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

 FORM 10-Q
 ☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBERJUNE 30, 20212022
 OR
 ☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM TO      
 COMMISSION FILE NUMBER 001-39294

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☐Accelerated filer☒
 Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒
 
The number of issued and outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of October 31, 2021August 1, 2022 was 44,634,085.48,178,245.



ASSERTIO HOLDINGS, INC.
FORM 10-Q FOR THE PERIOD ENDED SEPTEMBERJUNE 30, 20212022
TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION 
Item 1. 
Condensed Consolidated Balance Sheets at SeptemberJune 30, 20212022 and December 31, 20202021
Item 2. 
Item 3. 
Item 4. 
PART II — OTHER INFORMATION 
Item 1. 
Item 1A. 
Item 2.
Item 6.3. 
2
Table of Content

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASSERTIO HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)thousands, except share and per share data)
(Unaudited)
(Unaudited)
September 30, 2021December 31, 2020 June 30, 2022December 31, 2021
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$58,726 $20,786 Cash and cash equivalents$52,264 $36,810 
Accounts receivable, netAccounts receivable, net36,145 44,350 Accounts receivable, net48,537 44,361 
Inventories, netInventories, net5,481 11,712 Inventories, net12,259 7,489 
Prepaid and other current assetsPrepaid and other current assets12,193 17,406 Prepaid and other current assets3,632 14,838 
Total current assetsTotal current assets112,545 94,254 Total current assets116,692 103,498 
Property and equipment, netProperty and equipment, net1,678 2,437 Property and equipment, net1,133 1,527 
Intangible assets, netIntangible assets, net179,143 200,082 Intangible assets, net199,585 216,054 
Other long-term assetsOther long-term assets5,939 6,501 Other long-term assets4,566 5,468 
Total assetsTotal assets$299,305 $303,274 Total assets$321,976 $326,547 
LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$7,666 $14,808 Accounts payable$9,415 $6,685 
Accrued rebates, returns and discountsAccrued rebates, returns and discounts43,830 63,114 Accrued rebates, returns and discounts52,331 52,662 
Accrued liabilitiesAccrued liabilities13,782 27,071 Accrued liabilities13,232 14,699 
Current portion of long-term debt12,257 11,942 
Long-term debt, current portionLong-term debt, current portion11,662 12,174 
Contingent consideration, current portionContingent consideration, current portion7,200 6,776 Contingent consideration, current portion13,500 14,500 
Interest payable4,193 1,793 
Other current liabilitiesOther current liabilities11,552 7,182 Other current liabilities16,010 34,299 
Total current liabilitiesTotal current liabilities100,480 132,686 Total current liabilities116,150 135,019 
Long-term debtLong-term debt66,410 72,160 Long-term debt49,500 61,319 
Contingent considerationContingent consideration30,759 31,776 Contingent consideration23,259 23,159 
Other long-term liabilitiesOther long-term liabilities4,796 11,138 Other long-term liabilities4,698 4,636 
Total liabilitiesTotal liabilities202,445 247,760 Total liabilities193,607 224,133 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies00
Shareholders’ equity:Shareholders’ equity:Shareholders’ equity:
Common stock, $0.0001 par value, 200,000,000 shares authorized; 44,622,498
and 28,392,149 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
4 3 
Common stock, $0.0001 par value, 200,000,000 shares authorized; 48,172,055
and 44,640,444 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.
Common stock, $0.0001 par value, 200,000,000 shares authorized; 48,172,055
and 44,640,444 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.
5 4 
Additional paid-in capitalAdditional paid-in capital530,689 483,456 Additional paid-in capital540,692 531,636 
Accumulated deficitAccumulated deficit(433,833)(427,945)Accumulated deficit(412,328)(429,226)
Total shareholders’ equityTotal shareholders’ equity96,860 55,514 Total shareholders’ equity128,369 102,414 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$299,305 $303,274 Total liabilities and shareholders' equity$321,976 $326,547 





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Content
ASSERTIO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Revenues:Revenues:Revenues:
Product sales, netProduct sales, net$25,997 $33,664 $77,271 $61,974 Product sales, net$35,430 $25,244 $70,977 $51,274 
Commercialization agreement, net— — — 11,258 
Royalties and milestonesRoyalties and milestones416 299 1,391 1,158 Royalties and milestones451 542 1,443 975 
Other revenueOther revenue(941)602 (976)1,709 Other revenue(750)(413)(750)(36)
Total revenuesTotal revenues25,472 34,565 77,686 76,099 Total revenues35,131 25,373 71,670 52,213 
Costs and expenses:Costs and expenses:Costs and expenses:
Cost of salesCost of sales3,050 6,462 10,936 13,099 Cost of sales4,528 3,921 8,723 7,886 
Research and development expenses— 1,316 — 3,983 
Selling, general and administrative expensesSelling, general and administrative expenses9,313 27,607 43,279 83,052 Selling, general and administrative expenses10,543 24,040 21,184 32,364 
Fair value of contingent considerationFair value of contingent consideration1,300 2,195 2,945 1,602 
Amortization of intangible assetsAmortization of intangible assets7,175 5,587 20,939 18,237 Amortization of intangible assets7,969 7,218 16,469 13,764 
Restructuring chargesRestructuring charges— 268 1,089 6,787 Restructuring charges— — — 1,089 
Total costs and expensesTotal costs and expenses19,538 41,240 76,243 125,158 Total costs and expenses24,340 37,374 49,321 56,705 
Income (loss) from operationsIncome (loss) from operations5,934 (6,675)1,443 (49,059)Income (loss) from operations10,791 (12,001)22,349 (4,492)
Other (expense) income :
Other (expense) income:Other (expense) income:
Interest expenseInterest expense(2,495)(3,050)(7,783)(13,328)Interest expense(2,269)(2,605)(4,596)(5,288)
Other gain (loss), net344 253 747 (3,571)
Gain on sale of Gralise— — — 126,655 
Loss on extinguishment of convertible notes— — — (47,880)
Loss on sale of NUCYNTA— — — (14,749)
Other (loss) gainOther (loss) gain(95)137 451 403 
Loss on debt extinguishment— — — (8,233)
Total other (expense) income(2,151)(2,797)(7,036)38,894 
Total other expenseTotal other expense(2,364)(2,468)(4,145)(4,885)
Net income (loss) before income taxesNet income (loss) before income taxes3,783 (9,472)(5,593)(10,165)Net income (loss) before income taxes8,427 (14,469)18,204 (9,377)
Income tax (expense) benefitIncome tax (expense) benefit(46)(1,050)(294)6,374 Income tax (expense) benefit(593)300 (1,306)(248)
Net income (loss) and Comprehensive income (loss)$3,737 $(10,522)$(5,887)$(3,791)
Net income (loss) and comprehensive income (loss)Net income (loss) and comprehensive income (loss)$7,834 $(14,169)$16,898 $(9,625)
Basic net income (loss) per shareBasic net income (loss) per share$0.08 $(0.35)$(0.14)$(0.15)Basic net income (loss) per share$0.17 $(0.32)$0.37 $(0.23)
Diluted net income (loss) per shareDiluted net income (loss) per share$0.08 $(0.35)$(0.14)$(0.15)Diluted net income (loss) per share$0.16 $(0.32)$0.36 $(0.23)
Shares used in computing basic net income (loss) per shareShares used in computing basic net income (loss) per share44,969 29,891 42,550 24,958 Shares used in computing basic net income (loss) per share46,274 44,706 45,746 41,321 
Shares used in computing diluted net income (loss) per shareShares used in computing diluted net income (loss) per share45,055 29,891 42,550 24,958 Shares used in computing diluted net income (loss) per share47,579 44,706 46,857 41,321 
 










The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ASSERTIO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
(Unaudited)
Common StockAdditional
Paid-In
Capital*		Accumulated
Earnings
(Deficit)		Shareholders’
Equity
Shares*Amount*
Balances at December 31, 202028,392 $3 $483,456 $(427,945)$55,514 
Issuance of common stock upon exercise of options73 — — — — 
Issuance of common stock in connection with stock offerings14,400 1 44,860 — 44,861 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability211 — (388)— (388)
Issuance of common stock in conjunction with vesting of performance stock units13 — — — — 
Issuance of common stock upon exercise of warrant347 — — — — 
Stock-based compensation— — 772 — 772 
Net income and comprehensive income— — — 4,544 4,544 
Balances at March 31, 202143,436$4 $528,700 $(423,401)$105,303 
Issuance of common stock upon exercise of options— — 193 — 193 
Issuance of common stock under employee stock purchase plan4 — — — — 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability227 — (19)— (19)
Issuance of common stock upon exercise of warrant845 — — — — 
Stock split fractional shares settlement(18)— — — 
Stock-based compensation— — 957 — 957 
Net loss and comprehensive loss— — — (14,169)(14,169)
Balances at June 30, 202144,494$4 $529,831 $(437,570)$92,265 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability128 — (8)— (8)
Stock-based compensation— — 866 — 866 
Net income and comprehensive income— — — 3,737 3,737 
Balances at September 30, 202144,622$4 $530,689 $(433,833)$96,860 
Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Shareholders’
Equity
SharesAmount
Balances at December 31, 202144,640 $4 $531,636 $(429,226)$102,414 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability307 — (598)— (598)
Issuance of common stock upon exercise of warrant388 — — — — 
Stock-based compensation— — 982 — 982 
Net income and comprehensive income— — — 9,064 9,064 
Balances at March 31, 202245,335 $4 $532,020 $(420,162)$111,862 
Issuance of common stock in connection with at-the-market program2,464 1 7,019 — 7,020 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability373 — (81)— (81)
Stock-based compensation— — 1,734 — 1,734 
Net income and comprehensive income— — — 7,834 7,834 
Balances at June 30, 202248,172 $5 $540,692 $(412,328)$128,369 

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



















Common StockAdditional
Paid-In
Capital		Accumulated
Deficit		Shareholders’
Equity
SharesAmount
Balances at December 31, 202028,392 $3 $483,456 $(427,945)$55,514 
Issuance of common stock upon exercise of options73 — — — — 
Issuance of common stock in connection with stock offerings14,400 1 44,860 — 44,861 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability211 — (388)— (388)
Issuance of common stock in conjunction with vesting of performance stock units13 — — — — 
Issuance of common stock upon exercise of warrant347 — — — — 
Stock-based compensation— — 772 — 772 
Net income and comprehensive income— — — 4,544 4,544 
Balances at March 31, 202143,436$4 $528,700 $(423,401)$105,303 
Issuance of common stock upon exercise of options— — 193 — 193 
Issuance of common stock under employee stock purchase plan4 — — — — 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability227 — (19)— (19)
Issuance of common stock upon exercise of warrant845 — — — — 
Stock split fractional shares settlement(18)— — — — 
Stock-based compensation— — 957 — 957 
Net loss and comprehensive loss— — — (14,169)(14,169)
Balances at June 30, 202144,494 $4 $529,831 $(437,570)$92,265 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Content
Common StockAdditional
Paid-In
Capital*		Accumulated
Earnings
(Deficit)		Shareholders’
Equity
Shares*Amount*
Balances at December 31, 201920,222 $2 $457,757 $(399,801)$57,958 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability109 — (271)— (271)
Reacquisition of equity component of 2021 Notes and 2024 Notes— — (16,814)— (16,814)
Stock-based compensation— — 1,934 — 1,934 
Net income and comprehensive income— — — 41,230 41,230 
Balances at March 31, 202020,331 $2 $442,606 $(358,571)$84,037 
Issuance of common stock under employee stock purchase plan19 — 49 — 49 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability54 — (41)— (41)
Issuance of common stock in connection with the Zyla Merger6,370 122,930 — 22,931 
Issuance of warrants and stock options in conjunction with the Zyla Merger— — 11,626 — 11,626 
Reacquisition of equity component of 2021 Notes and 2024 Notes— — (2,718)— (2,718)
Stock-based compensation— — 3,593 — 3,593 
Net loss and comprehensive loss— — — (34,499)(34,499)
Balances at June 30, 202026,774 $3 $478,045 $(393,070)$84,978 
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability21— (17)— (17)
Stock-based compensation— — 1,511 — 1,511 
Net loss and comprehensive loss— — — (10,522)(10,522)
Balances at September 30, 202026,795 $3 $479,539 $(403,592)$75,950 

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)









 Six Months Ended June 30,
 20222021
Operating Activities  
Net income (loss)$16,898 $(9,625)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization16,863 14,286 
Amortization of royalty rights48 118 
Recurring fair value measurement of assets and liabilities2,945 1,602 
Stock-based compensation2,716 1,729 
Provision for inventory and other assets259 140 
Changes in assets and liabilities, net of acquisition:
Accounts receivable(4,176)(1,118)
Inventories(5,029)4,955 
Prepaid and other assets12,108 6,640 
Accounts payable and other accrued liabilities(245)(3,933)
Accrued rebates, returns and discounts(331)(18,006)
Interest payable(200)(50)
Net cash provided by (used in) operating activities41,856 (3,262)
Investing Activities
Purchase of Otrexup(16,518)— 
Net cash used in investing activities(16,518)— 
Financing Activities
Payment in connection with Series A-1 and A-2 debt(11,750)(4,750)
Payment of contingent consideration(3,845)(2,495)
Payment of Royalty Rights(630)(498)
Proceeds from issuance of common stock7,020 44,861 
Proceeds from exercise of stock options— 193 
Shares withheld for payment of employee's withholding tax liability(679)(407)
Net cash (used in) provided by financing activities(9,884)36,904 
Net increase in cash and cash equivalents15,454 33,642 
Cash and cash equivalents at beginning of year36,810 20,786 
Cash and cash equivalents at end of period$52,264 $54,428 
Supplemental Disclosure of Cash Flow Information
Net cash refunded for income taxes$(8,360)$— 
Cash paid for interest$4,748 $5,216 






