issuance costs and discount	4,214		3,218
Gain on sale of international businesses, net							Gain on sale of international businesses, net	(123)		(6,930)
Intangible asset impairment charges		158,610			8,474		Intangible asset impairment charges	3,175		79,096
Non-cash restructuring and asset-related charges		11,923			—		Non-cash restructuring and asset-related charges	—		1,314
Deferred tax provision (benefit)		371,683			(9,111	)
Stock-based compensation and PPU expense		16,666			163,991
Deferred tax benefit							Deferred tax benefit	—		(18,209)
Stock-based compensation							Stock-based compensation	10,202		10,571
Inventory provision		67,844			20,755		Inventory provision	34,708		50,410
Other operating charges and credits, net		5,945			(1,955	)	Other operating charges and credits, net	4,156		3,155
Changes in assets and liabilities:							Changes in assets and liabilities:
Trade accounts receivable, net		(46,457	)		(74,711	)	Trade accounts receivable, net	75,769		(162,954)
Inventories		(25,906	)		(53,708	)	Inventories	(33,182)		(19,658)
Income taxes receivable associated with the CARES Act							Income taxes receivable associated with the CARES Act	(110,069)		—
Prepaid expenses, other current assets and other assets		41,256			9,803		Prepaid expenses, other current assets and other assets	8,772		28,614
Related party receivables		(1,305	)		10,828		Related party receivables	633		(1,624)
Accounts payable, accrued expenses and other liabilities		(13,932	)		(26,858	)	Accounts payable, accrued expenses and other liabilities	15,172		(13,538)
Related party payables		25			(14,125	)	Related party payables	(139)		2,225
Net cash provided by (used in) operating activities		52,594			(9,421	)	Net cash provided by (used in) operating activities	228,267		(87,316)
Cash flows from investing activities:							Cash flows from investing activities:
Purchases of property, plant and equipment		(42,664	)		(63,065	)	Purchases of property, plant and equipment	(15,919)		(29,629)
Acquisition of product rights and licenses		(50,000	)		(14,000	)
Acquisition of intangible assets							Acquisition of intangible assets	(1,050)		(50,000)
Acquisitions, net of cash acquired		—			(324,634	)	Acquisitions, net of cash acquired	(254,000)		—
Proceeds from surrender of corporate owned life insurance		43,017			—
Proceeds from sale of international businesses, net of cash sold		34,834			—		Proceeds from sale of international businesses, net of cash sold	—		34,834
Net cash used in investing activities		(14,813	)		(401,699	)	Net cash used in investing activities	(270,969)		(44,795)
Cash flows from financing activities:							Cash flows from financing activities:
Payments of deferred financing costs and debt extinguishment costs		—			(54,955	)
Proceeds from issuance of debt		—			1,325,383		Proceeds from issuance of debt	180,000		—
Payments of principal on debt and capital leases		(20,250	)		(610,482	)
Net borrowings on revolving credit line		—			25,000
Payments of principal on debt, financing leases and other							Payments of principal on debt, financing leases and other	(17,072)		(13,500)
Payments of deferred financing costs							Payments of deferred financing costs	(4,102)		—
Proceeds from exercise of stock options		1,385			3,162		Proceeds from exercise of stock options	158		1,385
Employee payroll tax withholding on restricted stock unit vesting		(926	)		—		Employee payroll tax withholding on restricted stock unit vesting	(557)		(921)
Equity contributions		—			27,742
Capital contribution from non-controlling interest		—			360
Acquisition of non-controlling interest		(3,543	)		(11,775	)	Acquisition of non-controlling interest	—		(3,543)
Tax distribution to non-controlling interest		(13,494	)		—		Tax distribution to non-controlling interest	—		(13,494)
Distributions to members		—			(182,998	)
Payments of principal on financing lease - related party		(1,707	)		—		Payments of principal on financing lease - related party	(530)		(866)
Repayment of related party note		—			(14,842	)
Net cash (used in) provided by financing activities		(38,535	)		506,595
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	157,897		(30,939)
Effect of foreign exchange rate on cash		(967	)		(1,204	)	Effect of foreign exchange rate on cash	255		1,293
Net (decrease) increase in cash, cash equivalents, and restricted cash		(1,721	)		94,271
Net increase (decrease) in cash, cash equivalents, and restricted cash							Net increase (decrease) in cash, cash equivalents, and restricted cash	115,450		(161,757)
Cash, cash equivalents, and restricted cash - beginning of period		218,779			77,922		Cash, cash equivalents, and restricted cash - beginning of period	152,822		218,779
Cash, cash equivalents, and restricted cash - end of period	$	217,058		$	172,193		Cash, cash equivalents, and restricted cash - end of period	$	268,272	$	57,022
Cash and cash equivalents - end of period	$	212,738		$	165,192		Cash and cash equivalents - end of period	$	266,143	$	54,893
Restricted cash - end of period		4,320			7,001		Restricted cash - end of period	2,129		2,129
Cash, cash equivalents, and restricted cash - end of period	$	217,058		$	172,193		Cash, cash equivalents, and restricted cash - end of period	$	268,272	$	57,022
Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Cash paid for interest	$	121,872		$	89,075		Cash paid for interest	$	68,433	$	81,103
Cash received (paid) for income taxes, net	$	11,857		$	(5,379	)
Cash (paid) received for income taxes, net							Cash (paid) received for income taxes, net	$	(4,518)	$	8,533
Supplemental disclosure of non-cash investing and financing activity:							Supplemental disclosure of non-cash investing and financing activity:
Tax distribution to non-controlling interest	$	—		$	35,543
Distribution to members	$	—		$	8,562
Notes payable for acquisitions - related party							Notes payable for acquisitions - related party	$	36,033	$	—
Tax distributions to non-controlling interests							Tax distributions to non-controlling interests	$	1,573	$	—

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

Amneal Pharmaceuticals, Inc.

Consolidated ~~Statement~~Statements of Stockholders' Equity ~~/ Members’ Deficit~~

(unaudited; in thousands)

Class A Common
Stock

Class B Common
Stock

Additional
Paid-in

Stockholders'
Accumulated

Accumulated
Other
Comprehensive

Non-
Controlling

Total

Shares

Amount

Shares

Amount

Capital

Deficit

(Loss) Income

Interests

Equity

Balance at July 1, 2019

128,151

$
1,281

170,941

$
1,710

$
544,161

$
(80,746
)

$
(6,750
)

$
289,696

$
749,352

Net loss

—

—

—

—

—

(265,006
)

—

(98,386
)

(363,392
)
Foreign currency translation adjustment

—

—

—

—

—

—

2,184

2,813

4,997

Stock-based compensation

—

—

—

—

6,095

—

—

—

6,095

Restricted stock unit vesting, net of shares withheld to
cover payroll taxes

3

—

—

—

4

—

—

(9
)

(5
)
Redemption of Class B Common Stock

5,936

59

(5,936
)

(59
)

16,481

—

(313
)

(16,391
)

(223
)
Other

—

—

—

—

(1,100
)

—

—

—

(1,100
)
Balance at September 30, 2019

134,090

$
1,340

165,005

$
1,651

$
565,641

$
(345,752
)

$
(4,879
)

$
177,723

$
395,724


	Class A Common Stock				Class B Common Stock						Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interests		Total Equity	Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at April 1, 2020	147,311	$	1,472	152,117	$	1,522	$	611,600	$	(262,813)	$	(33,405)	$	85,082	$	403,458	$	12,563
Net (loss) income	—	—		—	—		—		(11,996)		—		(12,168)		(24,164)		220
Foreign currency translation adjustment	—	—		—	—		—		—		(1,460)		(1,507)		(2,967)		—
Stock-based compensation	—	—		—	—		5,663		—		—		—		5,663		—
Exercise of stock options	56	1		—	—		153		—		(6)		5		153		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	126	1		—	—		88		—		(15)		(257)		(183)		—
Unrealized loss on cash flow hedge, net of tax	—	—		—	—		—		—		(4,810)		(4,964)		(9,774)		—
Tax distribution	—	—		—	—		—		—		—		(1,170)		(1,170)		(403)

Balance at June 30, 2020	147,493	$	1,474	152,117	$	1,522	$	617,504	$	(274,809)	$	(39,696)	$	65,021	$	371,016	$	12,380


	Class A Common Stock				Class B Common Stock						Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive Loss		Non- Controlling Interests		Total Equity	Redeemable Non-Controlling Interests
	Shares	Amount		Shares	Amount
Balance at January 1, 2020	147,070	$	1,470	152,117	$	1,522	$	606,966	$	(377,880)	$	(68)	$	114,778	$	346,788	$	—
Net income (loss)	—	—		—	—		—		103,071		—		(6,806)		96,265		1,308
Foreign currency translation adjustment	—	—		—	—		—		—		(3,985)		(4,117)		(8,102)		—
Stock-based compensation	—	—		—	—		10,202		—		—		—		10,202		—
Exercise of stock options	58	1		—	—		158		—		(6)		5		158		—
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	365	3		—	—		178		—		(15)		(859)		(693)		—
Unrealized loss on cash flow hedge, net of tax	—	—		—	—		—		—		(35,622)		(36,810)		(72,432)		—
Tax distribution	—	—		—	—		—		—		—		(1,170)		(1,170)		(403)
Redeemable non-controlling interests issued for acquisitions	—	—		—	—		—		—		—		—		—		11,475
Balance at June 30, 2020	147,493	$	1,474	152,117	$	1,522	$	617,504	$	(274,809)	$	(39,696)	$	65,021	$	371,016	$	12,380

Amneal Pharmaceuticals, Inc.

Consolidated Statements of Stockholders' Equity

(unaudited; in thousands)


	Class A Common Stock				Class B Common Stock					Class B-1 Common Stock						Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income	Non- Controlling Interests	Total Equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at April 1, 2019	115,564	$	1,156	170,941	$	1,710	12,329	$	123	$	537,159	$	(63,844)	$	(4,099)	$	327,576	$	799,781
Net loss	—	—		—	—		—	—		—		(16,902)		—		(33,624)		(50,526)
Foreign currency translation adjustment	—	—		—	—		—	—		—		—		(2,663)		(3,556)		(6,219)
Stock-based compensation	—	—		—	—		—	—		6,224		—		—		—		6,224
Exercise of stock options	8	—		—	—		—	—		174		—		—		201		375
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	250	2		—	—		—	—		6		—		(5)		(924)		(921)
Conversion of Class B-1 Common Stock	12,329	123		—	—		(12,329)	(123)		—		—		—		—		—
Reclassification of foreign currency translation adjustment included in net loss	—	—		—	—		—	—		—		—		17		23		40
Other	—	—		—	—		—	—		598		—		—		—		598
Balance at June 30, 2019	128,151	$	1,281	170,941	$	1,710	—	$	—	$	544,161	$	(80,746)	$	(6,750)	$	289,696	$	749,352


	Class A Common Stock				Class B Common Stock					Class B-1 Common Stock						Additional Paid-in Capital		Stockholders' Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income	Non- Controlling Interests	Total Equity
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at January 1, 2019	115,047	$	1,151	171,261	$	1,713	12,329	$	123	$	530,438	$	(20,920)	$	(7,755)	$	391,613	$	896,363
Net loss	—	—		—	—		—	—		—		(64,783)		—		(110,495)		(175,278)
Cumulative-effective adjustment from adoption of Topic 842, net of tax	—	—		—	—		—	—		—		4,957		—		8,604		13,561
Foreign currency translation adjustment	—	—		—	—		—	—		—		—		(425)		(558)		(983)
Stock-based compensation	—	—		—	—		—	—		10,571		—		—		—		10,571
Exercise of stock options	205	2		—	—		—	—		922		—		(7)		468		1,385
Restricted stock unit vesting, net of shares withheld to cover payroll taxes	250	2		—	—		—	—		6		—		(5)		(924)		(921)
Redemption of Class B Common Stock	320	3		(320)	(3)		—	—		1,124		—		(19)		(882)		223
Conversion of Class B-1 Common Stock	12,329	123		—	—		(12,329)	(123)		—		—		—		—		—
Reclassification of foreign currency translation adjustment included in net loss	—	—		—	—		—	—		—		—		1,461		1,952		3,413
Tax distribution	—	—		—	—		—	—		—		—		—		(82)		(82)
Other	—	—		—	—		—	—		1,100		—		—		—		1,100
Balance at June 30, 2019	128,151	$	1,281	170,941	$	1,710	—	$	—	$	544,161	$	(80,746)	$	(6,750)	$	289,696	$	749,352

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

Amneal Pharmaceuticals, Inc.

~~Consolidated Statement of Stockholders' Equity / Members’ Deficit~~

~~(unaudited; in thousands)~~

Class A Common
Stock

Class B Common
Stock

Class B-1 Common
Stock

Additional
Paid-in

Stockholders'
Accumulated

Accumulated
Other
Comprehensive

Non-
Controlling

Total

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

(Loss) Income

Interests

Equity

Balance at January 1, 2019

115,047

$
1,151

171,261

$
1,713

12,329

$
123

$
530,438

$
(20,920
)

$
(7,755
)

$
391,613

$
896,363

Net loss

—

—

—

—

—

—

—

(329,789
)

—

(208,881
)

(538,670
)
Cumulative-effective adjustment from adoption
   of Topic 842

—

—

—

—

—

—

—

4,957

—

8,604

13,561

Foreign currency translation adjustment

—

—

—

—

—

—

—

—

1,759

2,255

4,014

Stock-based compensation

—

—

—

—

—

—

16,666

—

—

—

16,666

Exercise of stock options

205

2

—

—

—

—

922

—

(7
)

468

1,385

Restricted stock unit vesting, net of shares
   withheld to cover payroll taxes

253

2

—

—

—

—

10

—

(5
)

(933
)

(926
)
Redemption of Class B Common Stock

6,256

62

(6,256
)

(62
)

17,605

—

(332
)

(17,273
)

—

Conversion of Class B-1 Common Stock

12,329

123

—

—

(12,329
)

(123
)

—

—

—

—

—

Tax distribution

—

—

—

—

—

—

—

—

—

(82
)

(82
)
Reclassification of foreign currency translation
   adjustment included in net loss

—

—

—

—

—

—

—

—

1,461

1,952

3,413

Balance at September 30, 2019

134,090

$
1,340

165,005

$
1,651

—

$
—

$
565,641

$
(345,752
)

$
(4,879
)

$
177,723

$
395,724

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

~~Amneal Pharmaceuticals, Inc.~~

~~Consolidated Statement of Stockholders' Equity / Members’ Deficit~~

~~(unaudited; in thousands)~~

Class A Common
Stock

Class B Common
Stock

Class B-1
Common Stock

Additional
Paid-in

Stockholders'
Accumulated

Accumulated
Other
Comprehensive

Non-
Controlling

Total

Redeemable
Non-
Controlling

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

Loss

Interests

Equity

Interest

Balance at July 1, 2018

114,859

$
1,149

171,261

$
1,713

12,329

$
123

$
517,122

$
(19,104
)

$
(6,502
)

$
444,985

$
939,486

$
11,858

Net income

—

—

—

—

—

—

—

6,888

—

10,510

17,398

67

Effect of the Combination

—

—

—

—

—

—

(2,329
)

—

—

—

(2,329
)

—

Foreign currency translation adjustment

—

—

—

—

—

—

—

—

(3,384
)

(4,555
)

(7,939
)

—

Stock-based compensation

—

—

—

—

—

—

3,590

—

—

—

3,590

—

Exercise of stock options

115

1

—

—

—

—

1,369

—

(3
)

(182
)

1,185

—

Reclassification of redeemable non-
   controlling interest

—

—

—

—

—

—

—

64

—

86

150

(150
)
Non-controlling interests from acquisition
   of Gemini

—

—

—

—

—

—

—

—

—

(531
)

(531
)

—

Acquisition of redeemable non-controlling
   interest

—

—

—

—

—

—

—

—

—

—

—

(11,775
)
Tax distribution

—

—

—

—

—

—

—

—

—

(35,543
)

(35,543
)

—

Other

—
��

—

—

—

—

—

408

—

—

(556
)

(148
)

—

Balance at September 30, 2018

114,974

$
1,150

171,261

$
1,713

12,329

$
123

$
520,160

$
(12,152
)

$
(9,889
)

$
414,214

$
915,319

$
—

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

~~Amneal Pharmaceuticals, Inc.~~

~~Consolidated Statement of Stockholders' Equity / Members’ Deficit~~

~~(unaudited; in thousands)~~

Members'

Members'
Accumulated

Class A Common
Stock

Class B Common
Stock

Class B-1
Common Stock

Additional
Paid-in

Stockholders'
Accumulated

Accumulated
Other
Comprehensive

Non-
Controlling

Total

Redeemable
Non-
Controlling

Equity

Deficit

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Deficit

(Loss) Income

Interests

Equity

Interest

Balance at January 1, 2018

$
2,716

$
(382,785
)

—

$
—

—

$
—

—

$
—

$
8,562

$
—

$
(14,232
)

$
10,157

$
(375,582
)

$
—

Period Prior to the Combination

Net (loss) income

—

(148,806
)

—

—

—

—

—

—

—

—

—

97

(148,709
)

—

Cumulative-effective adjustment from
   adoption of ASU 2014-09 (Topic
   606)

—

4,977

—

—

—

—

—

—

—

—

—

—

4,977

—

Capital contribution from non-
   controlling interest

—

—

—

—

—

—

—

—

—

—

—

360

360

—

Distributions to members

—

(182,998
)

—

—

—

—

—

—

(8,562
)

—

—

—

(191,560
)

—

PPU expense

158,757

—

—

—

—

—

—

—

—

—

—

—

158,757

—

Foreign currency translation
   adjustment

—

—

—

—

—

—

—

—

—

—

1,721

—

1,721

—

Capital contribution by Amneal
   Holdings for employee bonuses

27,742

—

—

—

—

—

—

—

—

—

—

—

27,742

—

Period Subsequent to the
   Combination

Effect of the Combination

(189,215
)

709,612

73,289

733

224,996

2,250

—

—

323,589

—

9,437

626,737

1,483,143

—

Redemption of Class B Common
   Stock for PIPE

—

—

34,520

345

(46,849
)

(468
)

12,329

123

165,180

—

(1,965
)

(130,501
)

32,714

—

Redemption of Class B Common
   Stock for distribution to PPU
   Holders

—

—

6,886

69

(6,886
)

(69
)

—

—

24,293

—

(289
)

(19,181
)

4,823

—

Net (loss) income

—

—

—

—

—

—

—

—

—

(10,976
)

—

(21,355
)

(32,331
)

67

Foreign currency translation
   adjustment

—

—

—

—

—

—

—

—

—

—

(4,554
)

(6,131
)

(10,685
)

—

Stock-based compensation

—

—

—

—

—

—

—

—

5,234

—

—

—

5,234

—

Exercise of stock options

—

—

279

3

—

—

—

—

3,610

—

(7
)

(444
)

3,162

—

Reclassification of redeemable non-
   controlling interest

—

—

—

—

—

—

—

—

—

(1,176
)

—

(10,532
)

(11,708
)

11,708

Non-controlling interests from
   acquisition of Gemini

—

—

—

—

—

—

—

—

—

—

—

2,518

2,518

—

Acquisition of redeemable non-
   controlling interest

—

—

—

—

—

—

—

—

—

—

—

—

—

(11,775
)
Tax distribution

—

—

—

—

—

—

—

—

—

—

—

(35,543
)

(35,543
)

—

Other

—

—

—

—

—

—

—

—

(1,746
)

—

—

(1,968
)

(3,714
)

—

Balance at September 30, 2018

$
—

$
—

114,974

$
1,150

171,261

$
1,713

12,329

$
123

$
520,160

$
(12,152
)

$
(9,889
)

$
414,214

$
915,319

$
—

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

~~Amneal Pharmaceuticals, Inc.~~

Notes to Consolidated Financial Statements

(unaudited)

1. Nature of Operations

Amneal Pharmaceuticals, Inc., formerly known as Atlas Holdings, Inc. (the "Company"), was formed along with its wholly owned subsidiary, K2 Merger Sub Corporation, a Delaware corporation ("Merger Sub"), on October 4, 2017, for the purpose of facilitating the combination of Impax Laboratories, Inc. (now Impax Laboratories, LLC), a Delaware corporation then listed on the Nasdaq Stock Market ("Impax") and Amneal Pharmaceuticals LLC, a Delaware limited liability company ("Amneal"). The Company is a holding company, whose principal assets are Amneal Common Units.

Amneal was formed in 2002 and operates through various subsidiaries. Amneal is a vertically integrated developer, manufacturer, and seller of generic pharmaceutical products. Amneal’s pharmaceutical research includes analytical and formulation development and stability. Amneal operates principally in the United States, ~~Switzerland,~~ India, and Ireland. ~~Amneal divested its operations in the United Kingdom on March 30, 2019 and Germany on May 3, 2019. For additional information, refer to~~ ~~Note 3. Acquisitions and Divestitures~~. Amneal sells to wholesalers, distributors, hospitals, chain pharmacies and individual pharmacies, either directly or indirectly.

On October 17, 2017, Amneal, Impax, the Company and Merger Sub entered into the Business Combination Agreement, as amended on November 21, 2017 and December 16, 2017 (the "BCA").

On May 4, 2018, pursuant to the BCA, Impax and Amneal combined the generics and specialty pharmaceutical business of Impax with the generic drug development and manufacturing business of Amneal to create the Company as a new generics and specialty pharmaceutical company, through the following transactions (together, the "Combination", and the closing of the Combination, the "Closing"): (i) Merger Sub merged with and into Impax, with Impax surviving as a wholly owned subsidiary of the Company, (ii) each share of Impax’s common stock, par value $0.01 per share ("Impax Common Stock"), issued and outstanding immediately prior to the Closing, other than Impax Common Stock held by Impax in treasury, by the Company or by any of their respective subsidiaries, was converted into the right to receive ~~one~~1 fully paid and non-assessable share of Class A common stock of the Company, par value $0.01 per share ("Class A Common Stock"), (iii) Impax converted to a Delaware limited liability company, (iv) the Company contributed to Amneal all of the Company’s equity interests in Impax, in exchange for Amneal common units ("Amneal Common Units"), (v) the Company issued an aggregate number of shares of Class B common stock of the Company, par value $0.01 per share ("Class B Common Stock", and collectively, with the Class A Common Stock and Class B-1 common stock of the Company, par value $0.01 , ("Class B-1 Common Stock"), the "Company Common Stock") to APHC Holdings, LLC (formerly Amneal Holdings, LLC), the parent entity of Amneal as of the Closing ("Holdings"), and (vi) the Company became the managing member of Amneal.

Immediately upon the Closing, holders of Impax Common Stock prior to the Closing collectively held approximately 25% of the Company and Holdings held a majority interest in the Company with an effective voting interest of approximately 75% on a fully diluted and as converted basis through its ownership of Class B Common Stock. Holdings also held a corresponding number of Amneal Common Units, which entitled it to approximately 75% of the economic interests in the combined businesses of Impax and Amneal. The Company held an interest in Amneal of approximately 25%.

and became its managing member.

In connection with the Combination, on May 4, 2018, Holdings entered into definitive purchase agreements which provided for a private placement of certain shares of Class A Common Stock and Class B-1 Common Stock (the "PIPE Investment") with select institutional investors (the "PIPE Investors"). Pursuant to the terms of the purchase agreements, upon the Closing, Holdings exercised its right to cause the Company to redeem approximately 15% of its ownership interests in the Company in exchange for 34.5 million shares of Class A Common Stock and 12.3 million unregistered shares of Class B-1 Common Stock (the "Redemption"). The shares of Class A Common Stock and Class B-1 Common Stock received in the Redemption were sold immediately following the Closing by Holdings to the PIPE Investors at a per share purchase price of $18.25 for gross proceeds of $855 million. Following the PIPE Investment, the PIPE Investors owned collectively approximately 15% of the Company Common Stock on a fully diluted and as converted basis.

On May 4, 2018, Holdings also caused Amneal to redeem (the "Closing Date Redemption") 6.9 million of Amneal Common Units held by Holdings for a like number of shares of Class A Common Stock, for future distribution to certain direct and indirect members of Holdings who were or are employees of the Company and to whom were previously issued (prior to the Closing) profit participation units ("PPUs") in Amneal. As a result of the PIPE Investment and Closing Date Redemption, the voting and economic interest of approximately 75% held by Holdings immediately upon Closing was reduced by approximately 18%. The overall interest percentage held by non-controlling interest holders (the "Amneal Group") upon the consummation of the Combination, PIPE Investment and Closing Date Redemption was approximately 57%. As of ~~September~~both June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the overall interest percentage held by non-controlling interest holders was approximately ~~55% and 57%, respectively.~~

51%.

On July 5, 2018, Holdings distributed to its members all Amneal Common Units and shares of Class B Common Stock held by Holdings. As a result, as of ~~September~~June 30, ~~2019,~~2020, Holdings did not hold any equity interest in Amneal or the Company.

During the ~~three months~~year ended ~~June 30,~~December 31, 2019, pursuant to the Company's certificate of incorporation, the Company converted all (12.3 million) of its issued and outstanding shares of Class B-1 Common Stock to Class A Common Stock and such shares of Class B-1 Common Stock have been retired and may not be reissued by the Company. The rights of Class A Common Stock and Class B-1 Common Stock ~~are~~were identical, except that the Class B-1 Common Stock had certain director appointment rights and the Class B-1 Common Stock had no voting rights (other than with respect to its director appointment right and as otherwise required by law).

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States of America, should be read in conjunction with Amneal’s annual audited financial statements for the year ended December 31, ~~2018~~2019 included in the Company’s ~~2018~~2019 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in annual financial statements have been omitted from the accompanying unaudited consolidated financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of ~~September~~June 30, ~~2019,~~2020, cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 and the results of its operations, its comprehensive ~~loss~~income (loss) and its changes in stockholders' equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. The consolidated balance sheet data at December 31, ~~2018~~2019 was derived from the Company's audited annual financial statements, but does not include all disclosures required by generally accepted accounting principles ~~generally accepted~~ in the United States of America.

The accounting policies of the Company are set forth in Note 2. Summary of Significant Accounting Policies contained in the Company’s ~~2018~~2019 Annual Report on Form 10-K, except for the impact of the adoption of new accounting standards discussed under Recently Adopted Accounting Pronouncements.

The following new significant accounting policy relates to the acquisitions of AvKARE, Inc. and Dixon-Shane, LLC d/b/a R&S Northeast LLC (refer to Note 3. Acquisitions and Divestitures).

Chargebacks Received From Manufacturers

When a sale occurs on a contracted item, the difference between the cost the Company pays to the manufacturer of that item and the contract price that the end customer has with the manufacturer is rebated to the Company by the manufacturer as a chargeback. Chargebacks are recorded as a reduction to cost of sales and either a reduction in the amount due to the manufacturer (if there is a right of offset) or as a receivable from the manufacturer.

Use of Estimates

The preparation of financial statements requires the Company's management to make estimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The following are some, but not all, of such estimates: the determination of chargebacks, sales returns, rebates, billbacks, distribution fees, allowances for accounts receivable, accrued liabilities, chargebacks received from manufacturers, stock-based compensation, valuation of inventory balances, the determination of useful lives for product rights, allowances for deferred tax assets,measurement of assets acquired and liabilities assumed in business combinations at fair value and the assessment of expected cash flows used in evaluating goodwill and other long-lived assets for impairment. Actual results could differ from those estimates.

~~Reclassifications~~

~~Certain prior period balances have been reclassified to conform to the current period presentation.~~

Recently Adopted Accounting Pronouncements

~~Leases~~

In ~~February 2016,~~August 2018, the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) issued ~~ASU 2016-02,~~ ~~Leases,~~ ~~which was subsequently supplemented by clarifying guidance (collectively, "Topic 842"~~Accounting Standards Update (“ASU”) to improve financial reporting of leasing transactions. Topic 842 requires a lessee to recognize most leases, including those classified as operating, on its balance sheets as right of use ("ROU") assets and lease liabilities and requires disclose of additional key information about leases.

The Company elected to apply the modified retrospective transition provisions of Topic 842 on January 1, 2019, the date of adoption. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed the Company to carry forward historical lease classifications. Adoption of this standard resulted in the recording of operating lease ROU assets and operating lease liabilities of $85 million and $86 million, respectively.

The transition guidance of Topic 842 also required the Company to de-recognize the build to suit accounting associated with a related party lease for integrated manufacturing and office space and recognize that transaction as a financing lease as of January 1, 2019. The resulting de-recognition reduced leasehold improvements and a financing obligation by $24 million and $39 million, respectively, and increased non-controlling interests and stockholders' accumulated deficit, net of income taxes, by $9 million and $5 million, respectively. The arrangement was then recognized as a financing lease with an ROU asset and lease liability of $64 million on January 1, 2019. Leases with related parties, the details of which are described in ~~Note 15. Related Party Transactions,~~ ~~are presented separately in the Company's balance sheets.~~

The adoption of Topic 842 did not have a material impact on the Company's consolidated statements of operations. ROU assets and lease liabilities for reporting periods beginning on or after January 1, 2019 are presented under the new guidance, while prior periods amounts were not adjusted and continue to be reported in accordance with previous guidance.

All significant lease arrangements after January 1, 2019 are recognized as ROU assets and lease liabilities at lease commencement. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of the future lease payments using the Company's incremental borrowing rate, which is assessed quarterly.

Operating lease expense is recognized on a straight-line basis over the lease term. At each balance sheet date, operating and financing lease liabilities continue to represent the present value of the future payments. Financing lease ROU assets are expensed using the straight-line method, unless another basis is more representative of the pattern of economic benefit, to lease expense. Interest on financing lease liabilities is recognized in interest expense.

Leases with an initial term of 12 months or less (short-term leases) are not recognized in the balance sheet and the related lease payments are recognized as incurred over the lease term. The Company separates lease and non-lease components. A portion of the Company's real estate leases are subject to periodic changes in the Consumer Price Index ("CPI"). The changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

~~For further details regarding the Company's leases, refer to~~ ~~Note 11. Leases~~.

~~Financial Instruments~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments—Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities~~, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company adopted ASU 2016-01 as of January 1, 2019 and it did not have a material impact on the Company's consolidated financial statements.

~~Goodwill~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. The Company adopted ASU 2017-04 as of April 1, 2019 on a prospective basis and it did not have a material impact on the Company's consolidated financial statements.

~~Recently Issued Accounting Pronouncements~~

~~In August 2018, the FASB issued ASU~~ 2018-13, Fair Value Measurement (Topic 82): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurement. The ~~guidance is~~Company adopted ASU 2018-13 effective ~~for annual periods beginning after December 15, 2019~~January 1, 2020 and ~~interim periods within those annual periods, and early adoption is permitted. The Company is evaluating~~it did not have a material impact on the ~~impact of this new guidance on its~~Company’s consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, guidance that changes the impairment model for most financial assets including trade receivables and certain other instruments that are not measured at fair value through net income. The standard will replace today’s "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. Entities will apply the standard’s provisions as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The ~~guidance is~~Company adopted ASU 2016-13 effective January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform, which provided elective amendments for ~~the Company for the annual period beginning after~~entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments may be applied to impacted contracts and hedges prospectively through December ~~15, 2019.~~31, 2022. The Company is currently evaluating the impact of this ~~new~~ guidance will have on its consolidated financial statements.

3. Acquisitions and Divestitures

~~Impax Acquisition Unaudited Pro Forma Information~~

AvKARE and R&S Acquisitions

On ~~May 4, 2018,~~December 10, 2019, the Company, through its investment in Rondo Partners, LLC (“Rondo”), entered into an equity purchase and operating agreements to acquire approximately a 65.1% controlling financing interest in both AvKARE Inc., a Tennessee corporation, and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”) (collectively the “Acquisitions”). Prior to closing, AvKARE, Inc. converted to a limited liability company, AvKARE, LLC. AvKARE, LLC is one of the largest private label providers of generic pharmaceuticals in the U.S. federal agency sector, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. R&S is a national pharmaceutical wholesaler focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

On January 31, 2020, the Company completed the ~~Combination,~~Acquisitions. The purchase price of $295 million, included cash of $254 million and the issuance of long-term promissory notes to the sellers with an aggregate principal amount of $44 million (estimated fair value of $35 million) (the “Sellers Notes”) and a short-term promissory note (the “Short-Term Seller Note”) with a principal amount of $1 million to the sellers. The cash purchase price was funded by $76 million of cash on hand and $178 million of proceeds from a $180 million term loan. The remaining $2 million consisted of working capital costs. The Company is not party to or a guarantor of the term loan, Sellers Notes or Short-Term Sellers Note. (refer to Note 13.Debt). For further detail of the preliminary purchase price, refer to the table below.

For the six months ended June 30, 2020, there were $1 million of transaction costs associated with the Acquisitions recorded in acquisition, transaction-related and integration expenses (NaN for the three months ended June 30, 2020).

The Acquisitions were accounted for under the acquisition method of accounting, with Amneal as ~~described~~the accounting acquirer of AvKARE, LLC and R&S.

The preliminary purchase price is calculated as follows (in thousands):


Cash	$	254,000
Sellers Notes ⁽¹⁾	35,033
Settlement of Amneal trade accounts receivable from R&S ⁽²⁾	7,440
Short-Term Seller Note ⁽³⁾	1,000
Working capital adjustment ⁽⁴⁾	(2,640)
Fair value consideration transferred	$	294,833

(1)In accordance with ASC 805, Business Combinations, all consideration transferred was measured at its acquisition-date fair value. The Sellers Notes are stated at the preliminary fair value estimate of $35 million, which is the $44 million aggregate principal amount less a $9 million discount. The fair value of the Sellers Notes was estimated using the Monte-Carlo simulation approach under the option pricing framework.

(2)Represents trade accounts receivable from R&S that was effectively settled upon closing of the Acquisitions.

(3)Represents the principal amount due on the Short-Term Seller Note, which approximates fair value.

(4)Represents estimated working capital adjustment pursuant to the terms of the purchase agreement.

The following is a summary of the preliminary purchase price allocation for the Acquisitions (in thousands):


	Preliminary Fair Values as of January 31, 2020

Trade accounts receivable, net	$	49,286
Inventories	68,115
Prepaid expenses and other current assets	7,401
Related party receivables	61
Property, plant and equipment	5,278
Goodwill	108,790
Intangible assets, net	130,800
Operating lease right-of-use assets - related party	5,544
Total assets acquired	375,275
Accounts payable and accrued expenses	61,891
Related party payables	1,532
Operating lease liabilities - related party	5,544
Total liabilities assumed	68,967
Redeemable non-controlling interests	11,475
Fair value of consideration transferred	$	294,833

The acquired intangible assets are being amortized over their estimated useful lives as follows (in thousands):


	Preliminary Fair Values		Weighted-Average Useful Life
Government licenses	$	66,700	7 years
Government contracts	22,000		4 years
National contracts	28,600		5 years
Customer relationships	13,000		10 years
Trade name	500		6 years
	$	130,800

The estimated fair values of the customer relationships, government contracts and national contracts were determined using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an intangible asset based on market participant expectations of the cash flows that an intangible asset would generate over its remaining useful life. The estimated fair value of the trade name was determined using the “relief from royalty method,” which is a valuation technique that provides an estimate of the fair value of an intangible asset equal to the present value of the after-tax royalty savings attributable to owning the intangible asset. The estimated fair value of the government licenses was determined using the “with-and-without method,” which is a valuation technique that provides an estimate of the fair value of an intangible asset that is equal to the difference between the present value of the prospective revenues and expenses for the business with and without the subject intangible asset in place. The assumptions, including the expected projected cash flows, utilized in the preliminary purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing date of the Acquisitions on January 31, 2020.

Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each asset (including net revenues, cost of sales, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream, as well as other factors. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets, assumed liabilities and redeemable non-controlling interests. The Company obtains this information during due diligence and through other sources. In the months after closing, as the Company obtains additional information about these assets and liabilities and learns more about the newly acquired businesses, it is able to refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company is continuing to evaluate the acquired assets, assumed liabilities and redeemable non-controlling interests associated with the Acquisitions. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.

The Sellers Notes and redeemable non-controlling interests were estimated using the Monte-Carlo simulation approach under the option pricing framework. The non-controlling interests are redeemable at the option of either the non-controlling interest holder and Amneal. The fair value of the redeemable non-controlling interests considers these redemption rights.

Of the $109 million of goodwill acquired in connection with the Acquisitions, approximately $73 million was allocated to the Company’s AvKARE segment (refer to Note ~~1. Nature~~18.Segment Information) and approximately $36 million was allocated to the Generics segment. Goodwill was allocated to the Generics segment as net revenue of ~~Operations~~. products manufactured from Amneal and distributed by the Acquisitions is reflected in Generics’ segment results. Goodwill is calculated as the excess of the fair value of the consideration transferred and the fair value of the redeemable non-controlling interests over the fair value of the net assets recognized. Factors that contributed to the recognition of goodwill include Amneal’s intent to diversify its business and open growth opportunities in the large, complex and growing federal healthcare market.

For the three months ended June 30, 2020, the Acquisitions contributed total net revenue of approximately $67 million and operating income of $3 million, which included approximately $8 million of amortization expense from intangible assets acquired in the Acquisitions, to the Company’s consolidated results of operations.

For the six months ended June 30, 2020, the Acquisitions contributed total net revenue of approximately $132 million and operating income of $1 million, which included approximately $14 million of amortization expense from intangible assets acquired in the Acquisitions, to the Company’s consolidated results of operations.

Unaudited Pro Forma Information

The unaudited pro forma combined results of operations for the ~~nine~~three and six months ended ~~September~~June 30, ~~2018~~2020 and 2019 (assuming the closing of the ~~Combination~~Acquisitions occurred on January 1, ~~2017)~~2019) are as follows (in thousands):

Nine Months Ended
September 30, 2018

Net revenue

$
1,341,555

Net loss

$
(143,585
)
Net loss attributable to Amneal Pharmaceuticals, Inc.

$
(21,502
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net revenue	$	464,662	$	479,891	$	989,965	$	991,096
Net (loss) income	$	(23,944)	$	(45,622)	$	92,472	$	(178,006)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(11,996)	$	(15,535)	$	101,438	$	(65,712)

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the closing of the ~~Combination~~Acquisitions taken place on January 1, ~~2017.~~2019. Furthermore, the pro forma results do not purport to project the future results of operations of the Company.

~~The~~

Adjustments to arrive at the unaudited pro forma information ~~reflects~~ primarily ~~the following non-recurring adjustments (all of which were adjusted for the applicable tax impact):~~

~~Adjustments to costs of goods sold~~ related to ~~the inventory acquired; and~~

~~Adjustments to~~increases in selling, general and administrative ~~expense related to transaction costs directly attributable to~~expenses for amortization of acquired intangible assets, net of the ~~transactions.~~

applicable tax impact.

