Teligent, Inc.
Annual Report 2015

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2015 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: 001-08568 Teligent, Inc.(Formerly IGI Laboratories, Inc.)(Exact name of registrant as specified in its charter) Delaware 01-0355758(State or other jurisdiction (I.R.S. Employer Identification No.)of incorporation or organization) 105 Lincoln Ave., Buena, NJ 08310(Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (856) 697-1441 Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered Common Stock, $0.01 Par Value Per Share The NASDAQ Stock Market Securities registered pursuant to Section 12(g) of the Exchange Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x 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 1934during 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 filingrequirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment tothis Form 10-K. ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer xNon-accelerated filer ¨ [Do not check if a smaller reporting company]Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting that anyperson whose shares are not included in such calculation is an affiliate) computed by reference to the price at which the common stock was last sold, as of thelast business day of the registrant’s most recently completed second fiscal quarter was $158.8 million. As of March 10, 2016, the registrant had 53,005,689 shares of common stock outstanding. APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCYPROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨ DOCUMENTS INCORPORATED BY REFERENCE The following documents (or parts thereof) are incorporated by reference into the following parts of this Form 10-K: Certain information required inPart III of this Annual Report on Form 10-K is incorporated from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May25, 2016.  PART I Item 1.BUSINESS Our Company Strategic Overview Teligent, Inc., or the Company, is a specialty generic pharmaceutical company. Our mission is to become a leader in the specialty generic pharmaceuticalmarket. Under our own label, we currently market and sell generic topical and branded generic injectable pharmaceutical products in the United States andCanada. In the United States we are currently marketing eight generic topical pharmaceutical products and four branded generic pharmaceutical products.Through the completion of an acquisition, we now sell a total of nineteen generic and branded generic injectable products and medical devices in Canada.Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide development, formulation, and manufacturing servicesto the pharmaceutical, over-the-counter, or OTC, and cosmetic markets. We operate our business under one segment. Effective October 23, 2015, we changedour name from IGI Laboratories, Inc. to Teligent, Inc. On October 26, 2015, our common stock, which was previously listed on the NYSE MKT, began tradingon the NASDAQ Global Select Market, under the trading symbol “TLGT.” Our office, laboratories and manufacturing facilities are located at 105 LincolnAvenue, Buena, New Jersey. Currently, we have two platforms for growth: ·Developing, manufacturing and marketing a portfolio of generic pharmaceutical products in our own label in topical, injectable, complex andophthalmic dosage forms; and ·Managing our current contract manufacturing and formulation services business. We have been in the contract manufacturing and development of topical products business since the early 1990s, but our strategy since 2010 has beenfocused on the growth of our own generic pharmaceutical business. Since 2010, we have focused on transitioning our business to include more customers inthe topical pharmaceutical industry. In 2014, we broadened our target product focus from topical pharmaceuticals to include a wider specialtypharmaceutical approach. We believe that expanding our development and commercial base beyond topical generics, historically the cornerstone of ourexpertise, to include injectable generics, complex generics and ophthalmic generics (what we call our “TICO strategy”), will leverage our existing expertiseand capabilities, and broaden our platform for more diversified strategic growth. As of the date of this report, we have acquired 25 drug products that have been previously approved by the FDA. Our pipeline includes 31 Abbreviated NewDrug Applications, or ANDAs filed with the United States Food and Drug Administration, or FDA, for additional pharmaceutical products. In addition, wehave four abbreviated new drug submissions, or ANDSs, on file with Health Canada. We have an additional 39 product candidates at various stages of ourdevelopment pipeline, ten of which are on stability testing. In December 2015, we announced the approval by the FDA of Cefotan® (Cefotan for Injection).This was our first product approved from the portfolio of discontinued and withdrawn new drug applications, or NDAs, and ANDAs that we purchased fromAstra Zeneca on September 25, 2014. We have also experienced an increased rate of review by the FDA of applications filed in Generic Drug User FeeAmendments, or GDUFA, Year 3 and Year 4, which began October 1, 2014, and October 1, 2015, respectively. We submitted fifteen topical ANDAs in 2015.We expect to continue to expand our presence in the generic topical pharmaceutical market through the filing of additional ANDAs with the FDA and thesubsequent launch of products as these applications are approved. Our target is to file at least fifteen ANDAs in total in 2016 through our internal productdevelopment program, and we plan to file at least 8 ANDSs with Health Canada in 2016. We will also seek to license or acquire further products, intellectualproperty, or pending applications to expand our portfolio. Teligent Canada. On November 13, 2015, we acquired all of the rights, title and interest in the development, production, marketing, import and distributionof all injectable pharmaceutical products of Alveda Pharmaceuticals Inc., or Alveda, pursuant to two asset purchase agreements, one relating to theacquisition of all of the intellectual property-related assets of Alveda and the other relating to the acquisition of all other assets of Alveda. 2  In connection with the closing of the acquisition, we formed three subsidiaries: Teligent Luxembourg S.à.r.l., or LuxCo, a private limited companyincorporated under the laws of the Grand Duchy of Luxembourg and wholly-owned by the Company; Teligent OÜ, a private limited company incorporatedunder the laws of Estonia that is wholly-owned by LuxCo; and Teligent Canada Inc., a company incorporated under the laws of the Province of BritishColumbia that is wholly-owned by LuxCo. Teligent Canada currently has seven employees, including a general manager of Teligent Canada, located in our offices in Toronto, Canada. Teligent Canadaacquired all of the Alveda working capital, including accounts receivable, inventory, accounts payable, and capital assets. In addition, Teligent Canadaacquired Alveda’s existing customer relations, all contracts necessary to execute the Canadian distribution activities, the existing work force, operationalpermits, and all intellectual property required to operate the marketing and distributions of products in Canada. Teligent Canada currently markets anddistributes nineteen products. We plan to transition these products to distribute them under a Teligent Canada label later this year. Teligent OÜ. We hired our general manager of Teligent OÜ in the first quarter of 2016. Teligent OÜ will be responsible for the development, enhancement,maintenance, protection and exploitation functions related to the intellectual property-related assets acquired from Alveda. In addition, Teligent OÜ will beresponsible for the management of the supply chain function and procurement of products for sale to Teligent Canada. In 2016, we intend to hire additionalheadcount in Teligent OÜ and secure a quality control laboratory space in preparation to support our Teligent US supply chain management and technicalservices teams. Teligent Jersey Limited. On October 5, 2015, we, together with our wholly-owned subsidiary incorporated under the laws of Jersey, or Teligent Jersey, enteredinto and closed an Asset Purchase Agreement and certain other ancillary agreements with Concordia Pharmaceuticals Inc., S.à.r.l., Barbados Branch, orConcordia, pursuant to which we acquired all rights, title and interests of Concordia in the existing inventory and certain contracts associated with threecurrently marketed injectable pharmaceutical products (Fortaz®, Zinacef TM , and Zantac® Injection), and Teligent Jersey acquired all rights, title andinterests of Concordia in, among other things, certain other contracts, product registrations and books and records associated with those products. Inconsideration for the purchase of those assets, we paid Concordia an aggregate of $10,100,000 in cash. The transaction is accounted for as a purchase of theproduct and product rights. In addition, we purchased approximately $1.2 million of inventory related to the three products acquired. Facility Expansion. With the ongoing expansion activities at our facility of our research and development laboratories, as well as our manufacturingcapabilities, we believe that, based on current forecasts, capacity at our existing facility would be sufficient for our topical manufacturing needs into 2017. In2014, we initiated the planning phase of the expansion of our facility in Buena, New Jersey. Planning continued throughout 2015, and we acquired thebuilding adjacent to our manufacturing facility in August 2015. We have commenced the construction project at 101 Lincoln Avenue, in Buena, New Jersey,which will be the future home to our brand new product development laboratory, in addition to our regulatory affairs, supply chain and corporate servicesteams. We expect this phase of the project to be completed in the summer of 2016. We intend to begin the expansion of the existing manufacturing facility at105 Lincoln Avenue, in Buena, New Jersey in April 2016. This expansion will increase our manufacturing capacity for topical products, and also enable ourproduction of sterile injectable products. In order to begin development, registration and manufacture of some of our sterile injectable and ophthalmicproducts, we are partnering with contract manufacturing organizations. The current plans consider a total capital outlay of approximately $45 million tocomplete this project. Upon completion of the site expansion, we may transfer the manufacturing of some of those products back to our Buena, New Jerseyfacility. In addition, we may continue to explore ways to accelerate our growth through the creation of unique opportunities from the acquisition of additionalintellectual property, and the expansion of the use of our existing intellectual property. 3  Our Generic Pharmaceutical Business In September 2010, we leveraged our existing formulation and manufacturing capabilities to begin the Company’s transformation from being solely acontract manufacturing and development company into a generic pharmaceutical company with our own portfolio of products, as recognized by our firstANDA submission to the FDA. ANDAs are submitted to the FDA for generic drug products that have the same active ingredient, strength, dosage form, androute of administration as brand name innovator drug products to which they are bioequivalent, meaning that there is no significant difference between thedrugs in their rate and extent of absorption in the body. In the United States, approved ANDA generic drugs are usually interchangeable with the innovatordrug. This means that the generic version may generally be substituted for the branded product by either a physician or pharmacist when dispensing aprescription. Our commercialization of each of these product candidates requires approval of the respective ANDA by the FDA. Since September 2010, we have expanded our generic topical pharmaceutical pipeline of prescription products by submitting 35 ANDAs to the FDA, ofwhich four have been approved. We submitted fifteen ANDAs in 2015, and expect to file at least fifteen ANDAs in 2016 for topical generic pharmaceuticalproducts. In December 2012, we launched our first generic topical pharmaceutical products under our own label. In March 2014, we received our first approval from theFDA for an ANDA for the generic equivalent of lidocaine hydrochloride USP 4% topical solution. In May 2014, we received tentative approval for oursecond ANDA, the generic equivalent of diclofenac sodium topical solution 1.5%, which received final approval from the FDA in July 2015. We also have anumber of additional product candidates in various stages of development. Based on IMS Health Reports data, the addressable market, as of January 2016, for the 31 products we have pending at the FDA totals approximately $1.4billion in annual sales. We expect to continue to expand our presence in the generic topical pharmaceutical market through the submission of additionalANDAs to the FDA and the subsequent launch of products if and when these applications are approved by the FDA. We also plan to file at least 8 ANDSs withHealth Canada in 2016. As part of our growth strategy, we also seek opportunities to acquire additional products and ANDAs or ANDSs. On February 1, 2013, we acquired assets andintellectual property, including an approved ANDA, for econazole nitrate cream 1%, which we launched under our label in September 2013. On September24, 2014, we acquired from AstraZeneca previously approved ANDAs and NDAs associated with eighteen products, seventeen of which are injectableproducts and one non-injectable product for pain management. On September 30, 2014, we acquired previously marketed and approved ANDAs associatedwith two ophthalmic products from Valeant Pharmaceuticals LLC and Valeant Pharmaceuticals Luxembourg SARL, or Valeant, in addition to the exclusiveright to acquire three additional previously marketed and approved injectable products from Valeant. In November 2014, we completed the purchase of oneof those three optioned injectable products and its related NDA from Valeant. In March 2015, we completed the purchase of the final two optioned injectableproducts and their related ANDAs from Valeant. Our Contract Manufacturing and Development Business We also develop, manufacture, fill and package topical semi-solid and liquid products for branded and generic pharmaceutical customers, as well as the OTCand cosmetic industries. These products are used in a wide range of applications, from purely cosmetic to the prescription treatment of conditions likedermatitis, psoriasis and eczema. Our contract manufacturing and development business includes two services: contract formulation and contract manufacturing. These services are offered topharmaceutical, OTC and cosmetic customers. For our pharmaceutical contract services customers, we formulate, test and/or manufacture prescription drugsand medical devices. The products include cosmetics sold by retail stores directly to the public, as well as prescription drug products promoted directly tophysicians. All contract manufacturing products are produced under our customers’ labels. As a result of our commitment to file at least fifteen topicalANDAs for the Teligent portfolio in 2016, our research and development team will be focused more on the growth of our organic pipeline. Therefore, we donot expect to record significant revenues from our contract formulation services in 2016 and beyond. 4  Contract development involves developing topical formulations to satisfy a customer’s product request. Our experienced formulators can develop a novelformulation or replicate an existing formula through reverse engineering. We offer full support for the products we develop through developing test methods,full analytical services, manufacturing scale-up criteria, validation and regulatory assistance. Upon completion of our contract formulation projects, we areoften successful in securing contract manufacturing services to manufacture the products we helped the customer develop. We have filed several 510(k)submissions with the FDA to obtain clearance on behalf of our customers for the marketing and distribution of certain medical devices. In addition, we havefour additional ANDAs pending approval at the FDA that we submitted under joint development and commercialization agreements with our partners. InDecember 2012, after completion of the required formulation and regulatory requirements, we submitted two of those ANDAs on behalf of one of ourpharmaceutical partners. In December 2013, we submitted another of the ANDAs associated with a generic topical pharmaceutical drug product, which, onceapproved, will be licensed, marketed and distributed by one of our large multi-national pharmaceutical partners, West-Ward Pharmaceuticals Corp. In June2014, we submitted an ANDA under a joint development and commercialization agreement with Impax Laboratories, Inc. We believe that our quality contract manufacturing and development business provides a consistent and reliable source of products and services to ourcustomers. We offer flexibility in batch sizing and package design, which gives our customers the opportunity to select the appropriate presentation for eachproduct. Our high-speed packaging lines can accommodate a variety of tubes, bottles, pumps and jars. As a result of the rollout of our TICO strategy and theincreased focus and commitment of R&D and technical resources toward internal projects, we anticipate that revenue from our contract services business willdecrease over time. Our Financings On December 22, 2014, we consummated the sale of an aggregate of $143.75 million in principal of our notes, or the Notes, to Deutsche Bank Securities Inc.and J.P. Morgan Securities LLC, as the initial purchasers, including the initial purchasers’ exercise of their option to purchase an $18.75 million in principalof Notes. The Notes were sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Inconnection with the sale of the Notes, we entered into an indenture with Wilmington Trust, National Association, as trustee. The Notes bear interest at a rateof 3.75% per year, payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2015. The Notes will mature onDecember 15, 2019, unless earlier repurchased or redeemed by the Company or converted by holders, pursuant to the terms therein. Additionally, subject tocertain conditions, we may redeem for cash any or all outstanding Notes on or after December 19, 2017 in an amount equal to the outstanding principalamount of such Notes, plus accrued and unpaid interest. No sinking fund is provided for the Notes. The Notes are the Company’s senior unsecuredobligations and will not be guaranteed by any of our existing or future subsidiaries. Aggregate net proceeds were approximately $139 million, afterdeducting underwriter commissions and other expenses paid by us. Corporate Information We were incorporated in Delaware in 1977 and on May 7, 2008, our stockholders approved our name change from IGI, Inc. to IGI Laboratories, Inc. EffectiveOctober 23, 2015, we changed our name to Teligent Inc. Our principal executive offices are located at 105 Lincoln Avenue, Buena, New Jersey 08310. Ourtelephone number is (856) 697-1441. We maintain a website at www.teligent.com. We make available on or through our website our periodic reports that wefile with the Securities and Exchange Commission, or the SEC. This information is available on our website free of charge as soon as reasonably practicableafter we electronically file the information with or furnish it to the SEC. The contents of our website are not incorporated by reference into this document andshall not be deemed “filed” under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our Competitive Strategy Our goal is to become a leader in the specialty generic pharmaceutical market. Under our own label, we currently market and sell generic topical and brandedgeneric injectable pharmaceutical products in the United States and Canada. We also provide development, formulation, and manufacturing services to thepharmaceutical, OTC, and cosmetic industries. We have been in the contract manufacturing and development of topical products business since the early1990s, but our strategy since 2010 has been focused on the growth of our own generic pharmaceutical business. In 2014, we started the transformation of ourbusiness from working toward being a leader in the topical generic pharmaceutical industry to becoming a leader in the specialty pharmaceutical markets. Webelieve that expanding our development and commercial base beyond topical generics, the cornerstone of our expertise, to injectable generics, complexgenerics and ophthalmic generics (what we call our TICO strategy), will leverage existing expertise and capabilities, diversify our commercial opportunitiesand broaden our platform for long-term strategic growth. 5  Our TICO Strategy Our TICO strategy originated from our opportunity to leverage the industry value chain, which we have developed and strengthened through our topicalportfolio. This value chain includes our internal expertise in product and molecule selection and development, manufacturing, sales, logistics anddistribution, as well as our relationships with our customers and consumers. With the notable exception of manufacturing capabilities, we see the potential toeffectively leverage our existing infrastructure across this value chain and to further expand our strategic reach to the injectable, complex and ophthalmicgeneric pharmaceutical markets. Topical (T) - Our focus on the topical market has been the foundation for our growth. While the Company has manufactured topical products since theearly 1990s, we began to focus our strategy on the topical generic market in 2010. In December 2012, we launched our first generic topicalpharmaceutical products under our own label. Currently, we market eight topical products under our own label. We have recently received FDAapprovals for lidocaine ointment 5%, which we plan to launch in the first quarter of 2016, and desoximetasone ointment 0.25%, which we plan to launchin the second quarter of 2016. In our topical pipeline, we have 31 ANDAs submitted to the FDA that are awaiting approval, and an additional 39 productcandidates in our development pipeline, 10 of which are on stability testing. We intend to continue to develop topical generic products and utilize ourexpertise in drug formulation and manufacture to expand our own generic topical prescription drug portfolio. We are targeting to develop and fileregulatory submissions with the FDA for at least fifteen topical products in 2016 through the ANDA process. Upon regulatory approval, we would marketthese products under the Teligent label to national chain drug stores and drug wholesalers through our internal sales efforts. Based on IMS HealthReports data, the addressable market, as of January 2016, for the 31 products we have pending at the FDA totals approximately $1.4 billion in annualsales. In our topical contract services business, we have developed strong customer relationships that we believe provide us with both recurring revenuestreams from those customers and opportunities to selectively increase our product offerings to our customers. We intend to continue to capitalize on ourstrong customer relationships to maintain some contract manufacturing and development revenues. We have an FDA-registered, cGMP-compliant facility that is equipped for manufacturing topical, semi-solid and liquid products. The design andconfiguration of our manufacturing facility provides flexibility in manufacturing batch sizes from 250 kg up to 4,000 kg. We intend to leverage thisflexibility and capacity to support our growth in the topical prescription markets. We are finalizing the planning phase of expanding this facility toincrease our topical manufacturing capacity and warehousing capacity to accommodate the expected growth created by the eventual commercial launchof the 31 topical generic pharmaceutical products in our pipeline. Injectable (I) - As part of the injectable phase of our TICO strategy, on September 24, 2014, we acquired from AstraZeneca previously approved ANDAsand NDAs associated with eighteen products, seventeen of which are injectable products and one of which is a non-injectable product for painmanagement. Of the products we acquired, five of the products are currently on the FDA drug shortage list. We have received FDA approval for our firstproduct in this portfolio, Cefotan® (Cefotetan for Injection), and we are working with our manufacturing partner to launch the product in the first quarterof 2016. On November 13, 2015, we formed Teligent Canada, and completed the acquisition of Alveda. Teligent Canada currently has seven employees,including a general manager located in our offices in Toronto, Canada. Teligent Canada acquired all of the Alveda working capital, including accountsreceivable, inventory, accounts payable, and capital assets. In addition, Teligent Canada acquired Alveda’s existing customer relations, all contractsnecessary to execute the Canadian distribution activities, the existing work force, operational permits, and all intellectual property required to operatethe marketing and distributions of Alveda’s products in Canada. Teligent Canada currently markets and distributes nineteen injectable products. On October 5, 2015, we acquired three currently marketed injectable pharmaceutical products (Fortaz®, Zinacef TM and Zantac® Injection) fromConcodia Pharmaceuticals Inc., S.à.r.l., Barbados Branch. 6  On September 30, 2014, we acquired previously marketed and approved ANDAs associated with two ophthalmic products from Valeant, in addition tothe exclusive right to acquire three additional previously marketed and approved injectable products from Valeant. In November 2014, we completed thepurchase of one of those three optioned injectable products and its related NDA from Valeant. In March 2015, we completed the purchase of the final twooptioned injectable products and their related ANDA from Valeant. We intend to leverage our existing topical value chain as we build our injectable generic portfolio. In 2015, we entered into partnerships with contractmanufacturing organizations, or CMOs, for the manufacture of some of our products in our portfolio of sterile products. Longer term, we expect to bringmuch of this production capability in-house. In 2015, we have performed extensive analysis on the expansion of our existing facility in Buena, New Jersey, and the addition of sterile manufacturingcapabilities to our facility. We have completed the concept, design, equipment ordering and construction planning activities necessary to qualify afacility for both pilot- and commercial-scale operations, including an R&D laboratory, sterile manufacturing and packaging capabilities, and warehouseand administrative space. We intend to begin construction in April 2016. We plan to continue to review business development opportunities to expand our injectable portfolio. Complex (C) - We have begun three projects that we consider to be part of the complex portfolio of our TICO strategy. We consider our focus on complexproducts or markets to be broadly defined to include potential complexity in one of the critical areas of our industry value chain. As part of our complexprogram, we are researching two 505(b)(2) projects. A 505(b)(2) submission is an NDA that contains full safety and effectiveness reports, but permitssome of the information required for approval to come from studies not conducted by or for the applicant, thereby avoiding unnecessary duplication ofstudies already performed on a product. In addition, we are currently working with a contract research organization to develop a generic equivalent of apharmaceutical drug product designated for a chronic rare disease. The intent of this opportunity is to provide patients with a lower cost alternative of anapproved orphan drug. The Orphan Drug Designation program at the FDA provides orphan status to drugs and biologics which are defined as thoseintended for the safe and effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people in the U.S., or thataffect more than 200,000 persons, but are not expected to recover the costs of developing and marketing a treatment drug. We will continue to seekopportunities relevant to building our complex portfolio of products. Ophthalmic (O) - As part of the ophthalmic portfolio of our TICO strategy, on September 30, 2014, we acquired previously marketed and approvedANDAs associated with two ophthalmic products from Valeant. Similar to our injectable portfolio, we are forming partnerships with CMOs for near-termcommercial production, but plan to eventually manufacture these products within our own facility. We plan to continue to review business developmentopportunities to expand our ophthalmic portfolio. Our Customers Generic Pharmaceutical Business. The manufacturing and commercialization of generic specialty pharmaceutical markets is competitive, and there areestablished manufacturers, suppliers and distributors actively engaged in all phases of our business. We currently only manufacture and sell topical genericpharmaceutical products under our own label. In October 2015, we acquired and began to sell our first generic injectable products. The injectable productsare currently sold under another company’s label and will be transitioned to our label in accordance with FDA guidance in 2016. In Canada, we currentlymarket nineteen products in the Alveda label which will be transitioned to the Teligent label in 2016. As we continue to execute our TICO strategy, we willcompete in other markets, including the injectable and ophthalmic generic pharmaceutical markets, and expect to face other competitors. For the years ended December 31, 2015, and 2014, 43% and 44% of our total product sales, net, respectively, were to the three large wholesale drugdistributors: AmerisourceBergen Corporation, or ABC; Cardinal Health, Inc., or Cardinal; and McKesson Drug Company, or McKesson. ABC accounted forapproximately 28% and 42% of our accounts receivable as of December 31, 2015 and 2014, respectively. 