The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Content
ASSERTIO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 Nine Months Ended September 30,
 20212020
Operating Activities  
Net loss$(5,887)$(3,791)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Gain on sale of Gralise— (126,655)
Loss on sale of NUCYNTA— 14,749 
Loss on extinguishment of Convertible Notes— 47,880 
Loss on prepayment of Senior Notes— 8,233 
Depreciation and amortization21,698 19,468 
     Amortization of debt discount, debt issuance costs and royalty rights159 5,614 
Recurring fair value measurement of assets and liabilities1,902 5,485 
Stock-based compensation2,596 7,038 
Provision for inventory and other assets(86)2,561 
Changes in assets and liabilities, net of acquisition:
Accounts receivable8,205 24,944 
Inventories6,317 (792)
Prepaid and other assets5,777 1,837 
Accounts payable and other accrued liabilities(22,405)(18,447)
Accrued rebates, returns and discounts(19,284)(43,265)
Interest payable2,400 (4,449)
Net cash provided by (used in) operating activities1,392 (59,590)
Investing Activities
Purchases of property and equipment— (10)
Cash acquired in Zyla Merger— 7,585 
Proceeds from sale of NUCYNTA— 368,965 
Proceeds from sale of Gralise— 130,261 
Proceeds from sale of investments— 6,000 
Net cash provided by investing activities— 512,801 
Financing Activities
Payments in connection with convertible notes(335)(264,731)
Payment in connection with Series A-1 and A-2 debt(4,750)(10,000)
Payment of contingent consideration(2,495)(261)
Payments in connection with Senior Notes settlement— (171,775)
Payments on Revolver— (10,000)
Payments on Promissory Note— (3,000)
Payment of Royalty Rights(510)— 
Proceeds from issuance of common stock44,861 — 
Proceeds from exercise of stock options193 — 
Shares withheld for payment of employee's withholding tax liability(416)(814)
Net cash provided by (used in) financing activities36,548 (460,581)
Net increase (decrease) in cash and cash equivalents37,940 (7,370)
Cash and cash equivalents at beginning of year20,786 42,107 
Cash and cash equivalents at end of period$58,726 $34,737 
Supplemental Disclosure of Cash Flow Information
Net cash paid for income taxes$— $865 
Cash paid for interest$5,216 $12,100 






The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ASSERTIO HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 
NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation

The unaudited condensed consolidated financial statements of Assertio Holdings, Inc. (the Company or Assertio) and its subsidiaries and the related footnote information of the Company have been prepared pursuant to the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the information for the periods presented. Certain amounts in prior periods have been reclassified to conform with current period presentation. The results for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of results to be expected for the entire year ending December 31, 20212022 or future operating periods.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 20202021 included in Assertio Holdings, Inc.’s Annual Report on Form 10-K filed with the SEC on March 12,10, 2022 (the 2021 (the 2020 Form 10-K). The Condensed Consolidated Balance Sheet as of December 31, 20202021 has been derived from the audited financial statements at that date, as filed in the Company’s 2020 Form 10-K. The Company’s significant one-time 2020 transactions such as the sale of the NUCYNTA franchise, sale of Gralise, repayment of its debt obligations, and merger with Zyla Life Sciences are discussed in the 20202021 Form 10-K.

Stock Split

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

Revenue ReclassificationReclassifications

During the third quarter of 2021, the Company made certain reclassifications within Total Revenuestotal revenues related to product sales adjustments for previously divested products. Product sales adjustments for previously divested products were reclassified from Product sales, net to Other revenueRevenue on the Condensed Consolidated Statements of Comprehensive Income, which impacted previously reported amounts for the three and ninesix months ended SeptemberJune 30, 2020.2021. The reclassifications were made so the line itemline-item Product sales, net would reflect net sales of the Company’s current commercialized products. Prior period results were recast to conform with these changes, and resulted in a increasedecrease to Other revenueRevenue and an equal and offsetting decreaseincrease to Product sales, net of $0.6$0.4 million and $1.7$0.1 million, respectively, for the three and six months ended June 30, 2021. Total revenue as previously reported remains unchanged.

During the first quarter of 2022, the Company made certain reclassifications within Selling, general and administrative expenses related to changes in the fair value of contingent considerations. These fair value adjustments were reclassified from Selling, general and administrative expenses to Fair value of contingent consideration on the Condensed Consolidated Statements of Comprehensive Income, which impacted previously reported amounts for the three and six months ended June 30, 2021. The reclassifications were made to separately state changes in the fair value of contingent considerations from Selling, general and administrative expenses. Prior period results were recast to conform with these changes, and resulted in a decrease to Selling, general and administrative expenses and an equal and offsetting increase to Fair value of contingent consideration of $2.2 million and $1.6 million for the three and ninesix months ended SeptemberJune 30, 2020, respectively.2021. Total net revenuecost and expenses and Income (loss) from operations as previously reported remains unchanged.

Impact of COVID-19 on our Business

Following the outbreak of COVID-19 during early 2020, the Company’s priority was and remains the health and safety of its employees, their families, and the patients it serves. As a result, in March 2020, the Company initiated remote working arrangements and maintained flexible work arrangements for individuals, which continued through the remainder of 2020 and into 2021. In addition to the health and safety of its employees, the Company is focused on ensuring that it continues making its products accessible to the patients who need them. Because COVID-19 impacted the Company’s ability to see in-personin person providers who prescribe itsour products, the Company adaptedtransformed its commercial approach during 2020 and increased virtual visits, ultimately eliminating its virtual visits.in-person sales force in favor of a digital sales strategy. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, the Company has experienced a decline and subsequent volatility in prescriptions associated with those elective procedures. The extent to which the Company’s operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak, actions by government authorities to contain the outbreak, or treat its impact, the emergence of new COVID-19 variants and the related potential for new surges in infections and the distribution,impacts of increases in virtual physician visits on prescriber behavior. For example, although many public acceptance and efficacyhealth restrictions have eased, future surges could result in additional restrictions or other factors that may contribute to decreases in elective procedures. The impact of COVID-19 vaccines including for emerging variants.the pandemic on the global financial markets may reduce the Company’s ability to access capital,
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which could negatively impact its liquidity. The Company does not yet know the full extent of Content
potential delays or impacts on its business, financing or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which it relies, including suppliers and distributors.

NOTE 2. ACQUISITIONS
Otrexup Acquisition
On December 15, 2021, the Company, through a newly-formed subsidiary, Otter Pharmaceuticals, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Antares Pharma, Inc. (“Antares”), and concurrently consummated the transaction. Pursuant to the terms of the Purchase Agreement, the Company acquired Antares’ rights, title and interest in and to Otrexup, including certain related assets, intellectual property, contracts, and product inventory for (i) $18.0 million in cash paid at closing, (ii) $16.0 million in cash paid on May 31, 2022 and (iii) and $10.0 million in cash payable on December 15, 2022.

The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of Otrexup (in thousands):
Cash paid to Antares at closing$18,000 
Cash paid in May 202216,021 
Deferred cash payment due in December 202210,000 
Transaction costs1,478 
Total purchase price of assets acquired$45,499 

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

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

Inventories$1,413 
Intangible assets44,086 
Total assets acquired$45,499 

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

NOTE 3. REVENUE
 
Disaggregated Revenue
 
The following table reflects summary revenue, net for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands): 
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Product sales, net:
INDOCIN products (1)
$14,541 $13,773 $42,214 $19,207
CAMBIA5,038 7,449 17,628 21,503
Zipsor1,999 3,395 6,802 9,261
SPRIX (1)
2,272 5,642 6,911 7,244
Other products2,147 3,405 3,716 4,759
Total product sales, net25,997 33,664 77,271 61,974
Commercialization agreement revenue, net— — — 11,258
Royalties and milestone revenue416 299 1,391 1,158 
Other revenue(941)602 (976)1,709
Total revenues$25,472 $34,565 $77,686 $76,099
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(1)Products acquired in connection with the May 20, 2020 Zyla Merger.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Product sales, net:
INDOCIN products$22,841 $13,075 $44,197 $27,673
CAMBIA6,183 6,128 11,656 12,590
Otrexup2,616— 5,694 —
Zipsor2162,5812,4454,803
SPRIX2,216 2,942 3,982 4,639
Other products1,3585183,0031,569
Total product sales, net35,430 25,244 70,977 51,274 
Royalties and milestone revenue451 542 1,443 975 
Other revenue(750)(413)(750)(36)
Total revenues$35,131 $25,373 $71,670 $52,213
Product Sales, net:

For the three and ninesix months ended SeptemberJune 30, 2022 and 2021, product sales primarily consisted of sales from INDOCIN Products, CAMBIA, Zipsor and SPRIX. The Company acquired Otrexup in December 2021 and began shipping and recognizing product sales for INDOCIN Products and SPRIX upon the Zyla Merger on May 20, 2020.Otrexup in January 2022.
Other product netproducts sales includesinclude product sales for non-promoted products (OXAYDO and SOLUMATRIX) which were acquired from Zyla in May 2020.
The Company records contract liabilities in the form of deferred revenue resulting from prepayments from customers. As of September 30, 2021, contract liabilities were $0.3 million and included in Other Current Liabilities on the Condensed Consolidated Balance Sheet.

Pro Forma Information

Supplemental unaudited proforma information is based upon accounting estimates and judgments that the Company believes are reasonable. This supplemental unaudited pro forma financial information has been prepared for comparative purposes only, and is not necessarily indicative of what actual results would have occurred, or of results that may occur in the future. The pro forma consolidated product sales, net for the three and nine months ended September 30, 2020, as if the acquisition of Zyla had occurred on January 1, 2020, was $33.7 million and $89.1 million, respectively.

Commercialization Agreement Revenue, net
The Company ceased recognizing commercialization revenue and related costs for NUCYNTA effective with the closing of the transaction to sell its rights, title and interest in and to the NUCYNTA franchise to Collegium on February 13, 2020. In connection with the sale, the Commercialization Agreement terminated at closing with certain specified provisions of the Commercialization Agreement surviving in accordance with the terms of the purchase agreement. During the nine months ended September 30, 2020, the Company recognized net revenue from the Commercialization Agreement of $11.3 million. This included variable royalty revenue of $13.1 million offset by the amortization of the $1.8 million net contract asset in connection with the termination of the Commercialization Agreement.

.
Royalties and Milestone Revenue

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In November 2010, the Company entered into a license agreement with Tribute Pharmaceuticals Canada Ltd. (now known as Miravo Pharmaceuticals) granting them the rights to commercially market CAMBIA in Canada. Miravo independently contracts with manufacturers to produce a specific CAMBIA formulation in Canada. The Company receives royalties on net sales on a quarterly basis as well as certain one-time contingent milestone payments upon the occurrence of certain events. The Company recognized revenue related to CAMBIA in Canada of $0.4$0.5 million and $1.4$1.0 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively and $0.3$0.5 million and $1.2$1.0 million for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively.
The Company records contract liabilities in the form of deferred revenue resulting from prepayments from customers in Other current liabilities on the Condensed Consolidated Balance Sheets. As of December 31, 2021, contract liabilities were $0.3 million. For the six months ended June 30, 2022, the Company recorded an additional $0.3 million in contract liabilities and recognized $0.5 million as Milestone revenue associated with completion of service milestones. As of June 30, 2022, contract liabilities were $0.2 million.

Other Revenue

Other revenue consists of sales adjustments for previously divested products, which includes adjustments to reserves for product sales allowances (gross-to-net sales allowances) and can result in reductions to total revenue during the period. Sales adjustments for previously divested products primarily include Gralise, which was divested in January 2020, Nucynta and Lazanda and were $(0.9) million and $(1.0) million for the three and nine months ended September 30, 2021, respectively, and $0.6 million and $1.7 million for the three and nine months ended September 30, 2020, respectively.Lazanda.
NOTE 3.4. ACCOUNTS RECEIVABLES, NET
 
The following table reflects accounts receivables, net, as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands): 
September 30,
2021		December 31, 2020 June 30,
2022		December 31, 2021
Receivables related to product sales, netReceivables related to product sales, net$36,145 $40,784 Receivables related to product sales, net$46,565 $43,753 
Receivables from Collegium— 3,566 
OtherOther1,972 608 
Total accounts receivable, netTotal accounts receivable, net$36,145 $44,350 Total accounts receivable, net$48,537 $44,361 

As of SeptemberJune 30, 20212022 and December 31, 2020,2021, allowances for cash discounts for prompt payment were $0.7$0.9 million and $1.3$0.9 million, respectively.
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NOTE 4.5.  INVENTORIES, NET
 
The following table reflects the components of inventory, net as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands): 
September 30,
2021		December 31, 2020 June 30,
2022		December 31, 2021
Raw materialsRaw materials$1,480 $1,136 Raw materials$1,433 $1,242 
Work-in-processWork-in-process204 1,340 Work-in-process1,949 823 
Finished goodsFinished goods3,797 9,236 Finished goods8,877 5,424 
Total$5,481 $11,712 
Total Inventories, netTotal Inventories, net$12,259 $7,489 
    
As of SeptemberJune 30, 20212022 and December 31, 2020,2021, inventory reserves were $2.2$2.5 million and $2.3$3.7 million, respectively.