U.K. Divestiture

~~UK Divestiture~~

On March 30, 2019, the Company sold 100% of the stock of its Creo Pharma Holding Limited subsidiary, which comprised substantially all of the Company's operations in the United Kingdom, to AI Sirona (Luxembourg) Acquisition S.a.r.l ("AI Sirona") for net cash consideration of approximately $32 million which was received in April 2019. The carrying value of the net assets sold was $22 million, including intangible assets of $7 million and goodwill of $5 million. As a result of the sale, the Company recognized a pre-tax gain of $9 million, inclusive of transaction costs and the recognition of accumulated foreign currency translation adjustment losses of $3 million, within gain (loss) on sale of international businesses, net for the six months ended June 30, 2019. For the three months ended June 30, 2020, the Company made a $0.5 million payment to AI Sirona for and recognized a $0.1 million gain on sale of international business for final settlement of the ~~nine months ended September 30, 2019.~~divestiture. As part of

the disposition, the Company entered into a supply and license agreement with AI Sirona to supply certain products for a period of up to two years.

Germany Divestiture

On May 3, 2019, the Company sold 100% of the stock of its Amneal Deutschland GmbH subsidiary, which comprised substantially all of the Company's operations in Germany, to EVER Pharma Holding Ges.m.b.H. (“EVER”) for net cash consideration of approximately $3 million which was received in May 2019. The carrying value of the net assets sold was $7 million, including goodwill of $0.5 million. As a result of the sale, the Company recognized a pre-tax loss of $2 million, inclusive of transaction costs and the recognition of accumulated foreign currency translation adjustment losses, within gain (loss) ~~gain~~ on sale of international ~~business~~businesses, net for the ~~nine~~three and six months ended ~~September~~June 30, 2019. As part of the disposition, the Company also entered into a license and supply agreement with EVER to supply certain products for an 18 month period.

4. Revenue Recognition

Performance Obligations

The Company’s performance obligation is the supply of finished pharmaceutical and related products to its customers. The Company’s customers consist primarily of major wholesalers, retail pharmacies, managed care organizations, purchasing co-ops, hospitals, government agencies, institutions, and pharmaceutical companies. The Company’s customer contracts generally consist of both a master agreement, which is signed by the Company and its customer, ~~and~~and/or a customer submitted purchase order, which is governed by the terms and conditions of the master agreement. Customers purchase product by direct channel sales from the Company or by indirect channel sales through various distribution channels.

Revenue is recognized when the Company transfers control of its products to the customer, which typically occurs at a point-in-time, either upon shipment or delivery. Substantially all of the Company’s net revenues relate to products which are transferred to the customer at a point-in-time.

The Company offers standard payment terms to its customers and has elected the practical expedient to not adjust the promised amount of consideration for the effects of a significant financing, since the period between when the Company transfers the product to the customer and when the customer pays for that product is one year or less. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The consideration amounts due from customers as a result of product sales are subject to variable consideration, as described further below.

The Company offers standard product warranties which provide assurance that the product will function as expected and in accordance with specifications. Customers cannot purchase warranties separately and these warranties do not give rise to a separate performance obligation.

The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping errors or where product is damaged in transit. The Company accrues for the customer’s right to return as part of its variable consideration. See below for further details.

Variable Consideration

The Company includes an estimate of variable consideration in its transaction price at the time of sale, when control of the product transfers to the customer. Variable consideration includes but is not limited to: chargebacks, distribution fees, rebates, group purchasing organization ("GPO") fees, prompt payment (cash) discounts, consideration payable to the customer, billbacks, Medicaid and other government pricing programs, price protection and shelf stock adjustments, sales returns, and profit shares.

The Company assesses whether or not an estimate of its variable consideration is constrained and has determined that the constraint does not apply, since it is probable that a significant reversal in the amount of cumulative revenue will not occur in the future when the uncertainty associated with the variable consideration is subsequently resolved. The Company’s estimates for variable consideration are adjusted as required at each reporting period for specific known developments that may result in a change in the amount of total consideration it expects to receive.

Chargebacks

In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and the contract price charged to the indirect customer is lower than the wholesaler pricing, the Company pays the direct customer (wholesaler) a chargeback for the price differential. The Company estimates its chargeback accrual based on its estimates of the level of inventory of its products in the distribution channel that remain subject to chargebacks and historical chargeback rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Rebates

The Company pays fixed or volume-based rebates to its customers based on a fixed amount, fixed percentage of product sales or based on the achievement of a specified level of purchases. The Company’s rebate accruals are based on actual net sales, contractual rebate rates negotiated with customers, and expected purchase volumes / corresponding tiers based on actual sales to date and forecasted amounts.

Group Purchasing Organization Fees

The Company pays fees to GPOs for administrative services that the GPOs perform in connection with the purchases of product by the GPO participants who are the Company’s customers. The Company’s GPO fee accruals are based on actual net sales, contractual fee rates negotiated with GPOs and the mix of the products in the distribution channel that remain subject to GPO fees.

Prompt Payment (Cash) Discounts

The Company provides customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. The Company’s prompt payment discount accruals are based on actual net sales and contractual discount rates.

Consideration Payable to the Customer

The Company pays administrative and service fees to its customers based on a fixed percentage of the product price. These fees are not in exchange for a distinct good or service and therefore are recognized as a reduction of the transaction price. The Company accrues for these fees based on actual net sales, contractual fee rates negotiated with the customer and the mix of the products in the distribution channel that remain subject to fees.

Billbacks

~~Billbacks~~

In the case an indirect customer purchases product from their preferred wholesaler instead of directly from the Company, and the contract price charged to the indirect customer is higher than contractual pricing, the Company pays the indirect customer a billback for the price differential. The Company estimates its billback accrual based on its estimates of the level of inventory of its products in the distribution channel that remain subject to billbacks and historical billback rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Medicaid and Other Government Pricing Programs

The Company complies with required rebates mandated by law under Medicaid and other government pricing programs. The Company estimates its government pricing accruals based on monthly sales, historical experience of claims submitted by the various states and jurisdictions, historical rates and estimated lag time of the rebate invoices.

Price Protection and Shelf Stock Adjustments

The Company provides customers with price protection and shelf stock adjustments which may result in an adjustment to the price charged for the product transferred, based on differences between old and new prices which may be applied to the customer’s on-hand inventory at the time of the price change. The Company accrues for these adjustments when its expected value of an adjustment is greater than zero, based on contractual pricing, actual net sales, accrual rates based on historical average rates, and estimates of the level of inventory of its products in the distribution channel that remain subject to these adjustments. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Sales Returns

The Company permits the return of product under certain circumstances, mainly upon product expiration, instances of shipping errors or where product is damaged in transit, and occurrences of product recalls. The Company’s product returns accrual is primarily based on estimates of future product returns based generally on actual net sales, estimates of the level of inventory of its products in the distribution channel that remain subject to returns, estimated lag time of returns and historical return rates. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Profit Shares

For certain product sale arrangements, the Company earns a profit share upon the customer’s sell-through of the product purchased from the Company. The Company estimates its profit shares based on actual net sales, estimates of the level of inventory of its products in the distribution channel that remain subject to profit shares, and historical rates of profit shares earned. The estimate of the level of products in the distribution channel is based primarily on data provided by key customers.

Concentration of Revenue

The Company's three largest customers accounted for approximately 84% and 83% of total gross sales of products for the three and six months ended June 30, 2020, respectively. The Company's three largest customers accounted for approximately 81% and 80% of total gross sales of products for the three and ~~nine~~six months ended ~~September~~June 30, 2019, respectively. ~~The Company's three largest customers accounted for approximately 83% and 82% of total gross sales of products for the three and nine months ended September 30, 2018, respectively.~~

~~Significant Products~~

The Company generally consolidates net revenue by "product family," meaning that it consolidates net revenue from products containing the same active ingredient(s) irrespective of dosage strength, delivery method or packaging size.

Disaggregated Revenue

The Company's significant ~~product families,~~therapeutic classes for its Generics and Specialty segments and sales channels for its AvKARE segment, as determined based on ~~net revenue, and their percentage of the Company's consolidated~~ net revenue for each of the three and ~~nine~~six months ended June 30, 2020 and 2019 are set forth below (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,
		2020		2019		2020		2019
Generics
	Anti-Infective	$	9,722	$	8,147	$	22,776	$	14,089
	Hormonal/Allergy	89,277		92,293		177,919		195,018
	Antiviral	955		1,346		16,779		15,802
	Central Nervous System ⁽¹⁾	96,228		117,398		195,810		242,173
	Cardiovascular System	25,105		31,138		54,359		67,355
	Gastroenterology	16,625		9,938		37,878		19,494
	Oncology	16,567		21,746		31,422		36,705
	Metabolic Disease/Endocrine	6,769		10,887		23,408		28,734
	Respiratory	7,240		8,418		17,328		17,636
	Dermatology	10,442		14,771		27,584		27,744
	Other therapeutic classes	26,668		15,263		51,935		33,440
	International and other	961		3,719		1,947		19,351
	Total Generics net revenue	306,559		335,064		659,145		717,541
Specialty
	Hormonal/Allergy	13,669		9,888		27,623		20,787
	Central Nervous System ⁽¹⁾	74,056		50,694		142,367		93,593
	Gastroenterology	439		452		487		933
	Metabolic Disease/Endocrine	203		89		476		630
	Other therapeutic classes	5,889		8,455		11,280		17,278
	Total Specialty net revenue	94,256		69,578		182,233		133,221
AvKARE
	Distribution	31,839		—		63,425		—
	Government Label	25,073		—		46,451		—
	Institutional	4,511		—		7,924		—
	Other	2,424		—		4,017		—
	Total AvKARE net revenue	63,847		—		121,817		—
	Total net revenue	$	464,662	$	404,642	$	963,195	$	850,762

(1)During the three months ended September 30, 2019, ~~and 2018 are set forth below (in thousands, except~~operating results for ~~percentages):~~

Segment

Product Family

Three Months Ended September 30, 2019

$

%

Generics

Levothyroxine Sodium

$
39,767

11%

Specialty

Rytary®

33,710

9%

Generics

Epinephrine Auto-Injector (generic Adrenaclick®)

22,687

6%

Generics

Diclofenac Sodium Gel

19,264

5%

Specialty ⁽¹⁾

Oxymorphone

$
17,142

5%

Oxymorphone were reclassified from Generics to Specialty, where it is sold as a non-promoted product. Prior period results have not been restated to reflect the reclassification.

Segment

Product Family

Three Months Ended September 30, 2018

$

%

Generics

Yuvafem-Estradiol

$
48,466

10%

Specialty

Rytary®

33,073

7%

Generics

Epinephrine Auto-Injector (generic Adrenaclick®)

30,259

6%

Generics

Diclofenac Sodium Gel

26,455

6%

Generics

Aspirin; Dipyridamole ER Capsule

$
22,777

5%

Segment

Product Family

Nine Months Ended September 30, 2019

$

%

Generics

Levothyroxine Sodium

$
135,220

11%

Specialty

Rytary®

95,538

8%

Generics

Diclofenac Sodium Gel

67,741

6%

Generics

Epinephrine Auto-Injector (generic Adrenaclick®)

53,841

4%

Specialty⁽¹⁾

Oxymorphone

$
45,191

4%

⁽¹⁾	~~For the six months ended June 30, 2019 Oxymorphone net revenue was recorded in the Generics segment.~~

Segment

Product Family

Nine Months Ended September 30, 2018

$

%

Generics

Yuvafem-Estradiol

$
106,477

9%

Generics

Diclofenac Sodium Gel

78,551

7%

Generics

Aspirin; Dipyridamole ER Capsule

67,718

6%

Specialty

Rytary®

53,593

5%

Generics

Epinephrine Auto-Injector (generic Adrenaclick®)

$
49,425

4%

A rollforward of the major categories of sales-related deductions for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 is as follows (in thousands):

	Contract Charge- backs and Sales Volume Allowances			Cash Discount Allowances			Accrued Returns Allowance			Accrued Medicaid and Commercial Rebates
Balance at December 31, 2018	$	829,596		$	36,157		$	154,503		$	74,202
														Contract Charge - Backs and Sales Volume Allowances		Cash Discount Allowances		Accrued Returns Allowance		Accrued Medicaid and Commercial Rebates
Balance at December 31, 2019													Balance at December 31, 2019	$	829,807	$	34,308	$	150,361	$	114,960
Impact from the Acquisitions													Impact from the Acquisitions	12,444		944		15,229		10
Provision related to sales recorded in the period		3,413,718			101,285			71,126			143,145		Provision related to sales recorded in the period	2,025,733		60,000		49,285		69,685
Credits/payments issued during the period		(3,444,048	)		(109,309	)		(85,666	)		(110,319	)	Credits/payments issued during the period	(2,197,368)		(71,093)		(52,202)		(63,062)
Balance at September 30, 2019	$	799,266		$	28,133		$	139,963		$	107,028
Balance at June 30, 2020													Balance at June 30, 2020	$	670,616	$	24,159	$	162,673	$	121,593

5. Alliance and Collaboration

The Company has entered into several alliance, collaboration, license, distribution and similar agreements with respect to certain of its products and services with third-party pharmaceutical companies. The consolidated statements of operations include revenue recognized under agreements the Company has entered into to develop marketing and/or distribution relationships with its partners to fully leverage the technology platform and revenue recognized under development agreements which generally obligate the Company to provide research and development services over multiple periods. The Company's significant arrangements are discussed below.

Levothyroxine License and Supply Agreement; Transition Agreement

On August 16, 2018, the Company entered into a license and supply agreement with Jerome Stevens Pharmaceuticals, Inc. ("JSP") for levothyroxine sodium tablets ("Levothyroxine"). This agreement designated the Company as JSP's exclusive commercial partner for Levothyroxine in the U.S. market for a ~~10 -year~~10-year term commencing on March 22, 2019. ~~Under~~Additionally, under this license and supply agreement, ~~with JSP,~~ the Company accrued the up-front license payment of $50 million on March 22, 2019, which was paid in April 2019. The agreement also provides for the Company to pay a profit share to JSP based on net profits of the Company's sales of Levothyroxine, after considering product costs.

On November 9, 2018, the Company entered into a transition agreement ("Transition Agreement") with Lannett Company (“Lannett”) and JSP. Under the terms of the Transition Agreement, the Company assumed the distribution and marketing of Levothyroxine from Lannett beginning December 1, 2018 through March 22, 2019, ahead of the commencement date of the license and supply agreement with JSP described above.

In accordance with the terms of the Transition Agreement, the Company made $47 million of non-refundable payments to Lannett. For the ~~nine~~six months ended ~~September~~June 30, 2019, ~~and the year ended December 31, 2018,~~ $37 million, ~~and $10 million, respectively, were~~was expensed to cost of goods sold, as the Company sold Levothyroxine ~~(none~~(NaN in the ~~three~~six months ended ~~September~~June 30, ~~2019)~~2020). As of December 31, 2018 , the Company had a $4 million transition contract liability, which was fully settled in February 2019.

Additionally, during the year ended December 31, 2019, the Company recorded $1 million in cost of sales related to reimbursement due to Lannett for certain of its unsold inventory at the end of the transition period, which was fully settled in March 2020.

Biosimilar Licensing and Supply Agreement

On May 7, 2018, the Company entered into a licensing and supply agreement, with Mabxience S.L., for its biosimilar candidate for Avastin® (bevacizumab). The Company will be the exclusive partner in the U.S. market. The Company will pay development and regulatory milestone payments as well as commercial milestone payments on reaching pre-agreed sales targets in the market to Mabxience, up to $72 million. For the ~~nine~~six months ended ~~September~~June 30, 2019 the Company expensed a milestone payment of $1 million ~~(none~~(NaN for the three months ended ~~September~~June 30, 2019), to research and development. For the ~~nine~~three and six months ended ~~September~~June 30, ~~2018,~~2020 the Company expensed a milestone payment of ~~$0.5 million to research and development (none for the three months ended September 30, 2018).~~

$5 million.

Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited

In January 2012, Impax entered into an agreement with AstraZeneca UK Limited ("AstraZeneca") to distribute branded products under the terms of a distribution, license, development and supply Agreement (the "AZ Agreement"). The parties subsequently entered into a First Amendment to the AZ Agreement dated May 31, 2016 (as amended, the "AZ Amendment"). Under the terms of the AZ Agreement, AstraZeneca granted to Impax an exclusive license to commercialize the tablet, orally disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in the United States and in certain U.S. territories, except during an initial transition period when AstraZeneca fulfilled all orders of Zomig® products on Impax’s behalf and AstraZeneca paid to Impax the gross profit on such Zomig® products. Pursuant to the AZ Amendment, under certain conditions, and depending on the nature and terms of the study agreed to with the FDA, Impax agreed to conduct, at its own expense, the juvenile toxicity study and pediatric study required by the FDA under the Pediatric Research Equity Act ("PREA") for approval of the nasal formulation of Zomig ® for the acute treatment of migraine in pediatric patients ages six through eleven years old, as further described in the study protocol mutually agreed to by the parties (the "PREA Study"). In consideration for Impax conducting the PREA Study at its own expense, the AZ Amendment provides for the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig ® products under the AZ Agreement to be reduced by an aggregate amount of $30 million to be received in quarterly amounts specified in the AZ Amendment beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020 . In the event the royalty reduction amounts exceed the royalty payments payable by Impax to AstraZeneca pursuant to the AZ Agreement in

any given quarter, AstraZeneca will be required to pay Impax an amount equal to the difference between the royalty reduction amount and the royalty payment payable by Impax to AstraZeneca. Impax’s commitment to perform the PREA Study may be terminated, without penalty, under certain circumstances as set forth in the AZ Amendment. The Company recognizes the amounts received from AstraZeneca for the PREA Study as a reduction to research and development expense.

In May 2013, Impax’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and Impax launched authorized generic versions of those products in the United States. As discussed above, pursuant to the AZ Amendment, the total royalty payments payable by Impax to AstraZeneca on net sales of Zomig ® products under the AZ Agreement is reduced by certain specified amounts beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020, with such reduced royalty amounts totaling an aggregate amount of $30 million. The Company recorded cost of sales for royalties under this agreement of $5 million and ~~$14~~$9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019 ,~~2020, respectively, and $5 million and $8$9 million for the three and ~~nine~~six ended June 30, 2019, respectively.

During the three months ended ~~September 30, 2018, respectively.~~

~~Adello License~~March 31, 2020, AstraZeneca and ~~Commercialization~~the Company agreed to terminate the AZ Agreement

~~On October 1, 2017, Amneal~~ and ~~Adello Biologics, LLC ("Adello"), a~~subsequent AZ Amendment effective January 2021.

For detail on the Company’s related party ~~entered into a license and commercialization agreement. Adello granted Amneal an exclusive license, under its New Drug Application,~~agreements with Kashiv Biosciences, LLC, refer to distribute and sell two bio-similar products in the U.S. Adello is responsible for development, regulatory filings, obtaining FDA approval, and manufacturing, and Amneal is responsible for marketing, selling and pricing activities. The term of the agreement is 10 -years from the respective product’s launch date. In connection with the agreement, Amneal paid an upfront amount of $2 million in October 2017 for execution of the agreement which was expensed in research and development. The agreement also provides for potential future milestone payments to Adello of (i) up to $21 million relating to regulatory approval, (ii) up to $43 million for successful delivery of commercial launch inventory, (iii) between $20 million and $50 million relating to number of competitors at launch for one product, and (iv) between $15 million and $68 million for the achievement of cumulative net sales for both products. The milestones are subject to certain performance conditions which may or may not be achieved, including FDA filing, FDA approval, launch activities and commercial sales volume objectives. In addition, the agreement provides for Amneal to pay a profit share equal to 50% of net profits, after considering manufacturing and marketing costs. The research and development expenses for payments made to Adello for the three and nine months ended September 30, 2019 and 2018 were immaterial.

Note 19. Related Party Transactions.

6. Restructuring and Other Charges

During the ~~three~~six months ended June 30, 2018, in connection with the Combination, the Company committed to a restructuring plan to achieve cost savings. The Company expected to integrate its operations and reduce its combined cost structure through workforce reductions that ~~eliminate~~eliminated duplicative positions and ~~the consolidation of~~consolidated certain administrative, manufacturing and research and development facilities. In connection with this plan, the Company announced on May 10, 2018 that it intended to close its Hayward, ~~California based~~California-based operations.

~~In addition to the actions noted above, on~~

On July 10, 2019, the Company announced a plan to restructure its operations that iswas intended to reduce costs and optimize its organizational and manufacturing infrastructure. Pursuant to the restructuring plan as revised, the Company expects to reduce its headcount by approximately 300 to 350 employees through December 31, 2020, primarily by ~~closing~~ceasing manufacturing at its ~~manufacturing facility located in~~ Hauppauge, NY. As a result of the restructuring plan, the Company estimates that it will incur a pre-tax restructuring charge of approximately $6 to $8 million of cash expenditures related to severance benefits.

~~Other cash expenditures associated with this restructuring plan, including decommissioning and dismantling the sites and other third party costs cannot be estimated at this time (collectively~~NY facility. Collectively these actions comprise the "Plans").

The following table sets forth the components of the Company's restructuring and other charges (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Employee restructuring separation charges⁽¹⁾

$
6,187

$
(2,156
)

$
8,607

$
42,309

Asset-related charges ⁽²⁾

10,609

—

11,923

—

Total employee and asset-related restructuring charges

16,796

(2,156
)

20,530

42,309

Other employee severance charges ⁽³⁾

4,141

—

9,403

—

Total restructuring and other charges

$
20,937

$
(2,156
)

$
29,933

$
42,309

⁽¹⁾	Employee restructuring separation charges include the cost of benefits provided pursuant to the Company's severance programs for employees impacted by the Plans at the Company's Hauppauge, NY, Hayward, CA and other facilities.

⁽²⁾	~~Asset-related charges are primarily associated with the impairment of property, plant and equipment and right of use asset associated with the Company's Hauppauge, NY facility.~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Employee restructuring separation charges ⁽¹⁾	$	—	$	516	$	46	$	2,420
Asset-related charges ⁽²⁾	—		900		—		1,314
Total employee and asset-related restructuring charges	—		1,416		46		3,734
Other employee severance charges ⁽³⁾	333		1,419		2,335		5,262
Total restructuring and other charges	$	333	$	2,835	$	2,381	$	8,996

⁽³⁾

For the three months ended September 30, 2019, other employee severance charges are primarily associated with the resignation of the Company’s former Chief Executive Officer. For the nine months ended September 30, 2019, other employee severance charges are primarily associated with the resignation of the Company’s former Chief Executive Officer and other former senior executives.

(1)Employee restructuring separation charges include the cost of benefits provided pursuant to the Company's severance programs for employees impacted by the Plans at the Company's Hauppauge, NY, Hayward, CA and other facilities.

(2)Asset-related charges are primarily associated with the write-off of property, plant and equipment in connection with the closing of the Company's Hayward, CA facilities.

(3)Other employee severance charges are primarily associated with the cost of benefits for former senior executives.

The charges related to restructuring impacted segment earnings as follows (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018			2019		2018			2020		2019		2020		2019
Generics	$	14,888	$	(2,885	)	$	17,201	$	21,912	Generics	$	—	$	1,317	$	46	$	2,313
Specialty		213		(27	)		391		2,394	Specialty	—		—		—		178
Corporate		1,695		756			2,938		18,003	Corporate	—		99		—		1,243
Total employee and asset-related restructuring charges	$	16,796	$	(2,156	)	$	20,530	$	42,309	Total employee and asset-related restructuring charges	$	—	$	1,416	$	46	$	3,734

The following table shows the change in the employee separation-related liability associated with the Plans, which is included in accounts payable and accrued expenses (in thousands):

Employee
Restructuring

Balance at December 31, 2018

$
22,112

Charges to income

8,607

Payments

(28,422
)
Balance at September 30, 2019

$
2,297


	Employee Restructuring
Balance at December 31, 2019	$	3,900
Charges to income	46
Payments	(2,185)
Balance at June 30, 2020	$	1,761

7. (Loss) Earnings per Share

Basic (loss) earnings per share of Class A ~~Common Stock~~ and Class B-1 Common Stock is computed by dividing net ~~loss~~(loss) income attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of Class A ~~Common Stock~~ and Class B-1 Common Stock outstanding during the period. Diluted (loss) earnings per share of Class A ~~Common Stock~~ and Class B-1 Common Stock is computed by dividing net (loss) ~~earnings~~income attributable to Amneal Pharmaceuticals, Inc. by the weighted-average number of shares of Class A ~~Common Stock~~ and Class B-1 Common Stock outstanding, adjusted to give effect to potentially dilutive securities.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted (loss) earnings per share of Class A ~~Common Stock~~ and Class B-1 Common Stock (in thousands, except per share amounts):


	Three Months Ended September 30,					Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018		2019			2018				2020		2019		2020		2019
Numerator:												Numerator:
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(265,006	)	$	6,952	$	(329,789	)	$	(12,152	)	Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(11,996)	$	(16,902)	$	103,071	$	(64,783)
Denominator:												Denominator:
Weighted-average shares of Class A Common Stock and Class B-1 Common Stock outstanding - basic		130,729			127,247		128,822			127,196
Weighted-average shares outstanding - basic ⁽¹⁾												Weighted-average shares outstanding - basic ⁽¹⁾	147,392		128,016		147,286		127,852
Effect of dilutive securities:												Effect of dilutive securities:
Stock options		—			661		—			—		Stock options	—		—		278		—
Restricted stock units		—			314		—			—		Restricted stock units	—		—		745		—
Weighted-average shares of Class A Common Stock and Class B-1 Common Stock outstanding - diluted		130,729			128,222		128,822			127,196
Weighted-average shares outstanding - diluted												Weighted-average shares outstanding - diluted	147,392		128,016		148,309		127,852
Net (loss) earnings per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:												Net (loss) earnings per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:
Class A and Class B-1 basic	$	(2.03	)	$	0.05	$	(2.56	)	$	(0.10	)	Class A and Class B-1 basic	$	(0.08)	$	(0.13)	$	0.70	$	(0.51)
Class A and Class B-1 diluted	$	(2.03	)	$	0.05	$	(2.56	)	$	(0.10	)	Class A and Class B-1 diluted	$	(0.08)	$	(0.13)	$	0.69	$	(0.51)

~~The allocation of net (loss) earnings~~

⁽¹⁾During the three months ended June 30, 2019, pursuant to the ~~holders~~Company’s certificate of incorporation, the Company converted all 12.3 million of its issued and outstanding shares of ~~Class A Common Stock and~~ Class B-1 Common Stock ~~began following~~and such shares of Class B-1 Common Stock have been retired and may not be reissued by the ~~closing of~~Company. The weighted-average shares for the ~~Combination on May 4, 2018.~~ three and six months ended June 30, 2020 do not include Class B-1 Common Stock.

Shares of the Company's Class B Common Stock do not share in the earnings or losses of the Company and, therefore, are not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B Common Stock under the two-class method has not been presented.

The following table presents potentially dilutive securities excluded from the computations of diluted earnings per share of Class A ~~Common Stock~~ and Class B-1 Common Stock (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Stock options

7,973

⁽¹⁾

965

⁽²⁾

7,973

⁽¹⁾

5,862

⁽¹⁾
Restricted stock units

2,915

⁽¹⁾

—

2,915

⁽¹⁾

1,324

⁽¹⁾
Performance stock units

357

⁽¹⁾

—

357

⁽¹⁾

—

Shares of Class B Common Stock

165,004

⁽³⁾

171,261

⁽³⁾

165,004

⁽³⁾

171,261

⁽³⁾

⁽¹⁾	Excluded from the computation of diluted loss per share of Class A Common Stock and Class B-1 Common Stock because the effect of their inclusion would have been anti-dilutive since there was a net loss attributable to the Company during the period.

⁽²⁾	Excluded from the computation of diluted earnings per share of Class A Common Stock and Class B-1 Common Stock because the exercise price of the stock options exceeded the average market price of the Class A Common Stock during the period (out-of-the-money).


	Three Months Ended June 30,							Six Months Ended June 30,
	2020		2019		2020		2019
Stock options	4,008	⁽⁴⁾	8,407	⁽⁴⁾	671	⁽¹⁾	8,407	⁽⁴⁾
Restricted stock units	9,372	⁽⁴⁾	2,894	⁽⁴⁾	—		2,894	⁽⁴⁾
Performance stock units	3,054	⁽⁴⁾	465	⁽⁴⁾	3,054	⁽²⁾	465	⁽⁴⁾
Shares of Class B Common Stock	152,117	⁽³⁾	170,941	⁽³⁾	152,117	⁽³⁾	170,941	⁽³⁾

⁽³⁾

Shares of Class B Common Stock are considered potentially dilutive shares of Class A Common Stock and Class B-1 Common Stock. Shares of Class B Common Stock have been excluded from the computations of diluted earnings per share of Class A Common Stock and Class B-1 Common Stock because the effect of their inclusion would have been anti-dilutive under the if-converted method.

(1)Excluded from the computation of diluted earnings per share of Class A Common Stock because the exercise price of the stock options exceeded the average market price of the Class A Common Stock during the period (out-of-the-money).

(2)Excluded from the computation of diluted earnings per share of Class A Common Stock because the performance vesting conditions were not met for the six months ended June 30, 2020.

(3)Shares of Class B Common Stock are considered potentially dilutive shares of Class A and Class B-1 Common Stock. Shares of Class B Common Stock have been excluded from the computations of diluted earnings per share of Class A and Class B-1 Common Stock because the effect of their inclusion would have been anti-dilutive under the if-converted method. As noted above, the weighted-average shares for the three and six months ended June 30, 2020 do not include Class B-1 Common Stock.

(4)Excluded from the computation of diluted loss per share of Class A and Class B-1 Common Stock because the effect of their inclusion would have been anti-dilutive since there was a net loss attributable to the Company for three months ended June 30, 2020 and the three and six months ended June 30, 2019. As noted above, the weighted-average shares for the three and six months ended June 30, 2020 do not include Class B-1 Common Stock.

8. Income Taxes

~~As a result~~

For the three months ended June 30, 2020 and 2019, the Company's provision for (benefit from) income taxes and effective tax rates were $2 million and (10.0)% and $(6) million and 10.1%, respectively.

For the six months ended June 30, 2020 and 2019, the Company's benefit from income taxes and effective tax rates were $(106) million and 1259.7% and $(14) million and 7.5%, respectively. The year over year change in benefit from income taxes was primarily related to the Company’s full valuation allowance and the effects of the ~~Combination (refer to~~ ~~Note 1. Nature~~Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).

As of ~~Operations~~),September 30, 2019, the Company became the sole managing member of Amneal, with Amneal being the accounting predecessor for accounting purposes. Amneal is a limited liability company that is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Amneal is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Amneal is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis subject to applicable tax regulations. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of Amneal, as well as any stand-alone income or loss generated by the Company. Amneal provides for income taxes in the various foreign jurisdictions in which it operates.

The Company records its valuation allowances against its deferred tax assets (“DTAs”) when it is more likely than not that all or a portion of a DTA will not be realized. The Company routinely evaluates the realizability of its DTAs by assessing the likelihood that its DTAs will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, the Company considers its historical results and incorporates certain assumptions, including projected new product launches, revenue growth, and operating margins, among others.

A valuation allowance, if needed, reduces DTAs to the amount expected to be realized. When determining the amount of net DTAs that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, projected future earnings, carryback and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a DTA. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income to outweigh objective negative evidence of recent financial reporting losses.

~~In assessing the need for~~established a valuation allowance ~~in the third quarter of fiscal 2019, the Company considered~~based upon all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. The Company ~~currently estimates~~estimated that as of September 30, 2019 it ~~will have~~had generated a cumulative consolidated ~~three year~~three-year pre-tax ~~loss.~~loss, which continued as of December 31, 2019. As a result of ~~this analysis,~~the initial September 30, 2019 and December 31, 2019 analyses, the Company determined that it isremained more likely than not that it ~~will~~would not realize the benefits of its gross ~~DTAs~~deferred tax assets (" DTAs") and therefore ~~has~~ recorded aan additional valuation allowance of ~~$372~~$428 million for the ~~three months~~year ended ~~September 30,~~December 31, 2019 to reduce the carrying value of these gross DTAs, net of the impact of the reversal of taxable temporary differences, to zero.

As of June 30, 2020, based on its evaluation of available positive and negative evidence, the Company has maintained its position with respect to the valuation allowance.

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. Some of the key income tax-related provisions include net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Some of these tax provisions are effective retroactively for years ending before the date of enactment. Other non-income-based tax provisions include deferral of the employer share of Social Security payroll taxes due from the CARES Act date of enactment through December 31, 2020, and a potential 50% credit on qualified wages against employment taxes each quarter with any excess credits eligible for refunds.

The CARES Act permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs originating in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate refunds of previously paid income taxes. As a result of the CARES Act, the Company carried back approximately $345 million in NOLs generated in 2018 to prior taxable income years.

ASC 740, Income Taxes, requires the effect from adjusting deferred tax assets or changes to valuation allowances due to the CARES Act to be recognized as a component of income taxes expense or benefit in the interim period that includes the period in which the new legislation is enacted (quarter ended March 31, 2020), and it cannot be allocated to subsequent interim periods by an adjustment of the estimated annual effective tax rate. In the three months ended March 31, 2020, the Company reclassified the 2018 NOL carryback amount for previously paid income taxes to income tax receivable and reversed the corresponding valuation allowance. In carrying back the 2018 loss to an earlier year, the Company is able to benefit the losses at a 35% tax rate rather than the current U.S. corporate tax rate of 21%. Accordingly, the Company recorded a discrete income tax benefit of $110 million for the six months ended June 30, 2020. During July 2020, the Company received a cash refund for $106 million of the $110 million carryback, with the remainder expected to be received before December 31, 2020.

In connection with the Combination, the Company entered into a tax receivable agreement (“TRA”) for which it is generally required to pay the other holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal and state income tax that it is deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Amneal Common Units for shares of Class A Common Stock and (ii) tax benefits attributable to payments made under the ~~TRA (including imputed interest).~~TRA. In conjunction with the valuation allowance recorded on the DTAs at September 30, 2019, the Company reversed the ~~accrued~~ TRA liability, which had been recorded at the time of ~~$193 million, which resulted in a gain recorded as a component of Other income (expense), net.~~

the Combination.

The projection of future taxable income involves significant judgment. Actual taxable income may differ from ~~our~~the Company’s estimates, which could significantly impact the timing of the recognition of the contigent liability under the TRA. As noted above, ~~we have~~the Company has determined it is more-likely-than-not weit will be unable to utilize all of ~~our~~its DTAs subject to the TRA; therefore, ~~we have reversed~~as of June 30, 2020, the Company has not recognized the contingent liability under the TRA related to the tax savings weit may realize from common units sold or ~~exchanged through September 30, 2019.~~exchanged. If utilization of these DTAs becomes ~~more-likely- than-not~~more likely than not in the future, at such time, weAmneal will ~~record liabilities~~recognize a liability under the TRA, which amounts to approximately $202 million as of ~~up to an additional $193 million~~June 30, 2020 as a result of basis adjustments under Internal Revenue Code Section ~~754, which~~754.

The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and number of Amneal common units sold or exchanged for the Company's Class A Common Stock, the price of the Company's Class A Common Stock on the date of sale or exchange, the timing and amount of the Company's taxable income, and the tax rate in effect at the time of realization of the Company's taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the use of the TRA's attributes). Further sales or exchanges occurring subsequent to June 30, 2020 could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal common units. These obligations could be incremental to and substantially larger than the approximate $202 million contingent liability as of June 30, 2020 described above. Under certain conditions, such as a change of control or other early termination event, the Company could be obligated to make TRA payments in advance of tax benefits being realized.

Any future recognition of these TRA liabilities will be recorded through charges ~~to our~~in the Company’s consolidated ~~statement~~statements of operations. However, if the tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the TRA. Should wethe Company determine that a DTA with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and if a resulting TRA payment is determined to be probable, a corresponding TRA liability will be recorded.

For the three months ended September 30, 2019 and 2018, the Company's provision for income taxes and effective tax rates were $390 million and 1483.0% and $5 million and 22.6%, respectively. The change in provision for income taxes is primarily associated with the charge to record the valuation allowance against the Company’s DTAs.

For the nine months ended September 30, 2019, the Company’s provision for income taxes and effective tax rate were $376 million and (230.2%) For the nine months ended September 30, 2018, the Company’s benefit from income taxes and effective tax rate were $7 million and 3.7% The change in income taxes was primarily due to the provision to record the valuation allowance against the Company’s DTAs. The change is also due to the change in the Company's legal structure subsequent to the Combination. Prior to the Combination, as a limited liability company, income taxes were only provided for the international subsidiaries as all domestic taxes flowed to the members. Subsequent to May 4, 2018, domestic income taxes were also provided for the Company's allocable share of income or losses from Amneal at the prevailing U.S. federal, state, and local corporate income tax rates.

The Company and its subsidiaries file income tax returns in the U.S. federal, and various state, local and foreign jurisdictions. The Company is not currently under income tax audit in any jurisdiction, and it will file its first income tax returns for the period ended December 31, 2018. Impax's federal tax filings for the 2015, 2016 and 2017 tax years are currently under audit and these are the only tax years open under the IRS statute of limitations for Impax. If there were adjustments to the attributes of Impax, they could impact the carryforward losses at the Company, which is the successor in interest to Impax. The Amneal partnership was audited for the tax year ended December 31, 2015 without any adjustments to taxable income. Income tax returns are generally subject to examination for a period of 3 years in the U.S. The statute of limitations for the 2016 and 2017 tax years will, therefore, expire no earlier than 2020. However, any adjustments to the 2016 or 2017 tax years would be pre-transaction when the Company had no ownership interest in Amneal. Under the partnership income tax regulations and audit guidelines, the Company is not responsible for any hypothetical pre-transaction income tax liabilities which pass through to the owners as of the year of any potential income tax adjustment. Neither the Company nor any of its other affiliates is currently under audit for state income tax.