7  ABC, Cardinal and McKesson are key distributors of our products, as well as a broad range of health care products for many other companies. None of thesedistributors is an end user of our products. Generally, if sales to any one of these distributors were to diminish or cease, we believe that the end users of ourproducts would likely find little difficulty obtaining our products either directly from us or from another distributor. However, the loss of one or more of thesedistributors, together with a delay or inability to secure an alternative distribution source for end users, could have a material adverse effect on our revenue,business, financial condition and results of operations. Furthermore, ABC, Cardinal and McKesson have entered into strategic alliances with Walgreens, CVSCaremark and Rite-Aid, respectively. Since Walgreens, CVS Caremark and Rite-Aid are customers for several of our products, the loss of our distributorrelationship with any of the three large wholesalers could result in a reduction to our revenues. We consider our business relationships with ABC, Cardinal and McKesson to be in good standing and have fee for services contracts with each of them.However, a change in purchasing patterns, a decrease in inventory levels, an increase in returns of our products, delays in purchasing products and delays inpayment for products by one or more of these distributors could have a material adverse effect on our revenue, business, financial condition and results ofoperations. For example, we experienced a change in purchasing patterns at ABC in April 2015. We continue to analyze the market for other opportunities toexpand our current relationships with other customers, while we continue to seek to diversify our existing portfolio of specialty generic drug productsthrough internal research and development. In addition, we continue to explore business development opportunities to add additional products and /orcapabilities to our existing portfolio. Contract Manufacturing and Development Business. Our customers in the contract manufacturing business generally consist of pharmaceutical companies,as well as cosmetic and OTC product marketers, who require product development/manufacturing support. For the year ended December 31, 2015,approximately 86% of our contract services revenue was derived from pharmaceutical customers, as compared to 79% of total contract services revenue forthe year ended December 31, 2014. One contract manufacturing customer represented 11% of total revenue for the year ended December 31, 2015, and one ofour contract manufacturing services customers represented 13% of total revenue for the year ended December 31, 2014. We do not expect any contractmanufacturing or formulation services customers to exceed 10% of revenue for 2016 and beyond. Concentration of credit risk. In 2015, we had sales to three customers which individually accounted for more than 10% of our total revenue. These customershad sales of $12.3 million, $5.8 million and $5.0 million, respectively, and represented 52% of total revenues in the aggregate. Accounts receivable related tothese major customers comprised 83% of all accounts receivable as of December 31, 2015. In 2014, we had sales to two customers which individually accounted for more than 10% of our total revenue. These customers had sales of $10.5 million and$4.4 million, respectively, and represented 44% of total revenues in the aggregate. Accounts receivable related to these major customers comprised 42% ofall accounts receivable as of December 31, 2014. In 2013, we had sales to three customers which individually accounted for more than 10% of our total revenue. These customers had sales of $2.8 million,$2.2 million and $2.1 million, respectively, and represented 39% of total revenues in the aggregate. Our Products We recorded net revenue from one product, econazole nitrate cream, which accounted for 45% and 38% of total revenues in 2015 and 2014, respectively. The Company did not have significant revenue from any one product in 2013. Teligent United States Topical Pharmaceutical Products Product Formulation Presentations Brand equivalent Desoximetasone 0.25% (1) Ointment 15g, 60g, 100g Topicort® Diclofenac Sodium 1.5% Topical Solution 150mL Pennsaid® Fluocinolone Acetonide 0.01% (2) Topical Solution 60mL Synalar® Fluocinolone Acetonide 0.025% (2) Ointment 15g, 60g Synalar® Fluocinolone Acetonide 0.025% (2) Cream 15g, 60g Synalar® Fluocinolone Acetonide 0.01% (2) Cream 15g, 60g Synalar® Econazole Nitrate 1% Cream 15g, 30g, 85g Spectazole® Lidocaine 5% (3) Ointment 35.44g Xylocaine® Lidocaine 4% Topical Solution 50mL Xylocaine® (1)ANDA approved by the FDA on February 26, 2016, we expect to launch the product in the second quarter of 2016.(2)Teligent is the authorized generic to the Synalar NDA held by Medimetriks Pharmaceuticals, Inc.(3)ANDA approved by the FDA on February 2, 2016, we expect to launch this product in the first quarter of 2016. 8  Teligent United States Injectable Products Product Strength Formulation Presentations Dossier type held by Teligent Cefotan (Cefotetan) (4) 1g, 2g Injectable Vial NDA Fortaz (Ceftazidime) 500mg, 1g, 2g, 6g Injectable Vial, Twist Vial, Frozen Bag NDA Zantac (Ranitidine) 25mg/ml Injectable 2ml, 6ml, 40ml Vials NDA Zinacef (Cefuroxime) 750mg, 1.5g, 7.5g Injectable Vial, Twist Vial NDA (4)The Prior Approval Supplement approved by the FDA on December 10, 2015. We expect to launch this product in the first quarter of 2016. Teligent Canada Injectable Products Product Strength Formulation Presentations Brand equivalent Dossier typeheld by Teligent Acetylcysteine 2g, 6g Injectable 10ml and 30 ml vials Mucomyst®Parvolex® ANDS Atropine 0.4 mg, 0.6 mg Injectable 1 ml vials N/A ANDS Caldolor/Ibuprofen 800 mg Injectable 8 ml vials N/A NDS Dimenhydrinate 50 mg, 250 mg Injectable 1 ml ampoule, 5 ml vial Gravol® ANDS Epinephrine 1 mg Injectable 1 ml ampoule Adrenalin® ANDS Erogonovine Maleate 0.25 mg Injectable 1 ml ampoule N/A ANDS Furosemide 20 mg Injectable 2 ml ampoule Lasix® ANDS Irinotecan Hydrochloride 40 mg, 100 mg, 500 mg Injectable 2 ml, 5 ml, 25 ml vials Camptosar® ANDS Lidocaine 1% 50 mg, 100 mg Injectable 5 ml and 10 mlpolyampoule Xylocaine® ANDS Lidocaine 1% 200 mg, 500 mg Injectable 20 ml and 50 ml vials Xylocaine® ANDS Lidocaine 2% 100 mg, 200 mg Injectable 5 ml and 10 mlpolyampoule Xylocaine® ANDS Lidocaine 2% 400 mg, 1 g Injectable 20 ml and 50 ml vials Xylocaine® ANDS Lidocaine 2% with epinephrine 400 mg, 1 g Injectable 20 ml and 50 ml vials Xylocaine® ANDS Methylene Blue 50mg Injectable 5mL ampoule N/A ANDS Naloxone 0.4mg Injectable 1mL ampoule Narcan ANDS Piperacillin and Tazobactam 2g, 0.25 g, 3 g, 0.375 g, 4g, 0.5 g Injectable 2.25 g, 3.375 g, 4.5 gvials Tazocin® ANDS Sodium Cloride 90 mg Injectable 10 ml vials N/A ANDS Sterile Water for Injection 100% Injectable 10 ml polyampoule N/A ANDS Succinylcholine Chloride 200 mg, 400 mg Injectable 10 ml and 20 ml vials Quelicin® ANDS 9  Teligent United States Other Products Below is a listing of the previously marketed products that were purchased from AstraZeneca and Valeant, along with a description of each respectiveformulation, presentation, brand equivalent, dossier and indication. Product Strength Formulation Presentations Brand equivalent Dossier type held by TeligentCiprofloxacin 0.3% OphthalmicSolution 2.5ml, 5ml, 10ml bottles Ciloxan ® ANDA Betaxolol 0.5% OphthalmicSolution 5ml, 7.5ml, 15ml bottles Betopic ® ANDA Phytonadione 10mg, 1mg Injectable 0.5ml, 1ml ampoules;3cc, 6cc vials AquaMephyton ® NDA Amikacin Sulfate 50mg/ml, 250mg/ml Injectable 2ml, 4ml vials Amikacin Sulfate ® ANDA Calcitonin Salmon 200IU/ml Injectable 2ml vials Miacalcin ® ANDA Cefotetan Disodium 20mg/ml Injectable(bag) 50ml bags Cefotetan ® NDA Clindamycin Phosphate 150mg/ml Injectable 2ml, 4ml, 6ml, 60mlvials Cleocin ® ANDA Dobutamine HCl 12.5mg/ml Injectable 20ml, 40ml vials Dobutamine HCl ® ANDA Dopamine HCl 40mg/ml Injectable 5ml, 10ml (vials andsyringes) Dopamine HCl ® NDA / ANDA Dopamine HCl 80mg/ml Injectable 5ml, 10ml (vials,ampoules, and syringes) Dopamine HCl ® NDA / ANDA Dopamine HCl 160mg/ml Injectable 5ml (vials andampoules) Dopamine HCl ® NDA / ANDA Droperidol 2.5mg/ml Injectable 10ml vials, 2ml and 5mlampoules, and 2mlsyringes Inapsine ® ANDA Furosemide 10mg/ml Injectable 2ml, 4ml, 8ml, and 10mlvials, 4ml and 10mlsyringes Furosemide ® ANDA Mannitol USP 25% Injectable 50ml (vials andsyringes) Mannitol ® ANDA Meperidine HCl 25mg/ml, 50mg/ml,75mg/ml, 100mg/ml Injectable 1ml and 30ml vials, 1mland 1.5ml ampoules, and1ml syringes Demerol ® ANDA Midazolam HCl 5mg/ml Injectable 2ml syringe Midazolam ® ANDA Orphenadrine 30 mg/mL Injectable 2 mL ampule OrphenadrineCitrate ANDA Edrophonium 10 mg/mL Injectable 1 mL ampule and 10 mLvial Enlon® NDA MVI-12 N/A Injectable 10 mL ampules and 5mL vials N/A NDA Naloxone HCl 0.4 mg/mL, 1 mg/mL Injectable 1 mL 5 mLand 10 mLvials N/A ANDA Naloxone HCl (preservativefree) 0.4 mg/mL Injectable 1 mL vials N/A ANDA Tobramycin Sulfate 10 mg/mL, 40 mg/mL Injectable 2 mLand 35 mL vials N/A ANDA Nalbuphine 10 mg/mL and 20 mg/mL Injectable 1 mL and 10 mL vials Nubain® ANDA Our Suppliers We require a supply of quality raw materials and components to manufacture and package pharmaceutical products for ourselves and third parties with whichwe have contracted. The principal components of our products are active and inactive pharmaceutical ingredients and certain packaging materials. The APIsand other materials and supplies used in our pharmaceutical manufacturing operations are generally available and purchased from many different U.S. andnon-U.S. suppliers. However, in some cases, the raw materials used to manufacture pharmaceutical products are available only from a single supplier. Evenwhen more than one supplier exists, we may choose, and in some cases have chosen, only to list one supplier in our applications submitted to the FDA. Anychange in a supplier not previously approved must then be submitted through a formal approval process with the FDA. No supplier represented 10% or moreof our purchases in 2015, 2014 or 2013. 10  Research and Development Our R&D activities are integral to our business and are conducted at our facility in Buena, New Jersey. Our R&D department is led by our Chief ScientificOfficer, Stephen Richardson, who joined the Teligent team in October 2015. The R&D team consists of 26 full-time employees and their responsibilitiesinclude: formulation, reverse engineering, methods development, analytical and microbiologic testing and scale up, and regulatory expertise. Our employeeshave specific expertise in developing topical products in a wide range of dosage forms, including simple solutions through complex creams. All ANDAtopical development is conducted in-house except for bioequivalence testing, which is performed by what we believe to be a qualified contract researchorganization. In 2015, Teligent added injectable development capabilities to the team. We have been steadily increasing our investment in R&D as we believe that R&D is the future of the Company. We incurred $13.2, $6.9, and $2.7 million onR&D expenses in 2015, 2014, and 2013, respectively. We expect to increase our R&D spending in 2016 to approximately 28 to 32% of revenue in 2016 toexpand our ANDA submissions and pipeline. As the business continues to grow over the next three to five years, we expect research and development costs asa percentage of revenue to decline. Product Development and Government Regulation United States Prescription pharmaceutical products in the U.S. are generally marketed as either brand or generic drugs. Brand products are usually marketed under brandnames through marketing programs that are designed to generate physician and consumer loyalty. Brand products generally are patent protected, whichprovides a period of market exclusivity during which time they are sold with little or no competition for the compound, although there typically are otherparticipants in the therapeutic area. Additionally, brand products may benefit from other periods of non-patent market exclusivity. Exclusivity normallyprovides brand products with the ability to maintain their profitability for relatively long periods of time and brand products typically continue to play asignificant role in the market due to physician and consumer loyalties after the end of patent protection or other market exclusivities. Generic pharmaceutical products are the pharmaceutical and therapeutic equivalents of the brand product, also known as the reference listed drug, or RLD. Areference listed brand drug is an approved drug product listed in the FDA publication entitled Approved Drug Products with Therapeutic EquivalenceEvaluations, popularly known as the Orange Book. The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act,provides that generic drugs may enter the market after the approval of an ANDA, An ANDA approval requires that bioequivalence to the reference listed drugbe demonstrated and also requires that any patents on the corresponding reference listed drug be expired, invalidated, non-infringed and/or any otherrelevant market exclusivity periods related to the reference listed drug be expired as well. Generic drugs are bioequivalent to their reference brand namecounterparts. Accordingly, generic products provide a safe, effective and cost-efficient alternative to users of these reference brand products. Branded genericpharmaceutical products are generic products in that they are approved for marketing under an ANDA, but they may be more responsive to promotion effortsgenerally used to promote branded pharmaceutical products. Growth in the generic pharmaceutical industry has been, and will continue to be, driven by theincreased market acceptance of generic drugs, as well as the number of brand drugs for which patent terms and/or other market exclusivities have expired. We obtain new generic products primarily through internal product development. Additionally, we license or co-develop products through arrangementswith other companies. All applications for FDA approval must contain information relating to product formulation, raw material suppliers, stability,manufacturing processes, packaging, labeling and quality control. Information to support the bioequivalence of generic drug products or the safety andeffectiveness of new drug products for their intended use is also required to be submitted. There are generally two types of applications used for obtainingFDA approval of new products: ·New Drug Application — An NDA is filed when approval is sought to market a newly developed branded product and, in certain instances, for a newdosage form, a new delivery system or a new indication for a previously approved drug. 11  ·ANDA — An ANDA is filed when approval is sought to market a generic equivalent of a drug product previously approved under an NDA and listedin the FDA’s Orange Book or for a new dosage strength for a drug previously approved under an ANDA. The ANDA development process is generally less time-consuming and complex than the NDA development process. It typically does not require newpreclinical and clinical studies, because it relies on the studies establishing safety and efficacy conducted for the RLD previously approved through the NDAprocess. The ANDA process, however, does typically require one or more bioequivalence studies to show that the ANDA drug is bioequivalent to thepreviously approved reference listed brand drug. Bioequivalence studies compare the bioavailability of the proposed drug product with that of the RLDproduct containing the same active ingredient. Bioavailability is a measure of the rate and extent to which the active ingredient or active moiety is absorbedfrom a drug product and becomes available at the site of action. Thus, a demonstration of bioequivalence confirms the absence of a significant differencebetween the proposed product and the reference listed brand drug in terms of the rate and extent to which the active ingredient or active moiety becomesavailable at the site of drug action when administered at the same molar dose under similar conditions. Generic products are generally introduced to the marketplace at the expiration of patent protection for the brand product or at the end of a period of non-patent market exclusivity. However, if an ANDA applicant files an ANDA containing a certification of invalidity, non-infringement or unenforceabilityrelated to a patent listed in the Orange Book with respect to a reference drug product, the applicant may be able to market the generic equivalent prior to theexpiration of patent protection for the brand product. Such patent certification is commonly referred to as a Paragraph IV certification. If the holder of theNDA sues, claiming infringement or invalidation, within 45 days of notification by the applicant, the FDA may not approve the ANDA application until theearlier of the rendering of a court decision favorable to the ANDA applicant or the expiration of 30 months. An ANDA applicant that is first to file a ParagraphIV certification is eligible for a period of generic marketing exclusivity. This exclusivity, which under certain circumstances may be required to be sharedwith other ANDA sponsors that have made Paragraph IV certifications, lasts for 180 days, during which the FDA cannot grant final approval to other ANDAapplications for a generic equivalent to the same reference drug. In addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent market exclusivity, during which theFDA cannot approve an application for a generic version product. If the reference drug is a new chemical entity, the FDA may not accept an ANDA for ageneric product for up to five years following approval of the NDA for the new chemical entity. If it is not a new chemical entity, but the holder of the NDAconducted clinical trials essential to approval of the NDA or a supplement thereto, the FDA may not approve an ANDA for reference NDA product before theexpiration of three years. Certain other periods of exclusivity may be available if the RLD is indicated for treatment of a rare disease or the sponsor conductspediatric studies in accordance with FDA requirements. Supplemental ANDAs are required for approval of various types of changes to an approved application and these supplements may be under review for sixmonths or more. In addition, certain types of changes may only be approved once new bioequivalence studies are conducted or other requirements aresatisfied. An additional requirement for FDA approval of NDAs and ANDAs is that our manufacturing procedures and operations conform to FDA requirements andguidelines, generally referred to as current Good Manufacturing Practices, or cGMPs. The requirements for FDA approval encompass all aspects of theproduction process, including validation and recordkeeping, the standards around which are continuously changing and evolving. Facilities, procedures, operations and/or testing of products are subject to periodic inspection by the FDA, the U.S. Drug Enforcement Administration, orDEA, and other authorities. In addition, the FDA conducts pre-approval and post-approval reviews and plant inspections to determine whether our systemsand processes are in compliance with cGMP and other FDA regulations. Our suppliers are subject to similar regulations and periodic inspections. In 2012, the U.S. Food and Drug Administration Safety and Innovation Act, or the FDASIA, was enacted into law. FDASIA is intended to enhance the safetyand security of the U.S. drug supply chain by holding all drug manufacturers supplying products to the U.S. to the same FDA inspection standards andschedules. Specifically, prior to the passage of FDASIA, U.S. law required U.S. based manufacturers to be inspected by FDA every two years but remainedsilent with respect to foreign manufacturers, causing some foreign manufacturers to go as many as nine years without a routine FDA cGMP inspection,according to the Government Accountability Office. 12  FDASIA also included GDUFA, a novel user fee program to provide FDA with approximately $1.5 billion in total user fees through 2018 focused on threekey aims: ·Safety – Ensure that industry participants, foreign or domestic, are held to consistent quality standards and are inspected with parity using a risk-based approach. ·Access – Expedite the availability of generic drugs by bringing greater predictability to the review times for abbreviated new drug applications,amendments and supplements and improving timeliness in the review process. ·Transparency – Enhance FDA’s visibility into the complex global supply environment by requiring the identification of facilities involved in themanufacture of generic drugs and associated APIs, and improve FDA’s communications and feedback with industry. Under GDUFA, 70% of the total fees are being derived from facility fees paid by Finished Dosage Form manufacturers and API facilities listed in pending orapproved generic drug applications. The remaining 30% of the total fees are being derived from application fees, including generic drug application fees,prior approval supplement fees and fees for certain types of Drug Master Files, or DMFs. Canada In Canada, the registration process for approval of all generic pharmaceuticals has two tracks that proceed in parallel. The first track of the process involvesan examination of the proposed generic product by Health Canada, the Federal department responsible for national public health, to ensure that the quality,safety and efficacy of the proposed generic product meets Canadian standards and bioequivalence requirements. The second track concerns patent rights ofthe brand drug owner. Companies may submit an application called an abbreviated new drug submission, or ANDS to Health Canada that compares theproposed generic drug to another drug marketed in Canada under a Notice of Compliance, or NOC, issued to a first person. When Health Canada is satisfiedthat the generic pharmaceutical product described in the ANDS satisfies the statutory requirements, it issues an NOC for that product for the uses specified inthe ANDS, subject to any court order that may be made in the second track of the approval process. The second track of the approval process is governed by the Patented Medicines NOC Regulations, or the Regulations. The owner or exclusive licensee ofpatents relating to the brand drug for which it has an NOC may have established a list of patents administered by Health Canada that enumerates all thepatents claiming the medicinal ingredient, formulation, dosage form or the use of the medicinal ingredient. It is possible that even though the patent for theAPI may have expired, the originator may have other patents on the list which relate to new forms of the API, a formulation or additional uses. Most brandname drugs have an associated patent list containing one or more unexpired patents claiming the medicinal ingredient itself or a use of the medicinalingredient (a claim for the use of the medicinal ingredient for the diagnosis, treatment, mitigation or prevention of a disease, disorder or abnormal physicalstate or its symptoms). In its ANDS, a generic applicant must make at least one of the statutory allegations with respect to each patent on the patent list, forexample, alleging that the patent is invalid or would not be infringed and explaining the basis for that allegation. In conjunction with filing its ANDS, thegeneric applicant is required to serve the originator a Notice of Allegation, or NOA, which gives a detailed statement of the factual and legal basis for itsallegations in the ANDS. The originator may commence a court application within 45 days after it has been served with the NOA, if it takes the position thatthe allegations are not justified. When the application is filed in court and served on Health Canada, Health Canada may not issue an NOC until the earlier ofthe determination by the court after a hearing or the expiration of 24 months from the commencement of the generic drug application. The period may beshortened or lengthened by the court in certain circumstances. An NOC can be obtained for a generic product only if the generic respondent is successful indismissing the application under the Regulations in court. The legal costs incurred in connection with the application could be substantial. 