NOTE 5.6. PROPERTY AND EQUIPMENT, NET
 
The following table reflects property and equipment, net as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands): 

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September 30,
2021		December 31, 2020June 30,
2022		December 31, 2021
Furniture and office equipmentFurniture and office equipment$2,680 $2,680 Furniture and office equipment$2,733 $2,733 
Laboratory equipmentLaboratory equipment20 20 Laboratory equipment20 20 
Leasehold improvementsLeasehold improvements10,522 10,523 Leasehold improvements9,788 10,523 
13,222 13,223 12,541 13,276 
Less: Accumulated depreciation and amortization(11,544)(10,786)
Less: Accumulated depreciationLess: Accumulated depreciation(11,408)(11,749)
Property and equipment, netProperty and equipment, net$1,678 $2,437 Property and equipment, net$1,133 $1,527 
 
Depreciation expense was $0.2 million and $0.8$0.4 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively and $0.6$0.3 million and $1.2$0.5 million for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively. Depreciation expense is recognized in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive Income.
NOTE 6.7.  INTANGIBLE ASSETS
 
The following table reflects the gross carrying amounts and net book values of intangible assets as of SeptemberJune 30, 20212022 and December 31, 20202021 (dollar amounts in thousands): 

September 30, 2021December 31, 2020 June 30, 2022December 31, 2021
Remaining Useful Life
 (In years)		Gross Carrying AmountAccumulated AmortizationNet Book ValueGross Carrying AmountAccumulated AmortizationNet Book ValueRemaining Useful Life
 (In years)		Gross Carrying AmountAccumulated AmortizationNet Book ValueGross Carrying AmountAccumulated AmortizationNet Book Value
Products rights:Products rights:Products rights:
INDOCININDOCIN10.6$154,100 $(17,443)$136,657 $154,100 $(7,812)$146,288 INDOCIN9.9$154,100 $(27,075)$127,025 $154,100 $(20,654)$133,446 
OtrexupOtrexup7.544,086 (2,755)41,331 44,086 — 44,086 
SPRIXSPRIX5.639,000 (7,568)31,432 39,000 (3,389)35,611 SPRIX4.939,000 (11,746)27,254 39,000 (8,960)30,040 
CAMBIACAMBIA1.351,360 (41,422)9,938 51,360 (36,163)15,197 CAMBIA0.551,360 (47,385)3,975 51,360 (43,410)7,950 
ZipsorZipsorLess than 1 year27,250 (26,134)1,116 27,250 (24,381)2,869 Zipsor0.027,250 (27,250)— 27,250 (26,718)532 
Oxaydo—300 (300)— 300 (183)117 
Total Intangible AssetsTotal Intangible Assets$272,010 $(92,867)$179,143 $272,010 $(71,928)$200,082 Total Intangible Assets$315,796 $(116,211)$199,585 $315,796 $(99,742)$216,054 

Amortization expense was $7.2$8.0 million and $20.9$16.5 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, and $5.6$7.2 million and $18.2$13.8 million for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively.

The following table reflects future amortization expense the Company expects for its intangible assets (in thousands): 
Year Ending December 31,Estimated Amortization Expense
2021 (remainder)$7,176 
202226,895 
202318,412 
202418,413 
202518,413 
Thereafter89,834 
Total$179,143 
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Year Ending December 31,Estimated Amortization Expense
2022 (remainder)$15,936 
202323,924 
202423,924 
202523,924 
202623,924 
Thereafter87,953 
Total$199,585 
NOTE 7.8.  OTHER LONG-TERM ASSETS
 
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The following table reflects other long-term assets as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands): 

September 30,
2021		December 31, 2020 June 30,
2022		December 31, 2021
Investment, netInvestment, net$1,579 $1,579 Investment, net$1,579 $1,579 
Operating lease right-of-use assetsOperating lease right-of-use assets912 1,955 Operating lease right-of-use assets428 735 
Prepaid asset and depositsPrepaid asset and deposits2,692 1,936 Prepaid asset and deposits1,862 2,456 
OtherOther756 1,031 Other697 698 
Total other long-term assetsTotal other long-term assets$5,939 $6,501 Total other long-term assets$4,566 $5,468 

Investment, net consists of the Company’s $3.5 million investment in NES Therapeutic, Inc. (NES). In August 2018, the Company entered into a company engaged in medical research.Convertible Secured Note Purchase Agreement (Note Agreement) with NES. Pursuant the terms of the Note Agreement, the Company purchased a Convertible Secured Promissory Note (NES Note) for $3.0 million which accrues interest annually at a rate of 10% on $3.0 million principal, with both the principal and accrued interest due at maturity on August 2, 2024. Pursuant to the Note Agreement, the NES Note is convertible into equity based on (i) FDA acceptance of the NDA, (ii) initiation of any required clinical trials by NES, or (iii) a qualified financing event by NES. This investment is structuredaccounted as a long-term loan receivable with a convertible feature and is valued at amortized cost. As a result of the Company’s adoption of ASU 2016-13 Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020, the Company estimated an expected credit loss of approximately $1.9 million on its investment, which was recognized in Other (expense) income in the Company’s Condensed Consolidated Statement of Comprehensive Income in the first quarter of 2020. To calculate the expected credit loss allowance, the Company utilized a probability-of-default method (PDM). This process estimates the probability of the loan being successfully paid back or converted into equity based on the ability of the investee to obtain FDA acceptance of its research. The Company’s expected credit losses can vary from period to period based on several factors, such as progress of the medical research and FDA submission, and overall economic environment and the ability of the investee to fund its operations. As of SeptemberJune 30, 2021,2022, the Company continues to assess an estimated $1.9 million expected credit loss on its investment based on evaluation of probability of default that exist.exists.

NOTE 8.9.  ACCRUED LIABILITIES
 
The following table reflects accrued liabilities as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands): 

September 30,
2021		December 31, 2020 June 30, 2022December 31, 2021
Accrued compensationAccrued compensation$2,685 $5,498 Accrued compensation$2,889 $4,122 
Accrued restructuring costsAccrued restructuring costs1,294 8,744 Accrued restructuring costs338 828 
Other accrued liabilitiesOther accrued liabilities9,803 12,829 Other accrued liabilities7,974 8,062 
Interest payableInterest payable1,486 1,687 
Income tax payableIncome tax payable545 — 
Total accrued liabilitiesTotal accrued liabilities$13,782 $27,071 Total accrued liabilities$13,232 $14,699 


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NOTE 9.10.  DEBT
 
The following table reflects the Company’s debt as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands):

September 30, 2021December 31, 2020June 30, 2022December 31, 2021
13% Senior Secured Notes due 2024
13% Senior Secured Notes due 2024
$75,500 $80,250 
13% Senior Secured Notes due 2024
$59,000 $70,750 
Royalty rights obligationRoyalty rights obligation3,167 3,533 Royalty rights obligation2,162 2,743 
2.50% Convertible Notes due 2021— 335 
Total principal amountTotal principal amount78,667 84,118 Total principal amount61,162 73,493 
Unamortized debt discounts— (16)
Carrying value78,667 84,102 
Less: current portion of long-term debtLess: current portion of long-term debt(12,257)(11,942)Less: current portion of long-term debt(11,662)(12,174)
Net, long-term debtNet, long-term debt$66,410 $72,160 Net, long-term debt$49,500 $61,319 


13% Senior Secured Notes due 2024

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

As of May 20, 2020, the Existing Indenture was modified by a Supplemental Indenture (the Supplemental Indenture and the Existing Indenture, as so modified, the Indenture), pursuant to which Assertio (the Issuer) assumed the obligations as issuer of the Secured Notes and the subsidiaries of Assertio became guarantors of the Secured Notes. The Supplemental Indenture, among other things, provides for certain amendments to the restrictive covenants in the Indenture.

Interest on the Secured Notes accrues at a rate of 13% per annum and is payable semi-annually in arrears on May 1 and November 1 of each year (each, a Payment Date). The Existing Indenture also requires payments of outstanding principal on the Secured Notes equal to 10% per annum of the issued principal amount, payable semi-annually on each Payment Date.

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

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

Pursuant to the Supplemental Indenture, Assertio and its restricted subsidiaries must also comply with certain covenants, including limitations on the issuance of debt; the issuance of preferred and/or disqualified stock; the payment of dividends and other restricted payments; the prepayment, redemption or repurchase of subordinated debt; mergers, amalgamations or consolidations; engaging in certain transactions with affiliates; and the making of investments. In addition, the Issuer must maintain a minimum level of consolidated liquidity, based on unrestricted cash on hand and availability under any revolving credit facility, equal to the greater of (1) the quotient of the outstanding principal amount of the Secured Notes divided by 9.5 and (2) $7.5 million. The Company was in compliance with its covenants with respect to the Secured Notes as of SeptemberJune 30, 2021.2022.

The Company made a prepayment for the Senior Secured Notes in the second quarter of 2022 in the amount of $7.1 million, including $7.0 million of principal and $0.1 million of accrued interest. The Company had Senior Secured Notes obligations of $75.5$59.0 million and $70.8 million as of SeptemberJune 30, 2022 and December 31, 2021, respectively, with $9.5 million classified as current and $66.0$49.5 million classified as non-current debt in the Company’s Condensed Consolidated Balance Sheets.Sheets as of June 30, 2022 and $9.5 million classified as current and $61.3 million classified as non-current debt in the Company’s Condensed Consolidated Balance Sheets as of December 31, 2021.

Royalty Rights Obligation

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

The Company has Royalty Rights obligations of $3.2$2.2 million and $2.7 million as of SeptemberJune 30, 2022 and December 31, 2021, with $2.8 million classified as current and $0.4 millionrespectively, which are classified as non-currentcurrent debt in the Company’s Condensed Consolidated Balance Sheets.

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

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

On February 19, 2020, the Company entered into purchase agreements with a limited number of holders of the Company’s outstanding 2021 Notes to repurchase $102.5 million aggregate principal amount of 2021 Notes. On April 8, 2020, the Company completed its public tender offers to purchase the $42.1 million in aggregate principal amount outstanding 2021 Notes. As of December 31, 2020, only $0.3 million in aggregate principal amount of the 2021 Notes were outstanding and were classified as part of current portion of long-term debt on the Company’s Condensed Consolidated Balance Sheets.
On September 1, 2021, the remaining $0.3 million in aggregate principal amount of the 2021 Notes matured and were paid. As of September 30, 2021 there were no outstanding aggregate principal amount of the 2021 Notes.

5.00% Convertible Senior Notes Due 2024

On August 13, 2019, the Company issued $120.0 million aggregate principal of Convertible Senior Notes Due
2024 (the 2024 Notes). On February 19, 2020, the Company entered into purchase agreements with a limited number of holders of the Company’s outstanding 2024 Notes to repurchase $85.5 million aggregate principal amount of 2024 Notes. On April 8, 2020, the Company completed its public tender offers to purchase the remaining $34.5 million in aggregate principal amount outstanding 2024 Notes. As of December 31, 2020 there were no outstanding aggregate principal amount of the 2024 Notes.

Senior Secured Notes

On April 2, 2015, the Company issued $575 million aggregate principal amount of senior secured notes pursuant to a Note Purchase Agreement dated March 12, 2015 (Note Purchase Agreement). On February 13, 2020, the Company repaid in full all outstanding indebtedness, and terminated all commitments and obligations, under its Note Purchase Agreement.

Interest Expense

Debt discount and royaltyRoyalty rights are amortized as interest expense using the effective interest method. The following table reflects debt related interest included in the Interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Income for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Stated coupon interestStated coupon interest$2,454 $2,938 $7,624 $7,714 Stated coupon interest$2,248 $2,557 $4,547 $5,170 
Amortization of debt discount, and royalty rights41 103 1595,614
Amortization of royalty rightsAmortization of royalty rights21 48 48118
Total interest expenseTotal interest expense$2,495$3,041$7,783$13,328Total interest expense$2,269$2,605$4,595$5,288


NOTE 10.11.  STOCK-BASED COMPENSATION
    
The Company’s stock-based compensation generally includes stock options, restricted stock units (RSUs), and performance share units (PSUs), and purchases under the Company’s employee stock purchase program (ESPP).

The following table reflectsFor the three and six months ending June 30, 2022 stock-based compensation expenseof $1.7 million and $2.7 million, respectively, and for the three and six months ending June 30, 2021, $1.0 million and $1.7 million, respectively, was recognized in Selling, general, and administrative expenses in the Company’s Condensed Consolidated Statements of Comprehensive Income for the three and nine months September 30, 2021 and 2020 (in thousands).

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Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Cost of sales$—$2 $— $43 
Research and development expense—18 — 261 
Selling, general and administrative expense8661,491 2,596 5,735 
Restructuring charges—— — 999 
Total$866$1,511 $2,596 7,038 
Income.

During the ninesix months ended SeptemberJune 30, 20212022 the Company granted 1.71.4 million RSUs at an averagea weighted-average fair market value of $3.54$2.53 per share.share, 1.0 million options at a weighted-average fair market value of $2.28 per share, and collectively 2.0 million performance-based stock options and RSUs at a weighted-average fair value per unit was $2.02.