9. Trade Accounts Receivable, Net

Trade accounts receivable, net is comprised of the following (in thousands):


	September 30, 2019			December 31, 2018				June 30, 2020		December 31, 2019
Gross accounts receivable	$	1,347,401		$	1,349,588		Gross accounts receivable	$	1,280,380	$	1,470,706
Allowance for doubtful accounts		(1,893	)		(2,340	)	Allowance for doubtful accounts	(2,871)		(2,201)
Contract charge-backs and sales volume allowances		(799,266	)		(829,596	)	Contract charge-backs and sales volume allowances	(670,616)		(829,807)
Cash discount allowances		(28,133	)		(36,157	)	Cash discount allowances	(24,159)		(34,308)
Subtotal		(829,292	)		(868,093	)	Subtotal	(697,646)		(866,316)
Trade accounts receivable, net	$	518,109		$	481,495		Trade accounts receivable, net	$	582,734	$	604,390

Receivables from customers representing 10% or more of the Company’s gross trade accounts receivable reflected three customers at ~~September~~June 30, ~~2019,~~2020, equal to ~~35%~~37%, 25%, and 25%, respectively. Receivables from customers representing 10% or more of the Company’s gross trade accounts receivable reflected three customers at December 31, ~~2018,~~2019, equal to ~~30%~~39%, ~~28%~~25%, and ~~24%~~25%, respectively.

10. Inventories

Inventories, net of reserves, are comprised of the following (in thousands):

September 30,
2019

December 31,
2018

Raw materials

$
182,828

$
181,654

Work in process

50,763

54,152

Finished goods

168,236

221,413

Total inventories

$
401,827

$
457,219


	June 30, 2020		December 31, 2019
Raw materials	$	173,102	$	172,159
Work in process	47,435		58,188
Finished goods	223,419		150,720
Total inventories	$	443,956	$	381,067

11. ~~Leases~~

Prepaid and Other Current Assets

Prepaid expenses and other current assets are comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Deposits and advances	$	2,805	$	1,123
Prepaid insurance	1,768		3,858
Prepaid regulatory fees	1,387		4,016
Income and other tax receivables ⁽¹⁾	124,208		13,740
Prepaid taxes	3,503		3,255
Other current receivables	12,650		15,996
Other prepaid assets	38,427		28,176
Total prepaid expenses and other current assets	$	184,748	$	70,164

(1)On March 27, 2020, President Trump signed into law the CARES Act. The ~~majority~~CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. Amneal recorded a U.S. federal income tax receivable of $110 million related to benefits associated with the CARES Act, of which $106 million was received in July 2020 and the remainder is expected to be received before December 31, 2020. For further details, refer to Note 8.Income Taxes.

12. Other Assets

Other assets are comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Deferred revolving credit facility costs	$	3,174	$	3,099
Security deposits	2,123		1,938
Long-term prepaid expenses	5,801		6,438
Interest rate swap	—		16,373
Financing lease right-of-use assets	10,222		11,442
Other long-term assets	7,411		4,980
Total other assets	$	28,731	$	44,270

13. Debt

The following is a summary of the Company's ~~operating~~long-term debt (in thousands):


	June 30, 2020		December 31, 2019
Term Loan due May 2025	$	2,645,376	$	2,658,876
Rondo Term Loan due January 2025	177,750		—
Other	624		624
Total long-term debt	2,823,750		2,659,500
Less: debt issuance costs	(29,416)		(28,975)
Total debt, net of debt issuance costs	2,794,334		2,630,525
Less: current portion of long-term debt	(29,756)		(21,479)
Total long-term debt, net	$	2,764,578	$	2,609,046

Senior Secured Credit Facilities

On May 4, 2018 the Company entered into a senior credit agreement that provided a term loan ("Term Loan") with a principal amount of $2.7 billion and an asset backed revolving credit facility ("Revolving Credit Facility") under which loans and letters of credit up to a principal amount of $500 million, of which $414 million were available at June 30, 2020 (principal amount of up to $25 million is available for letters of credit) (collectively, the "Senior Secured Credit Facilities"). The Term Loan is repayable in equal quarterly installments at a rate of 1.00% of the original principal amount annually, with the balance payable at maturity on May 4, 2025. The Term Loan bears a variable annual interest rate, which is one-month LIBOR plus 3.5% at June 30, 2020. The Revolving Credit Facility bears an annual interest rate of one-month LIBOR plus 1.25% at June 30, 2020 and matures on May 4, 2023. The annual interest rate for the Revolving Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the average historical excess availability.

The proceeds of any loans made under the Senior Secured Credit Facilities can be used for capital expenditures, acquisitions, working capital needs and other general purposes, subject to covenants as described below. The Company pays a commitment fee based on the average daily unused amount of the Revolving Credit Facility at a rate based on average historical excess availability, between 0.25% and 0.375% per annum. At June 30, 2020, the Revolving Credit Facility commitment fee rate is 0.375% per annum.

During March 2020, as a precautionary measure to mitigate the uncertainty surrounding overall market liquidity due to the COVID-19 pandemic, the Company borrowed $300 million on the Revolving Credit Facility. As the financial markets stabilized following a period of high volatility due to the COVID-19 pandemic, the Company repaid all borrowings under the Revolving Credit Facility as of June 30, 2020.

The Company incurred costs associated with the Term Loan due May 2025 of $38 million and the Revolving Credit Facility of $5 million, which have been capitalized and are being amortized over the life of the applicable debt agreement to interest expense using the effective interest method. The Term Loan has been recorded in the balance sheet net of issuance costs. Costs associated with the Revolving Credit Facility have been recorded in other assets because there were no borrowings outstanding on the effective date of the Revolving Credit Facility. For both the three months ended June 30, 2020 and 2019, amortization of deferred financing ~~lease portfolio consists~~costs related to the Term Loan and the Revolving Credit Facility was $1 million. For both the six months ended June 30, 2020 and 2019, amortization of ~~corporate offices, manufacturing sites, warehouse space, research~~deferred financing costs related to the Term Loan and ~~development facilities~~the Revolving Credit Facility was $3 million.

The Senior Secured Credit Facilities contain a number of covenants that, among other things, create liens on Amneal's and ~~manufacturing equipment.~~its subsidiaries' assets. The ~~Company's leases~~Senior Secured Credit Facilities contain certain negative covenants that, among other things and subject to certain exceptions, restrict Amneal’s and its subsidiaries' ability to incur additional debt or guarantees, grant liens, make loans, acquisitions or other investments, dispose of assets, merge, dissolve, liquidate or consolidate, pay dividends or other payments on capital stock, make optional payments or modify certain debt instruments, modify certain organizational documents, enter into arrangements that restrict the ability to pay dividends or grant liens, or enter into or consummate transactions with affiliates. The Revolving Credit Facility also includes a financial covenant whereby Amneal must maintain a minimum fixed charge coverage ratio if certain borrowing conditions are met. The Senior Secured Credit Facilities contain customary events of default, subject to certain exceptions. Upon the occurrence of certain events of default, the obligations under the Senior Secured Credit Facilities may be accelerated and the commitments may be terminated. At June 30, 2020, Amneal was in compliance with all covenants.

Acquisition Financing - Revolving Credit and Term Loan Agreement

On January 31, 2020, in connection with the Acquisitions, Rondo Intermediate Holdings, LLC (“Rondo Holdings”), a wholly-owned subsidiary of Rondo, entered into a revolving credit and term loan agreement (“Rondo Credit Facility”) that provided a term loan ("Rondo Term Loan") with a principal amount of $180 million and a revolving credit facility (“Rondo Revolving Credit Facility”) which loans up to a principal amount of $30 million. The Rondo Term Loan is repayable in equal quarterly installments at a rate of 5.0% of the original principal amount annually, with the balance payable at maturity on January 31, 2025. The Rondo Credit Facility bears a variable annual interest rate, which is one-month LIBOR plus 3.0% at June 30, 2020 and matures on January 31, 2025. The annual interest rate for borrowings under the Rondo Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the total net leverage ratio, as defined in that agreement. At June 30, 2020, the Company had 0 outstanding borrowings under the Rondo Revolving Credit Facility.

A commitment fee based on the average daily unused amount of the Rondo Credit Facility is assessed at a rate based on total net leverage ratio, between 0.25% and 0.50% per annum. At June 30, 2020, the Rondo Credit Facility commitment fee rate is 0.4% per annum.

Costs associated with the Rondo Term Loan of $3 million and the Rondo Credit Facility of $1 million have ~~remaining lease terms~~been capitalized and are being amortized over the life of ~~1 year~~the applicable debt instrument to ~~25 years. Rent~~interest expense ~~for~~using the effective interest method. The Rondo Term Loan has been recorded in the balance sheet net of issuance costs. Costs associated with the Rondo Revolving Credit Facility have been recorded in other assets. For both the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, amortization of deferred financing costs associated with the Rondo Credit Facility was $7less than $1 million.

The Rondo Credit Facility contains a number of covenants that, among other things, create liens on the equity securities and assets of Rondo Holdings, Rondo, AvKARE, LLC and R&S. The Rondo Credit Facility contains certain negative, affirmative and financial covenants that, among other things, restrict the ability to incur additional debt, grant liens, transact in mergers and acquisitions, make certain investments and payments or engage in certain transactions with affiliates. The Rondo Credit Facility also contains customary events of default. Upon the occurrence of certain events of default, the obligations under the Rondo Credit Facility may be accelerated and/ or the interest rate may be increased. At June 30, 2020, Rondo was in compliance with all covenants. The Company is not party to the Rondo Credit Facility and is not a guarantor of any debt incurred thereunder.

The Term Loan and Rondo Term Loan require payments of $27 million and ~~$19~~$9 million, ~~respectively. Rent expense~~respectively, per year for the ~~three~~next five years and ~~nine months ended September 30, 2018 was $6~~the balance thereafter.

Acquisition Financing – Notes Payable-Related Party

The Sellers Notes with a stated aggregate principal amount of $44 million and ~~$13~~the Short-Term Sellers Note with a stated principal amount of $1 million ~~respectively.~~ were issued by Rondo or its subsidiary, Rondo Top Holdings, LLC, on January 31, 2020, the closing date of the Acquisitions. The Sellers Notes are unsecured and accrue interest at a rate of 5% per annum, not compounded, until June 30, 2025. The Sellers Notes are subject to prepayment at the option of Rondo, as the obligor, without premium or penalty. Mandatory payment of the outstanding principal and interest is due on June 30, 2025 if certain financial targets are achieved, the borrowers’ cash flows are sufficient (as defined in the Sellers Notes) and repayment is not prohibited by senior debt. If repayment of all outstanding principal and accrued interest on the Sellers Notes is not made on June 30, 2025, the requirements for repayment are revisited on June 30 of each subsequent year until all principal and accrued interest are satisfied no later than January 31, 2030 or earlier, upon a change in control. The Short-Term Sellers Note is also unsecured and accrues interest at a rate of 1.6% and is due on January 31, 2020.

In accordance with ASC 805, Business Combinations, all consideration transferred was measured at its acquisition-date fair value. The Sellers Notes were stated at the preliminary fair value estimate of $35 million, which was estimated using the Monte-Carlo simulation approach under the option pricing framework. The Short-Term Sellers Note of $1 million was recorded at the stated principal amount of $1 million, which approximates fair value. The $9 million discount on the Sellers Notes will be amortized to interest expense using the effective interest method from January 31, 2020 to June 30, 2025 and the carrying value of the Sellers Notes will accrete to the stated principal amount of $44 million.

The Company is not party to or a guarantor of the Sellers Notes or Short-Term Sellers Notes. The Sellers Notes and the Short-Term Sellers Note are recorded ~~a $2~~in notes payable-related party within long-term liabilities and notes payable-related party within current liabilities, respectively.

14. Other Long-Term Liabilities

Other long-term liabilities are comprised of the following (in thousands):


	June 30, 2020		December 31, 2019
Interest rate swap ⁽¹⁾	$	56,058	$	—
Uncertain tax positions	3,648		5,088
Long-term compensation ⁽²⁾	20,183		22,735
Financing lease liabilities	3,162		3,869
Other long-term liabilities	10,721		7,891
Total other long-term liabilities	$	93,772	$	39,583

(1)Refer to Notes 15.Fair Value Measurements and 16. Financial Instruments for information about the Company’s interest rate swap.

(2)Includes $11 million ~~impairment charge~~of long-term deferred compensation plan liabilities (refer to Note 15.Fair Value Measurements), $8 million of long-term employee benefits for the ~~right~~Company’s international employees and $1 million of use asset associated with its Hauppauge, NY facility during the three and nine months ended September 30, 2019 because the Company’s latest forecast does not support recoverability of that asset. For further details, see long-term severance liabilities (refer to Note 6.Restructuring and Other ~~Charges.~~

~~The components of total lease costs were as follows (in thousands):~~

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

Operating lease cost ⁽¹⁾

$
5,960

$
16,850

Finance lease cost:

Amortization of right-of-use assets

652

1,956

Interest on lease liabilities

1,115

3,358

Total finance lease cost

1,767

5,314

Total lease cost

$
7,727

$
22,164

Charges).

⁽¹⁾	~~Includes variable and short-term lease costs.~~

~~Supplemental balance sheet information related to the Company's leases was as follows (in thousands):~~

Operating leases

September 30, 2019

Operating lease right-of-use assets

$
56,455

Operating lease right-of-use assets - related party

14,930

Total operating lease right-of-use assets

$
71,385

Operating lease liabilities

$
44,375

Operating lease liabilities - related party

14,271

Current portion of operating lease liabilities

13,467

Current portion of operating and financing lease liabilities - related party

2,299

Total operating lease liabilities

$
74,412

Financing leases

Financing lease right of use assets - related party

$
61,936

Financing lease liabilities - related party

$
61,719

Current portion of operating and financing lease liabilities - related party

1,054

Total financing lease liabilities

$
62,773

At September 30, 2019 financing right of use assets of $3 million, financing short-term liabilities of $1 million and financing long-term liabilities of $2 million associated with our auto fleet are recorded in Other assets, Accounts payable and accrued expenses and Other liabilities, respectively.

~~Supplemental cash flow information related to leases was as follows (in thousands):~~

Three Months Ended September 30, 2019

Nine Months Ended September 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from finance leases

$
1,117

$
2,987

Operating cash flows from operating leases

4,964

14,968

Financing cash flows from finance leases

252

1,118

Non-cash activity:

Right-of-use assets obtained in exchange for new operating lease liabilities

$
—

$
360

~~The table below reflects the weighted average remaining lease term and weighted average discount rate for the Company's operating and finance leases as of September 30, 2019.~~

		~~September 30, 2019~~
~~Weighted average remaining lease term - operating leases~~		~~6 years~~
~~Weighted average remaining lease term - finance leases~~		~~23 years~~
~~Weighted average discount rate - operating leases~~		~~6.1%~~
~~Weighted average discount rate - finance leases~~		~~7.0%~~

~~Maturities of lease liabilities as of September 30, 2019 were as follows (in thousands):~~

Operating
Leases

Financing
Leases

2019 (1)

$
4,999

$
1,368

2020

19,812

5,474

2021

16,173

5,474

2022

12,327

5,474

2023

10,038

5,474

Thereafter

26,930

106,740

Total lease payments

90,279

130,004

Less: Imputed interest

(15,867
)

(67,231
)
Total

$
74,412

$
62,773

⁽¹⁾	~~Excludes the nine months ended September 30, 2019.~~

As disclosed in the Company's 2018 Annual Report on Form 10-K, under the previous lease accounting standard, the table below reflects the future minimum lease payments, including reasonably assured renewals, due under non-cancelable leases and a financing obligation as of December 31, 2018 (in thousands):

Operating
Leases

Financing
Obligation

2019

$
25,885

$
5,474

2020

12,071

5,474

2021

11,105

5,474

2022

10,329

5,474

2023

10,043

5,474

Thereafter

28,128

107,196

Total lease payments

97,561

134,566

Less: Imputed interest

—

(95,217
)
Total

$
97,561

$
39,349

~~For additional information regarding lease transactions between related parties, refer to~~ ~~Note~~ 15. ~~Related Party Transactions.~~

~~12.~~ Fair Value Measurements ~~of Financial Instruments~~

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

Level 1– Quoted prices in active markets for identical assets or liabilities.

Level 2 –Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

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. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and also includes instruments for which the determination of fair value requires significant judgment or estimation.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. The following table sets forth the Company’s financial assets and liabilities that were measured at fair value on a recurring basis as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

Fair Value Measurement Based on

September 30, 2019

Total

Quoted
Prices in
Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Liabilities

Deferred Compensation Plan liabilities ⁽¹⁾

$
21,637

$
—

$
21,637

$
—

December 31, 2018

Assets

Deferred Compensation Plan asset ⁽¹⁾

$
40,101

$
—

$
40,101

$
—

Liabilities

Deferred Compensation Plan liabilities ⁽¹⁾

$
27,978

$
—

$
27,978

$
—


			Fair Value Measurement Based on
June 30, 2020	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities
Interest rate swap ⁽¹⁾	$	56,058	$	—	$	56,058	$	—
Deferred compensation plan liabilities ⁽²⁾	14,983		—		14,983		—

December 31, 2019
Assets
Interest rate swap ⁽¹⁾	$	16,373	$	—	$	16,373	$	—
Liabilities
Deferred compensation plan liabilities ⁽²⁾	$	18,396	$	—	$	18,396	$	—

⁽¹⁾

As of September 30, 2019, deferred compensation plan liabilities of $8 million and $14 million were recorded in current and non-current liabilities, respectively. As of December 31, 2018, deferred compensation plan liabilities were recorded in non-current liabilities. They are recorded at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense. The calculation of the deferred compensation plan obligation is derived from observable market data by reference to hypothetical investments selected by the participants and is included in other long-term liabilities. The Company invested participant contributions in corporate-owned life insurance policies, for which the cash surrender value was included in Other non-current assets as of December 31, 2018. In July 2019, the Company surrendered all corporate-owned life insurance for approximately $43 million in cash proceeds.

(1)The fair value measurement of the Company’s interest rate swap classified within Level 2 of the fair value hierarchy is a model-derived valuation as of a given date in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present, and future market conditions.

(2)As of June 30, 2020, deferred compensation plan liabilities of $4 million and $11 million were recorded in current and non-current liabilities, respectively. As of December 31, 2019, deferred compensation plan liabilities of $4 million and $14 million were recorded in current and non-current liabilities, respectively. These liabilities are recorded at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense. The calculation of the deferred compensation plan obligation is derived from observable market data by reference to hypothetical investments selected by the participants.

There were no transfers between levels in the fair value hierarchy during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~

2020.

Assets and Liabilities Not Measured at Fair Value on a Recurring Basis

The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these instruments.

The ~~$2.7~~$2.6 billion ~~term loan under the Company’s senior credit agreement entered into on May 4, 2018 (the "Term Loan")~~Term Loan falls into the Level 2 category within the fair value level hierarchy. The fair value was determined using market data for valuation. The fair value of the Term Loan at ~~September~~both June 30, ~~2019~~2020 and December 31, ~~2018~~2019 was approximately ~~$2.3 billion~~$2.4 billion.

The $178 million Rondo Term Loan entered into on January 31, 2020 falls into the Level 2 category within the fair value level hierarchy. The fair value of the Rondo Term Loan at June 30, 2020 was approximately $174 million.

The Sellers Notes and ~~$2.5 billion, respectively.~~

the Short-Term Sellers Note fall into the Level 2 category within the fair value level hierarchy. At June 30, 2020, the carrying value of the Sellers Notes and the Short-Term Sellers Note of $36 million and $1 million, respectively, approximate their fair values.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

There were no non-recurring fair value measurements during the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019.

16. Financial Instruments

The Company uses an interest rate swap to manage its exposure to market risks for changes in interest rates.

Interest Rate Risk

The Company is exposed to interest rate risk on its debt obligations. Interest income earned on cash and cash equivalents may fluctuate as interest rates change; however, due to their relatively short maturities, the Company does not hedge these assets or their investment cash flows because the impact of interest rate risk is not material. The Company's debt obligations consist of variable-rate and fixed-rate debt instruments (for further details, refer to Note 13. Debt). The Company's primary objective is to achieve the lowest overall cost of funding while managing the variability in cash outflows within an acceptable range. In order to achieve this objective, the Company has entered into an interest rate swap on the Term Loan.

Interest Rate Derivative – Cash Flow Hedge

The interest rate swap involves the periodic exchange of payments without the exchange of underlying principal or notional amounts. In October 2019, the Company entered into an interest rate lock agreement for a total notional amount of $1.3 billion to hedge part of the Company's interest rate exposure associated with the variability in future cash flows from changes in the one-month LIBOR associated with its Term Loan.

As of June 30, 2020, the total loss, net of income taxes, related to the Company’s cash flow hedge was $56 million, of which $28 million was recognized in accumulated other comprehensive loss and ~~2018.~~

~~13.~~$28 million was recognized in non-controlling interests (NaN as of June 30, 2019).

A summary of the fair values of derivative instruments in the consolidated balance sheets was as follows (in thousands):

June 30, 2020

December 31, 2019

Derivatives Designated as Hedging Instruments

Balance Sheet
Classification

Fair Value

Balance Sheet
Classification

Fair Value

Variable-to-fixed interest rate swap

Other long-term liabilities

56,058

Other assets

16,373

17. Commitments and Contingencies

Commitments

Commercial Manufacturing, Collaboration, License, and Distribution Agreements

The Company continues to seek to enhance its product line and develop a balanced portfolio of differentiated products through product acquisitions and in-licensing. Accordingly, the Company, in certain instances, may be contractually obligated to make potential future development, regulatory, and commercial milestone, royalty and/or profit sharing payments in conjunction with collaborative agreements or acquisitions that the Company has entered into with third parties. The Company has also licensed certain technologies or intellectual property from various third parties. The Company is generally required to make upfront payments as well as other payments upon successful completion of regulatory or sales milestones. The agreements generally permit the Company to terminate the agreement with no significant continuing obligation. The Company could be required to make significant payments pursuant to these arrangements. These payments are contingent upon the occurrence of certain future events and, given the nature of these events, it is unclear when, if ever, the Company may be required to pay such amounts. Further, the timing of any future payment is not reasonably estimable.

Certain of these arrangements are with related parties (refer to Note 19. Related Party Transactions).

Contingencies

~~Contingencies~~

Legal Proceedings

The Company's legal proceedings are complex, constantly evolving and subject to uncertainty. As such, the Company cannot predict the outcome or impact of the legal proceedings set forth below. Additionally, the Company is subject to legal proceedings that are not set forth below. While the Company believes it has valid claims and/or defenses to the matters described below, the nature of litigation is unpredictable, and the outcome of the following proceedings could include damages, fines, penalties and injunctive or administrative remedies. For any proceedings where losses are probable and reasonably capable of estimation, the Company accrues for a potential loss. While these accruals have been deemed reasonable by the Company’s management, the assessment process relies heavily on estimates and assumptions that may ultimately prove inaccurate or incomplete. Additionally, unforeseen circumstances or events may lead the Company to subsequently change its estimates and assumptions. Unless otherwise indicated below, the Company is at this time unable to estimate the possible loss, if any, associated with such litigation.

The Company currently intends to vigorously prosecute and/or defend these proceedings as appropriate. From time to time, however, the Company may settle or otherwise resolve these matters on terms and conditions that it believes to be in its best interest. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the Company recorded a net ~~charge~~charges of ~~$15~~approximately $1 million and $6 million, respectively, for ~~the~~ commercial ~~and governmental~~ legal proceedings and claims. The ultimate resolution of any or all claims, legal proceedings or investigations could differ materially from our estimate and have a material adverse effect on the Company's results of operations and/or cash flow in any given accounting period, or on the Company's overall financial condition. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had liabilities for commercial and governmental legal proceedings and claims of ~~$30~~$16 million and ~~$15~~$17 million, respectively.

Additionally, the Company manufactures and derives a portion of its revenue from the sale of pharmaceutical products in the opioid class of drugs, and may therefore face claims arising from the regulation and/or consumption of such products.

Although the outcome and costs of the asserted and unasserted claims is difficult to predict, based on the information presently known to management, the Company does not currently expect the ultimate liability, if any, for such matters to have a material adverse effect on its business, financial condition, results of operations, or cash flows.

Medicaid Reimbursement and Price Reporting Matters

The Company is required to provide pricing information to state agencies, including agencies that administer federal Medicaid programs. Certain state agencies have alleged that manufacturers have reported improper pricing information, which allegedly caused them to overpay reimbursement costs. Other agencies have alleged that manufacturers have failed to timely file required reports concerning pricing information. Reserves are periodically established by the Company for any potential claims or settlements of overpayment.The Company intends to vigorously defend against any such claims. The ultimate settlement of any potential liability for such claims may be higher or lower than estimated.

Patent Litigation

There is substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products which are the subject of conflicting patent and intellectual property claims. One or more patents often cover the brand name products for which the Company is developing generic versions and the Company typically has patent rights covering the Company’s branded products.

Under federal law, when a drug developer files an Abbreviated New Drug Application ("ANDA") for a generic drug seeking approval before expiration of a patent which has been listed with the FDA as covering the brand name product, the developer must certify its product will not infringe the listed patent(s) and/or the listed patent is invalid or unenforceable (commonly referred to as a "Paragraph IV" certification). Notices of such certification must be provided to the patent holder, who may file a suit for patent infringement within 45 days of the patent holder’s receipt of such notice. If the patent holder files suit within the 45-day period, the FDA can review and tentatively approve the ANDA, but generally is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered in favor of the generic drug developer, or 30 months from the date the notice was received, whichever is sooner. The Company’s Generics segment is typically subject to patent infringement litigation brought by branded pharmaceutical manufacturers in connection with the Company’s Paragraph IV certifications seeking an order delaying the approval of the Company’s ANDA until expiration of the patent(s) at issue in the litigation. Likewise, the Company’s Specialty segment is currently involved in patent infringement litigation against generic drug manufacturers that have filed Paragraph IV certifications to market their generic drugs prior to expiration of the Company’s patents at issue in the litigation.

The uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict. For the Company’s Generics segment, the potential consequences in the event of an unfavorable outcome in such litigation include delaying launch of its generic products until patent expiration. If the Company were to launch its generic product prior to successful resolution of a patent litigation, the Company could be liable for potential damages measured by the profits lost by the branded product manufacturer rather than the profits earned by the Company if it is found to infringe a valid, enforceable patent, or enhanced treble damages in cases of willful infringement. For the Company’s Specialty segment, an unfavorable outcome may significantly accelerate generic competition ahead of expiration of the patents covering the Company’s branded products. All such litigation typically involves significant expense.

The Company is generally responsible for all of the patent litigation fees and costs associated with current and future products not covered by its alliance and collaboration agreements. The Company has agreed to share legal expenses with respect to third-party and Company products under the terms of certain of the alliance and collaboration agreements. The Company records the costs of patent litigation as expense in the period when incurred for products it has developed, as well as for products which are the subject of an alliance or collaboration agreement with a third-party.

Patent Infringement Matter

Impax Laboratories, LLC. v. Zydus Pharmaceuticals USA, Inc. and Cadila Healthcare Ltd. ~~(Rytary ®~~(Rytary®)

On December 21, 2017, Impax filed suit against Zydus Pharmaceuticals USA, Inc. and Cadila Healthcare Ltd. (collectively, "Zydus") in the United States District Court for the District of New Jersey, alleging infringement of U.S. Patent No. 9,089,608, based on the filing of Zydus’s ANDA relating to carbidopa and levodopa extended release capsules, generic to Rytary®. Zydus answered the complaint on April 27, 2018, asserting counterclaims of non-infringement and invalidity of U.S. Pat. Nos. 7,094,427; 8,377,474; 8,454,998; 8,557,283; and 9,089,607. Impax answered Zydus’s counterclaims on June 1, 2018. Zydus filed a motion for judgment on the pleadings regarding its counterclaims. On November 29, 2018, the Court granted Zydus’s motion for judgment as to its counterclaims. A case schedule ~~has~~had been set with trial anticipated in ~~February 2020.~~

April 2020, which was postponed indefinitely due to the COVID-19 pandemic. The parties thereafter reached a settlement agreement on or about May 15, 2020, and the case has been dismissed.

Other Litigation Related to the Company’s Business

Opana ER® FTC Antitrust Litigation

On February 25, 2014, Impax received a Civil Investigative Demand (“CID”) from the Federal Trade Commission (“FTC”) concerning its investigation into the drug Opana® ER and its generic equivalents. On March 30, 2016, the FTC filed a complaint against Impax, Endo Pharmaceuticals Inc. ("Endo"), and others in the United States District Court for the Eastern District of Pennsylvania, alleging that Impax and Endo violated antitrust laws when they entered into a June 2010 co-promotion and development agreement and a June 2010 settlement agreement that resolved patent litigation in connection with the submission of Impax’s ANDA for generic original Opana® ER. In July 2016, the defendants filed a motion to dismiss the complaint, and a motion to sever the claims regarding Opana® ER from claims with respect to a separate settlement agreement that was challenged by the FTC. On October 20, 2016, the Court granted the motion to sever, formally terminating the suit against Impax, with an order that the FTC re-file no later than November 3, 2016 and dismissed the motion to dismiss as moot. On October 25, 2016, the FTC filed a notice of voluntary dismissal. On January 19, 2017, the FTC filed a Part 3 Administrative complaint against Impax with similar allegations regarding Impax’s June 2010 settlement agreement with Endo that resolved patent litigation in connection with the submission of Impax’s ANDA for generic original Opana® ER. Impax filed its answer to the Administrative Complaint on February 7, 2017. Trial concluded on November 15, 2017. On May 11, 2018, the Administrative Law Judge ruled in favor of Impax and dismissed the case in its entirety. The government appealed this ruling to the FTC. On March 28, 2019, the FTC issued an Opinion & Order reversing the Administrative Law Judge’s initial dismissal decision. The FTC found that Impax had violated Section 5 of the FTC Act by engaging in an unfair method of competition, and accordingly entered an order enjoining Impax from entering into anticompetitive reverse patent settlements (or agreements with other generic original Opana® ER manufacturers) and requiring Impax to maintain an antitrust compliance program. On June 6, 2019, ~~the Company~~Impax filed a Petition for Review of the FTC’s Opinion & Order with the United States Court of Appeals for the Fifth Circuit. ~~The Company~~Impax filed its opening appellate brief with the Fifth Circuit on October 3, 2019; the FTC filed its brief in response on December 9, 2019 and Impax filed a reply brief on December 30, 2019.

Oral argument before the Fifth Circuit, which had been postponed due to the COVID-19 pandemic, was heard on June 9, 2020.

On July 12, 2019, the Company received a CID from the FTC concerning an August 2017 settlement agreement between Impax and Endo, which resolved a dispute between the parties regarding, and amended, the above-referenced June 2010 settlement agreement related to Opana® ER. The Company has been cooperating and intends to continue cooperating with the FTC regarding the CID. However, no assurance can be given as to the timing or outcome of the FTC’s underlying investigation.

Opana ER® Antitrust Litigation

From June 2014 to April 2015, 14 complaints styled as class actions on behalf of direct purchasers and indirect purchasers (also known as end-payors) and several separate individual complaints on behalf of certain direct purchasers (the “opt-out plaintiffs”) were filed against the manufacturer of the brand drug Opana ER® and Impax.

The direct purchaser plaintiffs comprise Value Drug Company and Meijer Inc. The end-payor plaintiffs comprise the Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund; Wisconsin Masons’ Health Care Fund; Massachusetts Bricklayers; Pennsylvania Employees Benefit Trust Fund; International Union of Operating Engineers, Local 138 Welfare Fund; Louisiana Health Service & Indemnity Company d/b/a Blue Cross and Blue Shield of Louisiana; Kim Mahaffay; and Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund. The opt-out plaintiffs comprise Walgreen Co.; The Kroger Co.; Safeway, Inc.; HEB Grocery Company L.P.; Albertson’s LLC; Rite Aid Corporation; Rite Aid Hdqtrs. Corp.; and CVS Pharmacy, Inc.

On December 12, 2014, the United States Judicial Panel on Multidistrict Litigation (the "JPML") ordered the pending class actions transferred to the United States District Court for the Northern District of Illinois (“N.D. Ill.”) for coordinated pretrial proceedings, as In Re: Opana ER Antitrust Litigation (MDL No. 2580). (Actions subsequently filed in other jurisdictions also were transferred by the JPML to the N.D. Ill. to be coordinated or consolidated with the coordinated proceedings, and the District Court likewise has consolidated the opt-out plaintiffs’ actions with the direct purchaser class actions for pretrial purposes.)

In each case, the complaints allege that Endo engaged in an anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with Impax to delay generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. Discovery, including expert discovery, is ongoing. On March 25, 2019, plaintiffs filed motions for class certification and served opening expert reports. Defendants’ oppositions to class certification and rebuttal expert reports were filed and served on August 29, 2019. NoOn November 5, 2019, plaintiffs filed reply briefs in further support of their motions for class certification. On January 17, 2020, defendants filed a motion for leave to file joint surreply briefs in response thereto; plaintiffs filed responses on January 24, 2020. On February 5, 2020, the court granted defendants’ motion for leave, and entered a case schedule to which the parties jointly stipulated, setting a trial date ~~has been scheduled.~~

of March 15, 2021, which the MDL court later

re-set for June 7, 2021 in light of COVID-19 pandemic-related delays. On April 15, 2020, defendants filed motions for summary judgment.

The Company believes it has substantial meritorious defenses to the claims asserted with respect to the litigation. However, any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.

~~Sergeants Benevolent Association Health & Welfare Fund v. Actavis, PLC, et. al.~~

In August 2015, a complaint styled as a class action was filed against Forest Laboratories (a subsidiary of Actavis plc) and numerous generic drug manufacturers, including Amneal, in the United States District Court for the Southern District of New York involving patent litigation settlement agreements between Forest Laboratories and the generic drug manufacturers concerning generic versions of Forest’s Namenda IR product. The complaint (as amended on February 12, 2016) asserts federal and state antitrust claims on behalf of indirect purchasers, who allege in relevant part that during the class period they indirectly purchased Namenda® IR or its generic equivalents in various states at higher prices than they would have absent the defendants’ allegedly unlawful anticompetitive conduct. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On September 13, 2016, the Court stayed the indirect purchaser plaintiffs’ claims pending factual development or resolution of claims brought in a separate, related complaint by direct purchasers (in which the Company is not a defendant). On September 10, 2018, the Court lifted the stay, referred the case to the assigned Magistrate Judge for supervision of supplemental, non-duplicative discovery in advance of mediation to be scheduled in 2019. The parties thereafter participated in supplemental discovery, as well as supplemental motion-to-dismiss briefing. On December 26, 2018, the Court granted in part and denied in part motions to dismiss the indirect purchaser plaintiffs’ claims. On January 7, 2019, Amneal, its relevant co-defendants, and the indirect purchaser plaintiffs informed the Magistrate Judge that they had agreed to mediation, which occurred in April 2019. In June 2019, the Company reached a settlement with plaintiffs, subject to Court approval. On September 10, 2019, the Court entered an order preliminarily approving the settlement and indefinitely staying the case as to the settling defendants (including the Company). The amount of the settlement is not material to the Company's consolidated financial statements.

Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum

On July 14, 2014, Impax received a subpoena and interrogatories (the "Subpoena") from the State of Connecticut Attorney General ("Connecticut AG") concerning its investigation into sales of Impax's generic product, digoxin. According to the Connecticut AG, the investigation is to determine whether anyone engaged in a contract, combination or conspiracy in restraint of trade or commerce which has the effect of (i) fixing, controlling or maintaining prices or (ii) allocating or dividing customers or territories relating to the sale of digoxin in violation of Connecticut state antitrust law. The Company has produced documents and information in response to the Subpoena. However, no assurance can be given as to the timing or outcome of this investigation.

United States Department of Justice Investigations

On November 6, 2014, Impax disclosed that one of its sales representatives received a grand jury subpoena from the Antitrust Division of the United States Department of Justice (the "DOJ"). In connection with this same investigation, on March 13, 2015, Impax received a grand jury subpoena from the DOJ requesting the production of information and documents regarding the sales, marketing, and pricing of certain generic prescription medications. In particular, the DOJ’s investigation currently focuses on ~~four~~4 generic medications: digoxin tablets, terbutaline sulfate tablets, prilocaine/lidocaine cream, and calcipotriene topical solution. The Company has ~~been cooperating~~produced documents and ~~intends to continue cooperating~~information in connection with the investigation. However, no assurance can be given as to the timing or outcome of the investigation.

On April 30, 2018, Impax received a CID from the Civil Division of the DOJ (the "Civil Division"). The CID requests the production of information and documents regarding the pricing and sale of Impax’s pharmaceuticals and Impax’s interactions with other generic pharmaceutical manufacturers. According to the CID, the investigation concerns allegations that generic pharmaceutical manufacturers, including Impax, engaged in market allocation and price-fixing agreements, paid illegal remuneration, and caused false claims to be submitted to the Federal government. The Company has ~~been cooperating~~produced documents and ~~intends to continue cooperating~~information in connection with the Civil Division’s investigation. However, no assurance can be given as to the timing or outcome of the investigation.

Texas State Attorney General Civil Investigative Demand

On May 27, 2014, a CID was served on Amneal by the Office of the Attorney General for the state of Texas (the "Texas AG") relating to products distributed by Amneal under a specific Amneal labeler code. Shortly thereafter, Amneal received a second CID with respect to the same products sold by Interpharm Holding, Inc. ("Interpharm"), the assets of which had been acquired by Amneal in June 2008. Amneal completed its production of the direct and indirect sales transaction data in connection with the products at issue and provided this information to the Texas AG in November 2015. In May 2016, the Texas AG delivered ~~two~~ 2 settlement demands to Amneal in connection with alleged overpayments made by the State of Texas for such products under its Medicaid programs. For the Amneal and Interpharm products at issue, the Texas AG’s initial demand was for an aggregate total of $36 million based on $16 million in alleged overpayments. After analyzing the Texas AG’s demand, Amneal

raised certain questions regarding the methodology used in the Texas AG’s overpayment calculations, including the fact that the calculations treated all pharmacy claims after 2012 for the products at issue as claims for over-the-counter ("OTC") drugs, even though the products were prescription pharmaceuticals. This had the effect of increasing the alleged overpayment because the dispensing fee for OTC drugs was lower than that for prescription drugs. Therefore, the Texas AG’s calculations were derived by subtracting a lower (and incorrect) OTC dispensing fee from the higher (and correct) prescription dispensing fee. The Texas AG later acknowledged this discrepancy. In March 2019, the Texas AG provided Amneal with a re-calculation of the alleged ~~overpayment, and in~~overpayment. In October 2019, Amneal reached an agreement in principle with the Texas AG to settle the matter.

The parties executed a Settlement Agreement and Release as of March 5, 2020, and the matter is now closed.

In Re Generic Pharmaceuticals Pricing Antitrust Litigation

~~Between~~

Beginning in March 2016, ~~and January 2019,~~ numerous complaints styled as antitrust class actions on behalf of direct purchasers and indirect purchasers (or end-payors) and several separate individual complaints on behalf of certain direct and indirect purchasers (the ~~“opt-out~~

“opt-out plaintiffs”) have been filed against manufacturers of generic digoxin, lidocaine/prilocaine, glyburide-metformin, and metronidazole, including Impax.