13  Section C.08.004.1 of the Canadian Food and Drug Regulations is the so-called data protection provision, and the current version of this section applies inrespect of all drugs for which an NOC was issued on or after June 17, 2006. A subsequent applicant for approval to market a drug for which an NOC hasalready been issued does not need to perform duplicate clinical trials similar to those conducted by the first NOC holder, but is permitted to demonstratesafety and efficacy by submitting data demonstrating that its formulation is bioequivalent to the formulation that was issued for the first NOC. The first partyto obtain an NOC for a drug will have an eight-year period of exclusivity starting from the date it received its NOC based on those clinical data. A subsequentapplicant for approval that seeks to establish safety and efficacy by comparing its product to the product that received the first NOC will not be able to file itsown application until six years after the issuance of the first NOC. The Minister of Health will not be permitted to issue an NOC to that applicant until eightyears after the issuance of the first NOC — this additional two-year period will correspond in most cases to the 24-month automatic stay under theRegulations. If the first person provides the Minister with the description and results of clinical trials relating to the use of the drug in pediatric populations,it will be entitled to an extra six months of data protection. A drug is only entitled to data protection so long as it is being marketed in Canada. Facilities, procedures, operations and/or testing of products are subject to periodic inspection by Health Canada and the Health Products and Food BranchInspectorate. In addition, Health Canada conducts pre-approval and post-approval reviews and plant inspections to determine whether our systems are incompliance with the good manufacturing practices in Canada, Drug Establishment Licensing, or the EL, requirements and other provisions of theRegulations. Competitors are subject to similar regulations and inspections. The federal government, provinces and territories in Canada operate drug benefit programs through which eligible recipients receive drugs through publicfunding; these drugs are listed on provincial or territorial Drug Benefit Formularies (each, a “Formulary”). Eligible recipients include First Nations and Inuitclients, seniors, persons on social assistance, low-income earners, and those with certain specified conditions or diseases. Formulary listings are also used byprivate payors to reimburse generic products. To be listed in a Formulary, drug products must have received an NOC from Health Canada and must complywith each jurisdiction’s individual review process. The primary regulatory approval for pharmaceutical manufacturers, distributors and importers selling pharmaceuticals to be marketed in Canada is theissuance of an establishment license, or EL. An EL is issued once Health Canada has approved the facility in which the pharmaceuticals are manufactured,distributed or imported. A key requirement for approval of a facility is compliance with the good manufacturing practices in Canada. For pharmaceuticalsthat are imported, the license for the importing facility must list all foreign sites at which imported pharmaceuticals are manufactured. To be listed, a foreignsite must demonstrate compliance with the good manufacturing practices in Canada. Sales and Marketing We make, sell, distribute and market our prescription drug products to national chain drug stores and drug wholesalers and distributors and group purchasingorganizations, or GPOs, in the United States and Canada. This commercialization infrastructure includes satisfying our state, provincial, territorial, or nationallicensing requirements, implementing procedures with our third-party logistics partners, and maintaining appropriate sales order to cash administrativeprocesses and a manager of national accounts to manage our sales. Competition In our generic topical prescription drug business, we face competition from other generic drug manufacturers and brand-name pharmaceutical companiesthrough authorized generics. Although there are a significant number of competitors in the generic drug market, there are fewer competitors in the topicalgeneric drug market. The six dominant companies in the topical generic drug market are: Taro Pharmaceutical Industries, Ltd., Sandoz (the genericpharmaceutical division of Novartis AG), Allergan, Inc., Perrigo Company, Mylan, Inc. and Akorn, Inc. Collectively, these six competitors controlapproximately 65% of the generic topical market by value based on IMS data from January 2016. We believe the concentrated nature of the topical genericdrug market creates an opportunity for us to be able to compete based on a variety of factors, including our focus on niche opportunities within the marketsegment and our dedication to quality in every area of our business. 14  In our generic injectable prescription drug business, we also face competition from other generic drug manufacturers and brand-name pharmaceuticalcompanies through authorized generics. Although there are a significant number of competitors in the generic drug market, there are fewer dominantcompetitors in the injectable generic drug market. The 6 dominant companies in the injectable generic drug market in the United States consist of Hospira,Inc. (a subsidiary of Pfizer, Inc.), Fresenius Kabi USA, Sandoz (the generic pharmaceutical division of Novartis AG), Mylan, Inc., Dr. Reddy’s LaboratoriesLimited, and West-Ward (a subsidiary of Hikma Pharmaceuticals PLC). Collectively, these six competitors control approximately 59% of the genericinjectable market by value based on IMS data from January 2016. In Canada, we face competition from largely the same firms as in the United States as wellas certain Canada-only firms. The Canadian generic injectable market is dominated by Sandoz (the generic pharmaceutical division of Novartis AG), PfizerInjectables, and Fresenius Kabi Canada. Our generic injectable strategy is focused on injectable products with limited competition, and products that have a history of lack of supply, or instability inthe supply chain, where we can add value and leverage on our ability to be a reliable supplier to the marketplace. We believe the concentrated nature ofsome molecules within the injectable generic drug market, and history of lack of supply of certain molecules in the marketplace, create opportunities for usthat we believe will enable us to compete based on a variety of factors, including our focus on niche opportunities within the market segment and ourdedication to quality in every area of our business. The contract manufacturing services market is highly competitive and includes larger organizations with substantially greater resources than us. Many of ourcompetitors are companies that commercialize and/or manufacture their required products at their own facilities. These competitors include majorpharmaceutical companies, generic drug manufacturers and consumer health product companies that generally have substantially greater manufacturing,R&D, marketing and financial resources than us and, in some cases, have more geographically diversified international operations. We compete specificallywith a number of different privately-held contract manufacturing companies, including DPT Laboratories, Ltd. Although this market is competitive, thecompetition is limited due to the need for specific expertise in topical formulations and cGMP facilities. We believe that we have the expertise required andwe will continue to service our existing customers in this market by providing high quality, customer-oriented service, complemented by our contractdevelopment expertise in topical formulations. Environmental Matters Our operations are subject to a variety of environmental, health and safety laws and regulations, including those of the United States EnvironmentalProtection Agency and equivalent state and local regulatory agencies. These laws and regulations govern, among other things, air emissions, wastewaterdischarges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety. Ourmanufacturing facility uses, in varying degrees, hazardous substances in its processes. Contamination at our facility can result and has resulted in liability tous, for which we have recorded appropriate reserves as needed. For example, two of the Company’s facilities have undergone remediation of environmentalcontamination. See Note 16 to the Company’s Consolidated Financial Statements included elsewhere in this Annual Report. Intellectual Property To compete effectively, we need to develop and maintain a proprietary position with regard to our own technology, product candidates and business. Ourgoal is to safeguard our trade secrets and know-how, attain, maintain and enforce patent protection for our product candidates, formulations, processes,methods and other proprietary technologies, and operate without infringing on the proprietary rights of others. We seek to obtain, where appropriate, thebroadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information andproprietary technology. We seek to achieve this protection through a combination of contractual arrangements and patents. We depend upon the skills, knowledge, experience and know-how of our management and R&D personnel, as well as that of our consultants, advisors andcollaborators. To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to enforce, wecurrently rely, and will continue to rely in the future, on confidentiality agreements to protect our interests. We require our employees, consultants, advisorsand collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to any other parties. We also require ouremployees and consultants to disclose and assign to us their ideas, developments, discoveries and inventions. We understand that these agreements may notprovide us with adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. 15  We also seek to obtain patent protection when necessary, and we understand that this may not provide us with complete protection against competitors whomay attempt to circumvent our patents. Facility and Operations The Company’s executive administrative offices are located in Buena, New Jersey, in two facilities of approximately 33,000 square feet built on 8.44 acres ofland in 1995, which we own. This facility is used for production, product development, marketing and warehousing for our pharmaceutical, cosmeceuticaland cosmetic products. Our manufacturing capabilities encompass a full suite of competencies, including regulatory, quality assurance and in-housevalidation. The facility is equipped to manufacture semi-solids, ointments, gels and liquids in solution form. The facility is also configured to provide flexibility inmanufacturing. Pilot batches typically range from 30 kg to 250 kg, while commercial batches may range from 250 kg to 4,000 kg. We operate our facility in accordance with cGMP, utilizing the same high standards as our pharmaceutical customers. Our facility is registered with the FDA.We believe that our facility and equipment are in good condition, are well-maintained and are able to operate at present levels. Our manufacturing operationsare focused on regulatory compliance, continuous improvement, process standardization and excellence in quality and execution across the organization. We also own four acres of land adjacent to our main facility that can be used for future expansion. We also lease an additional 11,000 square feet ofwarehouse space in Vineland, New Jersey. The Company also leases approximately 7,500 square feet of corporate office space in Iselin, New Jersey, and will soon occupy approximately 4,000 squarefeet of office space in Toronto, Canada. The Company currently subleases office space in Toronto, Canada. Employees On December 31, 2015, we had a total of 107 full-time employees, including five full-time employees in Canada. In addition, as the need arises, weoccasionally utilize short-term, part-time employees who are paid on an hourly basis. We also utilize temporary employees provided by a third-party on aregular basis, primarily in our production department. We do not have a collective bargaining agreement with our employees and we believe that ouremployee relations are good. 16  Item 1A.RISK FACTORS Our current business and future results may be affected by a number of risks and uncertainties, including those described below. The risks and uncertaintiesdescribed below are not the only risks and uncertainties we face. Additional risks and uncertainties not currently known to us or that we currently deemimmaterial also may impair our business operations. If any of the following risks actually occur, our business, results of operations and financial conditioncould suffer. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in theseforward-looking statements. Risks Related to Our Business We have a history of losses and cannot assure you that we will become profitable. As a result, we may have to cease operations and liquidate ourbusiness. Prior to 2014, our expenses exceeded our revenue in each of the last nine years, and no net income was been available to common stockholders during eachof these years. As of December 31, 2015, our stockholders’ equity was $66.8 million and we had an accumulated deficit of $33.0 million. Our futureprofitability depends on revenue exceeding expenses, but we cannot assure you that this will occur. If we do not become profitable or continue to raiseexternal financing, we could be forced to curtail operations and sell or liquidate our business, and you could lose some or all of your investment. We rely on a limited number of customers for a large portion of our revenues. We depend on a limited number of customers for a large portion of our revenue. Three of our customers accounted for 52% of our revenue for the year endedDecember 31, 2015, and two of our customers accounted for 44% of our revenue for the year ended December 31, 2014. The loss of one or more of thesecustomers could have a significant impact on our revenues and harm our business and results of operations. Due to our dependence on a limited number of products, our business will be materially adversely affected if these products do not perform as well asexpected. We expect to generate a significant portion of our total revenues and gross margin from the sale of a limited number of products. While we continue todiversify our product portfolio, one of our products accounted for 45% and 38% of our revenue for the years ended December 31, 2015 and 2014,respectively. Any material adverse developments, including increased competition, loss of customers, pricing pressures and supply shortages, with respect tothe sale or use of our products and prospective products, or our failure to successfully introduce such products, could have a material adverse effect on ourrevenues and gross margin. The pharmaceutical industry in which we operate is intensely competitive. We are particularly subject to the risks of competition. For example, thecompetition we encounter may have a negative impact upon the prices we may charge for our products, the market share of our products and ourrevenue and profitability. The pharmaceutical industry in which we operate is intensely competitive. The competition that we encounter has an effect on our product prices, marketshare, revenue and profitability. Depending upon how we respond to this competition, its effect may be materially adverse to us. We compete with: ·the original manufacturers of the brand-name equivalents of our generic products; and ·other generic drug manufacturers. 17  Most of the products that we are developing are either generic drugs or products without patent protection. These drugs and products do not benefit frompatent protection and are therefore more subject to the risk of competition than patented products. In addition, because many of our competitors havesubstantially greater financial, production and research and development resources, substantially larger sales and marketing organizations, and substantiallygreater name recognition than we have, we are particularly subject to the risks inherent in competing with them. For example, many of our competitors maybe able to develop products and processes competitive with, or superior to, our own. Furthermore, we may not be able to successfully develop or introducenew products that are less costly than those of our competitors or offer purchasers of our products payment and other commercial terms as favorable as thoseoffered by our competitors. Furthermore, in the current political climate in which drug prices are a focus of 2016 Presidential Candidates, Congress, government and private payors, andthe public more broadly, we cannot predict whether new legislative, regulatory, or other measures related to drug pricing may be enacted. If enacted, suchdrug pricing measures could have an impact on our drug prices or our gross margins from product sales, which could significantly and adversely impact ourfinancial condition and cash flows. As our competitors introduce their own generic equivalents of our generic pharmaceutical products, our revenues and gross margin from such productsmay decline, potentially rapidly. Revenues and gross margin derived from generic pharmaceutical products often follow a pattern based on regulatory and competitive factors that we believeare unique to the generic pharmaceutical industry. As the patent(s) for a brand name product and the statutory marketing exclusivity period (if any) expires,the first generic manufacturer to receive regulatory approval for a generic equivalent of the product often is able to capture a substantial share of the market.However, as other generic manufacturers receive regulatory approvals for identical competing products, that market share, and the price of that product, maydecline depending on several factors, including the number of competitors, the price of the brand product and the pricing strategy of the new competitors. Inaddition, the FDA has continued to shorten the review and response time to certain ANDAs, as a result of their guidelines established under GDUFA. If thistrend continues, and the FDA is successful in reducing the current backlog of unapproved ANDAs, currently pending approval at the FDA, competitors couldpotentially enter the markets in which we compete more quickly. We cannot provide assurance that we will be able to continue to develop such products orthat the number of competitors with such products will not increase to such an extent that we may stop marketing a product for which we previously obtainedapproval, which may have a material adverse impact on our revenues and gross margin. If pharmaceutical companies are successful in limiting the use of generics through their legislative, regulatory and other efforts, sales of our genericproducts may be adversely impacted. Many pharmaceutical companies increasingly have used state and federal legislative and regulatory means to delay generic competition. These efforts haveincluded: ·pursuing new patents for existing products that may be granted just before the expiration of earlier patents, which could extend patent protectionfor additional years or otherwise delay the launch of generics; ·selling the brand product as an “authorized generic,” either by the brand company directly, through an affiliate or by a marketing partner; ·using the Citizen Petition process to request amendments to FDA standards or otherwise delay generic drug approvals; ·seeking changes to the U.S. Pharmacopeia, an FDA- and industry-recognized compendia of drug standards; ·attaching patent extension amendments to non-related federal legislation; ·engaging in state-by-state initiatives to enact legislation that restricts the substitution of some generic drugs, which could have an impact onproducts that we are developing; and ·seeking patents on methods of manufacturing certain active pharmaceutical ingredients. If pharmaceutical companies or other third parties are successful in limiting the use of generic products through these or other means, our sales of our genericproducts may decline. If we experience a material decline in generic product sales, our results of operations, financial condition and cash flows may besignificantly and adversely impacted. 18  Our generics business also faces increasing competition from brand-name manufacturers that do not face any significant regulatory approval or otherbarriers to enter into the generics market. Our generics business also faces increasing competition from brand-name manufacturers that do not face any significant regulatory approval or other barriersto enter into the generics market. These brand-name companies sell “authorized generic” versions of their products to the market directly, acquire or formstrategic alliances with our competitor generic pharmaceutical companies, or grant them rights to sell “authorized generics.” Moreover, brand-namecompanies continually seek new ways to delay the introduction of generic products and decrease the impact of generic competition, such as filing newpatents on drugs whose original patent protection is about to expire, developing patented controlled-release products, changing product claims and productlabeling, or developing and marketing as over-the-counter products those branded products that are about to face generic competition, when feasible (giventhat significant new clinical data must be provided to FDA in a “switch” application and some drug products are not safe enough to be sold over-the-counter).Our competitors, which include major multinational corporations, are consolidating in both the branded and generics industries, and the strength of thecombined companies could affect our competitive position in all of our business areas. Furthermore, if one of our competitors or its customers acquires any ofour customers or suppliers, we may lose business from the customer or lose a supplier of a critical raw material. We may need to raise additional capital that will be required to operate and grow our business, and we may not be able to raise capital on termsacceptable to us or at all. Operating our business and maintaining our growth efforts will require additional cash outlays and capital expenditures. If cash on hand and cash generatedfrom operations are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or equity financings, tofund our growth. We cannot assure you that we will be able to raise needed cash on terms acceptable to the Company, our significant stockholders, or at all.Financings may be on terms that are dilutive or potentially dilutive to our stockholders, and the prices at which new investors would be willing to purchaseour securities may be lower than the current price per share of our common stock. The holders of new securities may also have rights, preferences or privilegeswhich are senior to those of existing holders of common stock. If new sources of financing are required, but are insufficient or unavailable, we will be requiredto modify our growth and operating plans based on available funding, if any, which would harm our ability to grow our business or even stay in business. Sales of our products may continue to be adversely affected by the continuing consolidation of our distribution network and the concentration of ourcustomer base. The result of such developments could have a material adverse effect on our business, financial position and results of operations andcould cause the market value of our ordinary shares to decline. Our principal customers are wholesale drug distributors and major retail drug store chains. These customers comprise a significant part of the distributionnetwork for pharmaceutical products in the U.S. This distribution network is continuing to undergo significant consolidation marked by mergers andacquisitions, alliances and partnerships among wholesale distributors and the growth of large retail drug store chains. As a result, a small number of largewholesale distributors control a significant share of the market, and the number of independent drug stores and small drug store chains has decreased. Weexpect that consolidation of drug wholesalers and retailers will increase pricing and other competitive pressures on drug manufacturers. In addition, theCompany generally does not enter into long-term supply agreements with its customers that would require them to purchase our products. The result of thesedevelopments may have a material adverse impact on our business, financial position and results of operations, and could cause the market value of ourordinary shares to decline. We face intense competition in the consumer products business. Our business competes with large, well-financed cosmetic, pharmaceutical and consumer products companies with development and marketing groups thatare experienced in the industry and possess far greater resources than those available to us. There is no assurance that we can compete successfully against ourcompetitors or that we can develop and market products that will be favorably received in the marketplace. 19  Lack of availability, issues with quality or significant increases in the cost of raw materials used in manufacturing our products could adversely impactour profit margins and operating results. Affordable, high quality raw materials and packaging components are essential to our business due to the nature of the products we manufacture. Rawmaterials and packaging components are generally available from multiple suppliers. Supplies of certain raw materials, and finished goods purchased by usare limited, or are available from one or only a few suppliers that have been pre-approved by FDA for use in the manufacture of our products. In this type oflimited-supplier situation, increased prices, rationing and/or shortages can occur. In response to the situation, we try to identify alternative materials orsuppliers for such raw materials and finished goods like containers and closures. However, FDA requirements for products approved through the ANDA orNDA process could substantially lengthen the time for approval of an alternate material source. Certain material shortages and approval of alternate sourcescould adversely affect our financial results. The rapid increase in cost of many raw materials from inflationary forces, such as increased energy costs, and ourability or inability to pass on these increases to our customers, could have a material impact on our financial results. In addition, raw materials purchased from third parties, including those from foreign countries, may contain counterfeit ingredients or other adulterants. Wemaintain a strict program of verification and product testing throughout the ingredient sourcing and manufacturing process to identify potential counterfeitingredients, adulterants and toxic substances. Nevertheless, discovery of previously unknown problems with the raw materials or product manufacturingprocesses or new data suggesting an unacceptable safety risk associated therewith, could result in a voluntary or mandatory withdrawal of a potentiallycontaminated product from the marketplace, either temporarily or permanently. In addition, because regulatory authorities must generally approve rawmaterial sources for pharmaceutical products, changes in raw material suppliers or the quality of their products may result in production delays or higher rawmaterial costs. Also, any future recall or removal would result in additional costs to us, and may give rise to product liability or other litigation, either ofwhich could have a material adverse effect on our operating results. Our products, and the raw materials used to make those products, generally have limited shelf lives. Our inventory levels are based, in part, on expectationsregarding future sales. We may experience build-ups in inventory if sales slow. Any significant shortfall in sales may result in higher inventory levels of rawmaterials and finished products, thereby increasing the risk of inventory spoilage and corresponding inventory write-downs and write-offs, which maymaterially and adversely affect our results of operations. Additionally, labeling changes required for regulatory compliance could render packaginginventories obsolete. Cargo thefts and/or diversions and economically or maliciously motivated product tampering in store shelves may be experienced fromtime to time, causing unexpected shortages. We depend on a limited number of suppliers for API. Generally, only a single source of API is qualified for use in each product due to the costs and timerequired to validate a second source of supply. Changes in API suppliers must usually be approved through a Prior Approval Supplement by the FDA. We maintain several single-source supplier relationships, either because alternative sources are not available or because the relationship is advantageous dueto regulatory, performance, quality, support, or price considerations. Unavailability or delivery delays of single-source components or products couldadversely affect our ability to ship the relevant product in a timely manner. The effect of unavailability or delivery delays would be more severe if associatedwith our higher volume or more profitable products. Even where alternative sources of supply are available, qualifying the alternate suppliers andestablishing reliable supplies could cost more or could result in delays and a loss of revenues. As a result, the loss of a single-source supplier could have amaterial adverse effect on our results of operations. Incidents related to hazardous materials could materially adversely affect our reputation, business, financial condition, operating results and cashflows. There are portions of our operations that require the controlled use of hazardous materials. Although we are diligent in designing and implementing safetyprocedures to comply with the standards prescribed by federal, state, and local regulations, the risk of accidental contamination of property or injury toindividuals from these materials cannot be completely eliminated. In the event of such an incident, we could be liable for any damages that result, whichcould materially adversely affect our reputation, business, financial condition, operating results and cash flows. 