NOTE 11.12.  LEASES

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

Prior to the Company’s corporate headquarters relocation in 2018, the Company had leased its previous corporate office lease terminates in Newark, California (the Newark lease) which will terminate at the end of November 2022 and will not be renewed. The Company relocated its corporate headquarters from Newark California to Lake Forest, Illinois in 2018 and subsequently entered into two subleases which, together, account forlease is currently partially subleased through the entirety of the Newark facility.lease term. Operating lease costs and sublease income related to the Newark facility are accounted for in Other gain (loss) in the Condensed Consolidated Statements of Comprehensive Income. During the first quarter of 2022, the Company recognized a gain of $0.6 million from the early termination and settlement of a Newark facility sublease.


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The following table reflects lease expense and income for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
Financial Statement Classification2021202020212020Financial Statement Classification2022202120222021
Operating lease costOperating lease costSelling, general and administrative expenses$54 $424 $256 $797 Operating lease costSelling, general and administrative expenses$39 $91 $79 $202 
Operating lease costOperating lease costOther gain (loss), net148 148 443 443 Operating lease costOther (loss) gain148 148 296 295 
Total lease costTotal lease cost$202 $572 $699 $1,240 Total lease cost$187 $239 $375 $497 
Sublease IncomeSublease IncomeOther gain (loss), net$347 $347 $1,040 $1,040 Sublease IncomeOther (loss) gain$168 $347 $943 $693 
The following table reflects supplemental cash flow information related to leases for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases667 861 2,129 2,085 
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases$530 $697 $1,060 $1,462 
The following table reflects supplemental balance sheet information related to leases as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands):
Financial Statement ClassificationSeptember 30,
2021		December 31,
2020		Financial Statement ClassificationJune 30, 2022December 31, 2021
LiabilitiesLiabilitiesLiabilities
Current operating lease liabilitiesCurrent operating lease liabilitiesOther current liabilities$2,252 $2,683 Current operating lease liabilitiesOther current liabilities$1,083 $1,978 
Noncurrent operating lease liabilitiesNoncurrent operating lease liabilitiesOther long-term liabilities772 2,815 Noncurrent operating lease liabilitiesOther long-term liabilities207 397 
Total lease liabilitiesTotal lease liabilities$3,024 $5,498 Total lease liabilities$1,290 $2,375 

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NOTE 12.13.  COMMITMENTS AND CONTINGENCIES

Jubilant HollisterStier Manufacturing and Supply Agreement

Pursuant to the Zyla Merger, the Company assumed a Manufacturing and Supply Agreement (the “Agreement”) with Jubilant HollisterStier LLC (“JHS”) pursuant to which the Company engaged JHS to provide certain services related to the manufacture and supply of SPRIX for the Company’s commercial use. Under the Agreement, JHS will be responsible for supplying a minimum of 75% of the Company’s annual requirements of SPRIX through July 30, 2022.SPRIX. The Company has agreed to purchase a minimum number of batches of SPRIX per calendar yearannually from JHS over the term of the Agreement. Total commitments to JHS are approximately $1.8 million through the period ending July 30, 2022 have been met, and total commitments through the period ending July 30, 2023 are expected to be met.approximately $1.5 million.

Cosette Pharmaceuticals Supply Agreement

Pursuant to the Zyla Merger, the Company assumed a Collaborative License, Exclusive Manufacture and Global Supply Agreement with Cosette Pharmaceuticals, Inc. (formerly G&W Laboratories, Inc.) (the “Supply Agreement”) for the manufacture and supply of INDOCIN Suppositories to Zyla for commercial distribution in the United States. On July 9, 2021, the Company and Cosette entered into Amendment No. 3 to the Supply Agreement, to among other things, extend the expiration date of the Supply Agreement from July 31, 2023 to July 9, 2028. The Company is obligated to purchase all of its requirements for INDOCIN Suppositories from Cosette Pharmaceuticals, Inc., and is required to meet minimum purchase requirements each calendar year during the extended term of the agreement. Total commitments to Cosette are approximately $6.3 million annually through the end of the contract term.
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Antares Supply Agreement

In connection with the Otrexup acquisition, the Company entered into a Supply Agreement with Antares pursuant to which Antares will manufacture and supply the finished Otrexup products. Under the Supply Agreement, the Company has agreed to annual minimum purchase obligations from Antares, which approximate $2.0 million annually. The Supply Agreement has an initial term through December 2031 with renewal terms beyond.

Legal Matters
General
The Company is currently involved in various lawsuits, claims, investigations and other legal proceedings that arise in the ordinary course of business. The Company recognizes a loss contingency provision in its financial statements when it concludes that a contingent liability is probable, and the amount thereof is estimable. Costs associated with our involvement in legal proceedings are expensed as incurred. Amounts accrued for legal contingencies are based on management’s best estimate of a loss based upon the status of the cases described below, assessments of the likelihood of damages, and the advice of counsel and often result from a complex series of judgments about future events and uncertainties that rely heavily on estimates and assumptions including timing of related payments. As of SeptemberJune 30, 20212022 and December 31, 20202021 the Company had a legal contingency accrual of approximately $3.6$3.2 million and 0, respectively. The Company recognized a gain on contingency provision of $0.8$3.4 million, and a loss on contingency provision of $10.6 million in the three and nine months ended September 30, 2021, respectively. The Company will continue to monitor each matter and adjust accruals as warranted based on new information and further developments in accordance with ASC 450-20- 25. For matters discussed below for which a loss is not probable, or a probable loss cannot be reasonably estimated, no liability has been recorded. Legal expenses are recorded in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive Income and the related accruals are recorded in Accrued Liabilities in the Company’s Condensed Consolidated Balance Sheets.

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

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

On July 30, 2020, Humana Inc. also filed a complaint against the Company and several other defendants in federal court in the Northern District of California alleging similar claims related to Glumetza®. On February 2, 2021, the District Court dismissed Humana’s state-law antitrustGlumetza. The claims but permittedasserted by Humana to proceed onin its federal direct purchaser claims. Oncase were ultimately withdrawn, and analogous claims were instead asserted by Humana in an action it filed in California state court on February 8, 2021, Humana refiled its state-law claimsand subsequently amended in September 2021. Additionally, on April 5, 2022, Health Care Service Corporation (“HCSC”) filed a complaint against the Company and severalthe same other defendants in the Superior Court for the State of California in the County of Alameda. On September 20, 2021, Humana voluntarily dismissed all of its remaining claims in the federal action and, pursuant to a stipulation with the defendants, will instead pursue its direct purchaser claims as part of the California state court lawsuit.alleging similar claims related to Glumetza.

These antitrust cases arise out of a Settlement and License Agreement (the Settlement) that the Company, Santarus, Inc. (Santarus) and Lupin Limited (Lupin) entered into in February 2012 that resolved patent infringement litigation filed by the Company against Lupin regarding Lupin’s Abbreviated New Drug Application for generic 500 mg and 1000 mg tablets of Glumetza. The antitrust plaintiffs allege, among other things, that the Settlement violated the antitrust laws because it allegedly included a “reverse payment” that caused Lupin to delay its entry in the market with a generic version of Glumetza. The alleged “reverse payment” is an alleged commitment on the part of the settling parties not to launch an authorized generic version of Glumetza for a certain period. The antitrust plaintiffs allege that the Company and its co-defendants, which include Lupin as well as Bausch Health (the alleged successor in interest to Santarus), are liable for damages under the antitrust laws for
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overcharges that the antitrust plaintiffs allege they paid when they purchased the branded version of Glumetza® due to delayed generic entry. Plaintiffs seek treble damages for alleged past harm, attorneys’ fees and costs.

On September 14, 2021, the Retailer Plaintiffs voluntarily dismissed all claims against the Company pursuant to a settlement agreement with the Company in return for $3.15 million. On September 22, 2021,February 3, 2022, the Court preliminarily approvedissued its final order approving a settlement agreement reached by the Company to settleof the direct purchaser class plaintiffs’ claims against the Company in return for $3.85 million, subject to final court approval. As part of the settlements, the Company admitted no liability as to the claims against it and denied all allegations of wrongdoing.million.

With respect to the Humana lawsuit that is continuing in California state court, on November 24, 2021, the Companystate court granted in part and other defendants fileddenied in part a motiondemurrer by the defendants. That case is now moving to dismiss all claims in the action on April 16, 2021.discovery, and trial is scheduled for August 25, 2023.

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

Securities Class Action Lawsuit and Related Matters

On August 23, 2017, the Company, 2 individuals who formerly served as its chief executive officer and president, and its former chief financial officer were named as defendants in a purported federal securities law class action filed in the U.S. District Court for the Northern District of California (the District Court). The action (Huang v. Depomed et al., No. 4:17-cv-4830-JST, N.D. Cal.) alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 relating to certain prior disclosures of the Company about its business, compliance, and operational policies and practices concerning the sales and marketing of its opioid products and contends that the conduct supporting the alleged violations affected the value of Company common stock and is seeking damages and other relief. In an amended complaint filed on February 6, 2018, the lead plaintiff (referred to in its pleadings as the Depomed Investor Group), which seeks to represent a class consisting of all purchasers of Company common stock between July 29, 2015 and August 7, 2017, asserted the same claims arising out of the same and similar disclosures against the Company and the same individuals as were involved in the original complaint. The Company and the individuals filed a motion to dismiss the amended complaint on April 9, 2018. On March 18, 2019, the District Court granted the motion to dismiss without prejudice, and the plaintiffs filed a second amended complaint on May 2, 2019. The second amended complaint asserted the same claims arising out of the same and similar disclosures against the Company and the same individuals as were involved in the original complaint. The Company and the individuals filed a motion to dismiss the second amended complaint on June 17, 2019, and the District Court granted that motion with prejudice on March 11, 2020. On April 9, 2020, the plaintiffs filed a notice of appeal with the United States Court of Appeals for the Ninth Circuit. The parties completed their briefing of the appeal on December 14, 2020. On March 1, 2021, the court granted the parties’ joint motion to stay the appeal pending settlement discussions. On July 30, 2021, the Company reached an agreement to settle the matter subject to District Court approval. On August 13, 2021, the plaintiffs filed an unopposed motion for preliminary approval of the settlement with the District Court. The District Court issued an order preliminarily approving the settlement on March 21, 2022. On May 26, 2022, in full satisfaction of its payment obligations under the settlement agreement, the Company funded an escrow account which will be released to the plaintiffs following the District Court’s final approval of the settlement. On July 28, 2022, the District Court held the final settlement hearing and approved the settlement.

In addition, 5 shareholder derivative actions were filed on behalf of the Company against its officers and directors for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and violations of the federal securities laws. The claims arise out of the same factual allegations as the purported federal securities
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class action described above. The first derivative action was filed in the Superior Court of California, Alameda County on September 29, 2017 (Singh v. Higgins et al., RG17877280). The second and third actions were filed in the Northern District of California on November 10, 2017 (Solak v. Higgins et al., No. 3:17-cv-6546-JST) and November 15, 2017 (Ross v. Fogarty et al., No. 3:17-cv-6592- JST). The fourth action was filed in the District of Delaware on December 21, 2018 (Lutz v. Higgins et al, No. 18-2044-CFC). The fifth derivative action was filed in the Superior Court of California, Alameda County on January 28, 2019 (Youse v. Higgins et al, No. HG19004409). On December 7, 2017, the plaintiffs in Solak v. Higgins, et al. voluntarily dismissed the action. On July 12, 2019, the Singh and Youse actions were consolidated. All of the derivative actions were stayed pending the resolution of the class action, and the stays have been extended pending the resolution of the appeal. On July 30, 2021, the Company reached an agreement to settle these matters subject to court approval. On August 6, 2021, plaintiffs in the consolidated Singh/Youse derivative action filed an unopposed motion for preliminary approval of the settlement with the Superior Court of California, Alameda County. On October 19, 2021, the Superior Court held a hearing regarding the preliminary approval motion. motion and, on October 28, 2021 and December 14, 2021, respectively, the Superior Court issued its preliminary and final orders approving the settlementA liability for these matters and the securities law class action described in the preceding paragraph has been recorded in the financial statements..

Opioid-Related Request and Subpoenas
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As a result of the greater public awareness of the public health issue of opioid abuse, there has been increased scrutiny of, and investigation into, the commercial practices of opioid manufacturers generally by federal, state, and local regulatory and governmental agencies. In March 2017, the Company’s subsidiary Assertio Therapeutics, Inc. (Assertio Therapeutics) received a letter from then-Sen. Claire McCaskill (D-MO), the then-Ranking Member on the U.S. Senate Committee on Homeland Security and Governmental Affairs, requesting certain information regarding Assertio Therapeutics’ historical commercialization of opioid products. Assertio Therapeutics voluntarily furnished information responsive to Sen. McCaskill’s request. Since 2017, Assertio Therapeutics has received and responded to subpoenas from the U.S. Department of Justice (DOJ) seeking documents and information regarding its historical sales and marketing of opioid products. Assertio Therapeutics has also received and responded to subpoenas or civil investigative demands focused on its historical promotion and sales of Lazanda, NUCYNTA, and NUCYNTA ER from various state attorneys general seeking documents and information regarding Assertio Therapeutics’ historical sales and marketing of opioid products. In addition, Assertio Therapeutics received and responded to a subpoena from the State of California Department of Insurance (CDI) seeking information relating to its historical sales and marketing of Lazanda. The CDI subpoena also seeks information on Gralise, a non-opioid product formerly in Assertio Therapeutics’ portfolio. In addition, Assertio Therapeutics received and responded to a subpoena from the New York Department of Financial Services seeking information relating to its historical sales and marketing of opioid products. The CompanyAssertio Therapeutics also from time to time receives and complies with subpoenas from governmental authorities related to investigations primarily focused on third parties, including healthcare practitioners. Assertio Therapeutics is cooperating with the foregoing governmental investigations and inquiries.
In July 2022, the Company became aware that the DOJ issued a press release stating that it had settled claims against a physician whom the DOJ alleged had received payments for paid speaking and consulting work from two pharmaceutical companies, including Depomed, Inc. (now known as Assertio Therapeutics), in exchange for prescribing certain of the companies’ respective products. As part of the settlement, the physician did not admit liability for such claims and the press release stated that there has been no determination of any liability for such claims. The Company denies any wrongdoing and disputes DOJ’s characterization of the payments from Depomed.