The end-payor plaintiffs ~~comprise~~comprised Plaintiff International Union of Operating Engineers Local ~~30 Benefits~~30Benefits Fund; Tulsa Firefighters Health and Welfare Trust; NECA-IBEW Welfare Trust Fund; Pipe Trade Services MN; Edward Carpinelli; Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund; Nina Diamond; UFCW Local 1500 Welfare Fund; Minnesota Laborers Health and Welfare Fund; The City of Providence, Rhode Island; Philadelphia Federation of Teachers Health and Welfare Fund; United Food & Commercial Workers and Employers Arizona Health and Welfare Trust; Ottis McCrary; Plumbers & Pipefitters Local 33 Health and Welfare Fund; Plumbers & Pipefitters Local 178 Health and Welfare Trust Fund; Unite Here Health; Valerie Velardi; and Louisiana Health Service Indemnity Company. The direct purchaser plaintiffs ~~comprise~~comprised KPH Healthcare Services, Inc. a/k/a Kinney Drugs, Inc.; Rochester Drug Co-Operative, Inc.; César Castillo, Inc.; Ahold USA, Inc.; and FWK Holdings, L.L.C. The opt-out plaintiffs ~~comprise~~comprised The Kroger Co.; Albertsons Companies, LLC; H.E. Butt Grocery Company L.P.; Humana Inc.; and United Healthcare Services, Inc.

On April 6, 2017, the JPML ordered the consolidation of all civil actions involving allegations of antitrust conspiracies in the generic pharmaceutical industry regarding 18 generic drugs in the United States District Court for the Eastern District of Pennsylvania (“E.D. Pa.”), as In Re: Generic Pharmaceuticals Pricing Antitrust Litigation (MDL No. 2724). Consolidated class action complaints were filed on August 15, 2017 for each of the 18 drugs; Impax is named as a defendant in the 2 complaints respecting digoxin and lidocaine-prilocaine. Impax also is a defendant in the class action complaint filed with the MDL court on June 22, 2018 by certain direct purchasers of glyburide-metformin and metronidazole.

Each of the various complaints alleges a conspiracy to fix, maintain, stabilize, and/or raise prices, rig bids, and allocate markets or customers for the particular drug products at issue. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On October 16, 2018, the Court denied Impax and its co-defendants’ motion to dismiss the digoxin complaint. On February 15, 2019, the Court granted in part and denied in part defendants’ motions to dismiss various state antitrust, consumer protection, and unjust enrichment claims brought by two classes of indirect purchasers in the digoxin action. The Court dismissed ~~seven~~7 state law claims in the end-payor plaintiffs’ complaint and ~~six~~6 state law claims in the indirect reseller plaintiffs’ complaint. Motions to dismiss the glyburide-metformin and metronidazole complaint, as well as 2 of the complaints filed by certain opt-out plaintiffs, were filed February 21, 2019. On March 11, 2019, the Court issued an order approving a stipulation withdrawing the direct purchaser plaintiffs’ glyburide-metformin claims against Impax. ~~Document discovery otherwise is proceeding.~~

On May 10, 2019, the Company was named in a civil lawsuit filed by the Attorneys General of 43 States and the Commonwealth of Puerto Rico in the United States District Court for the District of Connecticut against numerous generic pharmaceutical manufacturers, as well as certain of their current or former sales and marketing executives, regarding an alleged conspiracy to fix prices and allocate or divide customers or markets for various products, including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, and ranitidine HCL tablets, in violation of federal and state antitrust and consumer protection laws. Plaintiff States seek, among other things, unspecified monetary damages (including treble damages and civil penalties), as well as equitable relief, including disgorgement and restitution. On June 4, 2019, the JPML transferred the lawsuit to the E.D. Pa. for coordination and consolidation with MDL No. 2724. On November 1, 2019, the State Attorneys General filed an Amended Complaint in their lawsuit, bringing claims on behalf of 9 additional states and territories against several defendants; the relief sought and allegations concerning the Company (including the products allegedly at issue) are unchanged from the original complaint.

On July 31, 2019, the Company and Impax were served with a Praecipe to Issue Writ of Summons and Writ of Summons filed in the Philadelphia County Court of Common Pleas by 87 health insurance companies and managed health care providers (America’s 1st Choice of South Carolina, Inc., et al. v. Actavis Elizabeth, LLC, et al., No. 190702094), naming as defendants in the putative action the same generic pharmaceutical manufacturers and individuals named in the above-referenced State Attorneys General lawsuit. However, to date, no complaint has been filed or served in this ~~action, and in October~~action. On December 12, 2019, the ~~parties stipulated that~~court entered an Order placing the case ~~will be placed~~ in deferred status pending further developments in MDL No. 2724.

On October 11, 2019, opt-out plaintiff United Healthcare Services, Inc. filed a second complaint, in the United States District Court for the District of Minnesota (United Healthcare Services, Inc. v. Teva Pharmaceuticals USA, Inc., et al., No. 0:~~19-cv-02696)~~19-cv-2696), following on and supplementing its original action, asserting antitrust claims against the Company and other generic pharmaceutical manufacturers arising from the facts alleged in the above-referenced State Attorneys General lawsuit. Plaintiff seeks, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. ~~The parties anticipate that~~On October 25, 2019, the lawsuit ~~will be~~was transferred by the JPML to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On October 18, 2019, opt-out plaintiff Humana, Inc. also filed a second complaint, likewise following on supplementing its original action to assert antitrust claims against the Company and other generic pharmaceuticals manufacturers arising from the facts alleged in the above-referenced State Attorneys General lawsuit, and similarly seeking, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuit was filed in the E.D. Pa. (Humana Inc. v. Actavis Elizabeth, LLC, et al., No. 2:~~19-cv 04862)~~19-cv-4862), and likely will be incorporated into MDL No. 2724 for coordinated pretrial proceedings.

On November 14, 2019, the Company was named in a complaint filed in the Supreme Court of the State of New York, Nassau County, on behalf of 14 counties in the state of New York, who allege to be both direct and end-payor purchasers of generic pharmaceutical drugs (County of Nassau, et al., v. Actavis Holdco U.S., Inc., et al., No. 616029/2019). The complaint asserts antitrust claims against the Company and other generic pharmaceutical manufacturers arising from the facts alleged in the above-referenced State Attorneys General lawsuit. Plaintiff Counties seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On December 17, 2019, defendants removed the case to the United States District Court for the Eastern District of New York (No. 2:19-cv-7071) and, on January 3, 2020, the case was transferred by the JPML to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On December 11, 2019, the Company and Impax were named in a complaint filed in E.D. Pa. by Health Care Service Corp., a customer-owned health insurer opting out of the end-payor plaintiff class (Health Care Service Corp. v. Actavis Elizabeth, LLC, et al., No. 2:19-cv-5819-CMR). Plaintiff alleges a conspiracy among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, and ranitidine HCL tablets; and with respect to Impax, digoxin, lidocaine-prilocaine, and metronidazole) in violation of federal and state antitrust and consumer protection laws. Plaintiff seeks, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuit likely will be incorporated into MDL No. 2724 for coordinated pretrial proceedings.

On December 16, 2019, a complaint was filed in the United States District Court for the District of Connecticut against Impax and against numerous generic pharmaceutical manufacturers on behalf of assignees of claims from third-party health benefit plans, opting out of the end-payor plaintiff class (MSP Recovery Claims, Series LLC, et al. v. Actavis Elizabeth, LLC, et al., No. 3:19-cv-1972-SRU), and alleging a conspiracy to fix prices and allocate or divide customers or markets for various products (including, with respect to Impax, digoxin and lidocaine-prilocaine) in violation of federal and state antitrust and consumer protection laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On January 10, 2020, the case was transferred by the JPML to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On December 19, 2019, the end-payor plaintiffs filed a new complaint, following on and supplementing their putative class action lawsuit pending in MDL No. 2724. Plaintiffs’ new complaint, which names as defendants the Company, Amneal, Impax, and numerous generic pharmaceutical manufacturers, alleges a conspiracy to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company/Amneal, bethanechol chloride tablets, norethindrone acetate tablets, ranitidine HCL tablets, naproxen sodium tablets, oxycodone/acetaminophen tablets, phenytoin sodium capsules, and warfarin sodium tablets; and with respect to Impax, metronidazole, amphetamine salts tablets, dextroamphetamine sulfate ER capsules, cyproheptadine HCL tablets, methylphenidate tablets, and pilocarpine HCL tablets) in violation of federal and state antitrust and consumer protection laws. Plaintiffs continue to seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

On December 20, 2019, the indirect-reseller plaintiffs filed a new complaint naming the Company, following on and supplementing their putative class action lawsuit pending in MDL No. 2724. The new complaint is brought on behalf of both independent pharmacies and hospitals, and asserts antitrust claims against the Company and other generic pharmaceutical manufacturers (as well as distributors of generic pharmaceuticals, including AmerisourceBergen Corp., Cardinal Health Inc., and McKesson Corporation) arising from the facts alleged in the above-referenced State Attorneys General lawsuit. Plaintiffs continue to seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

On December 27, 2019, the Company and Impax were named in a complaint filed in the United States District Court for the Northern District of California by Molina Healthcare, Inc., a publicly traded healthcare management organization opting out of the end-payor plaintiff class (Molina Healthcare, Inc. v. Actavis Elizabeth, LLC, et al., No. 3:19-cv-8438). Plaintiff alleges a conspiracy among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, and ranitidine HCL tablets; and with respect to Impax, digoxin, lidocaine-prilocaine, and metronidazole) in violation of federal and state antitrust and consumer protection laws. Plaintiff seeks, among other things, unspecified monetary damages and equitable relief,

including disgorgement and restitution. On February 5, 2020, the case was transferred by the JPML, to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On February 7, 2020, the direct purchaser plaintiffs filed a new complaint, following on and supplementing their putative class action lawsuit pending in MDL No. 2724. Plaintiffs’ new complaint, which names as defendants the Company, Amneal, Impax, and numerous generic pharmaceutical manufacturers, alleges a conspiracy to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company/Amneal, bethanechol chloride tablets, ranitidine HCL tablets, naproxen sodium tablets, oxycodone/acetaminophen tablets, hydrocodone/acetaminophen tablets, phenytoin sodium capsules, and warfarin sodium tablets; and with respect to Impax, amphetamine salts tablets, dextroamphetamine sulfate ER capsules, methylphenidate tablets, and pilocarpine HCL tablets) in violation of federal and state antitrust and consumer protection laws. Plaintiffs continue to seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

On March 2, 2020, the Company, Amneal, and Amneal Pharmaceuticals of NY, LLC, were named in a complaint filed in the United States District Court for the Southern District of Texas by Harris County, Texas, which is the primary county for the Houston Metropolitan Area (Harris County, Texas v. Teva Pharmaceuticals USA, Inc., et al., No. 4:20-cv-733). Plaintiff alleges a conspiracy among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products in violation of federal and state antitrust and consumer protection laws; specifically, plaintiff alleges that it has paid approximately $3.86 million since 2013 for products attributable to Amneal entities. On March 30, 2020, the JPML issued a conditional transfer order tagging the case for transfer to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

On June 9, 2020, the Company and Impax were named in a complaint filed in E.D. Pa. by Cigna Corp., the parent company of businesses that operate pharmacies (including Express Scripts Holding Company), as well as of health insurance plans and prescription drug plans (Cigna Corp. v. Actavis Holdco US, Inc., et al., No. 2:20-cv-02711). Plaintiff alleges a conspiracy among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, ranitidine HCL tablets, and warfarin sodium tablets; and with respect to Impax, digoxin, lidocaine-prilocaine, and metronidazole) in violation of federal and state antitrust and consumer protection laws. Plaintiff seeks, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. The lawsuit likely will be incorporated into MDL No. 2724 for coordinated pretrial proceedings.

On June 10, 2020, the State Attorneys General filed in the United States District Court for the District of Connecticut a new complaint following on and supplementing their lawsuit pending in MDL No. 2724 against numerous generic pharmaceutical manufacturers, as well as certain of their current or former sales and marketing executives, regarding an alleged conspiracy to fix prices and allocate or divide customers or markets for various drug products (chiefly topical drugs), including, with respect to the Company, phenytoin sodium ER capsules, in violation of federal and state antitrust and consumer protection laws. Plaintiff States seek, among other things, unspecified monetary damages (including treble damages and civil penalties), as well as equitable relief, including disgorgement and restitution. On July 20, 2020, the JPML transferred the lawsuit to the E.D. Pa. for coordination and consolidation with MDL No. 2724.

Fact and document discovery in MDL No. 2724 are proceeding. On December 26, 2019, the MDL court entered a case management order extending by stipulation certain pretrial discovery deadlines, including leaving open-ended the date by which, after consultation with MDL court's appointed Special Master, the parties are to agree upon bellwether claims or cases for, inter alia, class certification and/or trials. On February 20, 2020, the Special Master issued a Report & Recommendation and Proposed Order providing for the establishment of two parallel bellwether trial tracks; Track One would involve a jury trial of the overarching conspiracy claims presented in the State Attorneys General’s May 10, 2019 complaint (in which the Company and Amneal are defendants), and Track Two would consist of trials on three different individual drug conspiracy complaints (none of which involve the Company or any Amneal entities). On July 13, 2020, the MDL court entered orders adopting the Special Master’s Report & Recommendation, and requiring the parties within 30 days either to agree upon a schedule or submit competing schedules for the discovery, motions, and other proceedings to bring the two Tracks to trial.

On June 3, 2020, the Company and Impax were named in a proposed class action complaint filed in the Federal Court of Canada in Toronto, Ontario against numerous generic pharmaceutical manufacturers on behalf of a putative class of individuals who have purchased generic drugs in the private sector from 2012 to present (Kathryn Eaton v. Teva Canada Limited, et al., No. T-607-20). Plaintiff alleges a conspiracy in Canada among generic pharmaceutical manufacturers to fix prices and allocate or divide customers or markets for various products (including, with respect to the Company, bethanechol chloride tablets, norethindrone acetate tablets, ranitidine HCL tablets, and warfarin sodium tablets; and with respect to Impax, digoxin and lidocaine-prilocaine) in violation of Canada’s Competition Act. Plaintiff seeks, among other things, $2.75 billion in monetary damages or compensation, pre- and post-judgment interest, and costs.

Xyrem® (sodium oxybate) Antitrust Litigation

Amneal has been named as a defendant, along with Jazz Pharmaceuticals, Inc. (“Jazz”) and numerous other manufacturers of generic versions of Jazz’s Xyrem® (sodium oxybate) product, in several putative class action lawsuits filed in the United States District Court for the Northern District of California on behalf of a regional health plan primarily providing prescription drug coverage for New York residents (New York State Teamsters Council Health and Hospital Fund v. Jazz Pharmaceuticals, Inc., et al., No. 5:20-cv-04056 (filed June 18, 2020)), and two national health plans providing coverage for federal employees and retirees (Government Employees Health Association, Inc. v. Jazz Pharmaceuticals, Inc., et al., No. 3:20-cv-04671 (filed July 13, 2020) and Blue Cross and Blue Shield Association v. Jazz Pharmaceuticals, Inc., et al., No. 4:20-cv-04667 (filed July 13, 2020)), alleging that the generic manufacturers (including Amneal) entered into anticompetitive agreements with Jazz in connection with settling patent litigation related to Xyrem® (sodium oxybate), in violation of state and federal antitrust and competition laws. In addition to class certification, plaintiffs seek, among other things, unspecified monetary damages (including treble damages and civil penalties), as well as equitable relief, including disgorgement and restitution.

Prescription Opioid Litigation

The Company and certain of its affiliates have been named as defendants in various matters relating to the promotion and sale of prescription opioid pain relievers. The Company is aware that other individuals and states and political subdivisions are filing comparable actions against, among others, manufacturers and parties that have promoted and sold prescription opioid pain relievers, and additional suits may be filed.

The complaints, asserting claims under provisions of different state and Federal law, generally contend that the defendants allegedly engaged in improper marketing of opioids, and seek a variety of remedies, including restitution, civil penalties, disgorgement of profits, treble damages, attorneys’ fees and injunctive relief. None of the complaints specifies the exact amount of damages at issue. The Company and its affiliates that are defendants in the various lawsuits deny all allegations asserted in these complaints and have filed or intend to file motions to dismiss where possible. ~~Each of the opioid-related matters described below is in its early stages.~~ The Company intends to continue to vigorously defend these cases. In light of the inherent uncertainties of civil litigation, the Company is not in a position to predict the likelihood of an unfavorable outcome or provide an estimate of the amount or range of potential loss in the event of an unfavorable outcome in any of these matters.

On August 17, 2017, plaintiff Linda Hughes, as the mother of Nathan Hughes, decedent, filed a complaint in Missouri state court naming Amneal Pharmaceuticals of New York LLC, Impax, ~~five~~5 other pharmaceutical company defendants, and ~~three~~3 healthcare provider defendants. Plaintiff alleges that use of defendants’ opioid medications caused the death of her son, Nathan Hughes. The complaint alleges causes of action against Amneal and Impax for strict product liability, negligent product liability, violation of Missouri Merchandising Practices Act and fraudulent misrepresentation. The case was removed to federal court on September 18, 2017. It was transferred to the United States District Court for the Northern District of Ohio on February 2, 2018 and is part of the multidistrict litigation pending as In Re National Prescription Opiate Litigation, MDL No. 2804 (the “MDL”). Plaintiff has filed a motion to remand the case to Missouri state court. That motion remains pending before the MDL court. All activity in the case is stayed by order of the MDL court.

On March 15, 2018, plaintiff Scott Ellington, purporting to represent the State of Arkansas, more than ~~sixty~~60 counties and a dozen cities, filed a complaint in Arkansas state court naming Gemini Laboratories, LLC and fifty-one other pharmaceutical companies as defendants. Plaintiffs allege that Gemini and the other pharmaceutical company defendants improperly marketed, sold, and distributed opioid medications and failed to adequately warn about the risks of those medications. Plaintiffs allege causes of actions against Gemini and the other pharmaceutical company defendants for negligence and nuisance and alleged violations of multiple Arkansas statutes. Plaintiffs request past damages and restitution for monies allegedly spent by the State of Arkansas and the county and city plaintiffs for “extraordinary and additional services” for responding to what plaintiffs term the “Arkansas Opioid Epidemic.” Plaintiffs also seek prospective damages to allow them to “comprehensively intervene in the Arkansas Opioid Epidemic,” punitive and treble damages as provided by law, and their costs and fees. The complaint does not include any specific damage amounts. Gemini filed a general denial and, on June 28, 2018, it joined the other pharmaceutical

company defendants in moving to dismiss plaintiffs’ complaint. On January 29, 2019, the Court granted without prejudice Gemini’s motion to dismiss and dismissed Gemini from the litigation on March 22, 2019.

On March 27, 2018, plaintiff American Resources Insurance Company, Inc. filed a complaint in the United States District Court for the Southern District of Alabama against Amneal, Amneal Pharmaceuticals of New York, LLC, Impax, and ~~thirty-five~~NaN other pharmaceutical company defendants. Plaintiff seeks certification of a class of insurers that since January 1, 2010, allegedly have been wrongfully required to: (i) reimburse for prescription opioids that allegedly were promoted, sold, and distributed illegally and improperly by the pharmaceutical company defendants; and (ii) incur costs for treatment of overdoses of opioid medications, misuse of those medications, or addiction to them. The complaint seeks compensatory and punitive damages, but plaintiff’s complaint does not include any allegation of specific damage amounts. On or about May 2, 2018, the case was transferred to the MDL. All activity in the case is stayed by order of the MDL court.

On May 30, 2018, plaintiff William J. Comstock filed a complaint in Washington state court against Amneal Pharmaceuticals of New York, LLC, and ~~four~~ 4 other pharmaceutical company defendants. Plaintiff alleges he became addicted to opioid medications manufactured and sold by the pharmaceutical company defendants, which plaintiff contends caused him to experience opioid-induced psychosis, prolonged hospitalizations, pain, and suffering. Plaintiff asserts causes of action against Amneal and the other pharmaceutical company defendants for negligence, fraudulent misrepresentation, and violations of the Washington Consumer Protection Act. On July 12, 2018, Amneal and other defendants removed the case to the United States District Court for the Eastern District of Washington. On August 17, 2018, the case was transferred to the MDL. All activity in the case is stayed by order of the MDL court.

On June 18, 2018, a Subpoena and CID issued by the Office of the Attorney General of Kentucky, Office of Consumer Protection was served on Amneal. The CID contains ~~eleven~~11 requests for production of documents pertaining to opioid medications

manufactured and/or sold by Amneal, or for which Amneal holds an Abbreviated New Drug Application. The Company is evaluating the CID and has been in communication with the Office of the Attorney General about the scope of the CID, the response to the CID, and the timing of the response. It is unknown if the Office of the Attorney General will pursue any claim or file a lawsuit against Amneal.

On July 9, 2018, the Muscogee (Creek) Nation filed a First Amended Complaint in its case pending in the MDL against the Company and 55 other defendants consisting of pharmaceutical companies, wholesalers, distributors, and pharmacies. Plaintiff alleges it has been damaged by the Company and the other pharmaceutical company defendants as a result of alleged improper marketing, including off-label marketing, failure to adequately warn of the risks of opioid medications, and failure to properly monitor and control diversion of opioid medications within the Nation. The case has been designated as a bellwether motion to dismiss case for the MDL, meaning it is a test case for arguments directed at the complaints filed by Indian tribes in the MDL cases. On August 31, 2018, the Company moved to dismiss the First Amended Complaint, and also joined in separate motions to dismiss filed by different defense subgroups. Plaintiff opposed these motions. Additionally, on September 28, 2018, plaintiff filed a motion to add Amneal and Amneal Pharmaceuticals of New York, LLC, and to dismiss the Company from the complaint. The Company opposed that motion, and plaintiff filed a reply on October 19, 2018. On April 1, 2019, the MDL court's designated magistrate judge issued a Report and Recommendation as to the Company’s motion to dismiss, recommending dismissal of plaintiff’s Lanham Act claims and state-law claims based on an alleged duty to correct alleged misrepresentations of brand-name manufacturers, but recommending denial of relief as to all other claims. On April 12, 2019, the magistrate judge overruled the Company’s objection to adding Amneal and Amneal Pharmaceuticals of New York, LLC, but dismissed the Company. Amneal and Amneal Pharmaceuticals of New York, LLC, filed an objection to the magistrate’s Report and Recommendation as to the Company’s motion to dismiss on April 29, 2019. On June 13, 2019, the MDL court denied the objections and subsequently ordered the defendants to file Answers to the First Amended Complaint. On August 16, 2019, Amneal and Amneal Pharmaceuticals of New York, LLC filed their respective answers.

Further activity in the case is stayed by order of the MDL court.

On July 18, 2018, the County of Webb, Texas requested waivers of service from Amneal and Amneal Pharmaceuticals of New York, LLC, in its case pending in the MDL. Plaintiff’s Amended Complaint, filed against Amneal and forty-one other defendants consisting of pharmaceutical companies, wholesalers, distributors, and pharmacy benefit managers, alleges damages as a result of Amneal’s and the pharmaceutical company defendants’ improper marketing, failure to adequately warn of the risks of opioid medications, and failure to properly monitor and control diversion of opioid medications in or affecting Webb County. Amneal and Amneal Pharmaceuticals of New York, LLC have returned the requested waivers. All activity in the case is stayed by order of the MDL court.

On August 24, 2018, the Tucson Medical Center filed a complaint against the Company and 18 other defendants consisting of pharmaceutical companies, distributors, and unidentified John Doe defendants, in the Superior Court of the State of Arizona, Pima County. Plaintiff alleges damages as a result of Amneal’s and the pharmaceutical company defendants’ improper

marketing, failure to adequately warn of the risks of opioid medications, and failure to properly monitor and control diversion of opioid medications. Plaintiff seeks economic damages related to its purchase of opioid medications and for the costs of unreimbursed healthcare it has provided as a result of the opioid epidemic over and above ordinary healthcare services. In addition, plaintiff seeks compensatory damages, treble damages, punitive damages, awards of attorney’s fees, and abatement of the alleged public nuisance, as provided by law. On September 24, 2018, the distributor defendants removed the case to the United States District Court for the District of Arizona. Plaintiff filed a motion to remand on September 25, 2018, which the distributor defendants opposed. The Company filed a motion to dismiss on October 1, 2018. On October 8, 2018, following the Court’s denial of its remand motion, plaintiff voluntarily dismissed its Complaint without prejudice. Plaintiff re-filed its Complaint on October 9, 2018, in the Superior Court of the State of Arizona, Pima County, along with a motion to designate the case as “complex.” The distributor defendants filed a notice of removal on October 29, 2018. Plaintiff filed an Emergency Motion to Remand on October 30, 2018. On December 19, 2018, the Court granted plaintiff’s motion and remanded the case to the Superior Court of Pima County, Arizona. On February 13, 2019, the Company again filed a motion to dismiss the complaint. The defendants (including the Company) also moved for a discovery stay pending resolution of their motions to dismiss. The Court entered an order on April 8, 2019 staying discovery until the earlier of June 25, 2019 or when the Court rules on the defendants’ separate motions to dismiss. On June 12, 13, and 14, 2019, the Court held hearings on all pending motions to dismiss. Immediately prior to the hearing on Amneal’s Motion to Dismiss, plaintiff agreed to a voluntary dismissal without prejudice of Amneal, which the parties then entered on the record. The co-defendants removed the case to federal court, but the federal court re-remanded the case to state court. Plaintiff ~~is attempting to amend~~initially amended its complaint in state court and ~~will attempt~~attempted to ~~add~~name Amneal as a defendant; however, plaintiff did not serve that complaint on Amneal. On February 7, 2020, plaintiff filed a second amended complaint that did not name Amneal as a defendant.

Accordingly, Amneal is not presently a defendant in this lawsuit.

On October 4, 2018, the City of Martinsville, Virginia, filed a complaint in Virginia state court, naming the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, Impax, and 45 other pharmaceutical companies and other entities as defendants. Plaintiff alleges that the defendants are liable for the economic and non-economic injuries allegedly suffered by resident doctors, health care payors, and opioid-addicted individuals, as well as for the costs incurred in addressing the opioid epidemic. Plaintiff requests an unspecified amount of damages against the defendants. The case was removed to federal court on December 13, 2018and was conditionally transferred to the MDL on December 27, 2018. Plaintiff opposed the transfer to the MDL and moved to remand the case to Virginia state court. On February 14, 2019, the United States District Court for the Western District of Virginia, Roanoke Division, remanded the case to the Martinsville Circuit Court in Martinsville, Virginia. Nine other Virginia municipalities have filed identical complaints naming the same defendants, but none have been served on the Company or its affiliates. The unserved Virginia cases ~~have been~~were removed ~~and are in~~to federal court ~~though plaintiffs have filed motions to remand~~ and ~~are opposing transfer of those cases~~subsequently transferred to the ~~MDL court.~~MDL. On April 24, 2019, the ~~Court in~~ Martinsville ~~Virginia,~~Circuit Court stayed this case until it is determined whether the other Virginia cases that were removed to federal court will be remanded, or until the parties or the court may determine whether consolidation of this case with others is possible in Virginia state court.

The removed cases were transferred to the MDL, but this case remains stayed in state court.

In October and November 2018, the SouthEast Alaska Regional Health Consortium, the Kodiak Area Native Association, and the Norton Sound Health Corporation requested that the Company execute waivers of service in their cases pending in the MDL. Plaintiffs’ complaints name the Company and 37 other entities as defendants. Plaintiffs allege damages and seek injunctive relief, compensatory and statutory damages, “as well as the means to abate the epidemic” that they allege was “created by Defendants’ wrongful and/or unlawful conduct.” All activity in these cases is stayed by order of the MDL court.

On December 3, 2018, Appalachian Regional Healthcare, Inc., filed a complaint in Kentucky state court, naming Amneal and 32 other pharmaceutical companies and other entities as defendants. Plaintiff alleges that the defendants are liable for the economic and non-economic injuries allegedly suffered by Kentucky’s hospitals and others. Plaintiff requested an unspecified amount of damages against the defendants. The case has now been removed to federal court, and all activity in these cases is stayed by order of the MDL court.

On January 23, 2019, Indian Health Council, Inc., requested that the Company execute a waiver of service in its case pending in the MDL. Plaintiff’s complaint names the Company and 18 other pharmaceutical companies and other entities as defendants. Plaintiff, an intertribal health organization which provides healthcare services to its consortium’s member tribes, alleges that the defendants are liable for the economic injuries it allegedly suffered as a result of its role in responding to an alleged “epidemic of opioid abuse”. Plaintiff requests an unspecified amount of damages against the defendants. The case has been transferred to the MDL. All activity in the case is stayed by order of the MDL court.

On February 7, 2019, Kentucky River District Health Department requested that the Company execute a waiver of service in its case pending in the MDL. Plaintiff’s putative class action complaint names Amneal and 20 other pharmaceutical companies and other entities as defendants. Plaintiff alleges that the defendants are liable for the economic injuries it suffered, on behalf of

itself and similarly situated Kentucky health departments, as a result of their role in responding to an alleged “opioid epidemic.” Plaintiff requests an unspecified amount of damages against the defendants. All activity in the case is stayed by order of the MDL court.

In February and March 2019, the Aleutian Pribilof Islands Association and Alaska Native Tribal Health Consortium requested that the Company execute waivers of service in their cases pending in the MDL. Plaintiffs’ complaints name the Company and 37 other entities as defendants. Plaintiffs allege damages and seek injunctive relief, compensatory and statutory damages, “as well as the means to abate the epidemic” that they allege was “created by Defendants’ wrongful and/or unlawful conduct.” All activity in these cases is stayed by order of the MDL court.

In March 2019, Glynn County, Georgia, requested waivers of service from the Company and Amneal in its case pending in the MDL. Plaintiff’s second amended short-form complaint, filed against Amneal and 39 other defendants consisting of pharmaceutical companies, wholesalers, retailers, and distributors, alleges damages as a result of defendants’ alleged improper marketing, fraud, including RICO violations, failure to adequately warn of the risks of opioid medications, failure to properly monitor and control diversion of opioid medications in or affecting Glynn County, negligence, public nuisance, and unjust enrichment. All activity in the case is stayed by order of the MDL court.

On March 14, 2019, the City of Concord, New Hampshire, filed a short-form amendment to its Second Amended Complaint in the MDL court adding the Company, Amneal, and Impax, to 31 other defendants, including pharmaceutical companies, corporate officers of certain brand manufacturer pharmaceutical companies, and distributors. As to the Company, Amneal, and Impax, plaintiff asserts claims for violation of the New Hampshire Consumer Protection Act, public nuisance, unjust enrichment, and violation of RICO. Plaintiff alleges that defendants are liable for economic injuries experienced by plaintiff, including unspecified restitution, civil penalties, disgorgement of unjust enrichment and attorneys’ fees, as well as for injunctive relief as to defendants’ further false or misleading statements as to opioids, and for exemplary damages. Amneal was served on April 25, 2019. All activity in the case is stayed by order of the MDL court.

On March 15, 2019, the International Union of Painters and Allied Trades, District Council No. 21 Welfare Fund, and, separately, the International Brotherhood of Electrical Workers Local 98 Health & Welfare Fund, and International Brotherhood of Electrical Workers Local 98 Sound and Communications Health and Welfare Fund, filed complaints in the Philadelphia County Common Pleas Court, naming Amneal, Impax, Amneal Pharmaceuticals of New York, LLC, and 29 other pharmaceutical companies as defendants. In each, plaintiffs allege that the defendants are liable for economic injuries allegedly suffered by the respective funds to the extent those funds paid for long term treatment of their benefit members with opioids, and for the costs incurred in addressing an alleged “opioid epidemic.” Plaintiffs request an unspecified amount of damages against the defendants. On April 17, 2019, Amneal and Amneal Pharmaceuticals of New York, LLC were served with both complaints. ~~Both~~On January 7, 2020, Karen Davidson, individually and as administratrix of the estate of John C. Davidson, filed a complaint in the Philadelphia County Common Pleas Court, naming the Company and Amneal, among other parties, as defendants. All three cases have been transferred to Delaware County, Pennsylvania, where numerous other opioid cases currently are pending. The cases are now stayed by order of the Delaware County court.

In March 2019, the State of New Mexico filed a Second Amended Complaint in its case pending against numerous generic drug manufacturers and distributors in the First District Court of Santa Fe County, naming as defendants Amneal and Amneal Pharmaceuticals of New York, LLC. Plaintiff seeks unspecified damages, and injunctive relief, “to eliminate the hazard to public health and safety caused by the opioid epidemic, to abate the nuisance, ~~in [the state],~~ and to recoup State monies that have been spent” on account of defendants’ alleged “false, deceptive and unfair marketing and/or unlawful diversion of prescription opioids.” On July 17, 2019, the Amneal entities moved to dismiss for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. On October 15, 2019, the court entered an order dismissing the plaintiff’s negligence per se claims, but declining to dismiss the Amneal entities for lack of personal jurisdiction. ~~Responsive pleadings~~The Amneal entities timely filed answers and moved for reconsideration of their jurisdictional motion on January 21, 2020. On March 27, 2020, the court held oral argument and denied the motion for reconsideration from the bench. The court entered an order denying the motion for reconsideration, without explanation, on April 6, 2020. The parties are ~~presently due to be filed on November 29, 2019.~~

now engaged in discovery.

In April 2019, several Virginia municipalities (the County Board of Arlington, Dinwiddie County, and Mecklenburg County) filed Complaints in their respective local circuit courts against the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax along with numerous additional generic drug manufacturers, distributors, and pharmacies. In each Complaint, plaintiffs seek unspecified damages and equitable relief, alleging that defendants were negligent and/or grossly negligent in flooding the relevant municipalities with prescription opioid medications and engaged in civil conspiracies to do so. Each case had been removed to the United States District Court for the Eastern District of Virginia, but all three since have been remanded back to Virginia state court. The Company was nonsuited (dismissed) from the Arlington case. Amended Complaints ~~are expected to be~~ were

filed in the Dinwiddie and Mecklenburg cases ~~before~~at the end of November ~~2019. There are no deadlines presently in those cases, and no responsive pleadings are due until after~~2019, but they did not include the ~~Amended Complaints are filed.~~

Amneal entities as defendants.

On June 10, 2019, in their cases currently pending in the MDL, West Virginia municipal-entity plaintiffs Cabell County Commission and the City of Huntington were granted leave to file, then filed, a Joint and Third Amended Complaint naming approximately 20 additional defendants, including the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax. The plaintiff municipalities, seek unspecified actual, treble, and punitive damages and disgorgement “to eliminate the hazard to public health and safety, to abate the public nuisance caused by the opioid epidemic in the City and County and to compensate both for abatement measures undertaken or underway and damages sustained as a result of the opioid epidemic” they allege the defendants “proximately caused.” These actions have been designated “Track Two” bellwether cases by the MDL court (intended to be adjudicated following the “Track One” cases for which bellwether trials had been scheduled for October 2019). On December 31, 2018, the MDL court entered an Order directing the then-parties in these Track Two actions to work with one of the MDL court's appointed Special Masters to prepare case management deadlines. On May 12, 2019, the Special Master entered an Order acknowledging that the press of issues surrounding ongoing litigation of the Track One cases had prevented both the parties and the MDL court from acting on the directives of the prior Track Two Order, and setting deadlines of June 10, 2019 for plaintiffs to amend their complaints, and June 14, 2019 for the submission of proposals for case management by the then-parties to the cases (the Amneal entities were not served with plaintiffs’ Third Amended Complaints until June 25, 2019). ~~However,~~On December 16, 2019, the MDL court granted plaintiffs’ motion to ~~date, none of~~sever all defendants from the ~~existing parties to the cases have filed or submitted any case management proposals to the Special Master. Accordingly, the case management aspect of these~~ Track Two cases ~~remains pending.~~

except certain distributor defendants (AmerisourceBergen Drug Corporation, Cardinal Health, Inc., and McKesson Corporation). On January 3, 2020, the MDL court ordered that plaintiffs cannot take discovery of any severed Track Two defendant. On January 14, 2020, the Track Two cases were remanded to the United States District Court for the Southern District of West Virginia, without the severed defendants. To the extent Amneal entities were defendants in the Track Two cases but have been severed, the cases are now stayed by order of the MDL court.

In October 2019, the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax were served with a putative class action complaint, which also names as defendants numerous manufacturers of opioid products (and certain corporate officers thereof), filed in the United States District Court for the Middle District of Tennessee by several individuals who allegedly purchased prescription opioid medication in cash and/or with an insurance co-payment (Rhodes, et al., v. Rhodes Technologies, Inc., et al., No. 3:~~19-cv-00885)~~19-cv-885). Plaintiffs claim that they would not have purchased these prescription opioid products had defendants not allegedly misrepresented the products’ “addiction propensities,” and thereby suffered economic loss. Plaintiffs purport to represent a nationwide class of all individuals who directly or indirectly purchased prescription opioid medication from January 2008 to the present in 31 different states, allege causes of action for violations of those states’ antitrust laws and consumer protection statutes (and unjust enrichment), and seek, in addition to class certification, unspecified monetary damages (including actual, statutory, and punitive or treble damages) and equitable relief, including declaratory judgment and restitution. ~~Responsive pleadings~~On February 13, 2020, this case was transferred to the MDL. All activity in the case is stayed by order of the MDL court.

There are currently 26 cases brought by various West Virginia and Kentucky hospitals that have been consolidated in the state-court West Virginia Opioid Litigation Multi-Litigation Panel (the “MLP”). On November 20, 2019, the manufacturer defendants collectively filed a motion to dismiss, in which Amneal joined, and the Company filed its own individual motion to dismiss. The MLP has denied the manufacturer defendants’ motion to dismiss, but has not yet ~~due~~ruled on the Company’s separate motion. There also are 5 additional cases brought by West Virginia municipalities against the Company, Amneal, Amneal Pharmaceuticals of New York, LLC, and Impax which have been transferred to ~~be filed.~~

the MLP. The Amneal entities filed motions to dismiss in those cases on June 12, 2020. The MLP also ordered an early mediation on February 26 and 27, 2020, during which plaintiffs did not make a settlement demand. The MLP has ordered a public nuisance bench trial to occur beginning on March 22, 2021. Defendants have filed a motion for reconsideration of the order denying a jury trial.

Including the above-referenced cases, the Company and certain of its affiliates recently have been named in approximately ~~800~~929 cases now pending in the MDL court or in various state and territorial courts, including cases brought by:

•Political subdivision / municipal entity plaintiffs from the states of Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming;

•Third-party payor plaintiffs;

•

~~Third-party payor plaintiffs;~~

•Individual plaintiffs;

•Indian tribe plaintiffs; and

•Hospital / healthcare provider plaintiffs.