20  We are subject to stringent regulatory requirements. Failure to adhere to such requirements could harm our business and results of operations. In the United States, we and our suppliers of raw materials are also subject to regulation under the Occupational Safety and Health Act, the Toxic SubstancesControl Act, the Resource Conservation and Recovery Act and other current and potential future federal, state or local regulations. Failure to adhere to suchregulations, by either us or our suppliers, could harm our business and results of operations. In addition, our analytical department uses certain hazardousmaterials and chemicals in limited and controlled quantities. We have implemented safety procedures for handling and disposing of such materials, however,such procedures may not comply with the standards prescribed by federal, state and local regulations. Even if we follow such safety procedures for handlingand disposing of hazardous materials and chemicals and such procedures comply with applicable law, the risk of accidental contamination or injury fromthese materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages and any such liability couldexceed our resources. Our operations and properties are also subject to a wide variety of increasingly complex and stringent federal, state and local environmental laws andregulations, including those governing the remediation of contaminated soil and groundwater. Such environmental laws may apply to conditions atproperties and facilities presently or formerly owned or operated by us, as well as to conditions at properties at which wastes or other contaminationattributable to us have been sent or otherwise come to be located. One of our facilities has undergone remediation of environmental contamination, and oneof our facilities is currently undergoing remediation of environmental contamination. The total estimated costs for the clean-up and remediation is $0.9million as of December 31, 2015, and remaining costs accrued at December 31, 2015 totaled $0.1 million. Based on information provided to us from ourenvironmental consultants and what is known to date, we believe the reserves are sufficient for the remaining remediation of the environmentalcontamination. There is a possibility, however, that the remediation costs may exceed our estimates. In addition, we can give no assurance that the future costof compliance with existing environmental laws will not give rise to additional significant expenditures or liabilities that would be material to us. Futureevents, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal, state orlocal regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations. In Canada, we and our suppliers of raw materials are also subject to regulation under Hazardous Products Act, Controlled Products Regulations, ConsumerProduct Safety Act. Canadian Environmental Protection Act and other current and potential future federal, provincial/territorial or local regulations. Failureto adhere to such regulations, by either us or our suppliers, could harm our business and results of operations. In addition, our analytical department usescertain hazardous materials and chemicals in limited and controlled quantities. We have implemented safety procedures for handling and disposing of suchmaterials, however, such procedures may not comply with the standards prescribed by federal, provincial/territorial and local regulations. Even if we followsuch safety procedures for handling and disposing of hazardous materials and chemicals and such procedures comply with applicable law, the risk ofaccidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for anydamages and any such liability could exceed our resources. Future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal,provincial/territorial or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations. We are subject to extensive government regulation by the FDA and other federal, state and local regulatory authorities that increases our costs andcould prevent us from marketing or selling our products. The manufacturing, processing, formulation, packaging, labeling, testing, storing, distributing, marketing, advertising and sale of our products, among otherthings, are subject to extensive regulation by one or more U.S. agencies, including the FDA, the Federal Trade Commission and the Consumer ProductsSafety Commission, as well as by several state and local agencies in localities where our products are stored, distributed or sold. In addition, we manufactureand market certain of our products in accordance with standards set by organizations, such as the United States Pharmacopeial Convention, or USP, ascientific nonprofit organization that sets standards for the identity, strength, quality, and purity of medicines, food ingredients, and dietary supplementsmanufactured, distributed and consumed worldwide. USP’s drug standards are enforceable in the United States by the FDA. 21  The FDA regulates the testing, manufacture, labeling, marketing and sale of pharmaceutical products. Approval by the FDA is required before any new drug,including any new generic drug, may be marketed or sold in the United States. In order to receive approval from the FDA for our product candidates that aregeneric versions of brand-name drugs, we intend to use the Abbreviated New Drug Application, or ANDA, route, which requires us to demonstrate to the FDAthat each generic product candidate has the same active ingredient, strength, dosage form, route of administration and intended use as a correspondingapproved drug product and is bioequivalent to the branded drug product (approved under a New Drug Application, or NDA), meaning that there is nosignificant difference between the drugs in their rate and extent of absorption in the body. However, if the FDA determines that an ANDA for a generic drugproduct is not adequate to support approval, it could deny our application or request additional data or information, which could delay approval of theproduct and impair our ability to compete with the brand-name drug product and/or other generic versions of the product. If our product candidates receive FDA approval through the ANDA process, the labeling claims and marketing statements that we can make for our genericdrugs are generally limited to the claims approved by the FDA for use in the brand-name product’s label. In addition, following regulatory approval, thelabeling, packaging, adverse event reporting, storage, advertising and promotion for the product will be subject to extensive and ongoing regulatoryrequirements. As a manufacturer of pharmaceutical products, we must also comply with cGMPs, or current Good Manufacturing Practices, which include requirementsrelated to production processes, quality control and assurance and recordkeeping. Our manufacturing facilities and procedures and those of our suppliers aresubject to periodic inspection by the FDA and foreign regulatory agencies. Any material deviations from pharmaceutical cGMPs or other applicablerequirements identified during such inspections may result in recalls or other enforcement actions, including warning letters, a delay or suspension inmanufacturing operations, consent decrees or civil or criminal penalties. Further, discovery of previously unknown problems with a product or manufacturermay result in restrictions or sanctions, including suspension or withdrawal of marketing approvals, seizures or recalls of products from the market, or civil orcriminal fines or penalties, any of which could significantly and adversely affect supplies of our products. We are subject to extensive government regulation by Health Canada and other federal, state provincial/territorial and local regulatory authoritiesthat increases our costs and could prevent us from marketing or selling our products. The manufacturing, processing, formulation, packaging, labeling, testing, storing, distributing, marketing, advertising and sale of our products, among otherthings, are subject to extensive regulation by one or more Canadian agencies, including Health Canada, as well as by several state and local agencies inlocalities where our products are stored, distributed or sold. In addition, we market certain of our products in accordance with standards set by organizations,such as the United States Pharmacopeial Convention, or USP, and the British Pharmacopeia, or BP, scientific nonprofit organizations that sets standards forthe identity, strength, quality, and purity of medicines, food ingredients, and dietary supplements manufactured, distributed and consumed worldwide.Adherence to USP and BP published drug standards are prescribed by the Food and Drug Regulations. Health Canada regulates the testing, manufacture, labeling, marketing and sale of pharmaceutical products. Approval by Health Canada is required beforeany new drug, including any new generic drug, may be marketed or sold in the Canada. In order to receive approval from Health Canada for our productcandidates that are generic versions of brand-name drugs, we intend to use the ANDS, or Drug Identification Number Application, or DINA, routes, whichrequires us to demonstrate to Health Canada that each generic product candidate has the same active ingredient, strength, dosage form, route ofadministration and intended use as a corresponding approved drug product and is bioequivalent to the branded drug product (approved under a New DrugSubmission or NDS or Drug Identification Number Application, or DINA), meaning that there is no significant difference between the drugs in their rate andextent of absorption in the body. However, if Health Canada determines that an ANDS or DINA for a generic drug product is not adequate to supportapproval, it could deny our application or request additional data or information, which could delay approval of the product and impair our ability tocompete with the brand-name drug product and/or other generic versions of the product. 22  If our product candidates receive Health Canada approval through the ANDS or DINA process, the labeling claims and marketing statements that we canmake for our generic drugs are generally limited to the claims approved by Health Canada for use in the brand-name product’s label. In addition, followingregulatory approval, the labeling, packaging, adverse event reporting, storage, advertising and promotion for the product will be subject to extensive andongoing regulatory requirements. As an importer and distributor of pharmaceutical products, we must also comply with cGMPs, or current Good Manufacturing Practices, which includerequirements related to production processes, quality control and assurance and recordkeeping. Our facilities and procedures and those of our suppliers aresubject to periodic inspection by Health Canada and foreign regulatory agencies. Any material deviations from pharmaceutical cGMPs or other applicablerequirements identified during such inspections may result in recalls or other enforcement actions, including non-compliance ratings, a delay or suspensionin manufacturing operations. Further, discovery of previously unknown problems with a product or manufacturer may result in restrictions or sanctions,including suspension or withdrawal of marketing approvals, seizures or recalls of products from the market, and revoking of licenses, any of which couldsignificantly and adversely affect supplies of our products. Violations of cGMP and other government regulations could have a material adverse effect on our reputation, business, financial condition and resultsof operations. All facilities and manufacturing techniques used to manufacture pharmaceutical products for clinical use or for commercial sale in the United States and otherTeligent markets must be operated in conformity with cGMP regulations as required by the FDA and other regulatory bodies. Our suppliers’ facilities aresubject to scheduled periodic regulatory and customer inspections to ensure compliance with cGMP and other requirements applicable to such products. Afinding that we or one or more of our suppliers had materially violated these requirements could result in one or more regulatory sanctions, loss of a customercontract, disqualification of data for client submissions to regulatory authorities and a mandated closing of our suppliers’ facilities, which in turn could havea material adverse effect on our reputation, business, financial condition, operating results and cash flows. During our efforts to expand our existing manufacturing facility, as well as potentially select and build out an additional manufacturing facility, wecould experience business interruptions, as well as incur significant capital expenditures to complete the expansions, which may have a materialadverse effect on our business, financial position and results of operations. We manufacture drug products at one domestic manufacturing facility. This facility may be forced to shut down or may be unable to operate at full capacityas a result of potential expansion plans. A significant disruption at this facility, even on a short-term basis, could impair our ability to produce and ship drugproducts to the market on a timely basis, which may have a material adverse effect on our business, financial position and results of operations. We could experience business interruptions at our manufacturing facility, which may have a material adverse effect on our business, financial positionand results of operations. We manufacture drug products at one domestic manufacturing facility. This facility may be forced to shut down or may be unable to operate at full capacityas a result of hurricanes, tornadoes, earthquakes, storms and other extreme weather events as well as strikes, war, violent upheavals, terrorist acts and otherforce majeure events. A significant disruption at this facility, even on a short-term basis, could impair our ability to produce and ship drug products to themarket on a timely basis, which may have a material adverse effect on our business, financial position and results of operations. 23  Our reporting and payment obligations related to our participation in federal health care programs, including Medicare and Medicaid, are complexand often involve subjective decisions that could change. Any failure to comply with those obligations could subject us to investigation, penalties, andsanctions. Federal laws regarding reporting and payment obligations with respect to a pharmaceutical company’s participation in federal health care programs,including Medicare and Medicaid, are complex. These programs generally require us to pay rebates or provide discounts to government payors in connectionwith our products that are dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are basedon pricing and rebate calculations that we report on a monthly and quarterly basis to the government agencies that administer the programs. Because ourprocesses for calculating applicable government prices and the judgments involved in making these calculations involve subjective decisions and complexmethodologies, these calculations are subject to risk of errors and differing interpretations. In addition, they are subject to review and challenge by theapplicable governmental agencies, and it is possible that such reviews could result in changes that may have material adverse legal, regulatory, or economicconsequences. Responding to current and future changes may increase our costs and the complexity of compliance will be time-consuming, and could have amaterial adverse effect on our results of operations. In addition, the Office of Inspector General has recently increased its focus on the methodologies used by manufacturers to calculate the averagemanufacturer price, or AMP, and best price, or BP, to assess manufacturer compliance with reporting requirements under the Medicaid Drug Rebate Program.We are liable for errors associated with our submission of pricing data and for overcharging government payors. For example, failure to submitmonthly/quarterly AMP and BP data on a timely basis could result in a civil monetary penalty of $10,000 per day for each day the submission is late beyondthe due date. Failure to make necessary disclosures and/or to identify overpayments could result in allegations against us under the Federal False Claims Actand other laws and regulations. Our policies regarding returns, allowances and chargebacks, failure to supply penalties and marketing programs adopted by wholesalers may reducerevenues in future fiscal periods. We, like other generic drug manufacturers, have agreements with customers allowing chargebacks, product returns, administrative fees, failure to supplypenalties and other rebates. Under many of these arrangements, we may match lower prices offered to customers by competitors. If we choose to lower ourprices, we generally give the customer a credit on the products that the customer is holding in inventory, which could reduce sales revenue and gross marginfor the period the credit is provided. Under many of these arrangements, we may have failure to supply penalties, which in the event we are unable to supply acertain product and are unable to meet the needs of our customers, we may incur failure to supply penalties which may be significant. Like our competitors,we also give credits for chargebacks to wholesalers with whom we have contracts for their sales to hospitals, group purchasing organizations, pharmacies orother customers. A chargeback is the difference between the price at which we invoice the wholesaler and the price that the wholesaler’s end-customer paysfor a product. Although we establish reserves based on prior experience and our best estimates of the impact that these policies may have in subsequentperiods, we cannot ensure that our reserves are adequate or that actual product returns, allowances, and chargebacks will not exceed our estimates. As wecontinue to experience the consolidation of our customers, which may result in changes to previous patterns of ordering and/or pricing of our products, thiscould disrupt our established methodologies for calculating our provisions for chargebacks and other accruals. We are subject to federal and state healthcare fraud and abuse and false claims laws and may be subject to related litigation brought by the governmentor private individuals. We are subject to state and federal healthcare laws pertaining to fraud and abuse, physician payment transparency and laws that govern the submission ofclaims for reimbursement. These laws include the following: ·the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering orpaying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order orrecommendation of, any good or service for which payment may be made under federal healthcare programs, such as Medicare and Medicaid. Inaddition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statuteconstitutes a false or fraudulent claim for purposes of the False Claims Act; 24  ·the federal False Claims Act, or FCA, which imposes civil liability and criminal fines on individuals or entities that knowingly submit, or cause tobe submitted, false or fraudulent claims for payment to the government. The FCA also allows private individuals to bring a suit on behalf of thegovernment against an individual or entity for violations of the FCA. These suits, also known as qui tam actions, may be brought by, with only afew exceptions, any private citizen who believes that he has material information of a false claim that has not yet been previously disclosed. Thesesuits have increased significantly in recent years because the FCA allows an individual to share in any amounts paid to the federal government infines or settlement as a result of a successful qui tam action; ·federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making false statements relating tohealthcare matters; ·the federal Physician Payment Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment isavailable under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the governmentinformation related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists andchiropractors) and teaching hospitals, and applicable manufacturers and group purchasing organizations to report annually ownership andinvestment interests held by physicians (as defined above) and their immediate family members and payments or other “transfers of value” to suchphysician owners and their immediate family members; ·the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology forEconomic and Clinical Health Act, or HITECH Act, which governs the conduct of certain electronic healthcare transactions and protects thesecurity and privacy of protected health information; and ·analogous state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or servicesreimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with theindustry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrictpayments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to reportinformation related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state lawsgoverning the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways andmay not have the same effect, thus complicating compliance efforts. If our past or present operations are found to be in violation of any of such laws or any other governmental regulations that may apply to us, we may besubject to penalties, including civil and criminal penalties, damages, fines, exclusion from federal health care programs, and/or the curtailment orrestructuring of our operations. Any penalties, damages, fines, curtailment, or restructuring of our operations could adversely affect our ability to operate ourbusiness and our financial results, action against us for violation of these laws, even if we successfully defend against them, it could cause us to incursignificant legal expenses and divert our management’s attention from the operation of our business. Healthcare legislative reform measures may have a material adverse effect on our business and results of operations. In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, thePatient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act, was passed, whichsubstantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry.The Affordable Care Act, among other things, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug RebateProgram are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by manufacturersunder the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations. We expect thatadditional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governmentswill pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures. 25  Even after our products receive regulatory approval, such products may not achieve expected levels of market acceptance. Even if we are able to obtain regulatory approvals for our generic pharmaceutical products the success of those products is dependent upon marketacceptance. Levels of market acceptance for our products could be impacted by several factors, including but not limited to: ·the availability of alternative products from our competitors; ·the price of our products relative to that of our competitors; ·the timing of our market entry; ·the ability to market our products effectively to the different levels in the distribution chain; ·other competitor actions; and ·the continued acceptance of and/or reimbursement for our products by government and private formularies and/or third party payors. Additionally, studies of the proper utilization, safety, and efficacy of pharmaceutical products are being conducted by the industry, government agencies,and others. Such studies, which increasingly employ sophisticated methods and techniques, including methods to investigate the comparative effectivenessof different products used for similar indications, can call into question the utilization, safety, and efficacy of previously marketed as well as future products.In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk management programs, such as theneed for a patient registry, as well as delays in approvals. The occurrence of any of the above risks could adversely affect our profitability, business, financialposition, results of operations and/or cash flow, and could cause the market value of our common stock to decline. Product recalls could harm our business. Product recalls or product field alerts may be issued at our discretion or required by the FDA and Health Canada, other governmental agencies or othercompanies having regulatory authority for pharmaceutical product sales. From time to time, we may recall products for various reasons, including failure ofour products to maintain their stability through their expiration dates or other quality issues. Any recall or product field alert has the potential of damagingour reputation or the reputation of the product. Any significant recalls could materially affect our sales. In these cases, our business, financial condition,results of operations and cash flows could be materially adversely affected. We are susceptible to product liability claims that may not be covered by insurance and could require us to pay substantial sums. We face the risk of loss resulting from, and adverse publicity and reputational harm associated with, product liability lawsuits, whether or not such claims arevalid. We may not be able to avoid such claims. In addition, our product liability insurance may not be adequate to cover such claims and we may not be ableto obtain adequate insurance coverage in the future at acceptable costs. A successful product liability claim that exceeds our policy limits could require us topay substantial sums. In addition, product liability coverage for pharmaceutical companies is becoming more expensive and increasingly difficult to obtainand, as a result, we may not be able to obtain the type and amount of coverage we desire or to maintain our current coverage. The manufacture and storage of pharmaceutical and other products are subject to inherent risk. Because chemical ingredients are used in the manufacture of our products and due to the nature of the manufacturing process itself, there is a risk of incurringliability for damages caused by or during the storage or manufacture of both the chemical ingredients and the finished products. Although we have neverincurred any material liability for damages of that nature, we may be subject to liability in the future. In addition, while we believe our insurance coverage isadequate, it is possible that a successful claim would exceed our coverage, requiring us to pay a substantial sum. 26  Counterfeit versions of our products could harm our patients and reputation. Our industry has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit productsin a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products that do not meet therigorous manufacturing and testing standards our products undergo. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening. Counterfeit medicines may contain harmful substances, the wrong dose of the active pharmaceutical ingredient, or API, or no API at all.However, to distributors and patients, counterfeit products may be visually indistinguishable from the authentic version. Reports of adverse reactions tocounterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and harm the business ofcompanies such as ours. Additionally, it is possible that adverse events caused by unsafe counterfeit products would mistakenly be attributed to the authenticproduct. In addition, there could be thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and which are sold throughunauthorized channels. Public loss of confidence in the integrity of pharmaceutical products as a result of counterfeiting or theft could have a materialadverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline. The testing required for the regulatory approval of our products is conducted by independent third parties. Any failure by any of these third parties toperform this testing properly and in a timely manner may have an adverse effect upon our ability to obtain regulatory approvals. Our applications for the regulatory approval of our products incorporate the results of testing and other information that is conducted or gathered byindependent third parties (including, for example, manufacturers of raw materials, testing laboratories, contract research organizations or independentresearch facilities). Our ability to obtain regulatory approval of the products being tested is dependent upon the quality of the work performed by these thirdparties, the quality of the third parties’ facilities, and the accuracy of the information provided to us by third parties. We have little or no control over any ofthese factors. If this testing is not performed properly, our ability to obtain regulatory approvals could be restricted or delayed. In addition, if third party fraudor other recordkeeping problems are discovered after our products are approved for marketing, any government investigations or findings could result in anyproducts that incorporated those fraudulent results having their regulatory approvals withdrawn. The failure to obtain, maintain or protect patents, trade secrets, know-how and other intellectual property could impact our ability to competeeffectively. To compete effectively, we need to develop and maintain a proprietary position with regard to our own technology, products and business. We rely on acombination of patents, trade secrets, proprietary know-how and other intellectual property to protect our proprietary technology and rights. We alsomaintain a number of trade secrets, know-how and other intellectual property. The risks and uncertainties that we face with respect to patents and other proprietary rights include the following: ·the pending patent applications we have filed or may file, or to which we have exclusive rights, may not result in issued patents, or may takelonger than we expect to result in issued patents; ·changes in U.S. patent laws may adversely affect our ability to obtain or maintain our patent protection; ·we may be subject to interference proceedings; ·the claims of any patents that are issued may not provide meaningful protection; ·we may not be able to develop additional proprietary technologies that are patentable; ·the patents licensed or issued to us or our collaborators may not provide a competitive advantage; 27  ·other companies may challenge patents licensed or issued to us or our collaborators; ·other companies may independently develop similar or alternative technologies, or duplicate our technology; ·other companies may design around technologies we have licensed or developed; and ·enforcement of patents is complex, uncertain and expensive. The trademark applications we have filed or may file may not result in trademark registrations, which would result in lesser protections for our brands. If we are unable to effectively enforce our proprietary rights, or if we are found to infringe the rights of others, we may be in breach of our licenseagreements with our partners. Our success also depends upon trade secrets, proprietary know-how and the skills, knowledge and experience of our personnel. As a result, we require ouremployees, consultants, advisors, and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to anyother parties. We also require our employees and consultants to disclose and assign to us their ideas, developments, discoveries, and inventions. Theseagreements may not, however, provide adequate protection for our trade secrets, know-how, or other proprietary information in the event of any unauthorizeduse or disclosure. If any material trade secret or proprietary know-how were to be disclosed to or independently developed by a competitor, our competitiveposition may be materially harmed. Our product offerings and our customers’ products may infringe on the intellectual property rights of third parties. From time to time, third parties have asserted intellectual property infringement claims against us and our customers and there can be no assurance that thirdparties will not assert infringement claims against either us or our customers in the future. While we believe that our product offerings do not infringe in anymaterial respect upon proprietary rights of other parties and/or that meritorious defenses would exist with respect to any assertions to the contrary, there canbe no assurance that we would not be found to infringe on the proprietary rights of others. Patent applications in the U.S. and some foreign countries are generally not publicly disclosed until they are published or the patent is issued, and we maynot be aware of currently filed patent applications that relate to our offerings or processes. If patents later issue on these applications, we may be found liablefor subsequent infringement. There has been substantial litigation in the pharmaceutical and biotechnology industries with respect to the manufacture, useand sale of products and processes that are the subject of conflicting patent rights. Any claims that our product offerings or processes infringe these rights, regardless of their merit or resolutions, could be costly and may divert the efforts andattention of our management and technical personnel. We may not prevail in such proceedings given the complex technical issues and inherent uncertaintiesin intellectual property litigation. If such proceedings result in an adverse outcome, we could, among other things, be required to: ·pay damages in the form of lost profits and/or a reasonable royalty for any infringement; ·pay substantial damages (potentially treble damages in the U.S. if any such infringement is found to be willful); ·pay attorney fees of a prevailing party, if the case is found to be exceptional; ·cease the manufacture, use or sale of the infringing offerings or processes; ·discontinue the use of the infringing technology; ·expend significant resources to design around patented technology and develop non-infringing technology; and 28  ·license patented technology from the third party claiming infringement, which license may not be available on commercially reasonable terms,or may not be available at all. In addition, our customers’ products may be subject to claims of intellectual property infringement and such claims could materially affect our business iftheir products cease to be manufactured and they have to discontinue the use of the infringing technology which we may provide. Further, depending on theparticular circumstances of any given claim, it may be the case that we may be responsible for indemnifying our customers for a claim of intellectual propertyinfringement. If we were to assert any of our own intellectual property against third parties and the third parties were found not to infringe our intellectual property or ourintellectual property was found to be invalid, and/or unenforceable, we would lose the opportunity to leverage our own intellectual property, for example,through licensing of our technology to others, collection of damages and/or royalty payments based upon successful assertion of our intellectual propertyrights via enjoining others from practicing the technology at issue. Any of the foregoing could affect our ability to compete or have a material adverse effect on our business, financial condition and results of operations. Significant balances of intangible assets, including goodwill, are subject to impairment testing and may result in impairment charges, which maymaterially and adversely affect our results of operations and financial condition. A significant amount of our total assets is related to goodwill and intangible assets. As of December 31, 2015 the value of our goodwill and intangible assetsnet of accumulated amortization was $54.7 million. Goodwill and other intangible assets are tested for impairment annually when events occur orcircumstances change that could potentially reduce the fair value of the reporting unit or intangible asset. Impairment testing compares the fair value of thereporting unit or intangible asset to its carrying amount. Any future goodwill or other intangible asset impairment, if any, would be recorded in operatingincome and could have a material adverse effect on our results of operations and financial condition. The expiration of certain patents related to the Novasome® technology could negatively impact our ability to generate income from the Novasomeproducts. We have licensed certain patents related to the Novasome® technology platform pursuant to a license agreement. Many of the patents under this license haveexpired. The loss of patent protection could allow additional competition. To the extent such competition develops, it could negatively impact the incomewe generate from the Novasome® technology platform. We may not be able to fully realize the expected benefits from the acquisition of certain products and or companies. Our recent acquisition of certain products and a company subjects us to additional operational and financial risks, including the following: ·additional costs that we may need to incur in order to return the products to the market and to comply with regulatory requirements; ·difficulties in coordinating research and development activities; ·uncertainties in the business relationships with our customers and suppliers; and ·lack of previous experiences in manufacturing, commercializing, and distributing products in therapeutic areas outside of the topical genericpharmaceutical market and in markets outside of the United States. 29  Our approved products may not achieve commercialization at levels of market acceptance that allow us to achieve profitability, which could have amaterial adverse effect on our business, financial position and results of operations. We seek to develop, license or acquire products that we can commercialize at levels of market acceptance that would allow us to recoup the costs ofdevelopment and commercialization, grow market share, and achieve profitability. Even if we are able to obtain regulatory approvals for certainpharmaceutical products, if we fail to accurately predict demand for such products, our business, financial position, and results of operations could beadversely impacted. Levels of market acceptance for products could be impacted by several factors, including but not limited to: ·the availability of alternative products from our competitors; ·the price of our products relative to that of our competitors; ·the effectiveness of our marketing relative to that of our competitors; ·the timing of our market entry; ·the ability to market our products effectively to the retail level; and ·the acceptance of our products by government and private formularies. Some of these factors are not within our control and, if any arises, our profitability, business, financial position and results of operations could be materiallyadversely affected. Future acquisitions and investments could disrupt our business and harm our financial condition and operating results. Our growth will depend, in part, on our continued ability to develop, commercialize and expand our drug products, including in response to changingregulatory and competitive pressures. In some circumstances, we accelerate our growth through the acquisition of complementary products and technologiesrather than through internal development. The identification of suitable products to be acquired can be difficult, time-consuming and costly, and we may notbe able to successfully complete or successfully execute strategies for identified acquisitions. The risks faced in connection with acquisitions include: ·diversion of management time and focus from operating our business to addressing acquisition and/or product integration challenges; ·coordination of research and development and sales and marketing functions; ·retention of key employees from the acquired company; ·integration of the acquired company’s accounting, management information, human resources and other administrative systems; ·the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls,procedures and policies; ·liability for activities of the acquired company and/or products before the acquisition, including patent infringement claims, violations of laws,commercial disputes, tax liabilities and other known and unknown liabilities; ·unanticipated write-offs or charges; and ·litigation or other claims in connection with the acquired company or product, including claims from product users, former stockholders or otherthird parties. 30  In any acquisition that we may undertake, our failure to address these risks or other problems encountered in connection with any acquisitions andinvestments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harmour business generally. We may become involved in legal proceedings from time to time which may result in losses, damage to our business and reputation and place a strainon our internal resources. In the ordinary course of our business, we may be involved in legal proceedings with both private parties and certain government agencies, including FDA.Enforcement actions and litigation may result in verdicts against us, which may include significant monetary awards, judgments that certain of ourintellectual property rights are invalid or unenforceable and injunctions preventing the manufacture, marketing and sale of our products. If disputes areresolved unfavorably, our business, financial condition and results of operations may be adversely affected. Any government enforcement action or litigation, whether or not successful, may damage our reputation. Furthermore, we are likely to incur substantialexpense in defending these actions and lawsuits, and the time demands of such enforcement actions and lawsuits could divert management’s attention fromongoing business concerns and interfere with our normal operations. In the normal course of business, we periodically enter into employment agreements, legal settlements, and other agreements which incorporateindemnification provisions. We maintain insurance coverage which we believe will effectively mitigate our obligations under these indemnificationprovisions. However, should our obligation under an indemnification provision exceed our coverage or should coverage be denied, it could have a materialadverse effect on our business, financial position and results of operations. Our business and operations would suffer in the event of system failures. Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access,natural disasters, terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions in ouroperations could result in a material disruption of our product development programs. To the extent that any disruption or security breach results in a loss ordamage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability and the further developmentof our product candidates may be delayed. In addition, we rely on complex information technology systems, including Internet-based systems, to support our supply chain processes as well as internaland external communications. The size and complexity of our systems make them potentially vulnerable to breakdown or interruption, whether due tocomputer viruses or other causes that may result in the loss of key information or the impairment of production and other supply chain processes. Suchdisruptions and breaches of security could adversely affect our business. Compliance with ongoing post-marketing obligations for our approved ANDAs, NDAs, NDSs, and ANDSs may uncover new safety information thatcould give rise to a product recall, updated warnings, or other regulatory actions that could have an adverse impact on our business. After FDA or Health Canada approve a drug for marketing under an NDA, ANDA, NDS, or ANDS, the product’s sponsor must comply with several post-marketing obligations that continue until the product is discontinued. These post-marking obligations include the prompt reporting of serious adverseevents to the agency, the submission of product-specific annual reports that include changes in the distribution, manufacturing, and labeling information,and notification when a drug product is found to have significant deviations from its approved manufacturing specifications (among others). Our ongoingcompliance with these types of mandatory reporting requirements could result in additional requests for information from FDA or Health Canada and,depending on the scope of a potential product issue that FDA or Health Canada may decide to pursue, potentially also result in a request from the agency toconduct a product recall or to strengthen warnings and/or revise other label information about the product. Any of these post-marketing regulatory actionscould materially affect our sales and, therefore, they have the potential to adversely affect our business, financial condition, results of operations and cashflows. 31  Economic conditions could severely impact us. Current economic conditions may cause a decline in business and consumer spending which could adversely affect our business and financial performance.Our operating results are impacted by the health of the North American economies. Our business and financial performance, including collection of ouraccounts receivable, realization of inventory, recoverability of assets including investments, may be adversely affected by current and future economicconditions, such as a reduction in the availability of credit, financial market volatility and recession. Adverse conditions in the economy and disruption of financial markets could negatively impact our customers and therefore our results of operations. An economic downturn in the businesses or geographic areas in which we sell our products could reduce demand for these products and result in a decrease insales volume that could have a negative impact on our results of operations. Volatility and disruption of financial markets could limit our customers’ abilityto obtain adequate financing or credit to purchase and pay for our products in a timely manner, or to maintain operations, and result in a decrease in salesvolume that could have a negative impact on our results of operations. Additionally, economic conditions and market turbulence may also impact oursuppliers causing them to be unable to supply in a timely manner sufficient quantities of product components, thereby impairing our ability to manufactureon schedule and at commercially reasonable costs. If the U.S. economy rapidly contracts or expands, we may have difficulty quickly scaling our operations in response, which may negatively impact ourbusiness and financial position. If we are unable to hire additional qualified personnel, our ability to grow our business may be harmed. We will need to hire additional qualified personnel with expertise in nonclinical testing, government regulation, formulation and manufacturing, sales andmarketing and finance. We compete for qualified individuals with numerous pharmaceutical and consumer products companies, universities and otherresearch institutions. Competition for such individuals is intense, and we cannot be certain that our search for such personnel will be successful. Attractingand retaining qualified personnel will be critical to our success. Our ability to market products successfully depends, in part, upon the acceptance of the products not only by consumers, but also by independent third-parties. Our ability to market generic pharmaceutical products successfully depends, in part, on the acceptance of the products by independent third-parties(including pharmacies, government formularies, managed care providers, insurance companies and retailers), as well as patients. In addition, unanticipatedside effects or unfavorable publicity concerning any of our products, or any brand-name product of which our generic product is the equivalent, could havean adverse effect on our ability to achieve acceptance by managed care providers, pharmacies and other retailers, customers and patients. If we are unable to satisfy regulatory requirements relating to internal controls, our stock price could suffer. Section 404 of the Sarbanes-Oxley Act of 2002 requires companies to conduct a comprehensive evaluation of the effectiveness of their internal control overfinancial reporting. At the end of each fiscal year, we must perform an evaluation of our internal control over financial reporting, include in our annual reportthe results of the evaluation and have our external auditors also publicly attest to the effectiveness of our internal control over financial reporting. If materialweaknesses are found in our internal controls in the future, if we fail to complete future evaluations on time or if our external auditors cannot attest to theeffectiveness of our internal control over financial reporting, we could fail to meet our regulatory reporting requirements and be subject to regulatory scrutinyand a loss of public confidence in our internal controls, which could have an adverse effect on our stock price. 32  Currency fluctuations and changes in exchange rates could adversely affect our business, financial condition, results of operations, cash flows, and/orcommon stock price. Although we report our financial results in U.S. Dollars, a portion of our revenues and other liabilities and our costs are denominated in non-U.S. currencies,including the Euro and Canadian Dollar. Our results of operations and, in some cases, cash flows, have in the past been and may in the future be adverselyaffected by certain movements in currency exchange rates. The occurrence of any of the above risks could cause a material adverse effect on our business,financial condition, results of operations, cash flows, and/or ordinary share price. Our ability to use our net operating loss carry forwards and certain other tax attributes may be limited. As of December 31, 2015, we had federal net operating loss carry forwards, or NOLs, of approximately $35.6 million which expire from 2020 through 2032.Our ability to utilize our NOLs may be limited under Section 382 of the Internal Revenue Code. The limitations apply if an ownership change, as defined bySection 382, occurs. Generally, an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50 percentage pointsover their lowest ownership percentage in a testing period (typically three years). Our ability to use net operating loss carry forwards is subject to substantiallimitation in future periods under certain provisions of Section 382 of the Internal Revenue Code, which limit the utilization of net operating losses upon amore than 50% change in ownership of our stock that is held by 5% or greater stockholders. We examined the application of Section 382 with respect to anownership change that took place during 2010, as well as the limitation on the application of net operating loss carry forwards. We believe that operatinglosses subsequent to the change date in 2010 (aggregating $15.1 million) are not subject to Section 382 limitations. We have estimated that the annuallimitation starting in 2010 aggregates from $1.0 million to $2.3 million per year including the effect of amortization of built in gains. Risks Related to Our Common Stock Shares of our common stock can be relatively illiquid which may affect the trading price of our common stock. For the twelve months ended December 31, 2015, the average daily trading volume of our common stock on the NYSE MKT (from January 2, 2015 throughOctober 23, 2015) and subsequently on the NASDAQ Global Select Market following the transfer of our listing (from October 26, 2015 through December 31,2015) was approximately 702,000 shares. As a result of our relatively small public float, our common stock may be less liquid than the stock of companieswith broader public ownership. Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading pricefor our shares than would be the case if our public float were larger. We have not paid dividends to our common stockholders in the past nor do we expect to pay dividends in the foreseeable future, and any return oninvestment may be limited to potential future appreciation on the value of our common stock. We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends inthe foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors,including without limitation, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be aparty to at the time. To the extent we do not pay dividends, our stock may be less valuable because a return on investment will only occur if and to the extentour stock price appreciates, which may never occur. In addition, investors must rely on sales of their common stock after price appreciation as the only way torealize their investment, and if the price of our stock does not appreciate, then there will be no return on investment. Investors seeking cash dividends shouldnot purchase our common stock. If we fail to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act of 2002, or if we fail to achieve andmaintain adequate disclosure controls and procedures and internal control over financial reporting, our business results of operations and financialcondition, and investors’ confidence in us, could be materially adversely affected. As a public company, we are required to comply with the periodic reporting obligations of the Exchange Act including preparing annual reports, quarterlyreports and current reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws,expose us to lawsuits and restrict our ability to access financing. In addition, we are required under applicable law and regulations to integrate our systems ofdisclosure controls and procedures and internal control over financial reporting. Our management assessed our existing disclosure controls and procedures asof December 31, 2015 and December 31, 2014, and our management concluded that our disclosure controls and procedures were effective as of such times.The year ended December 31, 2014 was the first year in which we were required to have our external auditors issue an attestation report on the effectivenessof internal controls over financial reporting. 