Multidistrict Opioid Litigation
A number of pharmaceutical manufacturers, distributors and other industry participants have been named in numerous lawsuits around the country brought by various groups of plaintiffs, including city and county governments, hospitals, individuals and others. In general, the lawsuits assert claims arising from defendants’ manufacturing, distributing, marketing and promoting of FDA-approved opioid drugs. The specific legal theories asserted vary from case to case, but the lawsuits generally include federal and/or state statutory claims, as well as claims arising under state common law. Plaintiffs seek various forms of damages, injunctive and other relief and attorneys’ fees and costs.
For such cases filed in or removed to federal court, the Judicial Panel on Multi-District Litigation issued an order in December 2017, establishing a Multi-District Litigation court (MDL Court) in the Northern District of Ohio (In re National Prescription Opiate Litigation, Case No. 1:17-MD-2804). Since that time, more than 2,000 such cases that were originally filed in U.S. District Courts, or removed to federal court from state court, have been filed in or transferred to the MDL Court. Assertio Therapeutics is currently involved in a subset of the lawsuits that have been filed in or transferred to the MDL Court. Assertio Holdings has also been named in one such case. Plaintiffs may file additional lawsuits in which the CompanyAssertio Therapeutics or Assertio Holdings may be named. Plaintiffs in the pending federal cases involving the CompanyAssertio Therapeutics or Assertio Holdings include individuals; county, municipal and other governmental entities; employee benefit plans, health insurance providers and other payors; hospitals, health clinics and other health care providers; Native American tribes; and non-profit organizations who assert, for themselves and in some cases for a putative class, federal and state statutory claims and state common law claims, such as conspiracy, nuisance, fraud, negligence, gross negligence, negligent and intentional infliction of emotional distress, deceptive trade practices, and products liability claims (defective design/failure to warn). In these cases, plaintiffs seek a variety of forms of relief, including actual damages to compensate for alleged personal injuries and for alleged past and future costs such as to provide care and services to persons with opioid-related addiction or related conditions, injunctive relief, including to prohibit alleged deceptive marketing practices and abate an alleged nuisance, establishment of a compensation fund, establishment of medical monitoring programs, disgorgement of profits, punitive and statutory treble damages, and attorneys’ fees and costs. No trial date has been set in any of these lawsuits, which are at an early stage of proceedings. The Company intendsAssertio Therapeutics and Assertio Holdings intend to defend itselfthemselves vigorously in these matters.
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State Opioid Litigation

Related to the cases in the MDL Court noted above, there have been hundreds of similar lawsuits filed in state courts around the country, in which various groups of plaintiffs assert opioid-drug related claims against similar groups of defendants. Assertio Therapeutics is currently named in a subset of those cases, including cases in Delaware, Missouri, Nevada,
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Pennsylvania, Texas and Utah. Plaintiffs may file additional lawsuits in which Assertio Therapeutics may be named. In the pending cases involving Assertio Therapeutics, plaintiffs are asserting state common law and statutory claims against the defendants similar in nature to the claims asserted in the MDL cases. Plaintiffs are seeking actual damages, disgorgement of profits, injunctive relief, punitive and statutory treble damages, and attorneys’ fees and costs. The state lawsuits in which Assertio Therapeutics has been served are generally each at an early stage of proceedings. The CompanyAssertio Therapeutics intends to defend itself vigorously in these matters.

Insurance Litigation

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

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

On July 16, 2021, the CompanyAssertio Therapeutics filed a complaint for declaratory relief against one of its excess products liability insurers, Lloyd’s of London Newline Syndicate 1218 and related entities (Newline), in the Superior Court of the State of California for the County of Alameda. Newline removed the case to federal court, and it is currently pending in the U.S. District Court for the Northern District of California (Case No. 3:21-cv-06642). The Company isAssertio Therapeutics was seeking a declaratory judgment that Newline has a duty to defend the CompanyAssertio Therapeutics or, alternatively, to reimburse the Company’sAssertio Therapeutics’ attorneys’ fees and other defense costs for opioid litigation claims noticed by Assertio Therapeutics. On May 18, 2022, Assertio Therapeutics entered into a Confidential Settlement Agreement and Mutual Release with Newline to resolve Assertio Therapeutics’ declaratory judgment action. Pursuant to the Company. Discovery has not yet commenced,Settlement Agreement, the parties settled and the case is not yet set for trial.coverage action was dismissed with prejudice.

CAMBIA® ANDA LitigationDuring the second quarter of 2022, Assertio Therapeutics received $2.0 million in insurance reimbursement for previous opioid-related spend, which was recognized within Selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income.

On April 1, 2022, Assertio Therapeutics filed a complaint for negligence and breach of fiduciary duty against its former insurance broker, Woodruff-Sawyer & Co. (“Woodruff”), in the Superior Court of the State of California for the County of Alameda (Case No. 22CV009380). Assertio Therapeutics is seeking to recover its damages caused by Woodruff’s negligence and breaches of its fiduciary duties in connection with negotiating and procuring products liability insurance coverage for Assertio Therapeutics. The litigation is in the early stages. Trial is set for February 2, 2024.

Indemnification Dispute with Collegium Pharmaceutical, Inc.

On May 24, 2022, Assertio Therapeutics filed an action in the Superior Court of Delaware against Collegium Pharmaceutical, Inc. (Collegium) seeking indemnification in excess of $1.8 million for Collegium’s breach of an asset purchase agreement related to Assertio Therapeutics’ former product, Nucynta. Assertio Therapeutics alleges that Collegium agreed to assume certain liabilities associated with customer returns of Nucynta products sold by Collegium, but that Collegium has failed to honor that agreement. On July 16, 2020,14, 2022, Collegium answered the Company and APR Applied Pharma Research SA (APR), received notice from Patrin Pharma Inc. (Patrin) advisingcomplaint asserting as a defense that, Patrin had filed an Abbreviated New Drug Application (ANDA) seeking to marketamong other things, the Superior Court of Delaware does not have jurisdiction over all aspects of the action because Collegium contends that a generic versionportion of CAMBIA® 50 mg priorthe dispute is subject to the expiration of U.S. patents in June 2026 as listed inalternative dispute resolution procedures under a different agreement. On July 18, 2022, Assertio Therapeutics moved to strike that defense, and the FDA “Orange Book”Court has set an August 8, 2022 due date for CAMBIA (Orange Book Patents). The Orange Book Patents are licensedCollegium to respond to the Company by APR. On August 27, 2020, the Company and APR filed a lawsuit against Patrin in the U.S. District Court for the Northern District of Illinois, Eastern Division, seeking an injunctionmotion to prevent approval of the Patrin ANDA. The lawsuit alleges that Patrin has infringed the Orange Book Patents by filing an ANDA with a Paragraph IV Certification seeking approval from the FDA to market a generic version of CAMBIA prior to the expiration of the patents. The commencement of the patent infringement suit stays or bars the FDA from approving Patrin’s ANDA for 30 months or until an earlier district court decision that each of the patents is invalid or not infringed. On September 18, 2020, Patrin filed its answer including affirmative defenses and counterclaims. On October 9, 2020, the Company and APR filed an answer to Patrin’s counterclaims. On January 21, 2021, the court stayed all case deadlines pending settlement discussions between the parties. On March 8, 2021, the Company entered into a confidential settlement agreement with Patrin. On March 10, 2021, the Court granted the parties’ agreed motion for entry of Judgment and Order of Permanent Injunction. This settlement concludes all ongoing ANDA litigation.strike.


NOTE 13.14.  RESTRUCTURING CHARGES
The Company continually evaluates its operations to identify opportunities to streamline operations and optimize operating efficiencies as an anticipation to changes in the business environment.
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    On December 15, 2020, the Company announced the December 2020 Plan which was designed to substantially reduce the Company’s operating footprint through the reduction of its staff at our headquarters office and remote sales force. The Company substantially completed the workforce reduction in the first quarter of 2021.

In May 2020, the Company began implementing reorganization plans of its workforce and other restructuring activities to realize the synergies of the Zyla Merger and to re-align resources to strategic areas and drive growth (Zyla Merger Reorganization). The Company completed the restructuring activities in 2020 and does not expect to incur significant costs related to the Zyla Merger Reorganization in 2021.    The following table reflects total expenses related to restructuring activities recognized within the Condensed Consolidated Statement of Comprehensive Income as restructuring costs (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Employee compensation costsEmployee compensation costs$— $260 $876 $5,695 Employee compensation costs$— $— $— $876 
Equity compensation costs— — — 999 
Other exit costsOther exit costs— 8 213 93 Other exit costs— — — 213 
Total restructuring costsTotal restructuring costs$— $268 $1,089 $6,787 Total restructuring costs$— $— $— $1,089 

The following table reflects cash activity relating to the Company’s accrued restructuring cost as of SeptemberJune 30, 20212022 (in thousands):
 Employee compensation costsOther exit costsTotal
Balance as of December 31, 2020$8,744 $— $8,744 
Restructuring charges876 213 1,089 
Cash paid(8,326)(213)(8,539)
Balance as of September 30, 2021$1,294 $— $1,294 
 Employee compensation costsOther exit costsTotal
Balance as of December 31, 2021$828 $— $828 
Cash paid(340)— (340)
Balance as of March 31, 2022$488 $— $488 
Cash paid(150)— (150)
Balance as of June 30, 2022$338 $— $338 


NOTE 14.15. SHAREHOLDERS EQUITY

At The Market Program

On December 17, 2021, the Company entered into a Sales Agreement with Roth Capital Partners, LLC (Roth) as sales agent to sell shares of the Company’s common stock, from time to time, through an at-the-market (ATM) offering program having an aggregate offering price of up to $25.0 million. As of June 30, 2022, 2,463,637 shares have been issued and settled at an average price of $3.02, through which Assertio received gross proceeds of $7.4 million, and net proceeds after commission and fees of $7.0 million.

Equity Raise

On February 9, 2021, the Company completed a registered direct offering with certain institutional investors and accredited investors to sell 5,650,000 shares of our common stock at a purchase price of $2.48 per share. The gross proceeds from the offering were approximately $14.0 million. After placement agent fees and other offering expenses payable by the Company, Assertio received net proceeds of approximately $13.1 million. On February 12, 2021, the Company completed a registered direct offering with certain institutional investors and accredited investors to sell 8,750,000 shares of our common stock at a purchase price of $3.92 per share. The gross proceeds from the offering were approximately $34.3 million. After placement agent fees and other offering expenses payable by the Company, Assertio received net proceeds of approximately $32.2 million. The Company intends to use proceeds from both offerings for general corporate purposes, including general working capital.

Warrant Agreements

Upon the Zyla Merger, the Company assumed Zyla’s outstanding Warrant Agreements which provides the holder the right to receive shares of the Company’s common stock. The warrants are exercisable at any time at an exercise price of $0.0016 per share, subject to certain ownership limitations including, with respect to Iroko and its affiliates, that no such exercise may increase the aggregate ownership of the Company’s outstanding common stock of such parties above 49% of the number of shares of its common stock then outstanding for a period of 18 months . All of the Company’s outstanding warrants
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have similar terms whereas under no circumstance may the warrants be net-cash settled. As such, all warrants are equity classified.

During the six months ended June 30, 2022 and 2021, 0.4 million and 1.2 million warrants, respectively, were exercised, and 0.4 million and 1.2 million common shares, respectively, were issued by the Company. As of June 30, 2022, there were no outstanding warrants remaining.


NOTE 16.  NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Upon consummation of the Zyla Merger in May 2020, the Company inherited outstanding Zyla warrants to purchase Zyla common stock, which were converted into the right to purchase shares of Assertio’s common stock. As these warrants are exercisable at any time at an exercise price of $0.0016 per share, they represent contingently issuable shares and therefore are included in the number of outstanding shares used for the computation of basic income per share. There were zero and 392,095 unexercised shares of common stock issuable upon the exercise of warrants as of SeptemberJune 30, 2021.2022 and 2021, respectively.