Requests for waivers for service of process have been transmitted by plaintiffs’ counsel to defense counsel in relation to the Company and certain of its affiliates in most of these cases. In each case where service on the Company or its affiliates has been perfected, and the case is not stayed, responsive pleadings or pre-answer motions have been filed.

Securities Class ~~Action~~

Actions

On April 17, 2017, ~~Lead Plaintiff~~lead plaintiff New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund filed an amended class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated against Impax and four current or former Impax officers alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule ~~10b-5.~~10b-5 (Fleming v. Impax Laboratories Inc., et al., No. 4:16-cv-6557-HSG). Plaintiff asserts claims regarding alleged misrepresentations about three generic drugs. Its principal claim alleges that Impax concealed that it colluded with competitor Lannett Corp. to fix the price of generic drug digoxin, and that its digoxin profits stemmed from this collusive pricing. Plaintiff also alleges that Impax concealed from the market anticipated erosion in the price of generic drug diclofenac and that Impax overstated the value of budesonide, a generic drug that it acquired from Teva. On June 1, 2017, Impax filed its motion to dismiss the amended complaint. On September 7, 2018, the Court granted Impax’s motion, dismissing plaintiff’s claims without prejudice and with leave to amend the complaint. Plaintiff filed a second amended complaint October 26, 2018. Impax filed a motion to dismiss the second amended complaint on December 6, 2018; plaintiffs’ opposition thereto was filed on January 17, 2019; and Impax’s reply in support of its motion to dismiss was filed on February 7, 2019. A hearing before the Court on the motion to dismiss took place on May 2, 2019. On August 12, 2019, the Court entered an order granting Impax’s motion, dismissing plaintiff’s second amended complaint with prejudice. On September 5, 2019, plaintiff filed a notice of appeal from both dismissal orders with the United States Court of Appeals for the Ninth Circuit.

~~Teva v. Impax Laboratories, LLC.~~

~~On February 15, 2017, plaintiffs Teva Pharmaceuticals USA, Inc. and Teva Pharmaceuticals Curacao N.V. ("Teva")~~Plaintiff’s opening brief was filed a Praecipe to Issue Writ of Summons and Writ of Summons in the Philadelphia County Court of Common Pleas against Impax alleging that Impax breached the Strategic Alliance Agreement between the parties by not indemnifying Teva in its two litigations with GlaxoSmithKline LLC regarding Wellbutrin ® XL (and therefore that Impax is liable to Teva for the amounts it paid to settle those litigations). Impax filed a Motion to Disqualify Teva’s counsel related to the matter, and on August 23, 2017, the trial court denied Impax's motion. Following the trial court’s order, Teva filed its complaint. On September 6, 2017, Impax appealed the trial court’s decision to the Pennsylvania Superior Court. On September 20, 2017, the Superior Court stayed the trial court action pending the outcome of Impax’s appeal. On November 2, 2018, the Superior Court affirmed the trial court’s decision. On November 16, 2018, Impax filed an application for reargument with the ~~Superior Court, which was denied~~Ninth Circuit on ~~December 28, 2018. On~~ February 13, 2019, the Superior Court remitted the record to the trial court. On February 15, 2019, Impax filed its answer with new matter to Teva’s complaint. On February 19, 2019, the trial court issued a revised case management order providing that, absent any extensions or amendments thereto, discovery was to have closed on July 1, 2019 and the case is expected to be ready for trial by February 3, 2020. On or about March 4, 2019, Teva filed a motion for judgment on the pleadings. Impax filed its answer and14, 2020, Impax’s answering brief in opposition to Teva’s motion for judgment on the pleadings on March 25, 2019. On April 4, 2019, the trial court denied Teva’s motion. On April 16, 2019, Impax filed a motion to stay the proceedings and compel Teva to arbitrate the dispute pursuant to an Indemnification Release Agreement negotiated and executed by the parties in 2012. Teva’s opposition to the motion was filed on May ~~7, 2019. On June 11, 2019, the trial court denied Impax’s motion. On June 24, 2019, Impax noticed~~15, 2020, and plaintiff filed its intent to appeal to the Superior Court the trial court’s denial of the motion to compel arbitration, and moved both to stay the trial court proceedings pending that appeal and for an extension of case management deadlines. On July 12, 2019, the trial court denied both motions. On July 24, 2019, Impax moved the Superior Court to stay all trial court proceedings pending the outcome of Impax’s appeal of the trial court’s denial of the motion to compel arbitration and,reply brief on August ~~13,~~4, 2020.

On December 18, 2019, the Superior Court granted Impax’s motion. Impax filed its opening appellate brief with the Superior Court on September 3, 2019 and Teva filed its response brief on October 3, 2019. In October 2019, the parties reached an agreement in principle to resolve the matter, subject to finalized documentation.

~~California Wage and Hour Class Action~~

~~On August 3, 2017, plaintiff Emielou Williams~~Cambridge Retirement System filed a class action complaint in the Superior Court ~~for the State~~ of ~~California in the~~New Jersey, Somerset County, ~~of Alameda~~ on behalf of ~~herself~~itself and others similarly situated against the Company and fourteen current or former officers alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (Cambridge Retirement System v. Amneal Pharmaceuticals, Inc., et al., No. SOM-L-1701-19). Plaintiff principally alleges that the amended registration statement and prospectus issued on May 7, 2018 in connection with the Amneal/Impax ~~alleging violation of California Business~~business combination was materially false and/or misleading, insofar as it purportedly failed to disclose that Amneal was an active participant in an alleged antitrust conspiracy with several other pharmaceutical manufacturers to fix generic drug prices, and ~~Professions Code section 17200 by violating various California wage and hour laws, and seeking,~~that this secret collusion improperly bolstered Amneal’s financial results reflected in the registration statement. Plaintiff seeks, among other things, ~~declaratory judgment, restitution~~certification of ~~allegedly unpaid wages,~~a class and disgorgement. On October 10, 2017, Impax filed a Demurrer and Motion to Strike Class Allegations. On December 12, 2017, the Court overruled Impax’s Demurrer to Plaintiff’s individual claims. However, it struck all of plaintiff’s class allegations.unspecified compensatory and/or recessionary damages. On March ~~13, 2018, plaintiff filed her First Amended Complaint once again including~~31, 2020, the ~~same class allegations. The~~ Company filed a ~~Demurrer~~motion to dismiss the complaint. Oral argument on the motion to dismiss was held telephonically on July 14, 2020 and, ~~Motion to Strike Class Allegations~~ on ~~April 12, 2018. On September 20, 2018,~~July 15, 2020, the ~~Court again struck plaintiff’s class allegations; plaintiff~~court entered an order denying the motion.

The Company believes it has ~~appealed this most recent order~~substantial meritorious defenses to the California State Court of Appeal. Plaintiff filed her opening appellate brief on February 22, 2019; Impax’s brief in response was filed on April 18, 2019; plaintiff filed her reply brief on May 7, 2019;claims asserted with respect to the litigation. However, any adverse outcome could negatively affect the Company and ~~Impax filed~~could have a ~~surreply on May 22, 2019. The appeal has now been fully submitted~~material adverse effect on the ~~briefs.~~

Company's results of operations, cash flows and/or overall financial condition.

United States Department of Justice / Drug Enforcement Administration Subpoenas

On July 7, 2017, Amneal Pharmaceuticals of New York, LLC received an administrative subpoena issued by the Long Island, NY District Office of the Drug Enforcement Administration (the “DEA”) requesting information related to compliance with certain recordkeeping and reporting requirements pursuant to regulations promulgated by the DEA. The Company is cooperating with this request for information and has provided relevant information responsive to the request. The Company and the U.S. Attorney for the Eastern District of New York (“E.D.N.Y.”) have entered into a tolling agreement (and several amendments thereto) with respect to the investigation. The material provisions of the tolling agreement (as amended) provide that the investigation is ongoing, that the U.S. Attorney will not file a claim against the Company on or before ~~December 19, 2019,~~November 11, 2020, and requests that the Company agree that the applicable statute(s) of limitations be tolled during the period from January 19, 2018 through ~~December 20, 2019.~~November 12, 2020. The Company cannot predict at this time whether the U.S. Attorney will file a lawsuit or other claims against the Company with respect to the investigation.

On March 14, 2019, Amneal received a subpoena (the “Subpoena”) from an Assistant U.S. Attorney (“AUSA”) for the Southern District of Florida. The Subpoena requests information and documents generally related to the marketing, sale, and

distribution of oxymorphone. The Company ~~intends~~has produced documents and information to ~~cooperate with~~ the AUSA ~~regarding~~in response to the Subpoena. However, no assurance can be given as to the timing or outcome of its underlying investigation.

On May 28, 2019, Amneal received a subpoena (the “Subpoena”) from an AUSA for the E.D.N.Y. requesting information and documents generally related to the Company’s compliance with Controlled Substances Act regulations. The Company ~~intends to cooperate~~is cooperating with the AUSA regarding the Subpoena. The Company and the U.S. Attorney for the E.D.N.Y. have entered into a tolling agreement (and several amendments thereto) with respect to the investigation. The material provisions of the tolling agreement (as amended) provide that the E.D.N.Y. has made no decision as yet as to the appropriate resolution of its pending investigation, that the Company’s time to present evidence and arguments to the E.D.N.Y. concerning the investigation is extended to November 12, ~~2019,~~2020, and that the Company agrees that the applicable statute(s) of limitations are tolled during the period from April 12, 2019 through November 12, ~~2019.~~2020. The Company cannot predict at this time whether the U.S. Attorney will file a lawsuit or other claims against the Company with respect to the investigation.

~~14.~~

Ranitidine Litigation

On January 27, 2020, the Company and Amneal were named in a putative class action complaint filed in the United States District Court for the Northern District of Illinois by several named plaintiffs on behalf of consumers who purchased Zantac® (ranitidine) and have not been diagnosed with, but “live in constant fear of developing,” cancer, alleging that the defendants, comprising various entities alleged to have manufactured or sold brand-name Zantac® or generic ranitidine, failed to disclose and/or concealed the product’s “dangerous propensities” in respect of the alleged presence in the product of N-Nitrosodimethylamine (or "NDMA") (White, et al., v. GlaxoSmithKline plc, et al., No. 1:19-cv-7773). The complaint purports to state claims for violations of state consumer protection acts, breaches of implied warranties, negligence/gross negligence, and fraudulent concealment (and seeks the certification of corresponding nationwide classes and subclasses). In addition to class certification, plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including the implementation and funding of a medical monitoring program. The complaint is one of hundreds of similar putative class actions and personal injury/product liability lawsuits filed in federal courts nationwide. In November 2019, the JPML established In re Zantac/Ranitidine NDMA Litigation (MDL No. 2924) for coordinated or consolidated pretrial proceedings and, on February 6, 2020, ordered the MDL centralized in the Southern District of Florida. On February 24, 2020 this lawsuit was transferred to and consolidated with MDL No. 2924. On March 2, 2020, plaintiffs voluntarily dismissed their claims without prejudice against the generic ranitidine manufacturers named as defendants (including the Company and Amneal).

On March 6, 2020, plaintiff Kathy McMillian filed a personal injury / products liability complaint in the United States District Court for the Southern District of Alabama against brand and generic ranitidine product manufacturers (including Amneal), as well as Walmart, Inc., alleging that she developed kidney cancer as a result of her use of Zantac®, Equate®, and/or generic ranitidine, and that defendants knew about but failed to warn regarding an alleged “NDMA defect” in those products (McMillian v. Sanofi-Aventis U.S. LLC, et al., No. 1:20-cv-141-N). Plaintiff seeks unspecified amounts of both compensatory and punitive damages, as well as attorneys’ fees and other costs. On March 31, 2020, the case was transferred to and consolidated with MDL No. 2924.

On March 13, 2020, plaintiff Walter Jones, on behalf of decedent Sue Jones, filed an amended complaint naming the Company, Amneal, and Amneal Pharmaceuticals of New York, LLC, in his personal injury / products liability lawsuit against brand and generic ranitidine product manufacturers pending in the United States District Court for the Western District of Tennessee (Jones v. Boehringer Ingelheim Pharmaceuticals, Inc., et al., No. 1:20-cv-2157-JDB-JAY). Plaintiff alleges that his decedent spouse developed liver cancer and died as a result of six years of use with Zantac®, and that defendants knew about but failed to warn regarding an alleged “NDMA defect” in their ranitidine products. Plaintiff seeks unspecified amounts of both compensatory and punitive damages, as well as attorneys’ fees and other costs. On March 31, 2020, the case was transferred to and consolidated with MDL No. 2924.

By order of the MDL court, on June 22, 2020, consolidated groups of personal injury plaintiffs, economic loss/medical monitoring class action plaintiffs, and third-party payor plaintiffs (comprising NECA-IBEW Welfare Trust Fund, Plumbers & Pipefitters Local Union 630, and Indiana Laborers Welfare Fund) each filed master complaints (superseding and replacing all previously filed individual complaints), in which the Company, Amneal, and Amneal Pharmaceuticals of New York, LLC are named as defendants, along with all brand and generic manufacturers, distributors, retailers, and repackagers of ranitidine-containing products. Responsive pleadings to these master complaints are due to be filed August 23, 2020.

On June 18, 2020, Amneal was named in a lawsuit filed in New Mexico state court on behalf of its Attorney General (State of New Mexico, ex rel. Hector H. Balderas v. Glaxosmithkline PLC, et al., No. D-101-CV-2020-01289), alleging claims of public nuisance, negligence, and violations of state consumer protection laws against brand/generic manufacturers and store-brand

distributors of Zantac®/ranitidine. Plaintiff seeks unspecified amounts of both compensatory and punitive damages, as well as civil penalties and injunctive relief (including restitution, disgorgement, and the funding of a medical monitoring program).

The Company believes it has substantial meritorious defenses to the claims asserted with respect to these lawsuits. However, any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.

Metformin Litigation

The Company, Amneal, and AvKARE, Inc. have been named as defendants, along with numerous other manufacturers, retail pharmacies, and wholesalers, in several putative class action lawsuits pending in the United States District Court for the District of New Jersey (“D.N.J.”), filed on behalf of consumers who purchased and third-party payors who paid or made reimbursements for prescription generic metformin products manufactured by or for defendants, alleging that defendants made and sold to putative class members metformin products that were “adulterated” or “contaminat[ed]” with NDMA and thus “worthless,” and therefore that plaintiffs suffered economic losses in connection with their purchases or reimbursements.

On June 3, 2020, the D.N.J. consolidated the lawsuits, as In Re Metformin Marketing and Sales Practices Litigation (No. 2:20-cv-02324-MCA-MAH). On July 6, 2020, plaintiffs filed a consolidated economic loss class action complaint, in which they seek, in addition to class certification, among other things, unspecified compensatory and punitive damages, statutory penalties, and equitable relief. Responsive pleadings are not yet due.

The Company believes it has substantial meritorious defenses to the claims asserted with respect to this matter. However, any adverse outcome could negatively affect the Company and could have a material adverse effect on the Company's results of operations, cash flows and/or overall financial condition.

18. Segment Information

~~The~~

As a result of the Acquisitions, the Company ~~has two~~added a third reportable segment, AvKARE, to its existing reportable segments, Generics and Specialty. Generics develops, manufactures and commercializes complex oral solids, injectables, ophthalmics, liquids, topicals, softgels, inhalation products and transdermals across a broad range of therapeutic categories. ~~The Company's~~Generics’ retail and institutional portfolio contains approximately ~~200~~250 product families, many of which represent difficult-to-manufacture products or products that have a high barrier-to-entry, such as oncologics, anti-infectives and supportive care products for healthcare providers.

Specialty delivers proprietary medicines to the U.S. market. The Company offers a growing portfolio in core therapeutic categories including central nervous system disorders, endocrinology, parasitic infections and other therapeutic areas. The Company's specialty products are marketed through skilled specialty sales and marketing teams, who call on neurologists, movement disorder specialists, endocrinologists and primary care physicians in key markets throughout the U.S.

Specialty also has a number of product candidates that are in varying stages of development.

AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is also a wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and surgical products. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment operating income (loss). Items below income (loss) from operations are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in "Corporate and Other." The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker.

The tables below present segment information reconciled to total Company financial results, with segment operating income or loss including gross profit less direct selling expenses, research and development expenses, and other operating expenses to the extent specifically identified by segment (in thousands):

Three Months Ended September 30, 2019

Generics ⁽¹⁾

Specialty ⁽¹⁾

Corporate
and Other

Total
Company

Net revenue

$
291,021

$
87,262

$
—

$
378,283

Cost of goods sold

217,773

49,944

—

267,717

Cost of goods sold impairment charges

49,115

7,017

—

56,132

Gross profit

24,133

30,301

—

54,434

Selling, general and administrative

14,256

20,228

29,313

63,797

Research and development

34,316

3,809

—

38,125

In-process research and development impairment charges

23,382

—

—

23,382

Charges (gains) related to legal matters, net

14,750

—

—

14,750

Intellectual property legal development expenses

2,586

—

—

2,586

Acquisition, transaction-related and integration expenses

502

2,455

174

3,131

Restructuring and other charges

14,702

213

6,022

20,937

Operating (loss) income

$
(80,361
)

$
3,596

$
(35,509
)

$
(112,274
)

Nine Months Ended September 30, 2019

Generics ⁽¹⁾

Specialty ⁽¹⁾

Corporate
and Other

Total
Company

Net revenue

$
1,008,562

$
220,483

$
—

$
1,229,045

Cost of goods sold

760,074

113,767

—

873,841

Cost of goods sold impairment charges

105,424

7,017

—

112,441

Gross profit

143,064

99,699

—

242,763

Selling, general and administrative

52,783

57,705

105,026

215,514

Research and development

129,915

10,084

—

139,999

In-process research and development impairment charges

46,169

—

—

46,169

Charges (gains) related to legal matters, net

14,750

—

—

14,750

Intellectual property legal development expenses

8,218

1,045

—

9,263

Acquisition, transaction-related and integration expenses

4,086

5,705

2,891

12,682

Restructuring and other charges

17,201

391

12,341

29,933

Operating (loss) income

$
(130,058
)

$
24,769

$
(120,258
)

$
(225,547
)

⁽¹⁾ For the quarter ended September 30, 2019, operating results for Oxymorphone were reclassified from the Generics to the Specialty, where it is sold as a non-promoted product. Prior period results have not been restated to reflect the reclassification.

Three Months Ended September 30, 2018	Generics			Specialty			Corporate and Other			Total Company

Three Months Ended June 30, 2020													Three Months Ended June 30, 2020	Generics ⁽¹⁾⁽²⁾		Specialty ⁽²⁾		AvKARE ⁽¹⁾		Corporate and Other		Total Company
Net revenue	$	391,175		$	85,312		$	—		$	476,487		Net revenue	$	306,559	$	94,256	$	63,847	$	—	$	464,662
Cost of goods sold		230,051			38,516			—			268,567		Cost of goods sold	218,909		50,229		50,528		—		319,666
Cost of goods sold impairment charges		7,815			—			—			7,815		Cost of goods sold impairment charges	759		—		—		—		759
Gross profit		153,309			46,796			—			200,105		Gross profit	86,891		44,027		13,319		—		144,237
Selling, general and administrative		21,030			19,716			34,740			75,486		Selling, general and administrative	12,802		16,870		15,647		35,625		80,944
Research and development		38,347			4,002			—			42,349		Research and development	40,316		5,256		—		—		45,572
In-process research and development impairment charges		650			—			—			650

Intellectual property legal development expenses		3,929			472			—			4,401		Intellectual property legal development expenses	3,550		—		—		—		3,550
Acquisition, transaction-related and integration expenses		—			—			2,231			2,231
Restructuring and other charges		(2,885	)		(27	)		756			(2,156	)
Charges (gains) related to legal matters, net		—			—			2,589			2,589		Charges (gains) related to legal matters, net	3,050		(1,750)		—		—		1,300
Other operating expenses													Other operating expenses	657		82		—		1,381		2,120
Operating income (loss)	$	92,238		$	22,633		$	(40,316	)	$	74,555		Operating income (loss)	$	26,516	$	23,569	$	(2,328)	$	(37,006)	$	10,751

Nine Months Ended September 30, 2018	Generics			Specialty		Corporate and Other			Total Company

Six Months Ended June 30, 2020												Six Months Ended June 30, 2020	Generics ⁽¹⁾⁽²⁾		Specialty ⁽²⁾		AvKARE ⁽¹⁾		Corporate and Other		Total Company
Net revenue	$	1,028,134		$	137,329	$	—		$	1,165,463		Net revenue	$	659,145	$	182,233	$	121,817	$	—	$	963,195
Cost of goods sold		572,179			62,474		—			634,653		Cost of goods sold	437,774		98,047		97,423		—		633,244
Cost of goods sold impairment charges		7,815			—		—			7,815		Cost of goods sold impairment charges	2,215		—		—		—		2,215
Gross profit		448,140			74,855		—			522,995		Gross profit	219,156		84,186		24,394		—		327,736
Selling, general and administrative		51,854			33,265		71,491			156,610		Selling, general and administrative	29,425		37,812		26,435		65,248		158,920
Research and development		129,762			7,131		—			136,893		Research and development	69,350		12,601		—		—		81,951
In-process research and development impairment charges		650			—		—			650		In-process research and development impairment charges	960		—		—		—		960
Intellectual property legal development expenses		12,509			515		—			13,024		Intellectual property legal development expenses	4,815		5		—		—		4,820
Acquisition, transaction-related and integration expenses		114,622			—		102,251			216,873
Restructuring and other charges		21,912			2,394		18,003			42,309
Charges (gains) related to legal matters, net		(3,000	)		—		2,589			(411	)
Charges related to legal matters, net												Charges related to legal matters, net	5,550		250		—		—		5,800
Other operating expenses												Other operating expenses	703		82		—		5,958		6,743
Operating income (loss)	$	119,831		$	31,550	$	(194,334	)	$	(42,953	)	Operating income (loss)	$	108,353	$	33,436	$	(2,041)	$	(71,206)	$	68,542

~~15.~~

(1)Operating results for the sale of Amneal products by AvKARE are included in Generics.

(2)During the three months ended September 30, 2019, operating results for Oxymorphone were reclassified from Generics to Specialty, where it is sold as a non-promoted product. Prior period results have not been restated to reflect the reclassification.


Three Months Ended June 30, 2019	Generics		Specialty		Corporate and Other		Total Company
Net revenue	$	335,064	$	69,578	$	—	$	404,642
Cost of goods sold	263,423		32,958		—		296,381
Cost of goods sold impairment charges	3,012		—		—		3,012
Gross profit	68,629		36,620		—		105,249
Selling, general and administrative	14,379		16,150		36,752		67,281
Research and development	45,448		2,568		—		48,016

Intellectual property legal development expenses	2,511		—		—		2,511
Acquisition, transaction-related and integration expenses	987		1,366		1,166		3,519
Restructuring and other charges	418		—		2,417		2,835
Operating income (loss)	$	4,886	$	16,536	$	(40,335)	$	(18,913)


Six Months Ended June 30, 2019	Generics		Specialty		Corporate and Other		Total Company
Net revenue	$	717,541	$	133,221	$	—	$	850,762
Cost of goods sold	542,301		63,823		—		606,124
Cost of goods sold impairment charges	56,309		—		—		56,309
Gross profit	118,931		69,398		—		188,329
Selling, general and administrative	38,527		37,477		75,713		151,717
Research and development	95,599		6,275		—		101,874
In-process research and development impairment charges	22,787		—		—		22,787
Intellectual property legal development expenses	5,632		1,045		—		6,677
Acquisition, transaction-related and integration expenses	3,584		3,250		2,717		9,551
Restructuring and other charges	2,499		178		6,319		8,996
Operating (loss) income	$	(49,697)	$	21,173	$	(84,749)	$	(113,273)

19. Related Party Transactions

The Company has various business agreements with certain third-party companies in which there is some common ownership and/or management between those entities, on the one hand, and the Company, on the other hand. The Company has no direct ownership or management in any of such related party companies. The related party relationships that generated income and/ or expense in the respective reporting periods are described below.

Financing ~~Lease/Financing Obligation~~Lease - Related Party

The Company has a financing lease for ~~two~~2 buildings located in Long Island, New York, that are used as an integrated manufacturing and office facility. For annual payments required under the terms of the non-cancelable lease agreement over the next five years and thereafter, refer to Note ~~11.~~12. Leases.

in the Company’s 2019 Annual Report on Form 10-K.

Lease costs and interest expense related to this lease were approximately $2 million and $3 million for the three and six months ended June 30, 2020, respectively. Lease costs and interest expense related to this lease were each approximately $2 million and $4 million for the three and six months ended June 30, 2019, respectively.

Kanan, LLC

Kanan, LLC ("Kanan") is an independent real estate company which owns Amneal’s manufacturing facilities located at 65 Readington Road, Branchburg, New Jersey, 131 Chambers Brook Road, Branchburg, New Jersey and 1 New England Avenue, Piscataway, New Jersey. Amneal leases these facilities from Kanan under ~~two~~2 separate triple-net lease agreements that expire in 2027 and 2031, respectively, at an annual rental cost of approximately $2 million combined, subject to CPI rent escalation adjustments as provided in the lease agreements. Rent expense paid to the related party for both of the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 was $0.5 million. Rent expense paid to the related party for both of the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 ~~and 2018~~ was ~~$1.5~~$1 million.

Asana Biosciences, LLC

Asana Biosciences, LLC (“Asana”) is an early stage drug discovery and research and development company focusing on several therapeutic areas, including oncology, pain and inflammation. Amneal provided research and development services to Asana under a development and manufacturing agreement. The total amount of income earned from this arrangement for the three and ~~nine~~six months ended ~~September~~June 30, 2019 was ~~nil~~$1 million and ~~$1.4~~$1 million, ~~respectively. The total amount of income earned from this arrangement for both the three and nine months ended September 30, 2018 was $0.2 million.~~respectively (NaN in 2020). At ~~September 30,~~December 31, 2019 receivables of approximately $1 million were due from the related party for research and development related ~~services.~~

~~Industrial Real Estate Holdings NY, LLC~~

services (NaN at June 30, 2020).

Industrial Real Estate Holdings NY, LLC ~~("IRE")~~and Sutaria Family Realty, LLC

Industrial Real Estate Holdings NY, LLC is an independent real estate management entity, which ~~among other activities, is~~was the ~~landlord~~sub-landlord of Amneal’s leased manufacturing facility located at 75 Adams Avenue, Hauppauge, New York. ~~The~~In May 2020, the lease ~~expires in~~was

assigned to the Company with the consent of the landlord, Sutaria Family Realty, LLC., which is also a related party. Concurrently with the assignment of the lease, the Company exercised a renewal option for $0.1 million to extend the lease by 5 years until March ~~2021.~~31, 2026. Monthly rent payments are $0.1 million and increase by 3% annually. Rent ~~expense~~ paid to the related ~~party~~parties for both the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 was $0.3 ~~million and $0.5 million, respectively.~~million. Rent ~~expense~~ paid ~~for~~to the related ~~party~~parties for both the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 ~~and 2018~~ was ~~$0.8 million and $1.0 million, respectively.~~

$0.6 million.

Kashiv BioSciences, LLC

Kashiv BioSciences, LLC ("Kashiv") is an independent contract development organization focused primarily on the development of 505(b) (2) NDA products. Amneal has various business agreements with Kashiv.

~~In May 2013, Amneal~~The parties entered into a ~~sublease agreement with Kashiv~~lease for ~~a portion~~parking spaces in Piscataway, NJ. The total amount of one of its research and development facilities. The sublease automatically renews annually if not terminated and has an annual base rent of $2 million. On January 15, 2018, Amneal and Kashiv entered into an Assignment and Assumption of Lease Agreement. The lease was assignedexpense paid to Kashiv ~~and Amneal was relieved of all obligations. Rental expense~~ from ~~the related party sublease for the nine months ended September 30, 2018 was $0.4 million (none~~this agreement for both the three and six months ended ~~September~~June 30, ~~2019 and 2018 and nine months ended September 30,~~2020 was less than $0.1 million (NaN in 2019).

Amneal has also entered into various development and commercialization arrangements with Kashiv to collaborate on the development and commercialization of certain generic pharmaceutical products. The total reimbursable expenses associated with these arrangements for the ~~nine~~six months ended ~~September~~June 30, ~~2019 was $1~~2020 were $0.2 million ~~(none~~(NaN for the three months ended ~~September~~June 30, ~~2019 and~~2020). The total reimbursable expenses associated with these arrangements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018).~~2019 were $2 million and $3 million, respectively. Kashiv receives a percentage of net profits with respect to Amneal’s sales of these products. The total profit share ~~paid to Kashiv~~ for the three and six months ended ~~September~~June 30, ~~2019 and 2018~~2020 was ~~$0.6~~$2 million and ~~$0.8~~$5 million, respectively. The total profit share ~~paid to Kashiv~~ for the ~~nine~~three and six months ended ~~September~~June 30, 2019 ~~and 2018 were $2~~was $0.7 million and $3$1 million, respectively. At September 30, 2019 and December 31, 2018 payables of approximately $0.6 million and $0.8 million, respectively, were due to the related party for royalty-related transactions. Additionally, as of September 30, 2019 a receivable of $0.7 million was due from the related party.

In June 2017, Amneal and Kashiv entered a product acquisition and royalty stream purchase agreement. The aggregate purchase price was $25 million on the closing, which has been paid, plus two potential future $5 million earn outs related to the Estradiol Product. The contingent earn outs were to be recorded in the period in which they are earned. The first and second $5 million earn outs were recognized in March 2018 and June 2018, respectively, as an increase to the cost of the Estradiol product intangible asset and amortized on a straight-line basis over the remaining life of the Estradiol intangible asset. The first earn out was paid in July 2018 and the second earn out was paid in September 2018.

Pursuant to a product development agreement, Amneal and Kashiv agreed to collaborate on the development and commercialization of Oxycodone HCI ER Oral Tablets. Under the agreement, this product is owned by Kashiv, with Amneal acting as the exclusive marketing partner and as Kashiv’s agent for filing the product ANDA. Under the agreement, Amneal was also responsible for assuming control of and managing all aspects of the patent litigation arising from the filing of the ANDA, including selecting counsel and settling such proceeding (subject to Kashiv’s consent). In December 2017, Amneal and Kashiv terminated the product development agreement and pursuant to the termination and settlement of the agreement, Kashiv agreed to pay Amneal $8 million, an amount equal to the legal costs incurred by Amneal related to the defense of the ANDA. The cash payment was received in February 2018.

Pursuant to a product development agreement, Amneal and Kashiv agreed to collaborate on the development and commercialization of Levothyroxine Sodium. Under the agreement, the IPintellectual property and ANDA for this product is owned by Amneal and Kashiv is to receive a profit share for all sales of the product made by Amneal. Amneal is precluded from selling the product made by Kashiv during the term of the license and supply agreement with JSP. Under the terms of the amended agreement with Kashiv, Amneal paid $2 million in July 2019, and may be required to pay up to an additional $18 million upon certain regulatory milestones being met. For the ~~nine~~three and six months ended ~~September~~June 30, ~~2019,~~2020, the Company recorded a $2 million to research and development expense, which was accrued in related party payable - short term as of June 30, 2020.

In November 2019, Amneal and Kashiv entered into a licensing agreement for the development and commercialization of Kashiv’s orphan drug K127 (Pyridostigmine) for the treatment of Myasthenia Gravis. Under the terms of the agreement, Kashiv will be responsible for all development and clinical work required to secure Food and Drug Administration approval and Amneal will be responsible for filing the NDA and commercializing the product. The Company made an upfront payment of approximately $2 million to Kashiv in December 2019, which was recorded in research and development, and Kashiv is eligible to receive development and regulatory milestones totaling approximately $17 million. Kashiv is also eligible to receive tiered royalties from the low double-digits to mid-teens on net sales of K127. For the six months ended June 30, 2020, the Company recorded $2 million (NaN in the three months ended June 30, 2020 or three and six months ended June 30, 2019), as research and development expense to compensate Kashiv for costs incurred to develop the product.

~~Adello Biologics, LLC~~

~~Adello is an independent clinical stage company engaged in~~

On February 20, 2020, the ~~development of biosimilar pharmaceutical products. Amneal~~Company and ~~Adello are parties to~~Kashiv entered into a master services agreement ~~pursuant to which, from time to time, Amneal~~covering certain services that Kashiv provides ~~human resources~~the Company for commercial product support for EluRyng and product quality assurance services on behalf of Adello. The parties are also party to a license agreement for parking spaces in Piscataway, NJ. The total amount of income received from Adello from these agreements was less than $0.1 million for bothother products, including Ranitidine and Nitrofurantoin. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019. The total amount~~2020, the Company recorded $2 million and $3 million, respectively, (NaN in 2019), as cost of ~~net expense paid~~goods sold to ~~Adello from these agreements~~compensate Kashiv for services performed.

At June 30, 2020 and December 31, 2019 payables of approximately $4 million and $6 million, respectively, were due to the related party for the aforementioned transactions. Additionally, at both ~~the three~~June 30, 2020 and ~~nine months ended September 30, 2018 was less than $0.1 million. At September 30,~~December 31, 2019 a receivable of ~~approximately~~ $0.1 million was due from the related party.

In March 2017, Amneal entered into a product development agreement with Adello. The collaboration extended the remaining development process to Adello for a complex generic product, while Amneal retained its commercial rights upon approval. Pursuant to the agreement, Adello paid Amneal $10 million for reimbursement of past development costs, which Amneal deferred as a liability and will pay royalties upon commercialization.

In October 2017, Amneal and Adello terminated their product development agreement pursuant to which Amneal and Adello had been collaborating to develop and commercialize Glatiramer Acetate products. Pursuant to the termination agreement, Amneal owed Adello $11 million for the up-front payment plus interest. This amount was paid in January 2018.

On October 1, 2017, Amneal and ~~Adello~~Kashiv, entered into a license and commercialization ~~agreement pursuant~~agreement. Kashiv granted Amneal an exclusive license, under its New Drug Application, to ~~which the parties have agreed to cooperate with respect to certain development activities in connection with~~distribute and sell two ~~biologic pharmaceutical products. In addition, under the agreement, Adello has appointed Amneal as its exclusive marketing partner for such~~bio-similar products in the ~~United States.~~ U.S. Kashiv is responsible for development, regulatory filings, obtaining FDA approval, and manufacturing, and Amneal is responsible for marketing, selling and pricing activities. The term of the agreement is 10 years from the respective product’s launch date.

In connection with the agreement, Amneal paid an upfront amount of $2 million in October 2017 for execution of the agreement which was ~~recorded within~~expensed in research and ~~development expenses.~~development. The agreement also provides for potential future milestone payments to ~~Adello.~~

Kashiv of (i) up to $21 million relating to regulatory approval, (ii) up to $43 million for successful delivery of commercial launch inventory, (iii) between $20 million and $50 million relating to number of competitors at launch for one product, and (iv) between $15 million and $68 million for the achievement of cumulative net sales for both products. The

milestones are subject to certain performance conditions which may or may not be achieved, including FDA filing, FDA approval, launch activities and commercial sales volume objectives. In ~~October 2017,~~addition, the agreement provides for Amneal ~~purchased~~to pay a ~~building from Adello~~profit share equal to 50% of net profits, after considering manufacturing and marketing costs. The research and development expenses under this agreement for the six months ended June 30, 2020 and 2019 were immaterial.

In May 2020, Amneal and Kashiv entered into a product development agreement for the development and commercialization of Posaconazole. Under the agreement, the intellectual property and ANDA for this product is owned by Amneal and Kashiv is to receive a profit share for all sales of the product made by Amneal.

In connection with the agreement, Amneal paid an upfront amount of $0.3 million in ~~Ireland~~May 2020 for execution of the agreement which was expensed in research and development. The agreement also provides for potential future milestone payments to ~~further support its inhalation dosage form. Amneal issued a promissory note~~Kashiv of (i) up to $0.8 million relating to development milestones, (ii) up to $0.3 million relating to regulatory approval, and (iii) up to $1 million for ~~13 million euros ($15 million based on exchange rate as~~the achievement of ~~December 31, 2017)~~cumulative net sales. The milestones are subject to certain performance conditions which ~~accrues interest at a rate of 2% per annum, due on~~may or ~~before July 1, 2019. The promissory note was paid in full in the second quarter of 2018. Refer to~~ ~~Note 5. Alliance~~may not be achieved, including FDA filing, FDA approval and ~~Collaboration~~ ~~for further information on collaboration agreements with Adello.~~

commercial sales volume objectives.

PharmaSophia, LLC

PharmaSophia, LLC ("PharmaSophia") is a joint venture formed by Nava Pharma, LLC ("Nava") and Oakwood Laboratories, LLC for the purpose of developing certain products. Currently PharmaSophia is actively developing two injectable products. PharmaSophia and Nava are parties to a research and development agreement pursuant to which Nava provides research and development services to PharmaSophia. Nava subcontracted this obligation to Amneal, entering into a subcontract research and development services agreement pursuant to which Amneal provides research and development services to Nava in connection with the products being developed by PharmaSophia. The total amount of income earned from these agreements for the three months ended ~~September~~June 30, 2020 and 2019 ~~and 2018~~ was ~~$0.3~~$0.2 million and ~~$0.2~~$0.3 million, respectively. The total amount of income earned from these agreements for the ~~nine~~six months ended ~~September~~June 30, 2020 and 2019 ~~and 2018~~ was ~~$0.9~~$0.4 million and ~~$0.5~~$0.6 million, respectively. At ~~September~~both June 30, ~~2019~~2020 and December 31, ~~2018~~2019 receivables of ~~$0.3~~$0.7 million ~~and $0.1 million, respectively,~~ were due from the related party.

~~Gemini Laboratories, LLC~~

~~Prior~~ Additionally, as of December 31, 2019 a payable of less than $0.1 million was due to the ~~Company's acquisition of Gemini~~related party, which was settled in May 2018, Amneal and Gemini were parties to various agreements. Total gross profit earned from the sale of inventory to Gemini for the nine months ended September 30, 2018 (through the acquisition date) was $0.1 million. The total profit share paid by Gemini for the nine months ended September 30, 2018 (through the acquisition date) was $5 million.

February 2020.

Fosun International Limited

Fosun International Limited (“Fosun”) is a Chinese international conglomerate and investment company that is a significant shareholder of the Company. On June 6, 2019, the Company entered into a license and supply agreement with a subsidiary of Fosun, which is a Chinese pharmaceutical company. Under the terms of the agreement, the Company will hold the imported drug license required for pharmaceutical products manufactured outside of China and will supply Fosun with finished, packaged products for Fosun to then sell in the China market. Fosun will be responsible for obtaining regulatory approval in China and for shipping the product from Amneal’s facility to Fosun’s customers in China. In consideration for access to the Company's U.S. regulatory filings to support its ~~China~~ regulatory filings in China and for the supply of product, Fosun paid the Company a $1 million non-refundable fee, net of tax, in July 2019 and will be required to pay the Company $0.3 million for each of 8 products upon the first commercial sale of each in China in addition to a supply price and a profit share. For the three and ~~nine~~six months ended ~~September~~June 30, 2020 and 2019, the Company ~~has not recognized~~did 0t recognize any revenue from this agreement.