33  If we fail to achieve and maintain the adequacy of our disclosure controls and procedures and internal control over financial reporting, we may not be able toensure that we can conclude that we have effective disclosure controls and procedures and internal control over financial reporting in accordance with theSarbanes-Oxley Act of 2002. Moreover, effective disclosure controls and procedures and internal control over financial reporting are necessary for us toproduce reliable financial reports and are important to help prevent fraud. As a result, our failure to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm ourbusiness and negatively impact the trading price of our common stock. Our principal stockholders, directors and executive officers own a significant percentage of our stock and will be able to exercise significant influenceover our affairs. Our current principal stockholders, directors and executive officers own in the aggregate a significant portion of the voting power of our capital stock. As aresult, these stockholders, if acting together, would be able to influence or control matters requiring approval by our stockholders, including the election ofdirectors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in away with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing ordeterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a saleof our company and might ultimately affect the market price of our common stock. If such stockholders sold a significant amount of stock it could have anadverse effect on the price of the stock. Due to the concentration of common stock owned by significant stockholders, the sale of such stock might adversely affect the price of our commonstock. Our largest stockholders own shares of common stock that have been registered for resale under the Securities Act. The sale of such stock, depending on theinterplay of numerous factors, including, without limitation, the method and timing of the sales, could substantially depress the value of our common stock. Our stock price is, and we expect it to remain, volatile and subject to wide fluctuations, which may make it difficult for stockholders to sell shares ofcommon stock at or above the price for which they were acquired. Our stock price is, and we expect it to remain, volatile, which could limit investors’ ability to sell stock at a profit. During the last two fiscal years, our stockprice has closed at a low of $2.93 in the first quarter of 2014 and a high of $12.05 in the first quarter of 2015. The volatile price of our stock makes it difficultfor investors to predict the value of their investment, to sell shares at a profit at any given time, or to plan purchases and sales in advance. A variety of factorsmay affect the market price of our common stock. These include, but are not limited to: ·publicity regarding actual or potential clinical results relating to products under development by our competitors or us; ·delay or failure in initiating, completing or analyzing nonclinical or clinical trials or the unsatisfactory design or results of these trials; ·achievement or rejection of regulatory approvals by our competitors or us; ·announcements of technological innovations or new commercial products by our competitors or us; ·developments concerning proprietary rights, including patents; ·developments concerning our collaborations; 34  ·regulatory developments in the U.S. and foreign countries; ·economic or other crises, especially given the recent financial deterioration in the markets in which we compete, and other external factors; ·stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in the cosmetic, pharmaceuticaland consumer products industry; ·actual or anticipated sales of our common stock, including sales by our directors, officers or significant stockholders; ·period-to-period fluctuations in our revenues and other results of operations; ·speculation about our business in the press or the investment community; ·changes in financial estimates by us or by any securities analysts who might cover our stock; and ·sales of our common stock, including sales by our significant holders. In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type oflitigation, even if it does not result in liability for us, could result in substantial costs to us and divert management’s attention and resources. If we fail to meet the continued listing standards of the NASDAQ Global Select Market, our common stock could be delisted and our liquidity and stockprice could suffer. Our common stock is listed on the NASDAQ Global Select Market, a national securities exchange, which imposes continued listing requirements with respectto listed shares. If we fail to meet the continued listing standards of the NASDAQ Global Select Market, our common stock could be delisted and our stockprice could suffer. A delisting of our shares of common stock could negatively impact us by further reducing the liquidity and market price of our shares ofcommon stock and the number of investors willing to hold or acquire our shares of common stock, which could negatively impact our ability to raise equityfinancing. Risks Related to the Notes We may not have the ability to raise the funds necessary to settle conversions of the Notes, purchase the Notes as required pursuant to the terms of theindenture governing the Notes or pay the redemption price for any Notes we redeem, and our future debt may contain limitations on our ability to paycash upon conversion or repurchase of the Notes. On December 16, 2014, we completed the sale of $125 million aggregate principal amount of our 3.75% Convertible Senior Notes due 2019, or the Notes, toDeutsche Bank Securities Inc. and J.P. Morgan Securities LLC as the initial purchasers and on December 22, 2014, we issued to the initial purchasers anadditional $18.75 million aggregate principal amount of the Notes. Pursuant to the terms of the indenture governing the Notes, following certain events,holders of Notes will have the right to require us to purchase their Notes for cash. Such event may also constitute an event of default or prepayment under,and result in the acceleration of the maturity of, our then-existing indebtedness. We cannot assure you that we will have sufficient financial resources, or willbe able to arrange financing, to pay the purchase price in cash with respect to any Notes surrendered by holders for purchase at that time, make cash paymentsupon conversions or pay the redemption price for any Notes we redeem. In addition, restrictions in our then existing credit facilities or other indebtedness, ifany, may not allow us to purchase the Notes (even if required pursuant to the terms of the indenture), make cash payments upon conversions of the Notes orpay the redemption price for any Notes we redeem would result in an event of default with respect to the Notes which could, in turn, constitute a default underthe terms of our other indebtedness, if any. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, wemay not have sufficient funds to repay the indebtedness and purchase the Notes, make cash payments upon conversions thereof or pay the redemption pricefor any Notes we redeem. 35  Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt. Our ability to make scheduled payments of the principal of, to pay interest on, to pay any cash due upon conversion of or to refinance our indebtedness,including the Notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Ourbusiness may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we areunable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additionalequity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financialcondition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a defaulton our debt obligations. To the extent we issue shares of our common stock to satisfy all or a portion of our conversion obligation, conversions of the Notes will dilute theownership interest of our existing stockholders, including holders who had previously converted their Notes. The holders of our Notes can require us, under certain circumstances, to convert their Notes. We have the option to satisfy this conversion obligation withcash, shares of our common stock or a combination of cash and shares of our common stock at our election. To the extent we issue shares of our commonstock to satisfy all or a portion of our conversion obligation, the conversion of some or all of the Notes will dilute the ownership interests of our existingstockholders. Any sales in the public market of our common stock issuable upon such conversion could adversely affect prevailing market prices of ourcommon stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could depressthe price of our common stock. Our substantial indebtedness could materially adversely affect our business, financial condition or results of operations and prevent us from fulfillingour obligations under the Notes. After giving effect to the issuance of the Notes, we will have a substantial amount of indebtedness. As of December 31, 2015, our total consolidatedindebtedness was $143.7 million. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay,when due, the principal of, interest on, or other amounts due in respect of our indebtedness. Our substantial indebtedness, combined with our other financialobligations and contractual commitments, may have a material adverse impact on us. For example, it could ·make it difficult for us to satisfy our obligations with respect to our outstanding and other future debt obligations; ·increase our vulnerability to general adverse economic conditions or a downturn in the industries in which we operate; ·impair our ability to obtain additional financing in the future for working capital, investments, acquisitions and other general corporate purposes; ·require us to dedicate a substantial portion of our cash flows to the payment to our financing sources, thereby reducing the availability of our cashflows to fund working capital, investments, acquisitions and other general corporate purposes; and ·place us at a disadvantage compared to our competitors. 36  We will continue to have the ability to incur debt; if we incur substantial additional debt, these higher levels of debt may affect our ability to pay theprincipal of and interest on the Notes. We and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some ofwhich may be secured debt. The indenture governing the Notes does not restrict our ability to incur additional indebtedness or require us to maintainfinancial ratios or specified levels of net worth or liquidity. If we incur substantial additional indebtedness in the future, these higher levels of indebtednessmay affect our ability to pay the principal of and interest on the Notes, or any fundamental change purchase price or any cash due upon conversion, and ourcreditworthiness generally. Item 1B.UNRESOLVED STAFF COMMENTS None. Item 2.PROPERTIES The Company’s executive administrative offices are located in Buena, New Jersey, in two facilities of approximately 33,000 square feet built on 8.44 acres ofland in 1995, which we own. This facility is also used for production, product development, marketing and warehousing for our own generic prescriptionpharmaceutical products and pharmaceutical, cosmeceutical and cosmetic products. We believe this facility is in good operating condition and adequatelyserving our current needs. The Company owns four acres of land adjacent to our main facility that can be used for future expansion. We lease an additional11,000 square feet of warehouse space in Vineland, New Jersey, and lease approximately 7,500 square feet of corporate office space in Iselin, New Jersey, andwill soon occupy approximately 4,000 square feet of office space in Toronto, Canada. The Company currently subleases office space in Toronto, Canada. Item 3.LEGAL PROCEEDINGS On March 2, 2001, the Company became aware of environmental contamination resulting from an unknown heating oil leak at its former manufacturingfacility. The Company immediately notified the New Jersey Department of Environmental Protection, or NJ DEP, and the local authorities, and hired acontractor to assess the exposure and required clean up. The total estimated costs for the clean-up and remediation was $889,000, of which approximately$123,000 remains accrued as of December 31, 2015. Based on information provided to the Company from its environmental consultant and what is known todate, the Company believes the reserve is sufficient for the remaining remediation of the environmental contamination. There is a possibility, however, thatthe remediation costs may exceed the Company’s estimates. 37  The restricted cash, included in other assets on the Consolidated Balance Sheet of $124,000 as of December 31, 2015 and $54,000 as of December 31, 2014,represents a restricted escrow account set up on the requirement of the NJ DEP for the soil remediation work. These funds will be released to the Companyupon the NJ DEP approval when the remediation is completed. On December 19, 2013, we filed a complaint in the United States District Court for the District of Delaware against Mallinckrodt LLC, Mallinckrodt, Inc. andNuvo Research Inc., which we collectively refer to as Mallinckrodt, seeking a declaration of non-infringement of United States Patent Nos. 8,217,078 and8,546,450 so that we can bring our generic diclofenac sodium topical solution 1.5% to market at the earliest possible date under applicable statutory andFDA regulatory provisions. On January 10, 2014, Mallinckrodt filed an answer and counterclaim alleging that we infringed the patents at issue. On June 26,2014, we entered into a settlement agreement with Mallinckrodt, pursuant to which Mallinckrodt granted us a non-exclusive license to launch our diclofenacsodium topical solution 1.5% product on March 28, 2015. There was no material impact on our financial statements as a result of the settlement. We receivedtentative approval to sell our diclofenac sodium topical solution 1.5% from the FDA on May 7, 2014. On May 21, 2015, Horizon Pharma Ireland Limited, HZNP Limited and Horizon Pharma USA, Inc., which we collectively refer to as Horizon, filed acomplaint in the United States District Court for the District of New Jersey against us alleging infringement of certain United States patents based upon oursubmission to the FDA of an ANDA seeking FDA approval to market diclofenac topical solution 2% w/w before the expiration of the patents asserted in thecomplaint. On June 30, 2015, August 11, 2015, September 17, 2015, October 27, 2015 and February 5, 2016, Horizon filed additional complaints in theUnited States District Court for the District of New Jersey against the Company alleging infringement of other of its United States patents in relation to theCompany’s submission of the same ANDA. On July 21, 2015, September 11, 2015, October 6, 2015, October 21, 2015 and December 17, 2015, we filedanswers, affirmative defenses and counterclaims with respect to the first five complaints filed by Horizon. In those filings, we asserted that the patents allegedto be infringed in the complaints filed by Horizon are invalid and not infringed by us. We believe the complaint has no merit, and we intend to continue tovigorously defend our position. Based on the early stage of these complaints and counterclaims, we are unable to predict the outcome On December 4, 2015, Galderma Laboratories, L.P. and Galderma S.A., which we collectively refer to as Galderma, filed a complaint in the United StatesDistrict Court for the Northern District of Texas against us alleging infringement of United States Patent No. 6,106,848 based upon our submission to theFDA of an ANDA seeking FDA approval to market clobetasol propionate lotion 0.05% before the expiration patent asserted in the complaint. On January 5,2016, Galderma and the Company entered into a Settlement and License Agreement, the terms of which are confidential. On January 22, 2016, the case wasdismissed with prejudice. Item 4.MINE SAFETY DISCLOSURES Not applicable. 38  PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES Market Information We transferred the listing of our common stock from the NYSE MKT to the NASDAQ Global Select Market. Our common stock ceased trading on the NYSEMKT under the symbol “IG” at the close of business on October 23, 2015 and began trading on the NASDAQ Global Select Market under the symbol“TLGT” on October 26, 2015. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock, as reported by the NYSE MKT and the NASDAQGlobal Select Market, as applicable. Common Stock High Low 2015: First Quarter 12.05 7.75 Second Quarter 9.40 4.75 Third Quarter 8.98 6.13 Fourth Quarter 9.18 5.90 2014: First Quarter 6.14 2.93 Second Quarter 6.07 3.84 Third Quarter 9.89 4.94 Fourth Quarter 11.28 7.60 Stockholders As of March 10, 2016, there were approximately 410 stockholders of record of the 53,005,689 outstanding shares of common stock. Dividends We have not paid cash dividends to our stockholders since inception and we do not plan to pay cash dividends in the foreseeable future. We currently intendto retain earnings, if any, to finance the growth of the Company. Equity Compensation Plans The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by reference to Item 12 of Part III of this AnnualReport. 39  Performance Graph Comparison of Cummulative Total Return among Teligent, Inc.,the S&P500 Index and the Dow Jones - US Healthcare Index Unregistered Sales of Securities None. Issuer Purchases of Equity Securities None. 40  Item 6. SELECTED FINANCIAL DATA The following table sets forth consolidated financial data with respect to the Company for each of the five-year periods ended December 31. The selectedfinancial data for each of the five-year periods ended December 31 have been derived from the consolidated financial statements of the Company, whichfinancial statements have been audited by EisnerAmper LLP, independent registered public accounting firm. The foregoing consolidated financial statementsand the report thereon are included elsewhere in this Annual Report on Form 10-K. The information below should be read in conjunction with theconsolidated financial statements (and notes thereon) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”included in Item 7. As of and For the Years Ended December 31, 2015 2014 2013 2012 2011 (In thousands, except per share data) Revenues $44,250 $33,740 $18,224 $8,563 $7,806 Gross profit 21,315 16,972 6,145 2,776 2,260 Operating income (loss) (3,192) 3,906 (82) (3,136) (2,969)Interest and other non-operating income (expense) 9,895 1,518 (199) (975) (264)Pretax income (loss) 6,703 5,424 (281) (4,111) (3,233)Income tax provision (benefit) 35 173 (197) (184) (226)Net income (loss) $6,668 $5,251 $(84) $(3,927) $(3,007)Preferred stock dividend - - (1,308) - - Net income (loss) attributable to common stockholders $6,668 $5,251 $(1,392) (3,927) $(3,007)Weighted average shares outstanding: Basic 52,873 49,818 43,518 39,786 39,449 Diluted 67,112 64,207 43,518 39,786 39,449 PER SHARE: Net income (loss): Basic 0.13 0.11 (0.03) (0.10) (0.08)Diluted (0.07) 0.09 (0.03) (0.10) (0.08) Share Price: High 12.05 11.28 3.39 1.48 1.8 Low 4.75 2.93 1 0.94 0.85 BALANCE SHEET DATA: Current assets $116,801 $177,218 $10,558 $6,139 $5,686 Net property, plant & equipment 8,706 3,262 2,623 2,691 2,800 Total assets 184,762 197,078 15,427 9,427 9,636 Current liabilities 10,768 13,002 5,221 1,976 1,316 Long-term obligations, less current installments 107,235 144,942 3,015 1,024 555 Shareholders’ equity 66,759 39,134 7,191 6,427 7,765 CASH FLOW DATA: Cash used in operating activities $(15,513) $(3,891) $(618) $(2,373) $(2,394)Cash used in investing activities (53,068) (3,792) (2,113) (342) (350)Cash provided by financing activities (3,111) 164,465 2,296 2,337 542 Increase/(Decrease) in cash and cash equivalents (71,692) 156,782 (435) (378) (2,202) 41  Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This “Management’s Discussion and Analysis of Financial Condition and Results of Operation” section and other sections of this Annual Report on Form 10-K contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about the industry and markets in which theCompany operates and on management’s beliefs and assumptions. In addition, other written or oral statements, which constitute forward-looking statements,may be made by or on behalf of the Company. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of suchwords and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance, andinvolve certain risks, uncertainties and assumptions, which are difficult to predict. See “Item 1A: Risk Factors” above. Therefore, actual outcomes and resultsmay differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publiclyany forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Company Overview Strategic Overview Teligent, Inc., or the Company, is a specialty generic pharmaceutical company. Our mission is to become a leader in the specialty generic pharmaceuticalmarket. Under our own label, we currently market and sell generic topical and branded generic injectable pharmaceutical products in the United States andCanada. In the United States we are currently marketing eight generic topical pharmaceutical products and four branded generic pharmaceutical products. Through the completion of an acquisition, we now sell a total of seventeen generic and branded generic injectable products and medical devices in Canada. Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide development, formulation, and manufacturing servicesto the pharmaceutical, over-the-counter, or OTC, and cosmetic markets. We operate our business under one segment. Effective October 23, 2015, we changedour name from IGI Laboratories, Inc. to Teligent, Inc. On October 26, 2015, our common stock, which was previously listed on the NYSE MKT, begantrading on the NASDAQ Global Select Market under the trading symbol “TLGT.” Our office, laboratories and manufacturing facilities are located at 105Lincoln Avenue, Buena, New Jersey. Currently, we have two platforms for growth: ·Developing, manufacturing and marketing a portfolio of generic pharmaceutical products in our own label in topical, injectable, complex andophthalmic dosage forms; and ·Managing our current contract manufacturing and formulation services business. We have been in the contract manufacturing and development of topical products business since the early 1990s, but our strategy since 2010 has beenfocused on the growth of our own generic pharmaceutical business. Since 2010, we have focused on transitioning our business to include more customers inthe topical pharmaceutical industry. In 2014, we broadened our target product focus from topical pharmaceuticals to include a wider specialtypharmaceutical approach. We believe that expanding our development and commercial base beyond topical generics, historically the cornerstone of ourexpertise, to include injectable generics, complex generics and ophthalmic generics (what we call our “TICO strategy”), will leverage our existing expertiseand capabilities, and broaden our platform for more diversified strategic growth. 42  As of the date of this report, we have acquired 25 drug products that have been previously approved by the FDA. Our pipeline includes 31 Abbreviated NewDrug Applications, or ANDAs filed with the United States Food and Drug Administration, or FDA, for additional pharmaceutical products. In addition, wehave four abbreviated new drug submissions, or ANDS, on file with Health Canada. We have an additional 39 product candidates at various stages of ourdevelopment pipeline, ten of which are on stability testing. In December 2015, we announced the approval by the FDA of Cefotan® (Cefotan for Injection).This was our first product approved from the portfolio of discontinued and withdrawn new drug applications, or NDAs, and ANDAs that we purchased fromAstra Zeneca on September 25, 2014. We have also experienced an increased rate of review by the FDA of applications filed in Generic Drug User FeeAmendments, or GDUFA, Year 3 and Year 4, which began October 1, 2014, and October 1, 2015, respectively. We submitted fifteen topical ANDAs in 2015.We expect to continue to expand our presence in the generic topical pharmaceutical market through the filing of additional ANDAs with the FDA and thesubsequent launch of products as these applications are approved. Our target is to file at least fifteen ANDAs in total in 2016 through our internal productdevelopment program, and we plan to file at least eight ANDSs with Health Canada in 2016. We will also seek to license or acquire further products,intellectual property, or pending applications to expand our portfolio. Effective October 26, 2015, we transferred the listing of our common stock from the NYSE MKT to the NASDAQ Global Select Market. Our common stockceased trading on the NYSE MKT under the symbol “IG” at the close of business on October 23, 2015 and began trading on the NASDAQ Global SelectMarket under the symbol “TLGT” on October 26, 2015. On November 13, 2015, we acquired all of the rights, title and interest in the development, production, marketing, import and distribution of allpharmaceutical products of Alveda Pharmaceuticals Inc., or Alveda, pursuant to two asset purchase agreements, one relating to the acquisition of all of theintellectual property-related assets of Alveda and the other relating to the acquisition of all other assets of Alveda. We also develop, manufacture, fill, and package topical semi-solid and liquid products for branded and generic pharmaceutical customers, as well as the OTCand cosmetic markets. These products are used in a wide range of applications from cosmetics and cosmeceuticals to the prescription treatment of conditionslike dermatitis, psoriasis, and eczema. We are currently exploring various options to enable us to expand our development and manufacturing capabilities toinclude sterile injectable and ophthalmic products. Results of Operations Fiscal Year 2015 Compared to Fiscal Year 2014 We had net income of $6,668,000 in 2015 compared to net income of $5,251,000 in 2014. Net income attributable to common stockholders was $6,668,000,or $0.13 per basic share in 2015, and net income applicable to common stockholders was $5,251,000, or $0.11 per share, in 2014: Revenues (in thousands): Year Ended December 31, Increase/(Decrease) Components of Revenue: 2015 2014 $ % Product sales $43,497 $32,104 $11,393 35%Research and development income 578 1,490 (912) (61)%Licensing, royalty, and other income 175 146 29 20%Total Revenues $44,250 $33,740 $10,510 31% The increase in product sales for the year ended December 31, 2015 as compared to the same period in 2014 was primarily due to the increased revenuefrom our own generic pharmaceutical product line that was launched in the first quarter of 2013, the launch of an additional Company label product in July2015, the purchase of three commercialized injectable products in October 2015 and the launch of two additional Company label products in June 2014.There was a decrease in product sales in our contract services business to three of our pharmaceutical customers and one cosmetic customer, which was onlypartially offset by increased sales to three of our pharmaceutical customers. Research and development income will not be consistent and will vary, fromperiod to period, depending on the required timeline of each development project. Licensing, royalty and other revenue decreased slightly due to a decreasein other revenue, while licensing and royalty revenue remained the same. 43  Costs and expenses (in thousands): Year Ended December 31, Increase/(Decrease) 2015 2014 $ % Cost of revenues $22,935 $16,948 $5,987 35%Selling, general and administrative 11,336 5,976 5,360 90%Product development and research 13,171 6,910 6,261 91%Totals costs and expenditures $47,442 $29,834 $17,608 59% Cost of sales increased for the year ended December 31, 2015 as compared to the same period in 2014 as a result of the increase in total revenue. Cost of salesas a percentage of total revenue was 52% for the year ended December 31, 2015 as compared to 50% for 2014. During 2015, approximately 86% of ourrevenue from contract and formulation services came from pharmaceutical customers as compared to 79% in 2014. Our research and development incomeresults primarily from services rendered under contractual agreements and, therefore, cost of sales as a percentage of our research and development income isrelatively low. Consistent with our strategy, we expect cost of sales as a percentage of total revenue to decline over time. Selling, general and administrative expenses for the year ended December 31, 2015 increased by $5,354,000 as compared to the same period in 2014. Duringthe fourth quarter the Company recorded acquisition related costs in the amount of $2,256,000, In addition, in 2015 there were increases of $1,056,000 fromthe issuance of stock-based compensation related to options and restricted stock, other corporate expenses of $519,000, professional fees of $431,000,amortization of product acquired in 2015 of $392,000, expenses related to Canadian operations of $171,000, travel-related costs of $153,000, websiteexpenses of $121,000, overhead costs of $106,000, recruiting and human resources expenses of $76,000, contributions of $50,000 and stockholder relationsexpense of $44,000 during the year ended December 31, 2015 as compared to the same period in 2014. These increases were partially offset by a decrease of$47,000 in salaries and related costs. Product development and research expenses for the year ended December 31, 2015 increased by $6,261,000 as compared to the same period in 2014.Consistent with our strategy to expand our portfolio of generic prescription pharmaceutical products, we increased headcount, including hiring our ChiefScientific Officer in October of 2015, which resulted in an increase of $781,000 in salaries and related costs; we increased spending on clinical studies by$2,687,000, costs related to our exhibit batches by $976,000, contract research by $857,000, professional fees by $272,000, $164,000 in expenses related toCanadian operations, stock based compensation related to options and restricted stock of $162,000, consulting fees by $83,000 and overhead costs by$147,000. In addition, fees related to GDUFA, and the associated filing of our applications with the FDA, increased by $129,000. Interest and Other Expense, net (in thousands): Year Ended December 31, Increase/(Decrease) 2015 2014 $ % Interest and other expense, net $(13,358) $(782) $12,576 1608%Foreign exchange gain (loss) $109 $- $109 100%Change in the fair value of derivative liability $23,144 $2,300 $20,844 906% Interest expense increased for the year ended December 31, 2015 as compared to the same period in 2014, primarily due to the inclusion in 2015 ofapproximately $12,799,000 of interest expense, amortization of debt discount and amortization of debt issuance costs related to the Convertible 3.75%Senior Notes (see Note 6 to the Company’s Consolidated Financial Statements. Loss on foreign exchange in 2015 resulted from the change in exchange ratesapplied to funds due from Teligent Canada at December 31, 2015. We also recorded a $23.1 million change in the fair value of the derivative liability as aresult in the change in the fair value of our derivative liability, caused primarily by the decrease in the price of our common stock in 2015. 