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

The following table reflects the calculation of basic and diluted earnings per common share for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands, except for per share amounts):
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Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Basic net income (loss) per share  
Basic net income per shareBasic net income per share  
Net income (loss)Net income (loss)$3,737 $(10,522)$(5,887)$(3,791)Net income (loss)$7,834 $(14,169)$16,898 $(9,625)
Weighted average common shares and warrants outstandingWeighted average common shares and warrants outstanding44,969 29,891 42,550 24,958 Weighted average common shares and warrants outstanding46,274 44,706 45,746 41,321 
Basic net income (loss) per shareBasic net income (loss) per share$0.08 $(0.35)$(0.14)$(0.15)Basic net income (loss) per share$0.17 $(0.32)$0.37 $(0.23)
Diluted net income (loss) per share
Diluted net income per shareDiluted net income per share
Net income (loss)Net income (loss)$3,737 $(10,522)$(5,887)$(3,791)Net income (loss)$7,834 $(14,169)$16,898 $(9,625)
Weighted average common shares and share equivalents outstandingWeighted average common shares and share equivalents outstanding44,969 29,891 42,550 24,958 Weighted average common shares and share equivalents outstanding46,274 44,706 45,746 41,321 
Add: effect of dilutive stock options, awards, and equivalentsAdd: effect of dilutive stock options, awards, and equivalents86 — — — Add: effect of dilutive stock options, awards, and equivalents1,305 — 1,111 — 
Diluted net income (loss) per shareDiluted net income (loss) per share$0.08 $(0.35)$(0.14)$(0.15)Diluted net income (loss) per share$0.16 $(0.32)$0.36 $(0.23)
 

The following table reflects outstanding potentially dilutive common shares that are not included in the computation of diluted net income (loss) per share, because to do so would be anti-dilutive, for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
2.5% Convertible Notes debt 20212.5% Convertible Notes debt 20213 4 4 447 2.5% Convertible Notes debt 2021— 4 — 4 
5.0% Convertible Notes debt 2024— — — 2,281 
Stock options, awards and equivalentsStock options, awards and equivalents2,297 3,063 2,725 2,478 Stock options, awards and equivalents2,124 2,924 1,614 2,899 
Total potentially dilutive common sharesTotal potentially dilutive common shares2,300 3,067 2,729 5,206 Total potentially dilutive common shares2,124 2,928 1,614 2,903 


NOTE 15.17.  FAIR VALUE

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The following table reflects the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of SeptemberJune 30, 20212022 and December 31, 20202021 (in thousands):

September 30, 2021Financial Statement ClassificationLevel 1Level 2Level 3Total
June 30, 2022June 30, 2022Financial Statement ClassificationLevel 1Level 2Level 3Total
Liabilities:Liabilities:Liabilities:
Short-term contingent considerationShort-term contingent considerationContingent consideration, current portion$— $— $7,200 $7,200 Short-term contingent considerationContingent consideration, current portion$— $— $13,500 $13,500 
Long-term contingent considerationLong-term contingent considerationContingent consideration— — 30,759 30,759 Long-term contingent considerationContingent consideration— — 23,259 23,259 
TotalTotal$— $— $37,959 $37,959 Total$— $— $36,759 $36,759 

December 31, 2020Financial Statement ClassificationLevel 1Level 2Level 3Total
Assets:
Money market fundsCash and cash equivalents$77 $— $— $77 
Total$77 $— $— $77 
December 31, 2021December 31, 2021Financial Statement ClassificationLevel 1Level 2Level 3Total
Liabilities:Liabilities:Liabilities:
Short-term contingent considerationShort-term contingent considerationContingent consideration, current portion$— $— $6,776 $6,776 Short-term contingent considerationContingent consideration, current portion$— $— $14,500 $14,500 
Long-term contingent considerationLong-term contingent considerationContingent consideration— — 31,776 31,776 Long-term contingent considerationContingent consideration— — 23,159 23,159 
TotalTotal$— $— $38,552 $38,552 Total$— $— $37,659 $37,659 
    
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Cash equivalents consisted of money market funds with overnight liquidity and no stated maturities. The Company classified cash equivalents as Level 1, due to their short-term maturity, and measured the fair value based on quoted prices in active markets for identical assets.

Pursuant to the May 2020 Zyla Merger, the Company assumed a contingent consideration obligation which is measured at fair value. The Company has obligations to make contingent consideration payments for future royalties to Iroko based upon annual INDOCIN Product net sales over $20.0 million.million at a 20% royalty through January 2029. The Company classified the acquisition-related contingent consideration liabilities to be settled in cash as Level 3, due to the lack of relevant observable inputs and market activity. As of September 30, 2021 and December 31, 2020, INDOCIN Product contingent consideration was $37.7 million and $38.4 million, respectively, with $7.2 million and $6.8 million classified as short-term and $30.5 million and $31.6 million classified as long-term contingent consideration, respectively, in the Condensed Consolidated Balance Sheet.

During the three and ninesix months ended SeptemberJune 30, 2021 and September 30, 2020,2022, the Company recognized a chargean expense of $0.3$1.3 million and $1.9 million, and a charge of $1.9 million and $1.9$2.9 million, respectively, for the change in fair value of contingent consideration, which was recognized in Selling, general and administrative expense inFair value of contingent consideration on the Company’s Condensed Consolidated Statements of Comprehensive Income. For the three and six months ended June 30, 2021, the Company recognized an expense of $2.2 million and $1.6 million, respectively, for the change in fair value of contingent consideration. The fair value of the contingent consideration is determined using an option pricing model under the income approach based on estimated INDOCIN product revenues through January 2029 and discounted to present value. The significant assumptions used in the calculation of the fair value as of SeptemberJune 30, 20212022 included revenue volatility of 40.0%35%, discount rate of 6.5%8.5%, credit spread of 5.1%7.8% and updated projections of future INDOCIN Product revenues.

Contingent consideration related to CAMBIA was $0.2 million as of SeptemberJune 30, 20212022 and December 31, 2020.2021.

The following table summarizes changes in fair value that are measured on a recurring basis using significant unobservable inputs (Level 3) for the three months ended June 30, 2022 and 2021 (in thousands):

 Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Fair value, beginning of the period$37,459 $37,959 $37,659 $38,552 
Change in fair value of contingent consideration recorded within costs and expenses1,300 2,195 2,945 1,602 
Cash payment related to contingent consideration(2,000)(2,495)(3,845)(2,495)
Fair value, end of the period$36,759 $37,659 $36,759 $37,659 

The carrying value of the Company’s debt for the period ended SeptemberJune 30, 20212022 approximates its fair value. When determining the estimated fair value of the Company’s debt, the Company uses a commonly accepted valuation methodology and market-based risk measurements that are indirectly observable, such as credit risk. 
 
There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three and ninesix months ended SeptemberJune 30, 2021.2022.

NOTE 16.18.  INCOME TAXES
 
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As of SeptemberJune 30, 2021,2022, the Company’s net deferred tax assets are fully offset by a valuation allowance.allowance, with the exception of a deferred tax liability of $0.5 million for certain separate filing state jurisdictions. The valuation allowance is determined in accordance with the provisions of ASC 740, Income Taxes, which require an assessment of both negative and positive evidence when measuring the need for a valuation allowance. Based on the weight of available evidence, the Company recorded a full valuation allowance against the majority of its net deferred tax assets beginning in the fourth quarter of 2016 and continues to provide a full valuation allowance against the its net deferred tax assets in subsequent quarters.assets. The Company reassesses the need for a valuation allowance on a quarterly basis. If it is determined that a portion or all of the valuation allowance is not required, it will generally be a benefit to the income tax provision in the period such determination is made.

For the ninesix months ended SeptemberJune 30, 2021,2022, the Company recorded an income taxestax expense of approximately $0.3$1.3 million. The difference between the income tax expense of $0.3$1.3 million and the tax at the statutory rate of 21.0% to date on current year operations is principally due to the recordingpartial release of a valuation allowance forrelated to the current year movement in deferred tax assets.

The Company filed a NOL carryback claim pursuant to the provisions of the CARES Act and is expected to receive approximately $8.3 million tax refund during 2021 which is included in Prepaid and other current assets on the Company’s Condensed Consolidated Balance Sheet. However, the timing of receiving the refund could be delayed by processing backlogs at the IRS.     

The Company files income tax returns in the United States federal jurisdiction and in various states, and the tax returns filed for the years 2007 through 2020 and the applicable statutes of limitation have not expired with respect to those returns. Because of NOLs and unutilized R&D credits, substantially all of the Company’s tax years remain open to examination. The Company previously exhausted all the federal research and development credits in the 2018 tax return, but the NOL carryback from CARES Act will result in making R&D credits utilized in 2018 available for future use, the percentage of unrecognized tax benefit against the R&D credit remains reserved, and the rest will be offset by valuation allowance. Interest and penalties, if any, related to unrecognized tax benefits, would be recognized as income tax expense by the Company. At SeptemberJune 30, 20212022, the Company did not have significant accrued interest and penalties associated with unrecognized tax benefits.

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

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

COMPANY OVERVIEW

We are a commercial pharmaceutical company offering differentiated products to patients. Our commercial portfolio of branded products focuses on three areas: neurology, hospital, and pain and inflammation. We have built our commercial portfolio through a combination of increased opportunities with existing products, as well as through the acquisition or licensing of additional approved products. Our primary marketed products are:

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

Other commercially available products include OXAYDO® (oxycodone HCI, USP) tablets for oral use only —CII.
On December 15, 2021, we, through a newly-formed subsidiary, Otter Pharmaceuticals, LLC, entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Antares Pharma, Inc. (“Antares”), and concurrently consummated the Otrexup transaction. Pursuant to the terms of the Purchase Agreement, we acquired Antares’ rights, title and interest in and to Otrexup, including certain related assets, intellectual property, contracts, and product inventory for (i) $18.0 million in cash paid at closing, (ii) $16.0 million in cash paid on May 31, 2022 and (iii) and $10.0 million in cash payable on December 15, 2022.
Impact of COVID-19 on our Business
    Following the outbreak of COVID-19 in early 2020, our priority was and remains the health and safety of our employees, their families, and the patients we serve. Because COVID-19 impacted our ability to see in-person providers who prescribe our products, we transformed our commercial approach during 2020 and increased virtual visits, ultimately eliminating our in-person sales force in favor a digital sales strategy. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, we have experienced a decline and subsequent volatility in prescriptions associated with those elective procedures. The extent to which our operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including actions by government authorities to contain the outbreak, the emergence of new COVID-19 variants and
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the related potential for new surges in infections and the impacts of increases in virtual physician visits on prescriber behavior. For example, although many public health restrictions have eased, future surges could result in additional restrictions or other factors that may contribute to decreases in elective procedures. The impact of the pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our liquidity. We do not yet know the full extent of potential delays or impacts on our business, financing or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely, including suppliers and distributors.

Segment Information

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


FORWARD-LOOKING INFORMATION

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

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

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

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

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

•our ability to attract and retain key executive leadership;

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

•the ability of our third-party manufacturers to manufacture adequate quantities of commercially salable inventory and active pharmaceutical ingredients for each of our products, and our ability to execute and achievemaintain our supply chain, which relies on single-source suppliers, in the expense savings expected from our restructuring plan announced in December 2020, which was designed to further reduce our cost base and right sizeface of global challenges such as the organization, as well as delays, challenges and expenses, and unexpected costs associated with executing the restructuring plan;

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

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

•the commercial success and market acceptance of our products;

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

•the entry of generics for any of our products;COVID-19 pandemic;

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

•our compliance or non-compliance with legal and regulatory requirements related to the outcomedevelopment or promotion of our antitrust litigation relating to our former drug Glumetza®, including final court approval ofpharmaceutical products in the class settlement and resolution of Humana’s pending claims in California state court;U.S.;

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

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

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

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

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

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

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

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

•our ability to successfully develop and execute our sales, marketing and non-personal and digital promotion strategies, including developing relationships with customers, physicians, payorsestimates regarding contingent consideration obligations and other constituencies;expenses, future revenues, capital requirements and needs for additional financing;

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

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

•the timing and results of any future research and development efforts including potential clinical studies relating to any future product candidates; and
•our counterparties’common stock maintaining compliance or non-compliance with their obligations under our agreements; andNasdaq’s minimum closing bid requirement of at least $1.00 per share.

•our ability to attract and retain key executive leadership.

Factors that could cause actual results or conditions to differ from those anticipated by these and other forward-looking statements include those more fully described and incorporated by reference in the “RISK FACTORS”“RISK FACTORS” section and elsewhere in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 and in our Quarterly ReportsReport on Form 10-Q for the three months ended March 31, 2021 and June 30, 2021, respectively.2022. Except as required by law, we assume no obligation to update any forward-looking statement publicly, or to revise any forward-looking statement to reflect events or developments occurring after the date of this Quarterly Report on Form 10-Q, even if new information becomes available in the future.
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COMPANY OVERVIEW

We are a commercial pharmaceutical company offering differentiated products to patients. Our commercial portfolio of branded products focuses on three areas: neurology, hospital, and pain and inflammation. We have built our commercial portfolio through a combination of increased opportunities with existing products, as well as through the acquisition or licensing of additional approved products. Our primary marketed products are:

INDOCIN® (indomethacin) Suppositories

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

Other commercially available products include OXAYDO® (oxycodone HCI, USP) tablets for oral use only —CII.
Impact of COVID-19 on our Business
    Following the outbreak of COVID-19 during early 2020, our priority was and remains the health and safety of our employees, their families, and the patients we serve. As a result, in March 2020, we initiated remote working arrangements and maintained flexible work arrangements for individuals, which continued through the remainder of 2020 and into 2021. In addition to the health and safety of our employees, we are focused on ensuring that we continue making our products accessible to the patients who need them. Because COVID-19 impacted our ability to see in-person providers who prescribe our products, we adapted our approach during 2020 and increased our virtual visits. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, we have experienced a decline and subsequent volatility in prescriptions associated with those elective procedures.