Apace KY, LLC d/b/a Apace Packaging LLC

Apace KY, LLC d/b/a Apace Packaging LLC (“Apace”) provides packaging solutions pursuant to an exclusive packaging agreement. Apace markets its services which include bottling and blistering for the pharmaceutical industry. The total amount of expenses from this arrangement for the three and six months ended June 30, 2020 was $4 million and $6 million, respectively (NaN in 2019). At June 30, 2020, payables of approximately $1 million were due to the related party for packaging services.

Tracy Properties LLC

R&S leases operating facilities, office and warehouse space from Tracy Properties LLC. The total amount of expenses from this arrangement for the three and six months ended June 30, 2020 was $0.1 million and $0.2 million, respectively (NaN in 2019).

AzaTech Pharma LLC

R&S purchases inventory from AzaTech Pharma LLC for resale. The total amount of expenses from this arrangement for the three and six months ended June 30, 2020 was $1 million and $2 million, respectively (NaN in 2019). At June 30, 2020, payables of approximately $0.7 million were due to the related party for inventory purchases.

AvPROP, LLC

AvKARE LLC leases its operating facilities from AvPROP, LLC. Rent expense from this arrangement for the three and six months ended June 30, 2020 was less than $0.1 million and $0.1 million, respectively.

Tarsadia Investments, LLC

Tarsadia Investments, LLC (“Tarsadia”) is a private investment firm that provides financial services and is a significant shareholder of the Company. Tarsadia offers capital and strategic support for companies with substantial growth potential primarily in the healthcare, financial services, real estate, and clean technology sectors. The Company entered into an agreement in which Tarsadia will provide financial consulting services. The services are not expected to have a material impact to the Company’s financial statements.

Avtar Investments, LLC

Avtar Investments, LLC ("Avtar") is a private investment firm. During April 2020, the Company entered into an agreement in which Avtar will provide consulting services. The total amount of consulting expense incurred for the three and six months ended June 30, 2020 was $0.8 million. As of June 30, 2020, $0.8 million is due to Avtar.

Zep Inc.

Zep Inc. ("Zep") is a producer, and distributor of maintenance and cleaning solutions for retail, food & beverage, industrial & institutional, and vehicle care customers. During May 2020, AvKARE entered into an agreement to supply cleaning products to Zep. The amount of revenue recorded for the three and six months ended June 30, 2020 was $0.4 million. As of June 30, 2020, $0.4 million was recorded in related party receivables.

Tax Distributions

Under the terms of the Limited Liability Company Agreement, Amneal is obligated to make tax distributions to its members, which are also holders of non-controlling interests in the Company. For further details, refer to Note ~~19.~~21. Stockholders' ~~Equity/ Members' Deficit~~ ~~contained~~Equity and Redeemable Non-Controlling Interests.

Additionally, under the terms of the limited liability company agreement between the Company and the holders of the Rondo Class B Units, Rondo is obligated to make tax distributions to those holders, subject to certain limitations as defined in the ~~Company's 2018 Annual Report on Form 10-K.~~

Rondo Credit Facility. For further details, refer to Note 21. Stockholders' Equity and Redeemable Non-Controlling Interests

~~During December 2018,~~.

Notes Payable – Related Party

The sellers of AvKARE, LLC and R&S hold the ~~Company acquired~~remaining 34.9% interest in Rondo (“Rondo Class B Units”). Certain holders of the ~~non-controlling interests in one~~Rondo Class B Units are also holders of ~~Amneal's non-public subsidiaries for approximately $3 million. As of December 31, 2018,~~ the ~~Company recorded a $3 million related party payable for this transaction which was paid in full as of September 30, 2019.~~

~~16.~~Sellers Notes and the Short-Term Sellers Note. For additional information, refer to Note 13.Debt.

20. Goodwill and Intangible Assets

The changes in goodwill for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and for the year ended December 31, ~~2018~~2019 were as follows (in thousands):


	September 30, 2019			December 31, 2018				June 30, 2020		December 31, 2019
Balance, beginning of period	$	426,226		$	26,444		Balance, beginning of period	$	419,504	$	426,226
Impax acquisition adjustment		(1,255	)		—		Impax acquisition adjustment	—		(1,255)
Goodwill acquired during the period		—			401,488		Goodwill acquired during the period	108,790		—
Goodwill divested during the period		(5,175	)		—		Goodwill divested during the period	—		(5,175)
Currency translation		(125	)		(1,706	)	Currency translation	(819)		(292)
Balance, end of period	$	419,671		$	426,226		Balance, end of period	$	527,475	$	419,504

As of ~~September~~June 30, 2020, $361 million, $93 million, and $73 million of goodwill was allocated to the Specialty, Generics, and AvKARE segments, respectively. As of December 31, 2019, $361 million and $59 million of goodwill was allocated to the ~~Specialty and Generics segment, respectively. As of December 31, 2018, $360 million and $66 million of goodwill was allocated to the~~

Specialty and Generics segment, respectively. For the ~~nine months~~year ended ~~September 30,~~December 31, 2019, goodwill divested was associated with the sale of the Company's operations in the United Kingdom and Germany. For the year ended December 31, ~~2018,~~2019, the adjustment to goodwill ~~acquired~~ was associated with the ~~Impax and Gemini acquisitions.~~Combination. Refer to Note 3. Acquisitions and Divestitures for additional information about the ~~acquisition of Impax~~Acquisitions and the ~~divestiture~~divestitures of the Company's operations in the United Kingdom and Germany.

~~Interim Goodwill Impairment Test~~

~~In light of the continued decline in the Company’s share price and financial performance,~~ the Company performed an interim goodwill impairment test during the three months ended September 30, 2019 by evaluating its two reporting units, which are the same as the Company’s two reportable segments. The fair values of the reporting units were determined by combining both the income and market approaches. In performing this test, the Company utilized long-term growth rates for its reporting units ranging from no growth to 1.0% and discount rates ranging from 9.0% to 11.5% in its estimation of fair value. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical performance by management.

Based on the results of the interim test performed as of August 31, 2019 and updated on September 30, 2019, the Company determined that the estimated fair values of the Generics and Specialty reporting units exceeded their respective carrying amounts; therefore, the Company did not record a goodwill impairment charge during the three months ended September 30, 2019. ~~The Generics reporting unit was in excess of its carrying value by approximately 15% and the Specialty reporting unit was in excess of its carrying value by approximately 9%.~~

While management believes the assumptions used were reasonable and commensurate with the views of a market participant, changes in key assumptions for these reporting units, including increasing the discount rate, lowering forecasts for revenue, operating margin or lowering the long-term growth rate, could result in a future impairment.

Intangible assets at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are comprised of the following (in thousands):


	September 30, 2019								December 31, 2018								June 30, 2020													December 31, 2019
	Weighted-Average Amortization Period (in years)	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net			Weighted-Average Amortization Period (in years)	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Amortizing intangible assets:																Amortizing intangible assets:
Product rights	9.9	$	1,213,195	$	(161,969	)	$	1,051,226	$	1,282,011	$	(88,081	)	$	1,193,930	Product rights	9.5	$	1,189,785	$	(265,284)	$	924,501	$	1,197,535	$	(198,857)	$	998,678
Customer relationships			—		—			—		7,005		(1,955	)		5,050
Other intangible assets	10.3		3,000		(950	)		2,050		5,620		(1,561	)		4,059	Other intangible assets	6.0	133,800		(15,590)		118,210		3,000		(1,000)		2,000
Total		$	1,216,195	$	(162,919	)	$	1,053,276	$	1,294,636	$	(91,597	)	$	1,203,039
Subtotal																Subtotal		$	1,323,585	$	(280,874)	$	1,042,711	$	1,200,535	$	(199,857)	$	1,000,678
In-process research and development			382,525		—			382,525		451,930		—			451,930	In-process research and development		381,115		—		381,115		382,075		—		382,075
Total intangible assets		$	1,598,720	$	(162,919	)	$	1,435,801	$	1,746,566	$	(91,597	)	$	1,654,969	Total intangible assets		$	1,704,700	$	(280,874)	$	1,423,826	$	1,582,610	$	(199,857)	$	1,382,753

The Company evaluated assets for potential impairment by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. For the three months ended ~~September~~June 30, ~~2019,~~2020, the Company recognized a total of ~~$79~~$1 million of intangible asset impairment charges, which was recognized in cost of goods sold impairment charges. For the six months ended June 30, 2020, the Company recognized a total of $3 million of intangible asset impairment charges, of which ~~$56~~$2 million was recognized in cost of goods sold impairment charges and ~~$23~~$1 million was recognized in in-process research and development impairment charges. For the nine months ended September 30, 2019, the Company recognized a total of $158 million of intangible asset impairment charges, of which $112 million was recognized in cost of goods sold impairment charges and $46 million was recognized in in-process research and development expense.

The impairment charges for the three months ended ~~September~~June 30, ~~2019~~2020 are primarily related to 43 marketed products, 2 of which experienced significant price erosion during 2020. The contract with the remaining product was terminated with the customer.

The impairment charges for the six months ended June 30, 2020 are primarily related to 5 currently marketed products and 4 2 in-process research and development (“IPR&D&D”) products ~~all~~that were acquired as part of the Combination. For the currently marketed products, ~~the impairment charges were the result of~~4 products experienced significant price erosion during ~~the three months ended September 30, 2019,~~2020, without an offsetting increase in customer demand, resulting in significantly lower than expected future cash ~~flows. For~~flows and negative margins and one product had its contract terminated. The IPR&D charges are associated with 2 products, 1 of which experienced a delay in its estimated launch date and the ~~IPR&D products,~~other was canceled due to the ~~impairment charges were~~withdrawal of our development partner.

During the ~~result of expected significant price erosion for the products resulting in significantly lower than expected future cash flows.~~

~~The impairment charges for the nine~~six months ended ~~September~~June 30, ~~2019 are primarily related to twelve products, six~~2020, the Company recognized $131 million of intangible assets associated with the Acquisitions, of which all are ~~currently marketed products~~classified in other intangible assets in the table above. These intangible assets consist of government licenses, government contracts, national contracts, customer relationships and ~~six of which~~a trade name and are IPR&D products, all acquired as part of the Combination. For the currently marketed products, the impairment charges were the result of significant price erosion during 2019, without an offsetting increase in customer demand, resulting in significantly lower than expected future cash flows. ~~For one IPR&D product, the impairment charge was the result of increased competition at launch resulting in significantly lower than expected future cash flows.~~ ~~For one IPR&D product, the impairment charge was the result of a strategic decision~~amortized to ~~no longer pursue approval of the product. For the other four IPR&D products, the impairment charges were the result of expected significant price erosion~~selling, general, and administrative over their estimated useful lives. Refer to Note 3.Acquisitions and Divestitures for ~~the products resulting in significantly lower than expected future cash flows.~~

additional information.

During the ~~nine~~six months ended ~~September~~June 30, 2019, the Company recognized a $50 million product rights intangible asset for the exclusive rights to sell Levothyroxine in the U.S. market under a license and supply agreement with JSP. Refer to Note 5. Alliance and Collaboration for additional information.

For the ~~nine~~six months ended ~~September~~June 30, 2019, included in the Company's divested United Kingdom operations were a net customer relationship intangible asset and a net trade name intangible asset of $5 million and $2 million, respectively. Refer to Note 3. Acquisitions and Divestitures for additional information.

Amortization expense related to intangible assets recognized is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2019

2018

2019

2018

Amortization

$
38,015

$
25,655

$
103,774

$
44,109


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Amortization	$	43,976	$	34,796	$	86,552	$	65,759

The following table presents future amortization expense for the next five years and thereafter, excluding ~~$383~~$381 million of IPR&D intangible assets (in thousands):

	Future Amortization
Remainder of 2019	$	40,163
2020		147,242
				Future Amortization
Remainder of 2020			Remainder of 2020	$	88,633
2021		150,941	2021	172,302
2022		140,971	2022	157,964
2023		131,778	2023	146,979
2024		127,107	2024	140,021
Thereafter		315,074	Thereafter	336,812
Total	$	1,053,276	Total	$	1,042,711

~~17. Acquisition, Transaction-Related~~

21. Stockholders’ Equity and ~~Integration Expenses~~

The following table sets forth the components of the Company’s acquisition, transaction-related and integration expenses for the three and nine months ended September 30, 2019 and 2018 (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

Acquisition, transaction-related and integration expenses⁽¹⁾

$
3,131

$
2,231

$
12,682

$
30,374

Profit participation units ⁽²⁾

—

—

—

158,757

Transaction-related bonus ⁽³⁾

—

—

—

27,742

Total

$
3,131

$
2,231

$
12,682

$
216,873

~~(1)~~

Acquisition, transaction-related and integration expenses include professional service fees (e.g. legal, investment banking and accounting), information technology systems conversions, and contract termination/renegotiation costs. These costs for the three and nine months ended September 30, 2019 primarily consist of integration costs.

Redeemable Non-Controlling Interests

~~(2)~~

Profit participation units expense relates to the accelerated vesting of certain of Amneal's profit participation units that occurred prior to the Closing of the Combination for current and former employees of Amneal for service prior to the Combination (see additional information in the paragraph below and~~Note 19. Stockholders' Equity/ Members' Deficit in the Company's 2018 Annual Report on Form 10-K~~).

Non-Controlling Interests

~~(3)~~

~~Transaction-related bonus is a cash bonus that was funded by Holdings for employees of Amneal for service prior to the closing of the Combination (see additional information in~~ ~~Note 19. Stockholders' Equity/ Members' Deficit in the Company's 2018 Annual Report on Form 10-K~~ ).

~~Accelerated Vesting of Profit Participation Units~~

Amneal’s historical capital structure included several classifications of membership and profit participation units. During the second quarter of 2018, the board of managers of Amneal Pharmaceuticals LLC approved a discretionary modification to certain profit participation units concurrent with the Combination that immediately caused the vesting of all profit participation units that were previously issued to certain current or former employees for service prior to the Combination. The modification entitled the holders to 6,886,140 shares of Class A Common Stock with a fair value of $126 million on the date of the Combination and $33 million of cash. The cash and shares were distributed by Holdings with no additional shares issued by the Company. As a result of this transaction, the Company recorded a charge in acquisition, transaction-related and integration expenses and a corresponding capital contribution of $159 million for the three and nine months ended September 30, 2018.

~~Impax Acquisition~~

~~On May 4, 2018, the Company completed the Combination, as described in~~ ~~Note 1. Nature of Operations~~. For the nine months ended September 30, 2018, transaction costs associated with the Impax acquisition were $23 million (none for the three months ended September 30, 2018) were recorded in acquisition, transaction-related and integration expenses (none in 2019).

~~18. Subsequent Events~~

~~Financial Instrument~~s

Effective October 31 2019, the Company entered into an interest rate lock agreement for a total notional amount of $1.3 billion, with a maturity date of May 2025. The hedge will be accounted for as a cash flow hedge.

~~Option Repricing~~

On October 10, 2019, the Compensation Committee of the Board of Directors of the Company, subject to the approval of the stockholders of the Company, approved a one-time stock option repricing (the “Option Repricing”). Pursuant to the Option Repricing, the exercise price of each relevant option will be amended to reduce such exercise price to the closing price of a share of the Company’s Class A Common Stock as reported on the New York Stock Exchange on or around November 13, 2019. The Company does not expect that the Option Repricing will have a material impact on its statement of operations.

~~Related Party Licensing Agreement~~

The Company has entered into a definitive licensing agreement with Kashiv for the development and commercialization of Kashiv’s orphan drug K127 (pyridostigmine) for the treatment of Myasthenia Gravis. Through this agreement, the Company has an exclusive license within the United States to market and sell the K127 product under a New Drug Application (“NDA”).

Under the terms of the ~~agreement, Kashiv will be responsible for all development~~Limited Liability Company Agreement, Amneal is obligated to make tax distributions to its members. For the three and clinical work required to secure Food and Drug Administration (“FDA”) approval and Amneal will be responsible for filing the NDA and commercializing the product. Kashiv will receive an upfront paymentsix months ended June 30, 2020, a tax distribution of ~~approximately $2~~$1 million and is eligible to receive development and regulatory milestones totaling approximately $17 million. Kashiv is also eligible to receive tiered royalties from the low double-digits to mid-teens on net sales of K127.

~~Voluntary Recall~~

~~On September 13, 2019, the FDA announced that ranitidine may potentially contain NDMA, which is classified~~was recorded as a ~~probable human carcinogen.~~reduction of non-controlling interests. For the three and six months ended June 30, 2019, 0 tax distribution was recorded due to tax losses incurred. As of June 30, 2020, a ~~precautionary measure,~~$1 million liability was included in related-party payables for the tax distribution.

During December 2018, the Company ~~immediately halted shipments~~acquired the non-controlling interests in 1 of ~~ranitidine-based products~~Amneal's non-public subsidiaries for approximately $3 million. As of December 31, 2018, the Company recorded a $3 million related party payable for this transaction which was paid in full in 2019.

Redeemable Non-Controlling Interests

As discussed in Note 3. Acquisitions and ~~began evaluation~~Divestitures, the Company acquired a 65.1% interest in Rondo on January 31, 2020. The sellers of ~~its externally sourced ranitidine active pharmaceutical ingredient.~~AvKARE, LLC and R&S hold the remaining 34.9% interest as Rondo Class B~~ased~~ Units. Beginning on January 1, 2026, the holders of the Rondo Class B Units have the right (“Put Right”) to require the Company to acquire the Rondo Class B Units for a purchase price that is based on a multiple of Rondo’s earnings before income taxes, depreciation, and amortization (EBITDA) if certain financial targets and other conditions are met. Additionally, beginning on January 31, 2020, the Company has the right to acquire the Rondo Class B Units based on the ~~FDA’s November 1, 2019 statement summarizing their NDMA results~~same value and conditions as the Put Right. The Rondo Class B Units are also redeemable by the holders upon a change in control.

Since the redemption of the Rondo Class B Units is outside of the Company's control, the units have been presented outside of stockholders' equity as redeemable non-controlling interests. Upon closing of the Acquisitions on January 31, 2020, the redeemable non-controlling interests were recorded as a component of the fair value of consideration transferred at an estimated preliminary fair value of $11 million. The fair value of the redeemable non-controlling interests was estimated using the Monte-Carlo simulation approach under the option pricing framework, which considers the redemption rights of both the Company and the holders of the Rondo Class B Units.

The Company will attribute 34.9% of the net income of Rondo to ~~date for numerous ranitidine products on~~ the ~~market,~~redeemable non-controlling interests. The Company will also accrete the ~~Company~~ ~~has made~~redeemable non-controlling interests to redemption value upon an event that makes redemption probable. For the ~~decision to conduct~~three and six months ended June 30, 2020, a ~~voluntary recall~~tax distribution of ~~its ranitidine-based products.~~ $0.4 million was recorded as a reduction of redeemable non-controlling interests. As of ~~September~~June 30, ~~2019,~~2020, a liability of $0.4 million was included in related-party payables for the ~~Company had approximately $6 million of ranitidine-based product inventory. The Company is currently testing the impacted inventory and is unable to estimate~~ ~~the possible loss, if any, at this time.~~

tax distribution.

Changes in Accumulated Other Comprehensive Loss by Component (in thousands):


	Foreign currency translation adjustment		Unrealized gain (loss) on cash flow hedge, net of tax		Accumulated other comprehensive loss
Balance December 31, 2018	$	(7,755)	$	—	$	(7,755)
Other comprehensive (loss) income before reclassification	(729)		7,764		7,035
Amounts reclassified from accumulated other comprehensive loss	1,461		—		1,461
Reallocation of ownership interests	(809)		—		(809)
Balance December 31, 2019	(7,832)		7,764		(68)
Other comprehensive loss before reclassification	(3,985)		(35,622)		(39,607)
Reallocation of ownership interests	(14)		(7)		(21)
Balance June 30, 2020	$	(11,831)	$	(27,865)	$	(39,696)

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

Amneal Pharmaceuticals, Inc. (the "Company," "we," "us," or "our") is a pharmaceutical company specializing in developing, manufacturing, marketing and distributing high-value generic pharmaceutical products across a broad array of dosage forms and therapeutic areas, as well as branded products. We were formed on October 4, 2017, under the name Atlas Holdings, Inc. for the purpose of facilitating the combination (the "Combination") of Impax Laboratories, Inc. ("Impax") and Amneal Pharmaceuticals LLC ("Amneal"), which closed on May 4, 2018.

The following discussion and analysis for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 should be read in conjunction with the consolidated financial statements and related notes of thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements for the year ended December 31, ~~2018~~2019 included in our ~~2018~~2019 Annual Report on Form 10-K.

On January 31, 2020, we acquired a 65.1% controlling interest in both AvKARE Inc., a Tennessee corporation now a limited liability company (“AvKARE, LLC”), and Dixon-Shane, LLC d/b/a R&S Northeast LLC, a Kentucky limited liability company (“R&S”). As a result of the AvKARE, LLC and R&S acquisitions (the “Acquisitions”), we now have three reportable segments, Generics, Specialty, and AvKARE.

Our Specialty segment is engaged in the development, promotion, sale and distribution of proprietary branded pharmaceutical products, with a focus on products addressing central nervous system ("CNS") disorders, including migraine and Parkinson’s disease. Our portfolio of products includes Rytary®, an extended release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication. In addition to Rytary®, our promoted Specialty portfolio includes Zomig® (zolmitriptan) products, for the treatment of migraine headaches, which is sold under a license agreement with AstraZeneca UKU.K. Limited, Emverm® (mebendazole) 100 mg chewable tablets, for the treatment of pinworm, whipworm, common roundworm, common hookworm and American hookworm in single or mixed infections, and Unithroid® (levothyroxine sodium), for the treatment of hypothyroidism, which is sold under a license and distribution agreement with JSP.

For Specialty products, the majority of the product’s commercial value is usually realized during the period in which the product has market exclusivity. In the U.S. and some other countries, when market exclusivity expires and generic versions of a product are approved and marketed, there can often be very substantial and rapid declines in the branded product’s sales.

~~The Company’s~~

Our Generics segment includes ~~over 200~~approximately 250 product families covering an extensive range of dosage forms and delivery systems, including both immediate and extended release oral solids, powders, liquids, sterile injectables, nasal sprays, inhalation and respiratory products, ophthalmics (which are sterile pharmaceutical preparations administered for ocular conditions), films, transdermal patches and topicals (which are creams or gels designed to administer pharmaceuticals locally through the skin). We focus on developing products with substantial barriers-to-entry resulting from complex drug formulations or manufacturing, or legal or regulatory challenges. Generic products, particularly in the U.S., generally contribute most significantly to revenues and gross margins at the time of their launch, and even more so in periods of market exclusivity, or in periods of limited generic competition. As such, the timing of new product introductions can have a significant impact on the Company’s financial results. The entrance into the market of additional competition generally has a negative impact on the volume and pricing of the affected products. Additionally, pricing is often affected by factors outside of the Company’s control.

AvKARE provides pharmaceuticals, medical and surgical products and services primarily to governmental agencies, primarily focused on serving the Department of Defense and the Department of Veterans Affairs. AvKARE is a wholesale distributor of bottle and unit dose pharmaceuticals under the registered names of AvKARE and AvPAK, as well as medical and surgical products. AvKARE is also a packager and wholesale distributor of pharmaceuticals and vitamins to its retail and institutional customers who are located throughout the United States of America focused primarily on offering 340b-qualified entities products to provide consistency in care and pricing.

The pharmaceutical industry is highly competitive and highly regulated. As a result, we face a number of industry-specific factors and challenges, which can significantly impact our results. For a more detailed explanation of our business and its risks, refer to our ~~2018~~2019 Annual Report on Form ~~10-K.~~

~~In 2019, our Generics segment has experienced both industry-wide~~10-K,as supplemented by Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated the outbreak of a novel strain of coronavirus (“COVID-19”) as a global pandemic. Governments and ~~company-specific challenges that resulted~~businesses around the world have taken unprecedented actions to mitigate the spread of

COVID-19, including imposing restrictions on movement and travel such as quarantines and shelter-in-place requirements, and restricting or prohibiting outright some or all commercial and business activity, including the manufacture and distribution of certain goods and the provision of non-essential services. These measures, though currently temporary in ~~our financial performance falling short of our expectations since~~nature, may become more severe and continue indefinitely depending on the ~~beginning~~evolution of the ~~year. Such challenges include increased competition~~outbreak.

The Company did not observe significant impacts on ~~certain key generic products, the uncertainty~~its business or results of supply of epinephrine auto-injector (generic Adrenaclick®) from our third-party supplier, and delays in key product approvals and launches, including generic NuvaRing®. We expect these challenges and others to persist at leastoperations for the ~~remainder~~three months ended March 31, 2020 due to the global emergence of ~~2019.~~

~~To address these challenges, we have,~~COVID-19. However, during April and May 2020, as the infection rate of COVID-19 spread throughout New York and New Jersey, the governors of those states issued executive orders requiring residents, among other things, ~~conducted~~to remain at home with limited exceptions such as working at an ~~in depth, company wide review~~essential business. Although as a pharmaceutical manufacturer Amneal is an essential business, we did experience supply chain constraints, including manufacturing and packaging delays at several of our ~~organizational structures, operational budgets, current~~key domestic manufacturing and ~~future capital projects~~packaging facilities in New York and ~~existing capability~~New Jersey during the three months ended June 30, 2020. In June and ~~infrastructure alignments, resulting~~July 2020, as the restrictions from the governors of New York and New Jersey were eased, our manufacturing and distribution facilities were able to resume normal productivity. However, we may again experience supply chain constraints at our New York, New Jersey, India or other facilities in the ~~comprehensive restructuring plan~~event of subsequent waves of COVID-19 infections. These potential supply chain disruptions may significantly impact our third and fourth quarter 2020 results of operations and cash flows. To mitigate any potential overall market liquidity constraints, we ~~announced~~borrowed $300 million under our revolving credit facility in ~~July 2019.~~March 2020 as a precautionary measure. As the financial markets stabilized following a period of high volatility due the COVID-19 pandemic, we repaid all of the $300 million of borrowings under our revolving credit facility before June 30, 2020. (Refer to Note 13.Debt, for further details). As noted in our 2019 Annual Report on Form 10-K, several of our key domestic manufacturing, packaging, and facilities are located in New York and New Jersey, two states with a high number of confirmed cases of COVID-19. To offset the decreased second quarter output, we will increase production during the third and fourth quarters.

To the extent that the COVID-19 pandemic continues or worsens, national, state, and local governments may impose additional restrictions or extend the restrictions already in place. The ~~revised restructuring plan is designed~~worsening of the pandemic and the related safety and business operating restrictions could result in a number of adverse impacts to ~~reduce costs, optimize~~ our ~~organizational and manufacturing infrastructure, which we expect~~business, including, but not limited to, ~~reduce costs by approximately $40 million per year once the plan has been executed. For~~ additional ~~information, refer to~~ ~~Note 6, Restructuring and Other Charges~~,disruption to the ~~unaudited~~economy and our customers, additional work restrictions, and supply chains being interrupted or slowed. Also, governments may impose other laws, regulations, or taxes that could adversely impact our business, financial ~~statements~~condition, or results of operations. Further, depending on the extent to which our customers are affected, they could delay or reduce purchases of products we provide. The potential effects of the COVID-19 pandemic also could impact us in a number of other ways including, but not limited to, reductions to our profitability, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying amount of goodwill or other definite-lived assets.

We will continue to actively monitor the situation and may take further precautionary and preemptive actions as may be required by national, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, suppliers, and shareholders. Until the ultimate extent and duration of the pandemic is known, we cannot predict the ultimate effects the pandemic may have on our business, in particular with respect to demand for our products, our strategy, and our prospects, the effects on our customers, or the impact on our financial results. Refer to Part I, II, Item 11A "Risk Factors" of this ~~report.~~

~~Our current year results continue to be impacted by our Combination with Impax as a result of our continued actions to adjust our operations and cost structure. The historical financial results~~Quarterly Report on Form 10-Q for further discussion of the ~~Company for the periods prior the May 4, 2018 closing~~potential impact of the Combination are the historical financial results of Amneal, and thus the current period results, and balances, may not be comparable to prior years as the current year includes the results of Impax from May 4, 2018.

COVID-19 pandemic on our business.

Results of Operations

Consolidated Results

The following table sets forth our summarized, consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net revenue	$	464,662	$	404,642	$	963,195	$	850,762
Cost of goods sold	319,666		296,381		633,244		606,124
Cost of goods sold impairment charges	759		3,012		2,215		56,309
Gross profit	144,237		105,249		327,736		188,329
Selling, general and administrative	80,944		67,281		158,920		151,717
Research and development	45,572		48,016		81,951		101,874
In-process research and development impairment charges	—		—		960		22,787
Intellectual property legal development expenses	3,550		2,511		4,820		6,677
Acquisition, transaction-related and integration expenses	1,787		3,519		4,362		9,551
Charges related to legal matters, net	1,300		—		5,800		—
Restructuring and other charges	333		2,835		2,381		8,996
Operating income (loss)	10,751		(18,913)		68,542		(113,273)
Total other expense, net	(32,509)		(37,314)		(76,956)		(76,134)
Loss before income taxes	(21,758)		(56,227)		(8,414)		(189,407)
Provision for (benefit from) income taxes	2,186		(5,701)		(105,987)		(14,129)
Net (loss) income	$	(23,944)	$	(50,526)	$	97,573	$	(175,278)

Net Revenue

Net revenue for the three months ended ~~September~~June 30, ~~2019 decreased~~2020 increased by ~~21%~~15%, or ~~$98~~$60 million, to ~~$378~~$465 million as compared to ~~$476~~$405 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The ~~decrease~~increase over the prior year is primarily attributable to ~~price and volume erosion of $132~~$67 million ~~mainly~~from the Acquisitions, $39 million from new product launches after June 30, 2019 in our Generics segment and $12 million ~~in divestitures of our international businesses and $15 million in the loss of exclusivity on Albenza~~primarily from volume increases in our Specialty segment, which were partially offset by ~~a $40 million contribution from Levothyroxine sodium tablets ("Levothyroxine") which launched in the fourth quarter 2018, and $19 million from new product launches~~erosion in our Generics ~~segment.~~

segment and a $2 million decline from the divestiture of our international business in Germany.

Net revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 increased by 5%13%, or ~~$64~~$112 million, to ~~$1,229~~$963 million as compared to ~~$1,165~~$851 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase over the prior year ~~period~~ is primarily attributable to ~~a $211~~$132 million ~~timing impact~~ from the ~~Combination and the acquisition of Gemini, a $135 million contribution from Levothyroxine, and $36~~Acquisitions, $101 million from new product launches after June 30, 2019 in our Generics segment and $20 million primarily from volume increases in our Specialty segment, which were partially offset by ~~price and volume~~ erosion ~~of $240 million mainly~~ in our Generics segment ~~$38~~and a $16 million ~~from the loss of exclusivity on Albenza in our Specialty segment and $27 million~~decline from the divestitures of our international businesses primarily in the UKU.K. and Germany.

Cost of Goods Sold and Gross Profit

Cost of goods sold, including impairment charges, increased ~~17%~~7%, or ~~$47~~$21 million, to ~~$324~~$320 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared to ~~$276~~$299 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The increase in cost of goods sold was primarily attributable to ~~$48~~a $49 million ~~of impairment~~increase associated with the Acquisitions, which were partially offset by a $15 million decline in inventory related charges, ~~on intangible assets primarily~~lower costs associated with sales erosion in our Generics segment, ~~$14~~a $4 million ~~in inventory charges, and $13 million in amortization of intangible assets, partially offset by a year over year~~ decline in ~~Generics volume.~~

site closure expenses, and a $2 million decline associated with the divestiture of our international business in Germany.

Accordingly, gross profit for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$54~~$144 million ~~(14%~~(31% of total ~~revenues)~~net revenue) as compared to gross profit of ~~$200~~$105 million ~~(42%~~(26% of total ~~revenues)~~net revenue) for the three months ended ~~September~~June 30, ~~2018.~~2019. Our gross profit as a percentage of ~~sales declined~~net revenue increased compared to the prior year ~~period~~ primarily as a result of the ~~impairment charges as well as price and volume erosion~~decline in ~~the Generics segment.~~

inventory related charges.

Cost of goods sold, including impairment charges, ~~increased 54%~~decreased 4%, or ~~$344~~$27 million, to ~~$986~~$635 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to ~~$642~~$662 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~increase~~decrease in cost of goods sold was primarily attributable to ~~higher product sales due to the Combination and Gemini acquisition, $105~~a $54 million decrease in intangible ~~impairment~~asset impairments mainly in our Generics segment, incremental expenses related to the Combination and the acquisition of Gemini, including amortization of intangible assets of $61 million and royalties of $22 million, $47 million of inventory charges in our Generics segment anda $36 million ofdecrease in expenses related to the Levothyroxine transition agreement with Lannett Company ("Lannett").

, a $16 million decline in inventory related charges, a $12 million decline in site closure expenses, lower costs associated with sales erosion in our Generics segment, and a $12 million decline associated with the divestitures of our international businesses primarily in the U.K. and Germany, which were partially offset by a $104 million increase associated with the Acquisitions.

Accordingly, gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$243~~$328 million ~~(20%~~(34% of total ~~revenues)~~net revenue) as compared to gross profit of ~~$523~~$188 million ~~(45%~~(22% of total ~~revenues)~~net revenue) for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. Our gross profit as a percentage of ~~sales declined~~net revenue increased compared to the prior year ~~period~~ primarily as a result of the $54 million decline in intangible impairment charges, ~~increased inventory related charges, and price erosion in our Generics segment~~ as well as other factors described above.

Selling, General, and Administrative

Selling, ~~general,~~General, and ~~administrative ("~~Administrative (“SG~~&A"~~&A”) expenses for the three months ended ~~September~~June 30, ~~2019~~2020 were ~~$64~~$81 million, as compared to ~~$75~~$67 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The ~~$11 million decrease from the prior year period was primarily due to post Combination synergies.~~

~~SG&A expenses for the nine months ended September 30, 2019 were $216 million, as compared to $157 million for the nine months ended September 30, 2018. The $59~~$14 million increase from the prior year was primarily due to ~~the timing of the Combination and Gemini acquisition, including selling expenses~~a $16 million increase associated with ~~our Specialty segment, stock-based compensation and higher Corporate functions spend including public company costs that did not exist~~the Acquisitions.

SG&A expenses for the six months ended June 30, 2020 were $159 million, as compared to $152 million for the six months ended June 30, 2019. The $7 million increase from the prior year was primarily due to a $26 million increase associated with the ~~Combination. These increases~~Acquisitions, which were partially offset by ~~post Combination synergies.~~

cost savings associated with our restructuring and integration programs.

Research and Development

Research and development (“R&D”) expenses for the three months ended ~~September~~June 30, ~~2019~~2020 were ~~$38~~$46 million, as compared to ~~$42~~$48 million for the three months ended ~~September~~June 30, ~~2018.~~2019. The $4$2 million decrease ~~is primarily attributable to post Combination synergies.~~

~~Research and development expenses for the nine months ended September 30, 2019 were $140 million, as compared to $137 million for the nine months ended September 30, 2018. The $3 million increase~~ compared to the prior year is primarily attributable to ~~the timing of the Combination and increased milestone payments~~cost savings in our Generics segment ~~partially offset by post Combination synergies.~~

associated with the Company’s restructuring programs and the timing of expenses in 2020 due to generic product mix and delayed spending as a result of COVID-19.

R&D expenses for the six months ended June 30, 2020 were $82 million, as compared to $102 million for the six months ended June 30, 2019. The $20 million decrease compared to the prior year is primarily attributable to cost savings in our Generics segment associated with the Company’s restructuring programs and the timing of expenses in 2020 due to delayed spending as a result of COVID-19.

In-Process Research and Development Impairment Charges

~~For the three months ended September 30, 2019, we~~

We recognized in-process research and development (“IPR&D”) impairment charges of $23 million associated with four intangible assets that were acquired as part of the Combination. The impairment charges were the result of expected significant price erosion for the products resulting in significantly lower than expected future cash flows. IPR&D impairment charges for the six months ended June 30, 2020 of $1 million as compared to $23 million for the six months ended June 30, 2019 (none in the three months ended ~~September~~June 30, ~~2018 were less than $1 million.~~

~~We recognized IPR&D impairment charges of $46 million for~~2020 and 2019).

For the ~~nine~~six months ended ~~September~~June 30, ~~2019. The~~2020, the charges are primarily associated with two products. One of the products experienced a delay in its estimated launch date and the other product was canceled due to the withdrawal of our development partner.

For the six months ended June 30, 2019, the charges are primarily associated with two products in our Generics segment that were acquired as part of the Combination. The impairment charges were the result of expected significant price erosion for the products resulting in significantly lower than expected future cash flows. IPR&D impairment charges for nine months ended September 30, 2018 were less than $1 million.

Intellectual Property Legal Development Expense

Intellectual property legal development expenses for the three months ended ~~September~~June 30, ~~2019~~2020 were $3$4 million as compared to $4$3 million for the three months ended ~~September~~June 30, ~~2018.~~2019. Intellectual property legal development expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 were $9$5 million as compared to ~~$13~~$7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. These costs include, but are not limited to, formulation assessments, patent challenge opinions and strategy, and litigation expenses to defend the intellectual property.

~~Charges (Gains) Related to Legal Matters, Net~~

For the three and nine months ended September 30, 2019, the Company recorded a net charge of $15 million primarily associated with an agreement in principle with Teva Pharmaceuticals. For further details, see ~~Note 13. Commitments and Contingencies.~~

Acquisition, Transaction-Related and Integration Expenses

We recognized approximately $3$2 million of acquisition, transaction-related and integration expenses for the three months ended ~~September~~June 30, ~~2019~~2020 as compared to $2$4 million for the three months ended ~~September~~June 30, ~~2018.~~2019. We recognized approximately ~~$13~~$4 million of acquisition, transaction-related and integration expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to ~~$217~~$10 million for the ~~nine~~three months ended ~~September~~June 30, ~~2018.~~

~~Expenses for~~2019.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 acquisition, transaction-related and integration expenses were primarily related to systems integrations associated with the Combination and integration activities associated with the Acquisitions. The decreases from the prior year are primarily related to the ~~ongoing~~substantial completion of integration activities related to the Combination.