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

Segment Information

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



CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that require significant judgment and/or estimates by management at the time that the financial statements are prepared such that materially different results might have been reported if other assumptions
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had been made. We consider certain accounting policies related to revenue recognition, accrued liabilities and use of estimates to be critical policies. These estimates form the basis for making judgments about the carrying value of assets and liabilities. We believe there have been no significant changes in our critical accounting policies and significant judgements and estimates since we filed our Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC on March 12,10, 2022 (the 2021 (the 2020 Form 10-K), see ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — Critical Accounting Policies and Estimates in our 20202021 Form 10-K for further information.

RESULTS OF OPERATIONS
Revenues
The following table reflects total revenues, net for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Product sales, net:
INDOCIN products (1)
$14,541 $13,773 $42,214 $19,207 
CAMBIA5,038 7,449 17,628 21,503 
Zipsor1,999 3,395 6,802 9,261 
  SPRIX (1)
2,272 5,642 6,911 7,244 
Other products2,147 3,405 3,716 4,759 
Total product sales, net25,997 33,664 77,271 61,974 
Commercialization agreement revenue, net— — — 11,258 
Royalties and milestone revenue416 299 1,391 1,158 
Other revenue(941)602 (976)1,709
Total revenues$25,472 $34,565 $77,686 $76,099 
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(1)Products acquired in connection with May 20, 2020 Zyla Merger.
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Product sales, net:
INDOCIN products$22,841 $13,075 $44,197 $27,673 
CAMBIA6,183 6,128 11,656 12,590 
Otrexup2,616 — 5,694 — 
Zipsor216 2,581 2,445 4,803
SPRIX2,216 2,942 3,982 4,639 
Other products1,358 518 3,003 1,569 
Total product sales, net35,430 25,244 70,977 51,274 
Royalties and milestone revenue451 542 1,443 975 
Other revenue(750)(413)(750)(36)
Total revenues$35,131 $25,373 $71,670 $52,213 
Product Sales, net
For the three and ninesix months ended SeptemberJune 30, 2021,2022, product sales primarily consisted of sales from INDOCIN Products, CAMBIA, ZipsorOtrexup and SPRIX. WeThe Company acquired Otrexup in December 2021 and began shipping and recognizing product sales for Otrexup in January 2022.
INDOCIN Products and SPRIX upon the Zyla Merger on May 20, 2020.
INDOCIN productsnet product sales for the three and six months ended SeptemberJune 30, 20212022 increased $0.8$9.8 million from $13.8$13.1 million to $14.5$22.8 million and $16.5 million from $27.7 million to $44.2 million, respectively, as compared to the same period in 20202021 primarily due to increased net pricing and higher volume partially offset by unfavorable payor mix. The increase in INDOCIN productsnet sales for the nine months ended September 30, 2021 of $23.0 million from $19.2 million to $42.2 million as compared to the same period in 2020 was primarily a result of 2020 began including product sales for INDOCIN Products upon the Zyla Merger on May 20, 2020.
CAMBIA net product sales for the three and nine months ended SeptemberJune 30, 2021 decreased $2.42022 increased $0.1 million from $7.4$6.1 million to $5.0$6.2 million and $3.9 million from $21.5 million to $17.6 million, respectively, as compared to the same periodsperiod in 2020,2021 primarily due favorable payor mix partially offset by lower volume. CAMBIAnet product sales for the six months ended June 30, 2022 decreased $0.9 million from $12.6 million to $11.7 million as compared to the same period in 2021 primarily due to lower volume partially offset by favorable payor mix.
Zipsor net product sales for the three and ninesix months ended SeptemberJune 30, 20212022 decreased $1.4$2.4 million from $3.4$2.6 million to $2.0$0.2 million and $2.5decreased $2.4 million from $9.3$4.8 million to $6.8$2.4 million, respectively, as compared to the same periodsperiod in 2020,2021 primarily due to lower volume partially offset by favorableand unfavorable payor mix.mix as certain parties who previously entered into settlement agreements with us began to market generic versions of Zipsor in 2022.
SPRIX net product sales for the three and six months ended SeptemberJune 30, 20212022 decreased $3.4$0.7 million from $5.6$2.9 million to $2.3$2.2 million and decreased $0.6 million from $4.6 million to $4.0 million, respectively, as compared to the same period in 20202021 primarily due to lower volumeunfavorable payor mix partially offset by favorable payor mix. The decrease in SPRIXhigher volume.
Other net product sales for the nine months ended September 30, 2021 of $0.3 million from $7.2 million to $6.9 million as compared to the same period in 2020 was primarily result of lower volume partially offset by the impact 2020 began including product sales for SPRIX upon the Zyla Merger on May 20, 2020.
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Other products net sales includesinclude product sales for non-promoted products (OXAYDO and SOLUMATRIX) which were acquired from Zyla in May 2020. In September 2020, we terminated our iCeutica License and as a result will no longer manufacture products using SOLUMATRIX technology.technology and will cease sales beginning in July 2022.

Commercialization Agreement Revenue,The increase in total product sales, net,

We ceased recognizing commercialization also reflects a decrease year over year in the amounts charged as a reduction to revenue for sales & return allowances, discounts, chargebacks, and related costs for NUCYNTA effective the closingrebates, which is attributed to changes in product mix and, specifically, a higher concentration of the transactionINDOCIN Products that typically require lower levels of product sales allowances relative to divest its rights, title and interest in and to the NUCYNTA franchise to Collegium on February 13, 2020. During the nine months ended September 30, 2020, we recognized net revenue from the Commercialization Agreement of $11.3 million. This included variable royalty revenue of $13.1 million partially offset by the amortization of the $1.8 million net contract asset in connection with the termination of the Commercialization Agreement.our other products.
    
Royalties & Milestones

In November 2010, we entered into a license agreement with Tribute Pharmaceuticals Canada Ltd. (now known as Miravo Pharmaceuticals) granting them the rights to commercially market CAMBIA in Canada. We receive royalties on net sales as well as certain one-time contingent milestone payments. During the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company recognized $0.4$0.5 million and $1.4$1.0 million of revenue related to CAMBIA in Canada, respectively. During the three and ninesix months ended SeptemberJune 30, 2020, the Company2021, we recognized $0.3$0.5 million and $1.2$1.0 million of revenue related to CAMBIA in Canada, respectively.
During the six months ended June 30, 2021, we recognized $0.5 million Milestone revenue associated with completion of certain service milestones.
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Other Revenue

Other revenue consists of sales adjustments for previously divested products.products, which includes adjustments to reserves for product sales allowances (gross-to-net sales allowances) and can result in reductions to total revenue during the period. Sales adjustments for previously divested products primarily include Gralise, which was divested in January 2020, Nucynta and Lazanda and were $(0.9) million and $(1.0) million for the three and nine months ended September 30, 2021, respectively, and $0.6 million and $1.7 million for the three and nine months ended September 30, 2020, respectively.Lazanda.

Cost of Sales (excluding amortization of intangible assets)

Cost of sales decreased $3.4increased $0.6 million from $6.5$3.9 million to $3.1$4.5 million during the three months ended SeptemberJune 30, 20212022 and increased $0.8 million from $7.9 million to $8.7 million during the six months ended June 30, 2022, respectively, as compared to the same period in 20202021 primarily due to the impact of lowerhigher net product sales and higher Zyla Merger related inventory step-up expense in the third quarter of 2020 not repeating in the current period.product mix.

Cost of sales decreased $2.2 million from $13.1 million to $10.9 million duringFor the ninethree months ended SeptemberJune 30, 2021 as compared to the same period in 2020 primarily due to lower cost of sales as a result of the Gralise divestiture in the first quarter of 20202022 and lower Zyla Merger related inventory step-up expense in current period, partially offset by higher net product sales.

The three and nine months ended September 30, 2021 cost of sales included zero$0.3 million and $0.3 million, respectively, of amortization of inventory step-up related to acquired inventories sold. For the six months ended June 30, 2022 and 2021 cost of sales included $0.7 million and $0.6 million, respectively, of amortization of inventory step-up related to Zyla acquired inventories sold. The three and nine months ended September 30, 2020 cost of sales included $0.5 million and $2.9 million, respectively, of amortization of inventory step-up related to Zyla acquired inventories sold.

Research and Development Expenses

As a result of the December 2020 restructuring plan, we do not expect to incur significant research and development costs in 2021. Research and development expense decreased for the three and nine months ended September 30, 2021 as compared to the same period in 2020 primarily due to the completion of all material research and development activities in 2020.









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Selling, General and Administrative Expenses

Selling, general, and administrative expenses decreased $18.3$13.5 million from $27.6$24.0 million to $9.3$10.5 million for the three months ended SeptemberJune 30, 2022 compared to the same period in 2021 primarily due to lower employee costs$11.3 million in loss contingency provisions recognized in second quarter of 2021 that are not repeating in 2022, $2.0 million gain in the second quarter of 2022 for insurance reimbursement for previous opioid-related spend, partially offset by an increase of $0.8 million in stock compensation expense. Selling, general, and administrative expenses decreased $11.2 million from $32.4 million to $21.2 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily due to $11.3 million in loss contingency provisions recognized in second quarter of 2021 that are not repeating in 2022, decrease of approximately $3.0 million in general operating expenses as a result of prior restructuring plans and one-time transaction costs in 2020 not repeating.

Selling, general, and administrative expenses decreased $39.8events, partially offset by a net increase of $3.0 million from $83.1 million to $43.3 million for the nine months ended September 30, 2021, as compared to the same period in 2020 primarily due to one-time transaction costs in 2020 not repeating, lower employee costs in 2021 as a result of prior restructuring plans, receipt ofthe $5.0 million gain for insurance reimbursement in the first quarter of 2021 compared to $2.0 million gain for previous opioid-related expenses, partially offsetinsurance reimbursement in second quarter of 2022, and an increase of $1.0 million in stock compensation expense.

Fair value of contingent consideration

Fair value of contingent consideration decreased by additional expense$0.9 million from $2.2 million to $1.3 million and increased by $1.3 million from $1.6 million to $2.9 million for loss contingency provisionthe three and six months ended June 30, 2022, respectively, as compared to the same period in 2021. The fair value of the contingent consideration is remeasured each reporting period, with changes in the fair value resulting from changes in the underlying inputs being recognized in 2021.operating expenses until the contingent consideration arrangement is settled. The fair value of the contingent consideration is determined using an option pricing model under the income approach based on estimated INDOCIN product revenues through January 2029 and discounted to present value. The significant assumptions used in the calculation of the fair value as of June 30, 2022 included revenue volatility of 35%, discount rate of 8.5%, credit spread of 7.8% and updated projections of future INDOCIN Product revenues.

Intangible Assets

The following table reflects amortization of intangible assets for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Amortization of intangible assets - INDOCINAmortization of intangible assets - INDOCIN$3,210 $2,661 $9,631 $4,601 Amortization of intangible assets - INDOCIN$3,210 $3,210 $6,421 $6,420 
Amortization of intangible assets - SPRIXAmortization of intangible assets - SPRIX1,393 1,048 4,179 1,996 Amortization of intangible assets - SPRIX1,988 1,393 2,786 2,786 
Amortization of intangible assets - CAMBIAAmortization of intangible assets - CAMBIA1,988 1,284 5,259 3,852 Amortization of intangible assets - CAMBIA1,378 1,988 3,975 3,272 
Amortization of intangible assets - OtrexupAmortization of intangible assets - Otrexup1,393 — 2,755—
Amortization of intangible assets - ZipsorAmortization of intangible assets - Zipsor584 584 1,752 1,753 Amortization of intangible assets - Zipsor— 584 532 1,168 
Amortization of intangible assets - OxaydoAmortization of intangible assets - Oxaydo— 10 118 108 Amortization of intangible assets - Oxaydo— 43 — 118 
Amortization of intangible assets - NUCYNTA— — — 5,927 
TotalTotal$7,175 $5,587 $20,939 $18,237 Total$7,969 $7,218 $16,469 $13,764 
 
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Amortization expense increased $0.8 million from $7.2 million to $8.0 million during the three months ended SeptemberJune 30, 20212022 and increased $1.6$2.7 million from $5.6$13.8 million to $7.2$16.5 million during the six months ended June 30, 2022, respectively, as compared to the same period in 20202021 primarily due to the timing of the finalization of the fair value of the Zyla acquired Otrexup product rights for INDOCIN Products, SPRIX, and OXAYDO occurring at the end of 2020.

Amortization expense during the nine months ended September 30, 2021 increased $2.7 million from $18.2 million to $20.9 million as compared to the same period in 2020 primarily due to the timing of Zyla Merger in May 2020 partially offset by the February 2020 divestiture of our rights, title and interest to the NUCYNTAfranchise of products to Collegium. As a result, we derecognized the remaining carrying value of the NUCYNTA product rights and ceased recognizing related amortization.December 2021.

Restructuring Charges

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

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

In May 2020, we began implementing reorganization plans of our workforce and other restructuring activities to realize the synergies of the Zyla Merger and to re-align resources to strategic areas and drive growth (Zyla Merger Reorganization). We completed the restructuring activities in 2020 and do not expect to incur significant costs related to the Zyla Merger Reorganization in 2021.