Charges Related to Legal Matters, Net

For the three months ended June 30, 2020, we recorded net charges of $1 million for commercial legal proceedings and ~~site closure expenses associated with Impax~~claims, of which a $3 million charge recorded in our Generics segment was partially offset by a $2 million gain in our Specialty segment.

For the six months ended June 30, 2020, we recorded net charges of $6 million for commercial legal proceedings and ~~Gemini. During the prior year period, expenses were~~claims, which was primarily ~~for transaction-related costs associated with pre and post Combination activities.~~

recorded in our Generics segment.

Restructuring and Other Charges

On July 10, 2019, ~~the Company~~we announced a plan to restructure ~~its~~our operations that is intended to reduce costs and optimize ~~its~~our organizational and manufacturing infrastructure. Pursuant to the restructuring plan as revised, ~~the Company expects~~we expect to reduce ~~its~~our headcount by approximately 300 to 350 by December 31, 2020, primarily by ~~closing its~~ceasing manufacturing ~~facility located in~~at our Hauppauge, ~~NY. As a result~~NY facility.

Restructuring and other charges were $0.3 million and $2 million for the three and six months ended June 30, 2020, respectively. These charges primarily consisted of ~~the restructuring plan, the Company estimates that it will incur a pre-tax restructuring charge of approximately $6~~charges associated with cash severance and other benefits provided pursuant to ~~$8 million of cash expenditures related to~~our severance ~~benefits.~~

~~We recorded $21 million of restructuring~~programs for former executives.

Restructuring and other charges for the three and six months ended ~~September~~June 30, 2019 ~~which~~were $3 million and $9 million, respectively. These charges primarily consisted of ~~$11 million of property plant and equipment and right of use asset impairment charges in connection with the planned closure of the Company’s Hauppauge, NY facility. Restructuring~~cash and other severance charges ~~also consisted of employee restructuring separation charges of approximately $6 million for severance~~ provided pursuant to our severance programs for employees at our ~~Hauppauge, NY,~~ Hayward, CA facility and other facilities ~~and approximately $4~~as well as cash severance charges associated with the cost of benefits for former senior executives.

Other Expense, Net

Other expense, net was $33 million ~~of other employee severance charges. The restructuring and other charges~~ for the three months ended ~~September~~June 30, ~~2018 were a benefit of $2~~2020, as compared to $37 million ~~which was primarily related to changes in estimates~~ for ~~certain employee-related separation liabilities associated with employees who exited early.~~

We recorded $30 million of restructuring and other charges for the nine months ended September 30, 2019, which primarily consisted of $11 million of property plant and equipment and right of use asset impairment charges in connection with the planned closure of the Company’s Hauppauge, NY facility. Restructuring and other charges also consisted of employee restructuring separation charges of approximately $9 million for severance provided pursuant to our severance programs for employees at our Hauppauge, NY, Hayward, CA and other facilities and $9 million of other employee severance charges. The restructuring and other charges for the nine months ended September 30, 2018 were $42 million, which were primarily associated with a reduction in workforce resulting from the Combination.

~~Gain From Reduction in Tax Receivable Agreement Liability~~

~~During~~ the three months ~~and nine months~~ ended ~~September~~June 30, 2019, we recorded a $372 million valuation allowance to reduce our deferred tax assets (“DTAs”). For further discussion, see Provision For (Benefit From) Income Taxes below. In conjunction with the valuation allowance of our DTAs, we reversed the accrued TRA liability, which resulted in a $193 million gain to our statement of operations.

~~Other Expense, Net~~

Other expense, net was $54 million for the quarter ended September 30, 2019, as compared to $52 million for the quarter ended September 30, 2018. The increase of $2 million was primarily attributable to $7 million of additional expense from the change in foreign exchange rates, primarily as a result of the impact of fluctuations in the Swiss Franc, Indian Rupee and Euro on intercompany loans, partially offset by $3 million decline in loss on the sale of international businesses and a $1 million savings on interest expense.

~~Other expense, net was $130 million for the nine months ended September 30, 2019, as compared to $145 million for the nine months ended September 30, 2018.~~2019. The decrease of ~~$15~~$4 million was primarily attributable to a ~~$20~~$7 million decline in ~~loss from extinguishment of debt, a $13 million benefit from the change~~interest expense as reductions in ~~foreign exchange~~interest rates ~~primarily as a result of the impact of fluctuations in the Swiss Franc, Indian Rupee and Euro on intercompany loans~~offset increased borrowings and a ~~$10~~$2 million ~~beneficial~~favorable impact from ~~the~~ divestitures, ~~of our international businesses. These decreases were~~ partially offset by ~~$29~~a $5 million unfavorable foreign currency impact.

Other expense, net was $77 million for the six months ended June 30, 2020, as compared to $76 million for the six months ended June 30, 2019. The increase of ~~additional~~$1 million was primarily attributable to a $7 million unfavorable impact from divestitures and a $5 million unfavorable foreign currency impact, partially offset by a $11 million decline in interest expense as reductions in interest rates offset increased borrowings.

Provision For (Benefit From) Income Taxes

For the three months ended June 30, 2020 and 2019, the Company's provision for (benefit from) income taxes and effective tax rates were $2 million and (10.0%) and $(6) million and 10.1%, respectively. The year over year change is primarily associated with an increase in ~~long-term debt related to~~foreign based earnings.

For the ~~Combination and the acquisition of Gemini.~~

~~Provision For (Benefit From) Income Taxes~~

~~The provision for income taxes was $390 million for the three~~six months ended ~~September~~June 30, 2020 and 2019, ~~as compared to~~ the provision for income taxes of $5 million for the three months ended September 30, 2018. The provision for income taxes was $376 million for the nine months ended September 30, 2019, as compared to theCompany's benefit from income taxes ~~of $7~~and effective tax rates were ($106) million ~~for the nine months ended September 30, 2018.~~

and 1259.7% and ($14) million and 7.5%, respectively. The year over year change ~~in income tax provision for the three and nine months ended September 30, 2019~~ is primarily ~~impacted by a $372~~associated with the $110 million ~~valuation allowance against our DTAs. We recorded valuation allowances against our various DTAs on a jurisdictional basis after it was determined that it is more likely than not that our~~benefit from the carryback of U.S. Federal deferred tax assets ~~will not~~under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). In July 2020, we received $106 million in cash from U.S. federal tax refunds associated with the CARES Act, with the remaining $4 million in cash refunds expected to be ~~realized.~~received before December 31, 2020. The ~~provision for the nine months ended September 30, 2019 compared~~CARES Act is an emergency economic stimulus package in response to the ~~prior year period was also impacted by the company structure. Prior~~COVID-19 pandemic which, among other things, includes provisions relating to ~~the Combination,~~income and non-income-based tax laws. These deferred tax assets had a 100% valuation allowance as a limited liability company, income taxes were only provided for the international subsidiaries as all domestic taxes flowed to the members. Subsequent to May 4, 2018, domestic income taxes were also provided for our allocable share of ~~income or losses from Amneal at the prevailing U.S. federal, state, and local corporate income tax rates.~~

December 31, 2019.

Net (Loss) Income

We recognized a net loss for the three months ended ~~September~~June 30, ~~2019~~2020 of $363 million as compared to net income of $17 million for the three months ended September 30, 2018. For the three months ended September 30, 2019, we recorded a $98 million decline in net revenues from the prior year period, a tax provision of $390 million, impairment charges of $79 million on intangible assets, $21 million in restructuring and other charges and $15 million in charges for legal matters, which were partially offset by $193 million from the gain in reduction of TRA liability.

~~We recognized a net loss for the nine months ended September 30, 2019 of $539~~$24 million as compared to net loss of ~~$181~~($51) million for the ~~nine~~three months ended ~~September~~June 30, ~~2018.~~2019. The year over year decrease in our net loss of $27 million is primarily attributable to favorable gross profit of $39 million and a decline in interest expense of $7 million, partially offset by an increase in selling, general and administrative expenses associated with the Acquisition of $16 million, a decrease in foreign exchange gains of $5 million and an increase in the provision for income taxes of $8 million.

We recognized net income for the six months ended June 30, 2020 of $98 million as compared to net loss of ($175) million for the six months ended June 30, 2019. The year over year increase of ~~$358~~$273 million is primarily attributable to favorable gross profit of $139 million (including a ~~$382~~$54 million ~~unfavorable impact from income tax expense, a $150 million~~decline of intangible asset impairment charges and a ~~$15~~$36 million ~~unfavorable impact on legal matters and incremental~~decrease in expenses related to the ~~Combination and acquisition of Gemini. These increases were partially offset by~~Levothyroxine transition agreement with Lannett), a ~~$204~~$92 million favorable impact from income taxes related to the CARES Act, a $22 million decline in ~~acquisition, transaction related~~IPR&D impairment charges and ~~integration expenses associated with the Combination and Gemini acquisition, a $20~~$11 million ~~decline in loss on extinguishment of debt, a $13 million benefit~~ from the change in foreign exchange rates, primarily as a result of the impact of fluctuations in the Swiss Franc, Indian Rupee and Euro on intercompany loans and a $12 million decline in restructuring and other charges.

lower interest expense.

Generics

The following table sets forth results of operations for our Generics segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018				2020		2019		2020		2019
Net revenue	$	291,021		$	391,175		$	1,008,562		$	1,028,134		Net revenue	$	306,559	$	335,064	$	659,145	$	717,541
Cost of goods sold		217,773			230,051			760,074			572,179		Cost of goods sold	218,909		263,423		437,774		542,301
Cost of goods sold impairment charges		49,115			7,815			105,424			7,815		Cost of goods sold impairment charges	759		3,012		2,215		56,309
Gross profit		24,133			153,309			143,064			448,140		Gross profit	86,891		68,629		219,156		118,931
Selling, general and administrative		14,256			21,030			52,783			51,854		Selling, general and administrative	12,802		14,379		29,425		38,527
Research and development		34,316			38,347			129,915			129,762		Research and development	40,316		45,448		69,350		95,599
In-process research and development impairment charges		23,382			650			46,169			650		In-process research and development impairment charges	—		—		960		22,787
Charges (gains) related to legal matters, net		14,750			—			14,750			(3,000	)
Intellectual property legal development expenses		2,586			3,929			8,218			12,509		Intellectual property legal development expenses	3,550		2,511		4,815		5,632
Other operating expense (income)		15,204			(2,885	)		21,287			136,534
Operating (loss) income	$	(80,361	)	$	92,238		$	(130,058	)	$	119,831
Charges related to legal matters													Charges related to legal matters	3,050		—		5,550		—
Other operating expenses													Other operating expenses	657		1,405		703		6,083
Operating income (loss)													Operating income (loss)	$	26,516	$	4,886	$	108,353	$	(49,697)

Net Revenue

Generics net revenue was ~~$291~~$307 million for the three months ended ~~September~~June 30, ~~2019,~~2020, a decrease of ~~$100~~$29 million or ~~26%~~9% when compared with the same period in 2018. Volume and pricing erosion of $132 million in our existing business as well as a $17 million decline from the reclassification of Oxymorphone to the Specialty segment (where it is sold as a non-promoted product), and a $12 million decline in international revenues from divestitures were partially offset by $40 million in sales of Levothyroxine which launched in the fourth quarter 2018 and $19 million from new product launches. Favorable volume growth increased revenue in Levothyroxine, Abiraterone Acetate, Chlorpromazine HCI, Guanfacine and Hydroxyprogesterone Caproate Injection, which was partially offset by price and volume declines in revenue of Yuvafem, Diclofenac Gel and Aspirin Dipyridamole ER Capsules.

~~Generics net revenue was $1,009 million for the nine months ended September 30, 2019, a decrease of $20 million or 2% when compared with the same period in 2018.~~2019. The year over year decrease was primarily driven by ~~price and volume declines of $249 million~~erosion in our existing business primarily ~~in Yuvafem, Aspirin Dipyridamole ER Capsules,~~from Levothyroxine and Diclofenac Gel ~~(price only) and Oseltamavir,~~generic competition, a ~~$27~~$13 million decline ~~in international revenues from divestitures and $17 million~~ from the reclassification of Oxymorphone to our Specialty segment, and a $2 million decline from the divestiture of our international business in Germany, partially offset by ~~$135 million in sales of Levothyroxine, a $113 million impact from the timing of the Combination, and $36~~$39 million from new product ~~launches.~~

launches after June 30, 2019, which included EluRyng and Sucralfate Oral Suspension.

Generics net revenue was $659 million for the six months ended June 30, 2020, a decrease of $58 million or 8% when compared with the same period in 2019. The year over year decrease was primarily driven by erosion in our existing business primarily from Levothyroxine and Diclofenac Gel generic competition, a $26 million decline from the reclassification of Oxymorphone to our Specialty segment, and a $16 million decline from the divestitures of our international businesses primarily in the U.K. and Germany, partially offset by $101 million from new product launches after June 30, 2019, which included EluRyng and Sucralfate Oral Suspension.

Cost of Goods Sold and Gross Profit

Generics cost of goods sold, including impairment charges, for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$267~~$220 million, ~~an increase~~a decrease of ~~12%~~18% or ~~$29~~$47 million compared to the three months ended ~~September~~June 30, ~~2018.~~2019. The year over year ~~increase is~~decrease was primarily associated with ~~$41 million of impairment charges, $14 million in inventory charges, amortization of intangible assets of $5 million and $5 million of royalties partially offset by~~ a ~~$16 million decline of purchase accounting adjustments, a $7~~$15 million decline in ~~acquisition and~~inventory related charges, a $9 million decline in royalty expense primarily associated with the reclassification of Oxymorphone, a $4 million decline in amortization expense, a decrease of $4 million in site closure expenses, a $2 million decline in intangible asset impairment charges, and a ~~year over year~~$2 million decline ~~in volume.~~ ~~The impairment charges are~~ associated with ~~four products that experienced significant price erosion during~~ the ~~three months ended September 2019, without an offsetting increase~~divestiture of our international business in ~~customer demand, resulting in significantly lower than expected future cash flows.~~

Germany.

Generics gross profit for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$24~~$87 million ~~(8%~~(28% of ~~total revenues)~~Generics net revenue) as compared to gross profit of ~~$153~~$69 million ~~(39%~~(20% of ~~total revenues)~~Generics net revenue) for the three months ended ~~September~~June 30, ~~2018.~~2019. Our Generics gross profit as a percentage of sales ~~declined compared to the prior year period primarily as a result of $41 million of incremental impairment charges and price erosion in addition to the other factors noted above.~~

Generics cost of goods sold, including impairment charges, for the nine months ended September 30, 2019 was $865 million, an increase of 49% or $286 million compared to the nine months ended September 30, 2018. The year over year increase is primarily associated with sales of Impax products added to portfolio with the Combination, $98 million in impairment charges primarily associated with six marketed products acquired as part of the Combination and $47 million in inventory charges. The impairment charges are associated with six products that experienced ~~significant price erosion during 2019, without an offsetting increase in customer demand, resulting in significantly lower than expected future cash flows~~. Cost of goods sold was also unfavorably impacted by $36 million of expenses related to the Levothyroxine transition agreement with Lannett and incremental expenses related to the Combination, including amortization of intangible assets of $22 million, royalties of $17 million and site closure costs of $5 million. These increases were partially offset by a $29 million decrease in purchase accounting adjustments.

Generics gross profit for the nine months ended September 30, 2019 was $143 million (14% of total revenue) as compared to gross profit of $448 million (44% of total revenue) for the nine months ended September 30, 2018. Our Generics gross profit as a percentage of sales declinedincreased compared to the prior year period primarily as a result of the ~~$98 million~~factors described above.

Generics cost of ~~incremental~~goods sold, including impairment charges, ~~price erosion~~for the six months ended June 30, 2020 was $440 million, a decrease of 26% or $159 million compared to the six months ended June 30, 2019. The year over year decrease was primarily

associated with a $54 million decline in intangible asset impairment charges. Cost of goods sold was also favorably impacted by a $36 million decline of expenses related to the Levothyroxine transition agreement with Lannett, a $16 million decline in inventory related charges, a $12 million decline in site closure expenses, a $12 million decline associated with the divestitures of our international businesses primarily in the U.K and Germany and a $4 million decline in amortization expense.

Generics gross profit for the six months ended June 30, 2020 was $219 million (33% of Generics net revenue) as compared to gross profit of $119 million (17% of Generics net revenue) for the six months ended June 30, 2019. Our Generics gross profit as a percentage of sales increased compared to the prior year period primarily as a result of the $54 million decline in impairment charges and the other factors described above.

Selling, General, and Administrative

Generics SG&A expense for the three months ended June 30, 2020 was $13 million, as compared to $14 million for the three months ended June 30, 2019. The $1 million year over year decrease was primarily associated with cost savings initiatives associated with our restructuring and integration programs and the timing of expenses in 2020 due to delayed spending as a result of COVID-19.

Generics SG&A expense for the six months ended June 30, 2020 was $29 million, as compared to $39 million for the six months ended June 30, 2019. The $10 million year over year decrease was primarily associated with cost savings initiatives associated with our restructuring and integration programs and the timing of expenses in 2020 due to delayed spending as a result of COVID-19 and a reduction in international expenditures.

Research and Development

Generics R&D expenses for the three months ended ~~September~~June 30, ~~2019 were $14~~2020 was $40 million, asa decrease of 11% or $5 million compared to ~~$21 million for~~ the three months ended ~~September~~June 30, ~~2018. The $7 million decrease from the prior year period was primarily due to post Combination synergies and the divesting of our UK and Germany businesses.~~

Generics SG&A expense for the nine months ended September 30, 2019 were $53 million, as compared to $52 million for the nine months ended September 30, 2018. The impact from the timing of the Combination was offset by post Combination synergies and the divesting of our UK and Germany businesses.

~~Research and Development~~

~~Generics research and development expenses for the three months ended September 30, 2019 were $34 million as compared to $38 million for the three months ended September 30, 2018.~~2019. The year over year decrease is primarily ~~attributable to post Combination synergies.~~

associated with cost savings associated with our restructuring program, delays from COVID-19 and transitioning some third party costs in-house.

Generics ~~research and development~~R&D expenses ~~remained consistent~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was $69 million, a decrease of 27% or $26 million compared to the six months ended June 30, 2019. The year over year decrease is primarily associated with cost savings associated with our restructuring programs, delays from COVID-19 and ~~2018 at $130 million. The impact from the timing of the Combination was offset by post Combination synergies.~~

transitioning some third party costs in-house.

In-Process Research and Development Impairment Charges

~~For the three months ended September 30, 2019, we~~

We recognized IPR&D impairment charges of ~~$23 million associated with four intangible assets that were partially impaired and one intangible asset that was fully impaired.~~

~~For the nine months ended September 30, 2019, we recognized IPR&D impairment charges of $46 million in the Generics segment.~~ The impairment charges are primarily related to six products, all acquired as part of the Combination. For one IPR&D product, the impairment charge was the result of increased competition at launch resulting in significantly lower than expected future cash flows. For one IPR&D product, the impairment charge was the result of a strategic decision to no longer pursue approval of the product. For the other four IPR&D products, the impairment charges were the result of expected significant price erosion for the products resulting in significantly lower than expected future cash flows.

~~The IPR&D charges for the three and nine months ended September 30, 2018 were less than~~ $1 ~~million.~~

~~Charges (Gains) Related to Legal Matters, Net~~

~~Gains for legal matters of $3~~ million for the ~~nine~~six months ended ~~September~~June 30, ~~2018 were primarily related~~2020 as compared to ~~settlements with several innovators of branded pharmaceutical products~~$23 million for the six months ended June 30, 2019 (none for the three months ended ~~September~~June 30, ~~2018)~~2020 and 2019).

For the six months ended June 30, 2020, the charges are primarily associated with two products. One of the products experienced a delay in its estimated launch date and the other product was canceled due to the withdrawal of our development partner.

For the six months ended June 30, 2019, the charges are primarily associated with two products that were acquired as part of the Combination.

Charges Related to Legal Matters

For the three and six months ended June 30, 2020, we recorded charges of approximately $3 million and $6 million, respectively, for commercial legal claims (none for the three and six months ended June 30, 2019).

Intellectual Property Legal Development Expenses

Generics intellectual property legal development expenses for the three months ended ~~September~~June 30, ~~2019~~2020 were $3$4 million as compared to $4$3 million for the prior year period. Generics intellectual property legal development expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 were $8$5 million as compared to ~~$13~~$6 million for the prior year period. ~~For both the three and nine month periods, these~~

These costs include, but are not limited to, formulation assessments, patent challenge opinions and strategy, and litigation expenses to defend the intellectual property.

Other Operating Expenses ~~(Income)~~

For the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019, other operating expenses were not material.

For the six months ended June 30, 2020, other operating expenses were not material. For the six months ended June 30, 2019, we recorded $6 million of other ~~expenses of $15 million and $21 million, respectively.~~operating expenses. These ~~charges~~expenses were primarily attributable to ~~restructuring, severance, and~~ integration expenses associated with the Combination.

For the three and nine months ended September 30, 2018, we recorded $3 million of other operating income and $137 million of other operating expenses, respectively. For the three months ended September 30, 2018, the $3 million of other operating income was a result of changes in estimates on restructuring charges. For the nine months ended September 30, 2018, the charges were primarily attributable to acquisition, integration and restructuring expenses associated with the Combination.

Specialty

The following table sets forth results of operations for our Specialty segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018			2019		2018			2020		2019		2020		2019
Net revenue	$	87,262	$	85,312		$	220,483	$	137,329	Net revenue	$	94,256	$	69,578	$	182,233	$	133,221
Cost of goods sold		49,944		38,516			113,767		62,474	Cost of goods sold	50,229		32,958		98,047		63,823
Cost of goods sold impairment charges		7,017		—			7,017		—
Gross profit		30,301		46,796			99,699		74,855	Gross profit	44,027		36,620		84,186		69,398
Selling, general and administrative		20,228		19,716			57,705		33,265	Selling, general and administrative	16,870		16,150		37,812		37,477
Research and development		3,809		4,002			10,084		7,131	Research and development	5,256		2,568		12,601		6,275
Intellectual property legal development expenses		—		472			1,045		515	Intellectual property legal development expenses	—		—		5		1,045
Other operating expense (income)		2,668		(27	)		6,096		2,394
(Gains) charges related to legal matters, net										(Gains) charges related to legal matters, net	(1,750)		—		250		—
Other operating expenses										Other operating expenses	82		1,366		82		3,428
Operating income	$	3,596	$	22,633		$	24,769	$	31,550	Operating income	$	23,569	$	16,536	$	33,436	$	21,173

Our Specialty segment is comprised of the Impax Specialty business acquired on May 4, 2018 and the Gemini business acquired on May 7, 2018. Prior to these two transactions, we did not have a Specialty segment. Refer to ~~Note 3. Acquisitions and Divestitures~~ ~~in our 2018 Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q for further information related to these two transactions.~~

Net Revenue

Specialty net revenue for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$87~~$94 million, an increase of 2%35% or $2$25 million compared to the three months ended ~~September~~June 30, ~~2018.~~2019. The increase from the prior year period was primarily due to ~~$17~~$13 million from the reclassification of Oxymorphone from ~~the~~our Generics segment ~~to the Specialty segment (where it is sold~~as well as a ~~non-promoted product), which was partially offset by a $15~~$12 million ~~decline~~increase in our existing business primarily associated with ~~the loss of exclusivity on Albenza.~~

volume increases in Oxymorphone and Rytary.

Specialty net revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$220~~$182 million, an increase of ~~61%~~37% or ~~$83~~$49 million compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase from the prior year period was primarily due to ~~a $99 million timing impact from the Combination and Gemini acquisition, and $17~~$26 million from the reclassification of Oxymorphone ~~which was partially offset by~~from our Generics segment as well as a ~~$29~~$20 million ~~decline~~increase in our existing business primarily associated with ~~the loss of exclusivity on Albenza.~~

volume increases in Oxymorphone, Rytary and Unithroid.

Cost of Goods Sold and Gross Profit

Specialty cost of goods sold ~~including impairment charges,~~ for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$57~~$50 million, an increase of ~~48%~~$17 million or ~~$19 million~~52% compared to the three months ended ~~September~~June 30, ~~2018.~~2019. The increase from the prior year period was primarily due to $8$11 million of incremental expenses associated with the reclassification of Oxymorphone and $5 million of incremental amortization expense, ~~and $7 million of impairment charges associated with one marketed product.~~

as well as a volume increase in our existing business.

Accordingly, Specialty gross profit for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$30~~$44 million ~~(35%~~(47% of ~~total revenues)~~Specialty net revenue) as compared to gross profit of ~~$47~~$37 million ~~(55%~~(53% of ~~total revenues)~~Specialty net revenue) for the three months ended ~~September~~June 30, ~~2018.~~

2019.

Specialty cost of goods sold ~~including impairment charges,~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$121~~$98 million, an increase of ~~$58~~$34 million or ~~93%~~54% compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The increase from the prior year period was primarily due to ~~$37~~$20 million of ~~amortization expense, increased volume~~incremental expenses associated with the ~~timing~~reclassification of ~~the Combination~~Oxymorphone and ~~Gemini acquisition and $7~~$10 million of ~~impairment charges associated with one marketed product.~~

incremental amortization expense, as well as a volume increase in our existing business.

Accordingly, Specialty gross profit for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$100~~$84 million ~~(45%~~(46% of ~~total~~Specialty net revenue) as compared to gross profit of ~~$75~~$69 million ~~(55%~~(52% of ~~total revenues)~~Specialty net revenue) for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~

2019.

Selling, General, and Administrative

Specialty SG&A expense of $17 million and $38 million for the three and six months ended June 30, 2020, respectively, was flat with the prior year periods.

Research and Development

Specialty R&D expenses ~~remained consistent~~ for the three months ended ~~September~~June 30, ~~2019 at $20 million compared to the prior year period.~~

~~Specialty SG&A expense for the nine months ended September 30, 2019 was $58~~2020 were $5 million, as compared to ~~$33~~$3 million for the ~~nine~~three months ended ~~September~~June 30, ~~2018.~~2019. The ~~$25 million increase from the prior period was primarily due to the timing of the Combination partially offset by post-Combination operating synergies.~~

~~Research and Development~~

~~Specialty research and development expenses remained consistent for the three month period ended September 30, 2019 at $4 million when compared to the prior year period of $4 million.~~

~~Specialty research and development expenses for the nine months ended September 30, 2019 were $10 million, as compared to $7 million for the nine months ended September 30, 2018. The $3~~$2 million increase from the prior year period was primarily due to ~~clinical~~an increase in development costs ~~associated with~~for IPX203.

Specialty R&D expenses for the six months ended June 30, 2020 were $13 million, as compared to $6 million for the six months ended June 30, 2019. The $7 million increase from the prior year period was primarily due to an increase in development for IPX203 and a $2 million milestone achievement of one of our ~~bio studies.~~

~~Other Operating Expenses~~

development partners.

(Gains) Charges Related to Legal Matters, Net

For the three months ended ~~September~~June 30, ~~2019,~~2020, we ~~recognized~~recorded a gain of $2 million for the favorable resolution of a commercial legal proceeding.

Other Operating Expenses

For the three and six months ended June 30, 2019, other operating expenses of $1 million and $3 million, in the Specialty segment compared to none for the three months ended September 30, 2018. For the nine months ended September 30, 2019, we recognized other operating expenses of $6 million in the Specialty segment compared to $2 million for the nine months ended September 30, 2018. For the three and nine month periods, these expensesrespectively, were primarily attributable to ~~acquisition, site closure and~~ integration expenses associated with the Combination.

AvKARE

The following table sets forth results of operations for our AvKARE segment for the three and six months ended June 30, 2020 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net revenue	$	63,847	$	—	$	121,817	$	—
Cost of goods sold	50,528		—		97,423		—
Gross profit	13,319		—		24,394		—
Selling, general and administrative	15,647		—		26,435		—
Operating loss	$	(2,328)	$	—	$	(2,041)	$	—

Our AvKARE segment consists of the businesses we acquired in the Acquisitions on January 31, 2020. Prior to the Acquisitions, we did not have an AvKARE segment. Refer to Note 3. Acquisitions and Divestitures.

Liquidity and Capital Resources

Our primary source of liquidity is cash generated from operations, available cash and borrowings under debt financing arrangements, including ~~$433~~$414 million of available additional capacity on our ~~asset backed revolving credit facility ("ABL").~~Revolving Credit Facility as of July 16, 2020, as defined below. We believe these sources are sufficient to fund our planned operations, meet our interest and contractual obligations and provide sufficient liquidity over the next 12 months. However, our ability to satisfy our working capital requirements and debt obligations will depend upon economic conditions, the impact of the COVID-19 pandemic, and demand for our products, which are factors that may be out of our control.

Our primary uses of capital resources are to fund operating activities, including research and development expenses associated with new product filings, and pharmaceutical product manufacturing expenses, license payments, and spending on production facility expansions and capital equipment items.

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. A continued worldwide disruption could materially affect our future access to sources of liquidity, particularly our cash flows from operations, and financial condition. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.

On March 27, 2020, President Trump signed into law the CARES Act. The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. In July 2020, we received $106 million in cash from U.S. federal tax refunds associated with the CARES Act (refer to Note 8.Income Taxes) with an additional $4 million in cash refunds expected to be received before December 31, 2020. Other non-income-based tax provisions include deferral of the employer share of Social Security payroll taxes due from the CARES Act date of enactment through December 31, 2020, and a potential 50% credit on qualified wages against employment taxes each quarter with any excess credits eligible for refunds.

Over the next 12 months, we will make substantial payments for monthly interest and quarterly principal amounts due on our term ~~loan under our senior secured credit facility (the "Term Loan"), any future borrowings under the ABL,~~loans, Revolving Credit Facility, severance and capital expenditures. ~~We made a $50 million payment to JSP on April 22, 2019 pursuant to the terms of a license and supply agreement, as described in~~ ~~Note 5. Alliance and Collaboration. Given the magnitude of projected expenditures, we may require additional funds from our ABL to meet these increased cash needs in the next year.~~

We are party to a tax receivable agreement that requires us to make cash payments to APHC Holdings LLC (formerly known as Amneal Holdings LLC) ("Holdings") in respect of certain tax benefits that we may realize or may be deemed to realize as a result of ~~redemptions~~sales or exchanges of Amneal common units by Holdings. The timing and amount of any payments under the TRA will also vary, depending upon a number of factors including the timing and number of Amneal common units sold or exchanged for our Class A Common Stock, the price of our Class A Common Stock on the date of sale or exchange, the timing and amount of our taxable income, and the tax rate in effect at the time of realization of our taxable income. The tax receivable agreement also requires that we make an accelerated payment to Holdings equal to the present value of all future payments due under the agreement upon certain change of control and similar transactions. ~~The timing~~Further sales or exchanges occurring subsequent to June 30, 2020 could result in future Amneal tax deductions and obligations to pay 85% of ~~any payments under~~such benefits to the ~~tax receivable agreement will vary depending upon a number~~holders of ~~factors, but payments~~Amneal common units. These obligations could be ~~substantial,~~incremental to and substantially larger than the approximate $202 million contingent liability as of June 30, 2020 (refer to Note 8.Income Taxes). Payments could also be in excess of the tax savings that we ultimately realize. Because of the foregoing, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity. For further details, see Item 1A. Risk Factors and Note 8. Income Taxes in our ~~2018~~2019 Annual Report on Form 10-K.

In addition, pursuant to the limited liability operating agreement of Amneal, in connection with any tax period, Amneal will be required to make distributions to its members, on a pro rata basis in proportion to the number of Amneal Common Units held by each member, of cash until each member (other than the Company) has received an amount at least equal to its assumed tax liability and the Company has received an amount sufficient to enable it to timely satisfy all of its U.S. federal, state and local and non-U.S. tax liabilities, and meet its obligations pursuant to the tax receivable agreement. For the ~~nine months ended September 30, 2019, Amneal made an aggregate of $13 million in tax distributions to Holdings (none for the~~ three months ended ~~September~~June 30, ~~2019). The amount due~~2020, no cash tax distributions were made to Holdings. In July 2020, we made cash tax distributions of $1 million to Holdings ~~as of September~~pursuant to the limited liability operating agreement.

At June 30, ~~2019 is immaterial.~~

~~At September 30, 2019,~~2020, our cash and cash equivalents consist of cash on deposit and highly liquid investments. A portion of our cash flows are derived outside the United States. As a result, we are subject to market risk associated with changes in foreign exchange rates. We maintain cash balances at both U.S. based and foreign country based commercial banks. At various times during the year, our cash balances held in the United States may exceed amounts that are insured by the Federal Deposit Insurance Corporation (FDIC). We make our investments in accordance with our investment policy. The primary objectives of our investment policy are liquidity and safety of principal.

Cash Flows

(in thousands)


	Nine Months Ended September 30,							Six Months Ended June 30,
	2019			2018				2020		2019
Cash provided by (used in):							Cash provided by (used in):
Operating activities	$	52,594		$	(9,421	)	Operating activities	$	228,267	$	(87,316)
Investing activities		(14,813	)		(401,699	)	Investing activities	(270,969)		(44,795)
Financing activities		(38,535	)		506,595		Financing activities	157,897		(30,939)
Effect of exchange rate changes on cash		(967	)		(1,204	)	Effect of exchange rate changes on cash	255		1,293
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(1,721	)	$	94,271
Net increase (decrease) in cash, cash equivalents, and restricted cash							Net increase (decrease) in cash, cash equivalents, and restricted cash	$	115,450	$	(161,757)

Cash Flows from Operating Activities

Net cash provided by operating activities was ~~$53~~$228 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to net cash used in operating activities of $9$(87) million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The change was primarily attributed to

improved operating performance, favorable timing ofimpacts from the collections of trade receivables and payments of accounts ~~receivable~~payable and ~~decreased transaction~~accrued expenses, and ~~integration costs~~a decrease in payments of employee separation benefits and interest, which were partially offset by ~~increased interest due to additional debt of the combined company and~~ an ~~increase in restructuring and severance related payments.~~

unfavorable impact from income taxes.

Cash Flows from Investing Activities

The ~~decrease~~increase in cash used in investing activities of ~~$387~~$226 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, was primarily related to cash paid for the Acquisitions, partially offset by a decrease in ~~cash paid for acquisitions, an increase in~~ proceeds from ~~corporate owned life insurance and an increase in the proceeds received on the~~ sale of international ~~businesses.~~

businesses and decreases in purchases of property, plant and equipment and acquisitions of intangible assets.

Cash Flows from Financing Activities

Net cash provided by financing activities was $158 million for the six months ended June 30, 2020 compared to net cash used in financing activities ~~was $39~~of ($31) million for the ~~nine~~six months ended ~~September~~June 30, ~~2019 compared to net cash provided by financing activities of $507 million for the nine months September 30, 2018.~~2019. The change was primarily attributable to ~~a decrease in~~the net proceeds from ~~our Term Loan~~a $180 million term loan associated with the Acquisitions and ~~an increase~~a decrease in tax distributions to non-controlling ~~interests partially offset by a decrease in distributions to members.~~

~~UK Divestiture~~

On March 30, 2019, Amneal sold 100% of the stock of its Creo Pharma Holding Limited subsidiary, which comprised substantially all of our operations in the United Kingdom, to AI Sirona (Luxembourg) Acquisition S.a.r.l for net cash consideration of approximately $32 million which was received in April 2019.

~~Germany Divestiture~~

On May 3, 2019, the Company sold 100% of the stock of its Amneal Deutschland GmbH subsidiary, which compromised substantially all of our operations in Germany, to EVER Pharma Holding Ges.m.b.H. for net cash consideration of approximately $3 million which was received in May 2019.

interests.

Commitments and Contractual Obligations

The contractual obligations of the Company are set forth in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s ~~2018~~2019 Annual Report on Form 10-K. WeOther than the contractual obligations noted below, there have been no material changes to the disclosure presented in our 2019 Annual Report on Form 10-K.


	Payments Due by Period (in thousands)
Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Rondo Term Loan ⁽¹⁾	$	177,750	$	4,500	$	18,000	$	18,000	$	137,250
Interest payments on Rondo Term Loan ⁽²⁾	34,383		4,214		15,651		13,966		552

(1)Rondo Term loan relates to the Acquisitions.

(2)Interest on the Rondo Term Loan was calculated based on the applicable rate at June 30, 2020.

The foregoing table does not include ~~herein certain updates~~the $45 million of aggregate principal and the related interest due on the long-term promissory notes (“Sellers Notes”) and the short-term promissory note (“Short-Term Sellers Note”) issued in connection with the Acquisition because of the uncertainty as to when those ~~obligations. The $50 million Levothyroxine license and supply contract liability outstanding at March 31, 2019 was paid in April 2019.~~

amounts will be repaid. Refer to the section Acquisition Financing – Notes Payable-Related Party below for additional information.

Levothyroxine License and Supply Agreement; Transition Agreement

On August 16, 2018, the Company entered into a license and supply agreement with Jerome Stevens Pharmaceuticals, Inc. ("JSP") for Levothyroxine. This agreement designated the Company as JSP's exclusive commercial partner for Levothyroxine in the U.S. market for a 10-year term commencing on March 22, 2019. Under this license and supply agreement with JSP, the Company accrued the up-front license payment of $50 million on March 22, 2019, which was paid in April 2019. The agreement also provides for the Company to pay a profit share to JSP based on net profits of the Company's sales of Levothyroxine, after considering product costs.

On November 9, ~~201 8,~~2018, the Company entered into a transition agreement ("Transition Agreement") with Lannett and JSP. Under the terms of the Transition Agreement, the Company assumed the distribution and marketing of Levothyroxine from Lannett beginning December 1, 2018 through March 22, 2019, ahead of the commencement date of the license and supply agreement with JSP described above.

In accordance with the terms of the Transition Agreement, the Company made $47 million of non-refundable payments to Lannett. For the ~~nine~~six months ended ~~September~~June 30, 2019, ~~and the year ended December 31, 2018,~~ $37 million ~~and $ 10 million, respectively,~~(none in 2020) were expensed to cost of goods sold, as the Company sold Levothyroxine. As of December 31, 2018, the Company had a $4 million transition contract liability, which was fully settled in February 2019.

Additionally, during the year ended December 31, 2019, the Company recorded $1 million in cost of sales related to reimbursement due to Lannett for certain of its unsold inventory at the end of the Transition Period, which was fully settled in March 2020.