For the three and ninesix months ended SeptemberJune 30, 2022 there were no restructuring charges incurred. For the three and six months ended June 30, 2021 restructuring charges incurred were zero and $1.1 million, respectively. The restructuring charges cost and one-time termination costs incurred for the three and nine months ended September 30, 2020 were $0.3 million and $6.8 million, respectively.

Other (Expense) Income
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The following table reflects other (expense) incomeexpense for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Gain on sale of Gralise$— $— $— $126,655 
Loss on extinguishment of convertible notes— — — (47,880)
Loss on sale of NUCYNTA— — — (14,749)
Interest expense(2,495)(3,050)(7,783)(13,328)
Loss on prepayment of Senior Notes— — — (8,233)
Other gain (loss)344 253 747 (3,571)
Total other (expense) income$(2,151)$(2,797)$(7,036)$38,894
 Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Interest expense$(2,269)$(2,605)$(4,596)$(5,288)
Other gain (loss)(95)137451 403 
Total other expense$(2,364)$(2,468)$(4,145)$(4,885)

Other (expense) income changedexpense decreased by $45.9$0.1 million from other incomeexpense of $38.9$2.5 million to other expense of $7.0$2.4 million for the ninethree months ended SeptemberJune 30, 20212022 and decreased by $0.7 million from expense of $4.9 million to an expense of $4.1 million for the six months ended June 30, 2022, respectively, as compared to the same period in 20202021 primarily due to the prior year gain on the sale of Gralise, loss on sale of NUCYNTA, loss on debt extinguishment and change in fair value of Collegium warrants not repeating. lower interest expense.

Sublease income offset by sublease expense is recorded in Other gain (loss) within the above table. For the six months ended June 30, 2022, a gain of $0.6 million was recognized from the early termination and settlement of a Newark facility sublease.

The following table reflects interest expense for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Interest payable on 13% Senior Secured Notes due 2024Interest payable on 13% Senior Secured Notes due 2024$2,454$2,936$7,618$4,341Interest payable on 13% Senior Secured Notes due 2024$2,248$2,557$4,548$5,164
Interest payable on Senior Notes———1,648
Interest payable on Convertible NotesInterest payable on Convertible Notes—261,725Interest payable on Convertible Notes———6
Amortization of debt discounts, and royalty rights411031595,614
Amortization of royalty rightsAmortization of royalty rights214848118
Other—9——
Total interest expenseTotal interest expense$2,495$3,050$7,783$13,328Total interest expense$2,269$2,605$4,596$5,288

For the three and six months ended SeptemberJune 30, 2021,2022, total interest expense decreased $0.6$0.3 million and decreased $0.7 million, respectively, as compared to the same period in 20202021 primarily due to the impact of the principal payments ofon the 13% Senior Secured Notes during the period.

For the nine months ended September 30, 2021, total interest expense decreased $5.5 million as compared to the same period in 2020 primarily due the settlement of the remaining principal of our Senior Notes and the repurchase of our 2021 and 2014 Notes in the third quarter of 2020 partially offset by interest expense associated with 13% Senior Secured Notes assumed from the Zyla Merger in May 2020.

Income Tax Provision

For the three and ninesix months ended SeptemberJune 30, 2021,2022, we recorded an income tax expense of approximately $0.1$0.6 million and $0.3$1.3 million, respectively, which represents an effective tax rate of 1.2%7.0% and (5.3)%7.2%, respectively. The difference between the income tax expense of $0.1$0.6 million and $0.3income tax expense of $1.3 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively, and the tax at the statutory rate of 21.0% is principally due to the recordingpartial release of a valuation allowance forrelated to the current year movement in the deferred tax assets.

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In the three and ninesix months ended SeptemberJune 30, 2020,2021, we recorded an income tax benefit of approximately $0.3 million and income tax expense of $1.1 million and an income tax benefit of $6.4$0.2 million, respectively, thatwhich represents an effective tax rate of (11.1)%2.1% and 62.7%(2.6)%, respectively. The difference between income tax expensebenefit of $1.1$0.3 million and income tax benefitexpense of $6.4$0.2 million for the three and ninesix months ended SeptemberJune 30, 2020,2021, respectively, and the tax at the statutory rate of 21.0% was principally due to the partial release of valuation allowance recorded againstrelated to the beginning of yearmovement in deferred tax asset for the net operating loss (NOL) carryback to the 2018 and 2019 tax years now permitted by the CARES Act.assets.

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LIQUIDITY AND CAPITAL RESOURCES

Historically and through SeptemberJune 30, 2021,2022, we have financed our operations and business development efforts primarily from product sales, private and public sales of equity securities, including convertible debt securities, the proceeds of secured borrowings, the sale of rights to future royalties and milestones, upfront license, milestone and fees from collaborative and license partners.

On December 17, 2021, we entered into a Sales Agreement with Roth Capital Partners, LLC (Roth) as sales agent to sell shares of our common stock, from time to time, through an at-the-market (ATM) offering program having an aggregate offering price of up to $25.0 million. As of June 30, 2022, 2,463,637 shares have been issued and settled at an average price of $3.02, through which we received gross proceeds of $7.4 million, and net proceeds after commission and fees of $7.0 million.

On February 9, 2021, we completed a registered direct offering with certain institutional investors and accredited investors to sell 22,600,0005,650,000 shares of our common stock at a purchase price of $0.62$2.48 per share. The gross proceeds from the offering were approximately $14.0 million. After placement agent fees, we received net proceeds of approximately $13.1 million. On February 12, 2021, we completed a registered direct offering with certain institutional investors and accredited investors to sell 35,000,0008,750,000 shares of our common stock at a purchase price of $0.98$3.92 per share. The gross proceeds from the offering were approximately $34.3 million. After placement agent fees, we received net proceeds of approximately $32.2 million. We also incurred $0.5 million direct incremental cost to complete both registered direct offerings. We intend to use proceeds from both offerings for general corporate purposes, including general working capital.

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

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

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

The following table reflects summarized cash flow activities for the ninesix months ended SeptemberJune 30, 20212022 and 20202021 (in thousands):
 Nine Months Ended September 30,
20212020
Net cash provided by (used in) operating activities$1,392 $(59,590)
Net cash provided by investing activities— 512,801 
Net cash provided by (used in) financing activities36,548 (460,581)
Net increase (decrease) in cash and cash equivalents$37,940 $(7,370)
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 Six Months Ended June 30,
20222021
Net cash provided by (used in) operating activities$41,856 $(3,262)
Net cash used in investing activities(16,518)— 
Net cash (used in) provided by financing activities(9,884)36,904 
Net increase in cash and cash equivalents$15,454 $33,642 

Cash Flows from Operating Activities

Cash provided by operating activities was $1.4$41.9 million during the ninesix months ended SeptemberJune 30, 20212022 compared to cash used of $59.6$3.3 million in the same period in 2020.2021. The increase of $45.1 million in cash provided from operating activities is primarily due to combination of lowerhigher net loss afterincome excluding non-cash adjustmentsitems and favorable working capital cash flows. For the six months ended June 30, 2022, net income was $16.9 million compared to a net loss of $9.6 million for the same period in 2021. For the six months ended June 30, 2022, non-cash items contributed approximately $5.0 million more to operating cash flows compared to the same period in 2021 primarily due to higher amortization expense and higher expense for recurring fair value measurement of contingent consideration. For the six months ended June 30, 2022, working capital contributed approximately $13.6 million more to operating cash flows compared to the same period in 2021 primarily due to less cash used in the settlement of accrued rebates, returns and discounts due to impact of sales product mix as well as timing of settlement, receipt of $8.3 million in tax refund in the first quarter of 2022, and timing of inventory purchases and receipts.

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Cash Flows from Investing Activities

Cash used in investing activities for the six months ended June 30, 2022 was $16.5 million, which was entirely composed of cash paid in relation to the purchase of Otrexup. There was no cash flow activity from investing activities for the ninesix months ended SeptemberJune 30, 2021. Cash provided from investing activities for the nine months ended September 30, 2020 was $512.8 million, which included cash received for the sales of NUCYNTA, Gralise and Collegium warrants as well as cash acquired in Zyla Merger.

Cash Flows from Financing Activities

Cash used in financing activities for the six months ended June 30, 2022 was $9.9 million, which primarily consisted of $11.8 million in principal payments on the Senior Secured Notes and $3.8 million payment for contingent consideration, partially offset by $7.0 million in cash proceeds from the ATM program. Cash provided by financing activities for the ninesix months ended SeptemberJune 30, 2021 was $36.5$36.9 million, which primarily consisted of $44.9 million proceeds from the registered direct offerings in February 2021, partially offset by $4.8 million in principal payments of our debt as well ason the Senior Secured Notes and $2.5 million payment for contingent consideration. Cash used in financing activities for the nine months ended September 30, 2020 was $460.6 million, which was primarily due to the settlement of our Senior Notes and the repurchase of our outstanding 2021 Notes and 2024 Notes.

Off-Balance Sheet Arrangement

There were no off-balance sheet arrangements during the quarter ended SeptemberJune 30, 2021.2022.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Controls over Financial Reporting

During the first quarter of 2021, we finalized the process of integrating our acquisition of Zyla’s operations in our internal control environment. There were no other significant changes in our internal controls over financial reporting during the ninethree months ended SeptemberJune 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
For a description of our material pending legal proceedings, see “Note 12.13. Commitments and Contingencies - Legal Matters” of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A.    RISK FACTORS

We are subject to various risks and uncertainties that could have a material impact on our business, results of operations and financial condition, including those hereby incorporated by reference from Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. There2021. Except as set forth below, there have been no material changes to our risk factors
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since our Annual Report on Form 10-K for the year ended December 31, 2020.2021. In addition to other information in this report, the following risk factors referenced above(together with the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2021) should be considered carefully in evaluating an investment in our securities. If any of these risks or uncertainties actually occurs, our business, results of operations or financial condition would be materially and adversely affected. The risks and uncertainties referenced above (including those set forth below) are not the only ones facing us. Additional risks and uncertainties of which we are unaware or that we currently deem immaterial may also become important factors that may harm our business, results of operations and financial condition.

We have no patent protection for Indocin, Zipsor began to face generic competition earlier this year, and Cambia may face generic competition starting in 2023. If we face competition with generic versions of our marketed products, our revenues will be adversely affected.

Under the Federal Food, Drug, and Cosmetic Act (FDCA), the FDA can approve an abbreviated new drug application (“ANDA”) for a generic version of a branded drug without the ANDA applicant undertaking the clinical testing necessary to obtain approval to market a new drug. In place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating that its product has the same active ingredient(s) and is bioequivalent to the branded product, in addition to any data necessary to establish that any difference in strength, dosage, form, inactive ingredients or delivery mechanism does not result in different safety or efficacy profiles, as compared to the reference drug.

There are no patents covering the INDOCIN Products (which accounted for 55% of our revenue in 2021), which means that a generic drug company or compounding pharmacy could introduce a generic for these drugs at any time. Furthermore, we are aware of other drug companies that have had interactions with regulatory agencies including FDA relating to indomethacin, which could indicate the development of one or more INDOCIN Product generics or other formulations of indomethacin. With respect to Cambia and Zipsor (which accounted for 23% and 9% of our revenue in 2021, respectively), we have entered into settlement agreements with generic drug companies, under which generic versions of these products can be marketed beginning in 2023 and 2022, respectively. As a result, we began to face generic competition for Zipsor earlier this year, we expect to face generic competition in the near term for Cambia and could face generic competition at any time for the INDOCIN Products.

Any introduction of one or more generic versions of our products would harm our business, financial condition and results of operations. The filing of the ANDAs described above, or any other ANDA or similar application in respect to any of our products, could have an adverse impact on our stock price. Moreover, if the patents covering our Otrexup (which expire in 2030) are not upheld in litigation or if a generic competitor is found not to infringe these patents, the resulting generic
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competition for Otrexup would have a further material adverse effect on our business, financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not repurchase any shares of the Company’s common stock during the period covered by this Quarterly Report, except for shares surrendered to us, as reflected in the following table, to satisfy tax withholding obligations in connection with the vesting of equity awards.
(a)
Total Number of Shares (or Units) Purchased (1)

(b) Average Price Paid per Share
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
July 1, 2021 -
July 31, 2021		3,072$1.30N/AN/A
August 1, 2021 - August 31, 20212,812$1.32N/AN/A
September 1, 2021 -
September 30, 2021		8510.93N/AN/A
Total6,735$1.26
(a)
Total Number of Shares (or Units) Purchased (1)

(b) Average Price Paid per Share
(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2022 - April 30, 20222,321$1.81N/AN/A
May 1, 2022 - May 31, 202231,845$2.41N/AN/A
June 1, 2022 - June 30, 2022——N/AN/A
Total34,166$2.37

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

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ITEM 6.3. EXHIBITS
10.1†
31.1
31.2
32.1*
32.2*
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(†) Confidential information omitted

(*)    Furnished herewith

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Date: November 4, 2021August 8, 2022ASSERTIO HOLDINGS, INC.
  
 /s/ Daniel A. Peisert
 Daniel A. Peisert
 President and Chief Executive Officer
/s/ Paul Schwichtenberg
Paul Schwichtenberg
Senior Vice President and Chief Financial Officer
/s/ Ajay Patel
Ajay Patel
Senior Vice President and Chief Accounting Officer
re
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