Outstanding Debt Obligations

~~Term Loan and Revolving~~

Senior Secured Credit ~~Agreements~~

Facilities

On May 4, 2018 we entered into a senior credit agreement that provided ~~the~~ a term loan (“Term ~~Loan~~Loan”) with a principal amount of $2.7 billion and ~~the ABL~~an asset backed revolving credit facility (“Revolving Credit Facility”) under which loans and letters of credit up to a principal amount of $500 million, on which $414 million are available (principal amount of up to $25 million is available for letters of credit) (collectively, the "Senior Secured Credit Facilities"). The Term Loan is repayable in equal quarterly installments at a rate of 1.00% or the original principal amount annually, with the balance payable at maturity on May 4, 2025. The Term Loan bears a variable annual interest rate, which is one-month LIBOR plus 3.5% at ~~September~~June 30, ~~2019.~~2020. The ~~ABL~~Revolving Credit Facility bears an annual interest rate of one-month LIBOR plus ~~1.5%~~1.25% at ~~September~~June 30, ~~2019~~2020 and matures on May 4, 2023. ~~As of September 30, 2019, the~~The annual interest rate for the ~~ABL~~Revolving Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the average historical excess availability. ~~At September 30, 2019, we had no outstanding borrowings under the ABL.~~

The proceeds of any loans made under the Senior Secured Credit ~~Facility~~Facilities can be used for capital expenditures, acquisitions, working capital needs and other general purposes, subject to covenants as described below. We pay a commitment fee based on the average daily unused amount of the ~~ABL~~Revolving Credit Facility at a rate based on average historical excess availability, between 0.25% and 0.375% per annum. At ~~September~~June 30, ~~2019,~~2020, the ~~ABL~~Revolving Credit Facility commitment fee rate is 0.375% per annum.

During March 2020, as a precautionary measure to mitigate the uncertainty surrounding overall market liquidity due to COVID-19, we borrowed $300 million on the Revolving Credit Facility. At June 30, 2020, all $300 million was repaid.

The Senior Secured Credit Facilities contain a number of covenants that, among other things, create liens on Amneal's and its subsidiaries' assets. The Senior Secured Credit Facilities contain certain negative covenants that, among other things and subject to certain exceptions, restrict Amneal’s and its subsidiaries' ability to incur additional debt or guarantees, grant liens, make loans, acquisitions or other investments, dispose of assets, merge, dissolve, liquidate or consolidate, pay dividends or other payments on capital stock, make optional payments or modify certain debt instruments, modify certain organizational documents, enter into arrangements that restrict the ability to pay dividends or grant liens, or enter into or consummate transactions with affiliates. The ~~ABL~~Revolving Credit Facility also includes a financial covenant whereby Amneal must maintain a minimum fixed charge coverage ratio if certain borrowing conditions are met. The Senior Secured Credit Facilities contain customary events of default, subject to certain exceptions. Upon the occurrence of certain events of default, the obligations under the Senior Secured Credit Facilities may be accelerated and the commitments may be terminated. At ~~September~~June 30, ~~2019,~~2020, Amneal was in compliance with all covenants under the Senior Secured Credit Facilities.

Acquisition Financing – Revolving Credit and Term Loan Agreement

On January 31, 2020, in connection with the Acquisitions, Rondo Intermediate Holdings, LLC (“Rondo Holdings”), a wholly-owned subsidiary of Rondo, entered into a revolving credit and term loan agreement (“Rondo Credit Facility”) that provided a term loan ("Rondo Term Loan") with a principal amount of $180 million and a revolving credit facility (“Rondo Revolving Credit Facility”) which loans up to a principal amount of $30 million. The Rondo Term Loan is repayable in equal quarterly installments at a rate of 5.0% of the original principal amount annually, with the balance payable at maturity on January 31, 2025. The Rondo Credit Facility bears a variable annual interest rate, which is one-month LIBOR plus 3.0% at June 30, 2020 and matures on January 31, 2025. The annual interest rate for borrowing under the Rondo Credit Facility may be reduced or increased by 0.25% based on step-downs and step-ups determined by the total net leverage ratio, as defined in that agreement. At June 30, 2020, the Company had no outstanding borrowings under the Rondo Revolving Credit Facility.

Acquisition Financing – Notes Payable-Related Party

The Sellers Notes with a stated principal amount of $44 million and the Short-Term Sellers Note with a stated principal amount of $1 million were issued by Rondo or its subsidiary, Rondo Top Holdings, LLC, on January 31, 2020, the closing date of the Acquisitions. The Sellers Notes are unsecured and accrue interest at a rate of 5% per annum, not compounded, until June 30, 2025. The Sellers Notes are subject to prepayment at the option of Rondo, as the obligor, without premium or penalty. Mandatory payment of the outstanding principal and interest is due on June 30, 2025 if certain financial targets are achieved, the borrowers’ cash flows are sufficient (as defined in the Sellers Notes) and repayment is not prohibited by senior debt. If repayment of all outstanding principal and accrued interest on the Sellers Notes is not made on June 30, 2025, the requirements for repayment are revisited on June 30 of each subsequent year until all principal and accrued interest on the Sellers Notes are satisfied no later than January 31, 2030 or earlier, upon a change in control. The Short-Term Sellers Note is also unsecured and accrues interest at a rate of 1.6% and is due on January 31, 2020.

The Sellers Notes were recorded at a fair value of $35 million, which was estimated using the Monte-Carlo simulation approach under the option pricing framework. The Short-Term Sellers Note of $1 million was recorded at the stated principal amount of $1 million, which approximates fair value. The $9 million discount on the Sellers Notes will be amortized to interest expense using the effective interest method from January 31, 2020 to June 30, 2025 as the carrying value of the Sellers Notes will accrete to the stated principal amount of $44 million.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of ~~September~~June 30, ~~2019.~~

2020.

Critical Accounting Policies

For a discussion of the Company’s critical accounting policies, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2018~~2019 Annual Report on Form 10-K. ~~Other than as set forth below, there~~There have been no material changes to the disclosure presented in our ~~2018~~2019 Annual Report on Form 10-K.

~~Impairment of Goodwill~~

~~In January 2017, the Financial Accounting Standards Board issued ASU 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~ that eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. We adopted ASU 2017-04 as of April 1, 2019 on a prospective basis and have updated our critical accounting policy accordingly.

Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. We review goodwill for possible impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable.

In order to test goodwill for impairment, an entity is permitted to first assess qualitative factors to determine whether a quantitative assessment of goodwill is necessary. The qualitative factors considered by us may include, but are not limited to, general economic conditions, our outlook, market performance of our industry and recent and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. If a quantitative assessment is required, we determine the fair value of the reporting unit using a discounted cash flow analysis. If the net book value of the reporting unit exceeds its fair value, we recognize a goodwill impairment charge for the reporting unit equal to the lesser of (i) the total goodwill allocated to that reporting unit and (ii) the amount by which that reporting unit’s carrying amount exceeds its fair value.

Goodwill is allocated and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. We have two reportable segments, Generics and Specialty, which are the same as the respective operating segments and reporting units. As of September 30, 2019, $361 million and $59 million of goodwill was allocated to our Specialty and Generics segments, respectively.

~~Interim Goodwill Impairment Test~~

In light of the decline in our share price and financial performance, we performed an interim goodwill impairment test during the three months ended September 30, 2019 by evaluating our two reporting units, which are the same as our two reportable segments. The fair values of each of our reporting units were determined by combining both the income and market approaches. In performing this test, the Company utilized long-term growth rates for its reporting units ranging from no growth to 1.0% and discount rates ranging from 9.0% to 11.5% in its estimation of fair value. The assumptions used in evaluating goodwill for impairment are subject to change and are tracked against historical performance by management.

Based on the results of the interim test performed as of August 31, 2019 and updated on September 30, 2019, we determined that the estimated fair values of the Generics and Specialty reporting units exceeded their respective carrying amounts; therefore, the Company did not record a goodwill impairment charge for the three months ended September 30, 2019. ~~The Generics reporting unit was in excess of its carrying value by approximately 15% and the Specialty reporting unit was in excess of its carrying value by approximately 9%.~~

~~A 50-basis point increase in the assumed discount rates utilized in each test would have not created a goodwill impairment charge in our Generics reporting unit or our Specialty reporting unit.~~

Significant judgment is employed in determining the assumptions utilized as of the acquisition date and for each subsequent measurement period. Accordingly, changes in assumptions described above, could have a material impact on our consolidated results of operations.

For each of our reporting units, there are a number of future events and factors that may impact future results and the outcome of subsequent goodwill impairment testing. For a list of these factors, see ~~Item 1A. Risk Factors.~~

Recently Issued Accounting Standards

Recently issued accounting standards are discussed in Note 2. Summary of Significant Accounting Policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~For a discussion~~

There has not been any material change in our assessment of ~~the Company’s quantitative and qualitative disclosures about~~ market ~~risks, see~~ risk as set forth in Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in our ~~2018~~2019 Annual Report on Form 10-K.

Item 4. ~~Control~~sControls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated 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 on Form 10-Q. Based upon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that due to the material weakness, described below, our disclosure controls and procedures were not effective as of June 30, 2020.

The material weakness in internal control over financial reporting (as defined in Rule ~~13a-15(e)~~13a-15(f) of the Exchange ~~Act, were effective as~~Act) resulted from ineffective controls over cash disbursements. Specifically, we did not have adequate controls to prevent improper changes to banking information in our vendor master file, which allowed cash disbursements to be redirected from a vendor bank account to an unrelated bank account. In light of ~~September 30, 2019 at~~ the ~~reasonable assurance level.~~

material weakness, we performed additional analysis, including validating changes to vendor bank account information made during 2020, to ensure that the Company’s financial statements covered by this Quarterly Report on Form 10-Q are prepared in accordance with generally accepted accounting principles in the United States of America.

This control deficiency did not result in any financial loss or any material impact to the financial statements for the periods covered by this Quarterly Report on Form 10-Q or for any prior periods.

To remediate the material weakness described above, we have enhanced the design and execution of our existing controls and procedures to prevent improper changes to the banking information in our vendor master file. We expect that remediation will be completed prior to December 31, 2020 following sufficient operational time for the applicable remedial controls and subsequent testing.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~September~~June 30, ~~2019,~~2020, except as noted above, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

Systems of disclosure controls and internal controls over financial reporting and their associated policies and procedures, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the system of control are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Accordingly, given the inherent limitations in a cost-effective system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected. Our disclosure controls and procedures are designed to provide a reasonable assurance of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures.

Part II – O~~THE~~ROTHER INFORMATION

Item 1. Legal Proceedings

Information pertaining to legal proceedings can be found in Note ~~13.~~17. Commitments and Contingencies and is incorporated by reference herein.

Item 1A. Risk Factors

Other than as set forth below, there have been no material changes to the ~~disclosure~~disclosures presented in our ~~2018~~2019 Annual Report on Form 10-K under Item 1A. Risk Factors.

The direct and indirect impact of the COVID-19 pandemic could also affect or amplify one or more of the risk factors included in our 2019 Annual Report on 10-K. However, given the unpredictable, unprecedented and fluid nature of the pandemic, the potential impacts it could have on us, whether direct or indirect, remain uncertain. Additionally, other risks that we do not presently perceive or that we currently believe are not material may also adversely affect us.

If we fail to maintain an effective system of internal control over financial reporting, or to remediate any existing material weakness, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud.

We are ~~controlled by the Amneal Group. The interests~~required to comply with Section 404 of the ~~Amneal Group may differ from~~Sarbanes-Oxley Act. Section 404 of the ~~interests~~Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and attestations of the effectiveness of internal controls by independent auditors. Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Our failure to maintain the effectiveness of our ~~other stockholders.~~

Asinternal controls in accordance with the requirements of ~~September 30, 2019,~~ the ~~group~~Sarbanes-Oxley Act or to remediate any identified material weaknesses, or the inability of ~~shareholders who owned Amneal prior~~our independent registered public accounting firm to express an opinion as to the ~~Combination (the "Amneal Group") controlled approximately 55% of the voting power of all~~effectiveness of our ~~outstanding shares of common stock.~~

Through its control of a majority of our voting power and the provisions set forth in our charter, bylaws and the Second Amended and Restated Stockholders Agreement dated December 16, 2017 (the "Stockholders Agreement"), the Amneal Group has the ability to designate and elect and has designated and elected a majority of our board of directors. The Amneal Group hasinternal control over all matters submitted to our stockholders for approval, including changes in capital structure, transactions requiring stockholder approval under Delaware law and corporate governance, subject to the terms of the Stockholders Agreement relating to the Amneal Group's agreement to vote in favor of directors not designated by the Amneal Group and such other matters that are set forth in the Stockholders Agreement. The Amneal Group may have different interests than our other stockholders and may make decisions adverse such interests.

Among other things, the Amneal Group's control could delay, defer, or prevent a sale of the Company that the Company’s other stockholders support, or, conversely, this control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could discourage a potential investor from seeking to acquire Class A Common Stock and, as a result, might harm the market price of that Class A Common Stock.

The Amneal Group could transfer control of us to a third party by transferring its shares. In addition, the Company believes members of the Amneal Group have pledged Amneal Common Units and the corresponding shares of Class B Common Stock to secure borrowings, and other members of the Amneal Group could enter into similar arrangements. In connection with these arrangements, the Company has entered into agreements with certain Amneal Group members and the lending institutions to whom their securities may be pledged. Because of the recent drop in our stock price, the value of pledged Amneal securities has decreased, which could increase the likelihood of a margin call on a pledge of Amneal securities. The voluntary or forced sale of some or all these units or shares pursuant to a margin call or otherwise could cause our stock price to decline and negatively impact our business. Similarly, a voluntary or forced sale could cause the Company to lose its “controlled company” status under the New York Stock Exchange listing requirements, which would require us to comply over a transition period with certain corporate governance requirements from which we are currently exempt, including having a fully independent compensation committee. If all of the Amneal Common Units and corresponding shares of Class B stock were pledged to secure borrowings, a complete foreclosure could result in a change of control.

~~Our future success depends on our ability to attract and retain talented employees and consultants.~~

Our future success depends, to a substantial degree, upon the continued service of the members of our management team. The loss of the services of members of our management team, or their inability to perform services on our behalf,financial reporting, could have a material adverse effect on our ~~business, condition (financial~~business. We could lose investor confidence in the accuracy and otherwise), prospects and results of operations. On August 5, 2019, we announced that President and Chief Executive Officer Robert A. Stewart was leaving the Company and resigning as a director, effective immediately, and would be replaced by Amneal’s co-founders Chirag Patel, who will serve as President and Co-Chief Executive Officer, and Chintu Patel, who will serve as Co-Chief Executive Officer. Each of Chirag Patel and Chintu Patel is a member of the Amneal Group. In connection with this transition, among other changes to the Company's board of directors, Executive Chairman Paul M. Bisaro also resigned from the Company and the board and was replaced on the board by Paul Meister, who will serve as non-executive Chairman of the Board. Any change in senior management involves significant inherent risk, and any failure to effect a smooth transition process could hinder our strategic planning, execution and future performance. While we endeavor to minimize any negative impact associated with changes such as these, there may be uncertainty among investors, employees and others regarding our future direction and performance. Any disruption in our operations, uncertainty regarding our future or negative public perception regarding the change could have a material adverse effect on our business, financial condition, operating results and cash flows.

~~Our success also depends, to a large extent, upon the contributions~~completeness of our sales, marketing, scientific and quality assurance staff. We compete with brand and generic pharmaceutical manufacturers for qualified personnel, and our competitors may offer more favorable employment opportunities than we do. If we are not able to attract and retain the necessary personnel to accomplish our business objectives we could experience constraints that would adversely affect our ability to sell and market our products effectively, to meet the demands of our strategic partners in a timely fashion, and to support our research and development programs. In particular, our sales and marketing efforts depend on the ability to attract and retain skilled and experienced sales, marketing and quality assurance representatives. Although we believe that we have been successful in attracting and retaining skilled personnel in all areas of our business, we cannot provide assurance that we can continue to attract, train and retain such personnel. Any failure in this regard could limit the rates at which we generate sales and develop or acquire new products.

~~If we determine that our goodwill has become impaired, we may record significant impairment charges, which would adversely affect our~~ financial ~~condition and results of operations.~~

Goodwill represents a significant portion of our assets. Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. In the future, goodwill may increase as a result of future acquisitions. We review our goodwill and indefinite lived intangible assets at least annually for impairment. Impairment may result from, among other things, deterioration in the performance of acquired businesses, adverse market conditions and adverse changes in applicable laws or regulations, including changes that restrict the activities of an acquired business.

Generic pharmaceuticals have faced regular and increasing price erosion each year, placing even greater importance on our ability to continually introduce new products. If these trends continue or worsen, or if we experience further difficulty in this market or the Specialty market, this may continue to adversely affect our revenues and profits in our Generics and Specialty segments. Furthermore, during the first three quarters of 2019, the Company's market capitalization decreased significantly. Additional decline in our market capitalization, even if due to macroeconomic or industry-wide factors, could put pressure on the carrying value of our goodwill in both our Generics and Specialty segments and cause the Company to conduct an interim impairment test. A determination that all or a portion of our goodwill is impaired, although a non-cash charge against earnings, could have a material adverse effect on our results of operations and financial condition.

If we determine in the future that we will not be able to fully utilize all or part of our deferred tax assets, we would record a valuation allowance through earnings in the period the determination was made,reports, which could have an adverse effect on the price of our ~~results~~common stock. In addition, if our efforts to comply with new or changed laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

In connection with the preparation of ~~operations~~our condensed consolidated financial statements for the three and ~~earnings.~~

~~We record valuation allowances against~~six months ended June 30, 2020, our ~~DTAs when it is more likely than not that all~~management identified a material weakness in internal controls over financial reporting regarding cash disbursements, as discussed in greater detail in Part I, Item 4 "Controls and Procedures." Our management or ~~a portion~~our independent registered public accounting firm may also identify material weaknesses in our internal control over financial reporting in the future. The existence of ~~a DTA will~~the existing material weakness or any future internal control material weaknesses may result in current and potential stockholders and alliance and collaboration agreements’ partners losing confidence in our financial reporting, which could harm our business, the market price of our common stock, and our ability to retain our current, or obtain new, alliance and collaboration agreements’ partners. Further, we may not be ~~realized. We routinely evaluate~~successful in making the ~~realizability~~improvements necessary to remediate the existing or any future material weakness, or in doing so in a timely and cost-effective manner.

In addition, the existence of material weaknesses in our internal control over financial reporting may affect our ability to timely file periodic reports under the Exchange Act. The inability to timely file periodic reports under the Exchange Act could result in the SEC revoking the registration of our ~~DTAs~~common stock, which would prohibit us from listing or having our stock quoted on any public market. This would have an adverse effect on our business and stock price by ~~assessing~~limiting the ~~likelihood that~~publicly available information regarding us and greatly reducing the ability of our ~~deferred tax assets will be recovered based on all available positive~~stockholders to sell or trade our common stock.

The spread of the novel coronavirus (“COVID-19”) pandemic and ~~negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies~~other adverse public health developments could adversely affect our business and results of operations. ~~Estimating future taxable income~~

On March 11, 2020, the World Health Organization designated the outbreak of a novel strain of coronavirus (“COVID-19”) as a global pandemic. Governments and businesses around the world have taken unprecedented actions to mitigate the spread of COVID-19, including imposing restrictions on movement and travel such as quarantines and shelter-in-place requirements, and restricting or prohibiting outright some or all commercial and business activity, including the manufacture and distribution of certain goods and the provision of non-essential services. These measures, though currently temporary in nature, may become more severe and continue indefinitely depending on the evolution of the COVID-19 pandemic. To date, no fully effective vaccines or treatments have been developed and effective vaccines or treatments may not be discovered soon enough to protect against a worsening of the outbreak or to prevent COVID-19 from becoming endemic.

Our business and results of operations could be materially adversely affected by the COVID-19 pandemic. In particular, the COVID-19 pandemic could materially adversely impact the Company's operations, including, among other things, its manufacturing operations, supply chain, sales and marketing and clinical trial operations. Any of these factors could adversely affect the Company's business, operating results or financial condition. The United States, India and China, three countries particularly hard hit by the pandemic, represent vital aspects of our direct and indirect supply chain and the United States is ~~inherently~~the largest end market for our products, representing the geographic source of almost our entire 2019 net revenue. We have taken precautionary measures intended to help minimize the risk of the virus to our employees, including requiring non-production employees to work remotely, suspending all non-essential travel worldwide, and restricting or prohibiting attendance at industry events and in-person work-related meetings. While these measures are temporary, they may continue until the pandemic is contained. The spread of COVID-19 could also negatively affect the operations of the third parties with whom we do business, including our raw material providers, aspects of our supply chain and our development, collaboration and commercial partners, for the same or different reasons that it is impacting our business directly. We expect the foregoing and other unanticipated challenges will cause delays or disruptions in the manufacture, supply and availability of our products, particularly those in New York and New Jersey and more generally will make it more difficult to operate our business. Any of these factors could adversely affect the Company's business, operating results or financial condition.

The spread of COVID-19 could also adversely affect our clinical trial operations and other research and development activities in the United States and elsewhere, including our ability to recruit and retain volunteers, principal investigators and site staff who, as patients and healthcare providers, may have heightened exposure risks and sensitivities to COVID-19. Further, some patients may be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services or may become infected with COVID-19 themselves, any of which would delay our ability to conduct clinical trials or release clinical trial results. COVID-19 may also affect employees of third-party contract research organizations that we rely upon to carry out our clinical trials, which could result in inefficiencies due to reductions in staff and disruptions to work environments. The outbreak could impact the day-to-day operations of the FDA and other health authorities in their ability to respond to non-emergency matters, which could delay reviews and approvals of product candidates.

The COVID-19 pandemic has adversely affected many industries as well as the economies and financial markets of many countries, including the United States, India and China, resulting in a significant deceleration of economic activity. This slowdown has reduced production, decreased the level of trade, and led to widespread corporate downsizing, causing a sharp increase in unemployment. We have also seen significant disruption of and extreme volatility in the global capital markets, which could increase the cost of, or entirely restrict access to, capital. This volatility and uncertainty have adversely affected our stock price and may continue to do so. The impact of this pandemic on the U.S., Indian, Chinese and world economies is uncertain and, ~~requires judgment. In projecting future taxable income, we consider our historical results~~unless the pandemic is contained, these adverse impacts could worsen, impacting all segments of the global economy, and ~~incorporate certain assumptions, including projected new product launches, revenue growth,~~result in a significant recession or worse.

Considerable uncertainty still surrounds the COVID-19 virus and ~~operating margins, among others.~~

~~In assessing~~its potential effects, and the ~~need for a valuation allowance in the third quarter~~extent of ~~fiscal 2019, we considered all available objective~~ and ~~verifiable evidence both positive and negative, including historical levels~~effectiveness of ~~pre-tax income (loss) both~~any responses taken on a ~~consolidated basis~~local, national and ~~tax reporting entity basis, legislative developments, expectations~~global level. Infections may become more widespread and that could accelerate or magnify one or more of the risks ~~associated with estimates of future pre-tax income,~~described above. While we expect the COVID-19 pandemic and ~~prudent and feasible tax planning strategies. We currently estimate that as of September 30, 2019 we~~related events will have ~~generated~~ a ~~cumulative consolidated three-year pre-tax loss. As a result of this analysis, we considered it more likely than not that we will not realize~~negative effect on our business, the ~~benefits of our gross DTAs~~full extent and ~~therefore, for the three and nine months ended September 30, 2019, we have recorded a valuation allowance of $372 million to reduce the carrying value of these gross DTAs, net~~scope of the impact on national, regional and global markets and economies, and therefore our business and industry, is highly uncertain and cannot be predicted. Accordingly, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, any of ~~the reversal~~which could have a material adverse impact on our business and our results of ~~taxable temporary differences, to zero.~~

operation and financial condition.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. E~~xhibits~~

Exhibits


Exhibit No.		Description of Document

10.1
~~10.1~~	~~Separation Agreement between Robert Stewart, Amneal Pharmaceuticals, Inc. and~~ Amneal Pharmaceuticals LLC ~~dated as of August 2, 2019 (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q, filed August 5, 2019)~~†Severance Plan and Summary Plan Description

~~10.2~~ 31.1		Amendment No. 1, dated as of August 2, 2019, to Second Amended and Restated Stockholders Agreement, by and among Amneal Pharmaceuticals Holding Company, LLC, a Delaware limited liability company, AP Class D Member, LLC, a Delaware limited liability company, AP Class E Member, LLC, a Delaware limited liability company, AH PPU Management, LLC, a Delaware limited liability company, and Amneal Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q, filed August 5, 2019)

~~31.1~~	Certification of the Co - Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

31.2		Certification of the Co - Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

31.3		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

32.1		Certification of the Co - Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2		Certification of the Co - Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.3		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

~~101~~

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2019~~2020 formatted in inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, (ii) Consolidated Statements of Comprehensive ~~Loss/~~(Loss) Income for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, (iii) Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, (iv) Consolidated Statements of Cash Flows for ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, (v) Consolidated Statements of Stockholders' ~~Equity/ Members' Deficit~~Equity for each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 and (vi) Notes to Consolidated Financial Statements. *

104		Cover Page Interactive Data File – The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 is formatted in Inline XBRL (included as Exhibit 101).


**			This certificate is being furnished solely to accompany the report pursuant to 18 U.S.C. 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

†

Denotes management compensatory plan or arrangement.

~~SIGNATURES~~

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~~August 6, ~~2019~~ 2020	Amneal Pharmaceuticals, Inc.
		(Registrant)

	By:	/s/ Chirag Patel
		Chirag Patel
		President and Co-Chief Executive Officer
		(Co-Principal Executive Officer)

	By:	/s/ Chintu Patel
		Chintu Patel
		Co-Chief Executive Officer
		(Co-Principal Executive Officer)

	By:	/s/ ~~Todd P. Branning~~ Anastasios Konidaris
		~~Todd P. Branning~~ Anastasios Konidaris
		~~Senior~~Executive Vice President, ~~and~~ Chief Financial Officer (Principal Financial and Accounting Officer)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net revenue	$	378,283		$	476,487		$	1,229,045		$	1,165,463
Cost of goods sold		267,717			268,567			873,841			634,653
Cost of goods sold impairment charges		56,132			7,815			112,441			7,815
Gross profit		54,434			200,105			242,763			522,995
Selling, general and administrative		63,797			75,486			215,514			156,610
Research and development		38,125			42,349			139,999			136,893
In-process research and development impairment charges		23,382			650			46,169			650
Charges (gains) related to legal matters, net		14,750			2,589			14,750			(411	)
Intellectual property legal development expenses		2,586			4,401			9,263			13,024
Acquisition, transaction-related and integration expenses		3,131			2,231			12,682			216,873
Restructuring and other charges		20,937			(2,156	)		29,933			42,309
Operating (loss) income		(112,274	)		74,555			(225,547	)		(42,953	)
Other income (expense):
Interest expense, net		(42,209	)		(43,018	)		(129,376	)		(100,691	)
Foreign exchange loss, net		(12,531	)		(5,137	)		(9,684	)		(22,518	)
Loss on extinguishment of debt		—			—			—			(19,667	)
(Loss) gain on sale of international businesses, net		—			(2,812	)		6,930			(2,812	)
Gain from reduction of tax receivable agreement liability		192,844			—			192,844			—
Other income (expense), net		446			(1,014	)		1,702			725
Total other income (expense), net		138,550			(51,981	)		62,416			(144,963	)
Income (loss) before income taxes		26,276			22,574			(163,131	)		(187,916	)
Provision for (benefit from) income taxes		389,668			5,109			375,539			(6,943	)
Net (loss) income		(363,392	)		17,465			(538,670	)		(180,973	)
Less: Net loss attributable to Amneal Pharmaceuticals LLC pre- Combination		—			—			—			148,806
Less: Net loss (income) attributable to non-controlling interests		98,386			(10,577	)		208,881			21,191
Net (loss) income attributable to Amneal Pharmaceuticals, Inc. before accretion of redeemable non-controlling interest		(265,006	)		6,888			(329,789	)		(10,976	)
Accretion of redeemable non-controlling interest		—			64			—			(1,176	)
Net (loss) income attributable to Amneal Pharmaceuticals, Inc.	$	(265,006	)	$	6,952		$	(329,789	)	$	(12,152	)
Net (loss) income per share attributable to Amneal Pharmaceuticals, Inc.'s common stockholders:
Class A and Class B-1 basic	$	(2.03	)	$	0.05		$	(2.56	)	$	(0.10	)
Class A and Class B-1 diluted	$	(2.03	)	$	0.05		$	(2.56	)	$	(0.10	)
Weighted-average common shares outstanding:
Class A and Class B-1 basic		130,729			127,247			128,822			127,196
Class A and Class B-1 diluted		130,729			128,222			128,822			127,196

	Class A Common Stock				Class B Common Stock						Additional Paid-in			Stockholders' Accumulated			Accumulated Other Comprehensive			Non- Controlling			Total
	Shares		Amount		Shares			Amount			Capital			Deficit			(Loss) Income			Interests			Equity
Balance at July 1, 2019		128,151	$	1,281		170,941		$	1,710		$	544,161		$	(80,746	)	$	(6,750	)	$	289,696		$	749,352
Net loss		—		—		—			—			—			(265,006	)		—			(98,386	)		(363,392	)
Foreign currency translation adjustment		—		—		—			—			—			—			2,184			2,813			4,997
Stock-based compensation		—		—		—			—			6,095			—			—			—			6,095
Restricted stock unit vesting, net of shares withheld to cover payroll taxes		3		—		—			—			4			—			—			(9	)		(5	)
Redemption of Class B Common Stock		5,936		59		(5,936	)		(59	)		16,481			—			(313	)		(16,391	)		(223	)
Other		—		—		—			—			(1,100	)		—			—			—			(1,100	)
Balance at September 30, 2019		134,090	$	1,340		165,005		$	1,651		$	565,641		$	(345,752	)	$	(4,879	)	$	177,723		$	395,724

	Class A Common Stock				Class B Common Stock						Class B-1 Common Stock						Additional Paid-in		Stockholders' Accumulated			Accumulated Other Comprehensive			Non- Controlling			Total
	Shares		Amount		Shares			Amount			Shares			Amount			Capital		Deficit			(Loss) Income			Interests			Equity
Balance at January 1, 2019		115,047	$	1,151		171,261		$	1,713			12,329		$	123		$	530,438	$	(20,920	)	$	(7,755	)	$	391,613		$	896,363
Net loss		—		—		—			—			—			—			—		(329,789	)		—			(208,881	)		(538,670	)
Cumulative-effective adjustment from adoption of Topic 842		—		—		—			—			—			—			—		4,957			—			8,604			13,561
Foreign currency translation adjustment		—		—		—			—			—			—			—		—			1,759			2,255			4,014
Stock-based compensation		—		—		—			—			—			—			16,666		—			—			—			16,666
Exercise of stock options		205		2		—			—			—			—			922		—			(7	)		468			1,385
Restricted stock unit vesting, net of shares withheld to cover payroll taxes		253		2		—			—			—			—			10		—			(5	)		(933	)		(926	)
Redemption of Class B Common Stock		6,256		62		(6,256	)		(62	)								17,605		—			(332	)		(17,273	)		—
Conversion of Class B-1 Common Stock		12,329		123		—			—			(12,329	)		(123	)		—		—			—			—			—
Tax distribution		—		—		—			—			—			—			—		—			—			(82	)		(82	)
Reclassification of foreign currency translation adjustment included in net loss		—		—		—			—			—			—			—		—			1,461			1,952			3,413
Balance at September 30, 2019		134,090	$	1,340		165,005		$	1,651			—		$	—		$	565,641	$	(345,752	)	$	(4,879	)	$	177,723		$	395,724

	Members'			Members' Accumulated			Class A Common Stock				Class B Common Stock						Class B-1 Common Stock				Additional Paid-in			Stockholders' Accumulated			Accumulated Other Comprehensive			Non- Controlling			Total			Redeemable Non- Controlling
	Equity			Deficit			Shares		Amount		Shares			Amount			Shares		Amount		Capital			Deficit			(Loss) Income			Interests			Equity			Interest
Balance at January 1, 2018	$	2,716		$	(382,785	)		—	$	—		—		$	—			—	$	—	$	8,562		$	—		$	(14,232	)	$	10,157		$	(375,582	)	$	—
Period Prior to the Combination
Net (loss) income		—			(148,806	)		—		—		—			—			—		—		—			—			—			97			(148,709	)		—
Cumulative-effective adjustment from adoption of ASU 2014-09 (Topic 606)		—			4,977			—		—		—			—			—		—		—			—			—			—			4,977			—
Capital contribution from non- controlling interest		—			—			—		—		—			—			—		—		—			—			—			360			360			—
Distributions to members		—			(182,998	)		—		—		—			—			—		—		(8,562	)		—			—			—			(191,560	)		—
PPU expense		158,757			—			—		—		—			—			—		—		—			—			—			—			158,757			—
Foreign currency translation adjustment		—			—			—		—		—			—			—		—		—			—			1,721			—			1,721			—
Capital contribution by Amneal Holdings for employee bonuses		27,742			—			—		—		—			—			—		—		—			—			—			—			27,742			—
Period Subsequent to the Combination
Effect of the Combination		(189,215	)		709,612			73,289		733		224,996			2,250			—		—		323,589			—			9,437			626,737			1,483,143			—
Redemption of Class B Common Stock for PIPE		—			—			34,520		345		(46,849	)		(468	)		12,329		123		165,180			—			(1,965	)		(130,501	)		32,714			—
Redemption of Class B Common Stock for distribution to PPU Holders		—			—			6,886		69		(6,886	)		(69	)		—		—		24,293			—			(289	)		(19,181	)		4,823			—
Net (loss) income		—			—			—		—		—			—			—		—		—			(10,976	)		—			(21,355	)		(32,331	)		67
Foreign currency translation adjustment		—			—			—		—		—			—			—		—		—			—			(4,554	)		(6,131	)		(10,685	)		—
Stock-based compensation		—			—			—		—		—			—			—		—		5,234			—			—			—			5,234			—
Exercise of stock options		—			—			279		3		—			—			—		—		3,610			—			(7	)		(444	)		3,162			—
Reclassification of redeemable non- controlling interest		—			—			—		—		—			—			—		—		—			(1,176	)		—			(10,532	)		(11,708	)		11,708
Non-controlling interests from acquisition of Gemini		—			—			—		—		—			—			—		—		—			—			—			2,518			2,518			—
Acquisition of redeemable non- controlling interest		—			—			—		—		—			—			—		—		—			—			—			—			—			(11,775	)
Tax distribution		—			—			—		—		—			—			—		—		—			—			—			(35,543	)		(35,543	)		—
Other		—			—			—		—		—			—			—		—		(1,746	)		—			—			(1,968	)		(3,714	)		—
Balance at September 30, 2018	$	—		$	—			114,974	$	1,150		171,261		$	1,713			12,329	$	123	$	520,160		$	(12,152	)	$	(9,889	)	$	414,214		$	915,319		$	—

	Nine Months Ended September 30, 2018
Net revenue	$	1,341,555
Net loss	$	(143,585	)
Net loss attributable to Amneal Pharmaceuticals, Inc.	$	(21,502	)

Segment	Product Family	Three Months Ended September 30, 2019
		$		%
Generics	Levothyroxine Sodium	$	39,767	11%
Specialty	Rytary®		33,710	9%
Generics	Epinephrine Auto-Injector (generic Adrenaclick®)		22,687	6%
Generics	Diclofenac Sodium Gel		19,264	5%
Specialty ⁽¹⁾	Oxymorphone	$	17,142	5%

Segment	Product Family	Nine Months Ended September 30, 2019
		$		%
Generics	Levothyroxine Sodium	$	135,220	11%
Specialty	Rytary®		95,538	8%
Generics	Diclofenac Sodium Gel		67,741	6%
Generics	Epinephrine Auto-Injector (generic Adrenaclick®)		53,841	4%
Specialty⁽¹⁾	Oxymorphone	$	45,191	4%

	Employee Restructuring
Balance at December 31, 2018	$	22,112
Charges to income		8,607
Payments		(28,422	)
Balance at September 30, 2019	$	2,297

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost ⁽¹⁾	$	5,960	$	16,850
Finance lease cost:
Amortization of right-of-use assets		652		1,956
Interest on lease liabilities		1,115		3,358
Total finance lease cost		1,767		5,314
Total lease cost	$	7,727	$	22,164

Operating leases	September 30, 2019
Operating lease right-of-use assets	$	56,455
Operating lease right-of-use assets - related party		14,930
Total operating lease right-of-use assets	$	71,385

Operating lease liabilities	$	44,375
Operating lease liabilities - related party		14,271
Current portion of operating lease liabilities		13,467
Current portion of operating and financing lease liabilities - related party		2,299
Total operating lease liabilities	$	74,412

Financing leases
Financing lease right of use assets - related party	$	61,936

Financing lease liabilities - related party	$	61,719
Current portion of operating and financing lease liabilities - related party		1,054
Total financing lease liabilities	$	62,773

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	1,117	$	2,987
Operating cash flows from operating leases		4,964		14,968
Financing cash flows from finance leases		252		1,118
Non-cash activity:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—	$	360

	Operating Leases			Financing Leases
2019 (1)	$	4,999		$	1,368
2020		19,812			5,474
2021		16,173			5,474
2022		12,327			5,474
2023		10,038			5,474
Thereafter		26,930			106,740
Total lease payments		90,279			130,004
Less: Imputed interest		(15,867	)		(67,231	)
Total	$	74,412		$	62,773

	Operating Leases		Financing Obligation
2019	$	25,885	$	5,474
2020		12,071		5,474
2021		11,105		5,474
2022		10,329		5,474
2023		10,043		5,474
Thereafter		28,128		107,196
Total lease payments		97,561		134,566
Less: Imputed interest		—		(95,217	)
Total	$	97,561	$	39,349

Three Months Ended September 30, 2019	Generics ⁽¹⁾			Specialty ⁽¹⁾		Corporate and Other			Total Company
Net revenue	$	291,021		$	87,262	$	—		$	378,283
Cost of goods sold		217,773			49,944		—			267,717
Cost of goods sold impairment charges		49,115			7,017		—			56,132
Gross profit		24,133			30,301		—			54,434
Selling, general and administrative		14,256			20,228		29,313			63,797
Research and development		34,316			3,809		—			38,125
In-process research and development impairment charges		23,382			—		—			23,382
Charges (gains) related to legal matters, net		14,750			—		—			14,750
Intellectual property legal development expenses		2,586			—		—			2,586
Acquisition, transaction-related and integration expenses		502			2,455		174			3,131
Restructuring and other charges		14,702			213		6,022			20,937
Operating (loss) income	$	(80,361	)	$	3,596	$	(35,509	)	$	(112,274	)

~~Delaware~~

~~32-0546926~~

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

Amneal Pharmaceuticals, Inc. 400 Crossing Boulevard,
Bridgewater, NJ

(Address of principal executive offices)

(Zip Code)