44  Net income attributable to common stockholders (in thousands, except per share numbers): Year Ended December 31, Increase/(Decrease) 2015 2014 $ % Net income attributable to common stockholders $6,668 $5,251 $1,417 27%Basic income per share $0.13 $0.11 $0.02 18%Diluted income (loss) per share $(0.07) $0.09 $(0.16) (178)% Net income for the year ended December 31, 2015 increased as compared to the year ended December 31, 2014 due to the change in the fair value of thederivative liability, partially offset by the increase in revenues and the increase in costs and expenses noted above. Fiscal Year 2014 Compared to Fiscal Year 2013 We had net income of $5,251,000 in 2014 compared to a net loss of $84,000 in 2013. Net income attributable to common stockholders was $5,251,000, or$0.11 per basic share in 2014, and net loss applicable to common stockholders was $1,392,000, or ($0.03) per share, in 2013: Revenues (in thousands): Year Ended December 31, Increase/(Decrease) Components of Revenue: 2014 2013 $ % Product sales $32,104 $16,981 $15,123 89%Research and development income 1,490 1,094 396 36%Licensing, royalty, and other income 146 149 (3) (2)%Total Revenues $33,740 $18,224 $15,516 85% The increase in product sales for the year ended December 31, 2014 as compared to the same period in 2013 was primarily due to the increased revenue fromour own generic pharmaceutical product line that was launched in the first quarter of 2013, the launch of econazole nitrate cream 1% in September 2013 andthe launch of two additional IGI label products in June 2014. In addition, we increased product sales in our contract services business to three of ourpharmaceutical customers, which was only partially offset by decreased sales to two of our cosmetic customers. Research and development income will not beconsistent and will vary, from period to period, depending on the required timeline of each development project. Licensing, royalty and other revenuedecreased slightly due to a decrease in other revenue, while licensing and royalty revenue remained the same. Costs and expenses (in thousands): Year Ended December 31, Increase/(Decrease) 2014 2013 $ % Cost of revenues $16,948 $12,079 $4,869 40%Selling, general and administrative 5,976 3,484 2,492 72%Product development and research 6,910 2,743 4,167 152%Totals costs and expenditures $29,834 $18,306 $11,528 63% Cost of sales increased for the year ended December 31, 2014 as compared to the same period in 2013 as a result of the increase in total revenue. Cost of salesas a percentage of total revenue was 50% for the year ended December 31, 2014 as compared to 66% for 2013. The decrease in cost of sales as a percentage ofproduct sales for 2014 was attributable to increased revenue from our Company label products, which have higher margins, and a shift in the mix of ourproduct sales to include greater higher-margin pharmaceutical products. During 2014, approximately 79% of our revenue from contract and formulationservices came from pharmaceutical customers as compared to 61% in 2013. Our research and development income results primarily from services renderedunder contractual agreements and, therefore, cost of sales as a percentage of our research and development income is relatively low. Consistent with ourstrategy, we expect cost of sales as a percentage of total revenue to decline over time. 45  Selling, general and administrative expenses for the year ended December 31, 2014 increased by $2,492,000 as compared to the same period in 2013. Therewere increases in salaries and related costs of $1,038,000 due to an increase in headcount, professional fees of $561,000, $271,000 in expense from theissuance of stock-based compensation related to options and restricted stock, $255,000 in dues, subscriptions and corporate fees, $129,000 in recruitingexpenses and $118,000 in travel-related costs during the year ended December 31, 2014 as compared to the same period in 2013. These increases werepartially offset by a decrease of $35,000 in trade show expenses. Product development and research expenses for the year ended December 31, 2014 increased by $4,167,000 as compared to the same period in 2013.Consistent with our strategy to expand our portfolio of generic prescription pharmaceutical products, we increased headcount, which resulted in an increaseof $225,000 in salaries and related costs; we increased spending on clinical studies by $1,122,000, pilot batch expense by $963,000, outside testing andsupplies by $859,000 and consulting fees by $299,000. In addition, fees related to the Generic Drug User Fee Act, and the associated filing of ourapplications with the FDA, increased by $680,000. Interest and Other Expense, net (in thousands): Year Ended December 31, Increase/(Decrease) 2014 2013 $ % Interest and other expense, net $(782) $(199) $583 293% Change in the fair value of derivative liability $2,300 $- $2,300 100% Interest expense increased for the year ended December 31, 2014 as compared to the same period in 2013, primarily due to the inclusion in 2014 ofapproximately $513,000 of interest expense; amortization of debt discount and amortization of debt issuance costs related to the Convertible 3.75% SeniorNotes (see Note 6 to the Company’s Consolidated Financial Statements). In addition, there was approximately $42,000 amortization of debt issuance costsrelated to the payoff of the note payable to Square 1 Bank in 2014 (see Note 8 to the Company’s Consolidated Financial Statements). We also recorded a $2.3million change in the fair value of the derivative liability as a result in the change in the fair value of our derivative liability, caused primarily by thedecrease in the price of our common stock in December 2014. Net income (loss): Year Ended December 31, Increase/(Decrease) 2014 2013 $ % Net income (loss) $5,251 $(84) $5,335 6,351% Net income for the year ended December 31, 2014 as compared to net loss for the year ended December 31, 2013 is due to the increase in revenues partiallyoffset by the increase in costs and expenses noted above. Net income (loss) attributable to common stockholders (in thousands, except per share numbers): Year Ended December 31, Increase/(Decrease) 2014 2013 $ % Net income (loss) attributable to common stockholders $5,251 $(1,392) $6,643 477%Basic net income (loss) per share $0.09 $(0.03) $0.12 400%Diluted net income (loss) per share $0.11 $(0.03) $0.14 467% The net income attributable to common stockholders for the year ended December 31, 2014 as compared to the net loss attributable to common stockholdersfor the year ended December 31, 2013 is due to the increase in revenues partially offset by the increase in costs and expenses noted above. For the year endedDecember 31, 2013, there was a preferred stock dividend recorded on December 6, 2013 in connection with the mandatory conversion of our Series Cpreferred stock. This dividend of $1,308,000 was recorded upon conversion of our Series C preferred stock into common stock. 46  Liquidity and Capital Resources Our principal sources of liquidity were cash and cash equivalents of approximately $87 million at December 31, 2015, $10 million available under the $10million General Electric Capital Corporation credit facility and cash from operations. We had working capital of $106.0 million at December 31, 2015. Wemay require additional funding and this funding will depend, in part, on the timing and structure of potential business arrangements. If necessary, we maycontinue to seek to raise additional capital through the sale of our equity or through a strategic alliance with a third party. There may also be additionalacquisition and growth opportunities that may require external financing. There can be no assurance that such financing will be available on termsacceptable to us, or at all. We believe that our existing capital resources will be sufficient to support our current business plan beyond March 2017. On December 10, 2014, we entered into a purchase agreement, pursuant to which we agreed to sell $125 million aggregate principal amount of our 3.75%Convertible Senior Notes due 2019, or the Notes, to Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, as the initial purchasers (See Note 21 tothe Company’s Consolidated Financial Statements). In addition, we granted the initial purchasers a 30-day option to purchase up to an additional $18.75million aggregate principal amount of the Notes on the same terms and conditions. The Notes were sold in a private placement to qualified institutionalbuyers pursuant to Rule 144A under the Securities Act of 1933, as amended. On November 18, 2014, we entered into a $10 million line of credit with General Electric Capital Corporation (See Note 7 to the Company’s ConsolidatedFinancial Statements). As of December 31, 2015, the outstanding principal balance on the line of credit was $0. The Company terminated the line in February2016. On June 27, 2014, we announced the pricing of our underwritten public offering of 4,650,000 shares of our common stock at a price to the public of $5.00 pershare (See Note 19 to the Company’s Consolidated Financial Statements). The offering closed on July 2, 2014, and, after giving effect to the underwriters’exercise of the over-allotment option in full, we sold an aggregate of 5,347,500 shares of common stock. The net proceeds of the offering were approximately$24.9 million, after deducting the underwriters’ commission and offering expenses. Our operating activities used $15.5 million, $3.9 million and $.6 million of cash during the years ended December 31, 2015, 2014 and 2013, respectively.The use of cash for the year ended December 31, 2015 was a result of $5.2 million paid related to Canadian goods and services tax (GST) and the harmonizedsales tax (HST), which we expect to be refunded in 2016. We also paid interest expense in the amount of $6.7 million related to our Notes. In connection withthe acquisition of Alveda, we paid $2.2 million in acquisition costs. The remaining use of cash was primarily a result of the $3.8 million in changes inoperating assets and liabilities, which included a $6.0 million payment related to the AstraZeneca assets acquired in September of 2015, offset by the netincome for the year. The use of cash for the year ended December 31, 2014 was substantially a result of the changes in operating assets and liabilities offsetby the net income for the year. The use of cash for the year ended December 31, 2013 was substantially a result of the net loss for the period offset by non-cash expense items. Our investing activities used $53.1 million during the year ended December 31, 2015 compared to $3.8 million of cash used in the year ended December 31,2014 and $2.1 million of cash used in the year ended December 31, 2013. We paid $35.4 million in cash to acquire the assets of Alveda in November 2015.We completed the acquisition of five products, which used $11.7 million in cash in 2015. We also used $6.0 million for the purchase of capital expendituresrelated to additional scientific and manufacturing equipment and costs related to the planning phase of our expansion. The equipment purchased inmanufacturing, will automate certain aspects of our manufacturing processes, and allow us to continue to increase efficiency. The funds used during the yearended December 31, 2014 were for the purchase of products (see Note 7 to the Company’s Condensed Consolidated Financial Statements) and capitalexpenditures related to additional computer equipment and scientific equipment and improvements incurred to expand our R & D. In 2013, we used $1.8million to acquire econazole nitrate cream 1%, which we launched in September 2013. The remaining funds used in 2013 were for additional equipment andrelated services for our analytical and compounding functions, packaging and filling lines. Our financing activities used $3.1 million of cash during the year ended December 31, 2015 compared to $164.5 million of cash provided by financingactivities in the year ended December 31, 2014 and $2.3 million of cash provided by financing activities in the year ended December 31, 2013. The cashused during the year ended December 31, 2015 in the amount of $3.1 million was used to pay down debt. The cash provided for the year ended December 31,2014 was mainly $139 million net proceeds from the Notes, $24.9 million net proceeds from the public offering of common stock and $0.8 million proceedsfrom the exercise of common stock warrants and options. The cash provided for the year ended December 31, 2013 was primarily related to the $2.0 millionwe drew down on our existing credit line in 2013. 47  Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changesin financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our shareholders. Contractual Obligations As more fully described under Item 2, Properties, we lease the facilities that we occupy in one building in Buena, New Jersey, a warehouse in Vineland, NewJersey and office space in Iselin, New Jersey. Our remaining obligations under these leases are summarized in the table below. As of December 31, 2015, our principal outstanding debt obligation related to our Notes is a total of $143.75 million and are due in December of 2019. Payments Due by Period (in thousands) Contractual Obligations Total Less than 1 Year 1-3 Years 3-5 Years More than 5Years Convertible Senior Notes $143,750 $- $- $143,750 $- Capital Lease 71 71 - - - Operating Lease 2,898 408 794 632 1,064 Total $146,719 $479 $794 $144,382 $1,064 Critical Accounting Policies and Estimates Our consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles, which require us to make subjectivedecisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting thejudgment increases, such judgments become even more subjective. While we believe our assumptions are reasonable and appropriate, actual results may bematerially different than estimated. Fair Value of Financial Instruments The Company measures fair value in accordance with ASC 820-10, Fair Value Measurements and Disclosures (formerly SFAS 157, Fair ValueMeasurements). ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based onassumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantiallythe full term of the asset or liability. 48  Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, therebyallowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The fair value hierarchy also requires anentity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company measures its derivative liability at fair value. The derivative convertible option related to Convertible Notes issued December 16, 2014 wasvalued using the “with” and “without” analysis. A “with” and “without” analysis is a standard valuation technique for valuing embedded derivatives by firstconsidering the value of the Convertible Notes with the option and then considering the value of the Convertible Notes without the option. The difference isthe fair value of the embedded derivatives. The convertible note derivative is classified within Level 3 because it is valued using the “with” and “without”method, which does utilize inputs that are unobservable in the market. On May 20, 2015, the Company received approval to increase its authorized shares sufficient to allow for the conversion of the embedded option into equityat the annual shareholders meeting. Therefore, the derivative liability of $18.3 million was reclassified into stockholders equity. Based on the closing price ofthe Company’s common stock as of December 31, 2015, the fair value of the Notes was approximately $107 million compared to their face value of $143.75million as of December 31, 2015. However, this variance is due to the conversion feature in the Notes rather than to changes in market interest rates. TheNotes carry a fixed interest rate and therefore do not subject the Company to interest rate risk. The Company recorded a change in the fair value of thederivative liability through May 20, 2015 of $23.1 million for the year ended December 31, 2015 on the condensed consolidated statements of operations.On May 20, 2015, the Company recorded the final change in fair value and subsequently reclassified the value of the derivative liability into stockholdersequity due to the approval of sufficient shares. Allowance for Doubtful Accounts The Company extends credit to its contract services customers, based upon credit evaluations, in the normal course of business, primarily with 30-day terms.The Company does not require collateral from its customers. Bad debt provisions are provided for on the allowance method based on historical experienceand management’s evaluation of outstanding accounts receivable. The Company reviews the allowance for doubtful accounts regularly, and past duebalances are reviewed individually for collectability. The Company charges off uncollectible receivables against the allowance when the likelihood ofcollection is remote. The Company extends credit to wholesaler and distributor customers and national retail chain customers, based upon credit evaluations, in the normal courseof business, primarily with 60-day terms. The Company maintains customer-related accruals and allowances that consist primarily of chargebacks, rebates,sales returns, shelf stock allowances, administrative fees and other incentive programs. Some of these adjustments relate specifically to the genericprescription pharmaceutical business. Typically, the aggregate gross-to-net adjustments related to these customers can exceed 50% of the gross sales throughthis distribution channel. Certain of these accruals and allowances are recorded in the balance sheet as current liabilities and others are recorded as areduction to accounts receivable. Revenue Recognition The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred or contractualservices rendered, the sales price is fixed or determinable, and collection is reasonably assured in conformity with ASC 605, Revenue Recognition. The Company derives its revenues from three basic types of transactions: sales of its own generic pharmaceutical topical products, sales of manufacturedproduct for its customers included in product sales, and research and product development services performed for third parties. Due to differences in thesubstance of these transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each. Product Sales: Product Sales includes Company Product Sales and Contract Manufacturing Sales. Company Product Sales: The Company records revenue from Company product sales when title and risk of ownership have been transferred to the customer,which is typically upon delivery of products to the customer. 49  Revenue and Provision for Sales Returns and Allowances As customary in the pharmaceutical industry, the Company’s gross product sales from Company label products are subject to a variety of deductions inarriving at reported net product sales. When the Company recognizes revenue from the sale of products, an estimate of sales returns and allowances, or SRA,is recorded, which reduces product sales. Accounts receivable and/or accrued expenses are also reduced and/or increased by the SRA amount. Theseadjustments include estimates for chargebacks, rebates, cash discounts and returns and other allowances. These provisions are adjusted as estimates are basedon historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with direct andindirect customers. The estimation process used to determine our SRA provision has been applied on a consistent basis and no material adjustments havebeen necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying estimates. The Company will use a variety ofmethods to assess the adequacy of our SRA reserves to ensure that our financial statements are fairly stated. These will include periodic reviews of customerinventory data, customer contract programs, subsequent actual payment experience and product pricing trends to analyze and validate the SRA reserves. The provision for chargebacks is our most significant sales allowance. A chargeback represents an amount payable in the future to a wholesaler for thedifference between the invoice price paid to the Company by our wholesale customer for a particular product and the negotiated contract price that thewholesaler’s customer pays for that product. The Company’s chargeback provision and related reserve varies with changes in product mix, changes incustomer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expectedwholesaler sell-through levels to indirect customers at contract prices. The Company will validate the chargeback accrual quarterly through a review of theinventory reports obtained from our largest wholesale customers. This customer inventory information is used to verify the estimated liability for futurechargeback claims based on historical chargeback and contract rates. These large wholesalers represent 90% - 95% of the Company’s chargeback payments.The Company continually monitors current pricing trends and wholesaler inventory levels to ensure the liability for future chargebacks is fairly stated. Net revenues and accounts receivable balances in the Company’s consolidated financial statements are presented net of SRA estimates. Certain SRA balancesare included in accounts payable and accrued expenses. Contract Manufacturing Sales: The Company recognizes revenue when title transfers to its customers, which is generally upon shipment of products. Theseshipments are made in accordance with sales commitments and related sales orders entered into with customers either verbally or in written form. Therevenues associated with these transactions, net of appropriate cash discounts, product returns and sales reserves, are recorded upon shipment of the productsincluded in Product Sales in the statement of operations. Research and Development Income: The Company establishes agreed upon product development agreements with its customers to perform productdevelopment services. Product development revenues are recognized in accordance with the product development agreement upon the completion of thephases of development and when the Company has no future performance obligations relating to that phase of development. Revenue recognition requiresthe Company to assess progress against contracted obligations to assure completion of each stage. These payments are generally non-refundable and arereported as deferred until they are recognizable as revenue. If no such arrangement exists, product development fees are recognized ratably over the entireperiod during which the services are performed. In making such assessments, judgments are required to evaluate contingencies such as potential variances in schedule and the costs, the impact of changeorders, liability claims, contract disputes and achievement of contractual performance standards. Changes in total estimated contract cost and losses, if any,are recognized in the period they are determined. Billings on research and development contracts are typically based upon terms agreed upon by theCompany and customer and are stated in the contracts themselves and do not always align with the revenues recognized by the Company. 50  Derivatives The Company accounts for its derivative instruments in accordance with ASC 815-10, Derivatives and Hedging, or ASC 815-10. ASC 815-10 establishesaccounting and reporting standards requiring that derivative instruments, including derivative instruments embedded in other contracts, be recorded on thebalance sheet as either an asset or liability measured at its fair value. ASC 815-10 also requires that changes in the fair value of derivative instruments berecognized currently in results of operations unless specific hedge accounting criteria are met. The Company has not entered into hedging activities to date.The Company recognizes all derivative instruments as either assets or liabilities in the consolidated balance sheets at their respective fair values. TheCompany's derivative instruments include the embedded convertible option of its Notes issued December 16, 2014 (as defined in Note 6), all of which havebeen recorded as a liability at fair value, and are revalued at each reporting date, with changes in the fair value of the instruments included in theconsolidated statements of operations as non-operating income (expense). Due to the approval of the sufficient shares at the Company’s annual shareholdermeeting, the liability for the embedded derivative was reclassified to equity on May 20, 2015. The Company has no derivatives at December 31, 2015. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or GAAP, requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include derivatives,SRA allowances, allowances for excess and obsolete inventories, allowances for doubtful accounts, provisions for income taxes and related deferred tax assetvaluation allowances, stock based compensation and accruals for environmental cleanup and remediation costs. Actual results could differ from thoseestimates. Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842): “Recognition and Measurement of Financial Assetsand Financial Liabilities”. The update supersedes Topic 840, Leases and requires the recognition of lease assets and lease liabilities by lessees for thoseleases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases, with cash paymentsfrom operating leases classified within operating activities in the statement of cash flows. The amendments in this update are effective for fiscal yearsbeginning after December 15, 2018 for public business entities, which for the Company means January 1, 2019. The Company is currently evaluating theimpact of this ASU on its consolidated financial statements. In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): “Simplifying the Accounting for Measurement-PeriodAdjustments”. The update eliminates the requirement to retrospectively adjust the provisional amounts recognized at the acquisition date with acorresponding adjustment to goodwill during the measurement period when new information is obtained about the facts and circumstances that existed as ofthe acquisition date, that if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition ofadditional assets or liabilities. The amendments in this update are effective for fiscal years beginning after December 15, 2015, which for the Company meansJanuary 1, 2016, and should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update. Earlyapplication is permitted for financial statements that have not been issued. The Company is currently evaluating the impact of this ASU on its consolidatedfinancial statements. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): “Simplifying the Measurement of Inventory”. ASU 2015-11 requires inventorymeasured using any method other than last-in, first out (“LIFO”) or the retail inventory method to be subsequently measured at the lower of cost or netrealizable value, rather than at the lower of cost or market. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory methodis unchanged. ASU 2015-11 is effective prospectively for fiscal years, and for interim periods within those years, beginning after December 15, 2016. Earlyapplication is permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. 51  In April 2015, the FASB issued ASU 2015-3, “Simplifying the Presentation of Debt Issuance Costs.” The new guidance specifies that debt issuance costsunder the new standard are to be netted against the carrying value of the financial liability. Under current guidance, debt issuance costs are recognized as adeferred charge and reported as a separate asset on the balance sheet. The new guidance aligns the treatment of debt issuance costs and debt discounts in thatboth reduce the carrying value of the liability. Amortization of debt issuance costs is to be recorded as interest expense on the income statement. ASU 2015-3is effective fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statementsthat have not been issued previously. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This ASU is a comprehensive new revenue recognition model thatrequires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects toreceive in exchange for those goods or services. This ASU is effective for annual reporting periods beginning after December 15, 2016 and early adoption isnot permitted. Accordingly, the Company will adopt this ASU on January 1, 2017. Companies may use either a full retrospective or modified retrospectiveapproach to adopt this ASU and management is currently evaluating which transition approach to use. The Company is currently evaluating the impact ofASU 2014-09. In August 2014, FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity’s Ability toContinue as a Going Concern”. This ASU requires management to evaluate, in connection with preparing financial statements for each annual and interimreporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as agoing concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements areavailable to be issued when applicable) and provide related disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, andfor annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2014-15. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2015, our principal debt obligation was related to our Notes. Interest accrues at a fixed rate of 3.75% on the outstanding principalamount of the Notes and is paid semi-annually every June 15 and December 15 until the Notes mature on December 15, 2019. Since the interest rate is fixed,we have no market risk related to the Notes. Our revolving Credit and Security Agreement with General Electric Capital Corporation calls for interest to accrue based on a premium above either thecurrent prime rate or current LIBOR rates. Therefore, borrowings pursuant to this revolving credit facility would be subject to market risk. However, as ofDecember 31, 2015, we had no outstanding loans and therefore no market risk related to this revolving credit facility. Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and the Notes. The fair values of cash and cashequivalents, accounts receivable and accounts payable approximate book value because of the short maturity of these instruments. Based on the closingprice of our common stock as of December 31, 2015, the fair value of our Notes was approximately $107 million compared to their face value of $143.75million as of December 31, 2015. However, this variance is due to the conversion feature in the Notes rather than to changes in market interest rates. Asnoted above, the Notes carry a fixed interest rate and therefore do not subject us to interest rate risk. As a result in the change in fair value, we recorded a$23.1 million change in the fair value of the derivative liability on our consolidated statements of operations in 2015. At December 31, 2015, the bulk of our cash and cash equivalents was invested in overnight instruments, the interest rates of which may changedaily. Accordingly, these overnight investments are subject to market risk. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Statements on page F-1. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL DISCLOSURE None. 52  Item 9a. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness ofour disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Reporton Form 10-K, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to bedisclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periodsspecified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financialofficers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) Changes in Internal Controls. There were no changes in our internal control over financial reporting, identified in connection with the evaluation ofsuch internal control that occurred during the fourth quarter of our last fiscal year that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting. The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financialofficers and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. TheCompany’s internal control over financial reporting includes those policies and procedures that: ·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; ·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and ·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets thatcould have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making thisassessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in InternalControl-Integrated Framework (2013). Based on our assessment, management believes that, as of December 31, 2015, the Company’s internal control over financial reporting is effective based onthose criteria. EisnerAmper LLP, the independent registered public accounting firm that audited the consolidated financial statements in this Annual Report on Form 10-Kfor the year ended December 31, 2015, has issued a report concerning the effectiveness of our internal control over financial reporting for that year, which isincluded in Part II, Item 8 of this Annual Report on Form 10-K. Item 9B. OTHER INFORMATION None. 53  PART III Item 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Management and Corporate GovernanceMatters,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Code of Conduct and Ethics” in the Company’s Proxy Statement for the 2016Annual Meeting of Stockholders. Item 11.EXECUTIVE COMPENSATION The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Executive Officer and DirectorCompensation,” “Compensation Discussion and Analysis,” “Management and Corporate Governance Matters,” “Compensation Committee Report” and“Compensation Discussion and Analysis” in the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders. Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Security Ownership of Certain BeneficialOwners and Management” and “Equity Compensation Plan Information” in the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders. Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The response to this item is incorporated by reference from the discussion responsive thereto under the captions “Certain Relationships and Related PersonTransactions” and “Management and Corporate Governance” in the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders. Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICES The response to this item is incorporated by reference from the discussion responsive thereto under the caption “Independent Registered Public AccountingFirm” in the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders. 54  PART IV Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a)The following documents are filed as part of this Annual Report on Form 10-K: (a)(1)See “Index to Consolidated Financial Statements and Financial Statement Schedules” at Item 8 to this Annual Report on Form 10-K. (a)(2)Other financial statement schedules have not been included because they are not applicable or the information is included in the financialstatements or notes thereto. (a)(3)The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Exhibits (3.1)Amended and Restated Certificate of Incorporation of IGI Laboratories, Inc., dated May 7, 2008 (incorporated by reference to Exhibit 3.1 tothe Company’s Report on Form 8-K, filed May 12, 2008). (3.2)Amended and Restated Bylaws of IGI Laboratories, Inc., effective May 7, 2008 (incorporated by reference to Exhibit 3.2 to the Company’sReport on Form 8-K, filed May 12, 2008). (4.1)Specimen stock certificate for shares of Common Stock, par value $.01 per share (incorporated by reference to Exhibit 4 to the Company’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2000, filed March 28, 2001 (“the 2000 Form 10-K”)). (4.2)Indenture dated as of December 16, 2014, by and between IGI Laboratories, Inc. and Wilmington Trust, National Association (incorporatedby reference to Exhibit 4.1 to the Company’s Report on Form 8-K, filed December 17, 2014). (10.1)#IGI, Inc. 1998 Directors Stock Plan, as amended (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on FormS-8 (Registration No. 333-160342), filed June 30, 2009). (10.2)#IGI, Inc. 1999 Director Stock Option Plan, as amended (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statementon Form S-8 (Registration No. 333-160342, filed June 30, 2009). (10.3)#IGI, Inc. 1999 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement onForm S-8 (Registration No. 333-160342), filed June 30, 2009). (10.4)#IGI Laboratories, Inc. 2009 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Company’sReport on Form 8-K, filed June 4, 2014). (10.5)#Form of Non-Qualified Stock Option Agreement under the IGI Laboratories, Inc. 2009 Equity Incentive Plan (incorporated by reference toExhibit 10.2 to the Company’s Report on Form 8-K, filed July 2, 2009). (10.6)#Form of Stock Option Award Agreement under the IGI Laboratories, Inc. 2009 Equity Incentive Plan (incorporated by reference to Exhibit10.2 to the Company’s Report on Form 8-K, filed July 20, 2011). (10.7)#Form of Award Agreement for Restricted Shares under the IGI Laboratories, Inc. 2009 Equity Incentive Plan (incorporated by reference toExhibit 10.3 to the Company’s Report on Form 8-K, filed July 2, 2009). 55  (10.8)#Indemnification Agreement by and between IGI Laboratories, Inc. and Joyce Erony, dated March 13, 2009 (incorporated by referenceExhibit 10.10 to the Company’s Report on Form 8-K, filed March 19, 2009 (the “March 2009 8-K”)). (10.9)#Form of Indemnification Agreement for Certain Directors (incorporated by reference to Exhibit 10.11 to the March 2009 8-K). (10.10)#Employment Agreement dated July 14, 2011 between IGI Laboratories, Inc. and Jenniffer Collins (incorporated by reference to Exhibit 10.1to the Company’s Report on Form 8-K, filed July 20, 2011). (10.11)#Employment Agreement dated July 30, 2012 between IGI Laboratories, Inc. and Jason Grenfell-Gardner (incorporated by reference toExhibit 10.1 to the Company’s Report on Form 8-K, filed July 30, 2012). (10.12)+Purchase and Sale Agreement between the Company and Prasco, LLC for the purchase of econazole nitrate cream 1%, dated February 1,2013, (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed August 9, 2013). (10.13)Asset Purchase Agreement dated as of September 30, 2014, by and between IGI Laboratories, Inc. and Valeant Pharmaceuticals NorthAmerica, LLC and Valeant Pharmaceuticals Luxembourg SARL (incorporated by reference to Exhibit 10.1 to the Company’s Report onForm 8-K, filed October 1, 2014). (10.14)Asset Purchase Agreement dated as of September 30, 2014, by and between IGI Laboratories, Inc. and Valeant Pharmaceuticals NorthAmerica, LLC and Valeant Pharmaceuticals Luxembourg SARL (incorporated by reference to Exhibit 10.2 to the Company’s Report onForm 8-K, filed October 1, 2014). (10.15)+Asset Purchase Agreement dated as of September 24, 2014, by and between IGI Laboratories, Inc. and AstraZeneca Pharmaceuticals LP(incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-Q, filed November 13, 2014). (10.16)Credit Agreement dated as of November 18, 2014, by and among IGI Laboratories, Inc., Igen, Inc., and IGI Labs, Inc. as Borrowers, the otherPersons party thereto that are designated as Credit Parties, General Electric Capital Corporation as Agent for all Lenders, GE Capital Bankas a Lender, and the other financial institutions party thereto as Lenders (incorporated by reference to Exhibit 10.1 to the Company’sReport on Form 8-K, filed November 24, 2014). (10.17)Guaranty and Security Agreement dated as of November 18, 2014, by and among IGI Laboratories, Inc., Igen, Inc., and IGI Labs, Inc. asBorrowers and each other Grantor from time to time party thereto in favor of General Electric Capital Corporation as Agent (incorporated byreference to Exhibit 10.2 to the Company’s Report on Form 8-K, filed November 24, 2014). (10.18)Purchase Agreement dated December 10, 2014, by and between IGI Laboratories, Inc. and the initial purchasers set forth on Schedule 1thereto (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed December 17, 2014). (21)*List of Subsidiaries. (23.1)*Consent of EisnerAmper LLP. (31.1)*Certification of the President and Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 56  (31.2)*Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002. (32.1)*Certification of the President and Chief Executive Officer and of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (101)*The following financial information from this Annual Report on Form 10-K for the year ended December 31, 2015, formatted in XBRL(Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Operations; (ii) theConsolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to Consolidated Financial Statements,tagged as blocks of text. *Filed herewith.#Indicates management contract or compensatory plan.+Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to a request for confidential treatment that has been grantedby the SEC. 57  SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Teligent, Inc. By:/s/ Jason Grenfell-Gardner Jason Grenfell-Gardner President and Chief Executive Officer Date: March 14, 2016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated below and on the dates indicated. Signature Title Date /s/ Jason Grenfell-Gardner Director, President and Chief Executive Officer March 14, 2016Jason Grenfell-Gardner (Principal Executive Officer) /s/ Jenniffer Collins Chief Financial Officer March 14, 2016Jenniffer Collins (Principal Financial Officer) /s/ Steven Koehler Director March 14, 2016Steven Koehler /s/ James Gale Director March 14, 2016James Gale /s/ Narendra Borkar Director March 14, 2016Narendra Borkar /s/ Bhaskar Chaudhuri Director March 14, 2016Bhaskar Chaudhuri /s/ John Celentano Director March 14, 2016John Celentano 58  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2015 and 2014 F-4 Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013 F-5 Consolidate Statements of Comprehensive Income/(Loss) F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013 F-7 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013 F-8 Notes to Consolidated Financial Statements F-9 - F-38 Financial Statement Schedule: Quarterly Results F-39 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts F-40 F-1  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and StockholdersTeligent, Inc. and subsidiaries (formerly known as IGI Laboratories, Inc.) We have audited the accompanying consolidated balance sheets of Teligent, Inc. and subsidiaries (the "Company") as of December 31, 2015 and 2014, andthe related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the years in the three-yearperiod ended December 31, 2015. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinionon these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Teligent, Inc. andsubsidiaries as of December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the years in the three-yearperiod ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Teligent, Inc. and subsidiaries'internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control - Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), and our report dated March 14, 2016 expressed an unqualified opinionthereon. In connection with our audits of the consolidated financial statements referred to above, we also audited Schedule II - Valuation and Qualifying Accounts foreach of the years in the three-year period ended December 31, 2015. In our opinion, this financial schedule, when considered in relation to the consolidatedfinancial statements taken as a whole, presents fairly, in all material respects, the information stated therein. /s/ EisnerAmper LLP Iselin, New JerseyMarch 14, 2016 F-2  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and StockholdersTeligent, Inc. and subsidiaries (formerly known as IGI Laboratories, Inc.) We have audited Teligent, Inc. and subsidiaries' (the "Company") internal control over financial reporting as of December 31, 2015, based on criteriaestablished in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission("COSO"). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over FinancialReporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. In our opinion, Teligent, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015,based on criteria established in the 2013 Internal Control - Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof Teligent, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss),stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated, March 14, 2016, expressedan unqualified opinion thereon. /s/ EisnerAmper LLP Iselin, New JerseyMarch 14, 2016 F-3  TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share and per share information) December 31, December 31, 2015 2014 ASSETS Current assets: Cash and cash equivalents $87,191 $158,883 Accounts receivable, net 14,028 14,366 Inventories 8,985 2,784 Prepaid expenses and other receivables 6,597 1,185 Total current assets 116,801 177,218 Property, plant and equipment, net 8,706 3,262 Debt issuance costs, net 4,027 5,132 Intangible assets, net 54,320 10,604 Goodwill 426 - Other 482 862 Total assets $184,762 $197,078 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $3,955 $1,643 Accrued expenses 6,267 5,141 Payable for product acquisition costs - 6,000 Deferred income, current 476 87 Capital lease obligation, current 70 131 Total current liabilities 10,768 13,002 Convertible 3.75% senior notes, net of debt discount (face of $143,750) 106,991 100,311 Fair value of derivative liability - convertible 3.75% senior notes - 41,400 Note payable, bank - 3,160 Deferred tax liability 244 - Other long term liabilities - 71 Total liabilities 118,003 157,944 Stockholders’ equity: Series A Convertible Preferred stock, $0.01 par value, 100 shares authorized; 0 shares issued and outstanding asof December 31, 2015 and 2014, respectively - - Series C Convertible Preferred stock, $0.01 par value, 1,550 shares authorized; 0 shares issued and outstanding asof December 31, 2015 and 2014, respectively - - Common stock, $0.01 par value, 60,000,000 shares authorized; 53,000,689 and 52,819,787 shares issued andoutstanding as of December 31, 2015 and December 31, 2014, respectively 549 548 Additional paid-in capital 99,258 78,172 Accumulated deficit (32,918) (39,586)Accumulated other comprehensive income, net of taxes (130) - Total stockholders’ equity 66,759 39,134 Total liabilities and stockholders’ equity $184,762 $197,078 The accompanying notes are an integral part of the consolidated financial statements. F-4  TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFor the years ended December 31, 2015, 2014 and 2013(in thousands, except shares and per share information) 2015 2014 2013 Revenues: Product sales, net $43,497 $32,104 $16,981 Research and development income 578 1,490 1,094 Licensing, royalty and other revenue 175 146 149 Total revenues 44,250 33,740 18,224 Costs and Expenses: Cost of revenues 22,935 16,948 12,079 Selling, general and administrative expenses 11,336 5,976 3,484 Product development and research expenses 13,171 6,910 2,743 Total costs and expenses 47,442 29,834 18,306 Operating income (loss) (3,192) 3,906 (82) Other Income (Expense): Change in the fair value of derivative liability 23,144 2,300 - Foreign exchange gain (loss) 109 - - Interest and other expense, net (13,358) (782) (199)Income (loss) before income tax expense (benefit) 6,703 5,424 (281) Income tax expense (benefit) 35 173 (197) Net income (loss) 6,668 5,251 (84) Preferred stock dividend - - (1,308) Net income (loss) attributable to common stockholders $6,668 $5,251 $(1,392) Basic earnings (loss) per share $0.13 $0.11 $(0.03)Diluted earnings (loss) per share $(0.07) $0.09 $(0.03) Weighted average shares of common stock outstanding: Basic 52,872,814 49,817,721 43,517,640 Diluted 67,111,995 64,207,190 43,517,640 The accompanying notes are an integral part of the consolidated financial statements. F-5 TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)For the years ended December 31, 2015, 2014 and 2013(in thousands) 2015 2014 2013 Net Income (loss) $6,668 $5,251 $(84) Other Comprehensive (loss) income, net of tax Foreign currency translation adjustment (130) - - Other Comprehensive loss (130) - - Comprehensive income (loss) $6,538 $5,251 $(84) F-6  TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2015, 2014 and 2013(in thousands) 2015 2014 2013 Cash flows from operating activities: Net income (loss) $6,668 $5,251 $(84)Reconciliation of net income (loss) to net cash used in operating activities: Depreciation and amortization of fixed assets 560 415 375 Amortization of license fee 100 100 100 Provision for write down of inventory 50 228 110 Issuance of stock to consultant - 80 - Stock based compensation expense 2,273 823 536 Amortization of debt issuance costs 1,132 107 31 Amortization of Intangibles 514 120 60 Foreign currency exchange gain (109) - - Amortization of debt discount on convertible 3.75% senior notes 6,680 261 - Change in the fair value of derivative liability (23,144) (2,300) - Loss on abandonment of property - - - Changes in operating assets and liabilities: Accounts receivable 1,250 (9,419) (3,370)Inventories (3,578) (143) (1,206)Prepaid expenses and other current receivables (5,408) (1,075) (402)Other assets (14) - - Accounts payable and accrued expenses (2,849) 2,346 2,528 Deferred income 362 (685) 704 Net cash used in operating activities (15,513) (3,891) (618) Cash flows from investing activities: Capital expenditures (5,998) (834) (287)Acquisition of product rights and other related assets (35,418) - - Product acquisition costs, net (11,652) (2,958) (1,826)Net cash used in investing activities (53,068) (3,792) (2,113) Cash flows from financing activities: Proceeds from convertible 3.75% senior notes, net of $4,765 - 138,985 - Proceeds from issuance of stock, net (3) 24,858 - Proceeds from note payable, net of debt issuance costs - 2,755 2,000 Repayment of note payable (3,160) (3,000) - Repayment of note payable, related party - - - (Expenses of) proceeds from sale of treasury stock, net of expenses - - (63)Proceeds from exercise of common stock options and warrants 165 837 376 Principal payments on capital lease obligations (132) (64) (17)Recovery from stockholder, net 19 - - Excess tax benefits from stock compensation - 94 - Net cash (used in) provided by financing activities (3,111) 164,465 2,296 Net increase (decrease) in cash and cash equivalents (71,692) 156,782 (435)Cash and cash equivalents at beginning of year 158,883 2,101 2,536 Cash and cash equivalents at end of year $87,191 $158,883 $2,101 Supplemental Cash flow information: Cash payments for interest $5,517 $178 $142 Cash payments for (receipts from) income taxes 123 23 (194) Non cash investing and financing transactions: Reclassification of derivative liability to equity 18,256 - - Issuance of stock to consultant 31 - - Issuance of restricted stock 347 - 3 Bifurcation of derivative from convertible 3.75% senior notes - 41,400 - Payable related to product acquisition costs - 6,000 - Common stock issued for conversion of Series C Convertible Preferred stock - - 2,825 Common stock issued for conversion of Series A Convertible Preferred stock - - 500 Equipment financed through capital lease - - 20 The accompanying notes are an integral part of the consolidated financial statements. F-7  TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the years ended December 31, 2015, 2014 and 2013(in thousands, except share information) Series A Series C Accumulated Convertible Convertible Additional Other Total Preferred Stock Preferred Stock Common Stock Paid-In Comprehensive Accumulated Treasury Stockholders’ Shares Amount Shares Amount Shares Amount Capital Income (Loss) Deficit Stock Equity Balance, December 31,2012 50 $500 1,550 $1,517 42,705,032 $446 $47,409 $- $(43,445) $- $6,427 Stock basedcompensationexpense 536 536 Restricted stockissuance 325,000 3 (3) - Stock warrantsexercised 427,713 5 231 236 Stock options exercised 129,336 1 138 139 Costs related to stockissuance (63) (63)Common stock issuedupon conversion ofSeries AConvertible Preferredstock (50) (500) 500,000 5 495 - Common stock issuedupon conversion ofSeries C ConvertiblePreferred stockincluding deemeddividend of $1,308 (1,550) (1,517) 2,661,494 27 2,798 (1,308) - Net loss - - - - - - - - (84) - (84) Balance, December 31,2013 - $- - $- 46,748,575 $487 $51,541 $- $(44,837) $- $7,191 Issuance of stockpursuant to a publicoffering, net ofassociated fees of$1,868 5,347,500 53 24,805 24,858 Issuance of stock toconsultant 10,000 80 80 Stock basedcompensationexpense 823 823 Stock warrantsexercised 270,546 3 325 328 Stock options exercised 443,166 5 504 509 Excess tax benefitsfrom stockcompensation 94 94 Net income - - - - - - - - 5,251 - 5,251 Balance, December 31,2014 - $- - $- 52,819,787 $548 $78,172 $- $(39,586) $- $39,134 Issuance of stock toconsultant 5,000 31 31 Stock basedcompensationexpense 2,273 2,273 Stock warrantsexercised 67,636 82 82 Stock options exercised 75,766 1 82 83 Issuance of restrictedstock 32,500 346 346 Reclassification ofderivative liability toequity 18,256 18,256 Recovery fromstockholder, net 19 19 Costs related to stockissuance (3) (3)Cumulative translationadjustment (130) (130)Net income - - - - - - - - 6,668 - 6,668 Balance, December 31,2015 - $- - $- 53,000,689 $549 $99,258 $(130) $(32,918) $- $66,759  The accompanying notes are an integral part of the condensed consolidated financial statements. F-8  TELIGENT, INC. AND SUBSIDIARIES(FORMERLY IGI LABORATORIES, INC. AND SUBSIDIARIES)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Nature of the Business Teligent, Inc. (the “Company”) is a Delaware corporation incorporated in 1977. On October 22, 2015, the Company announced the change of its name fromIGI Laboratories, Inc. to Teligent, Inc. effective as of October 23, 2015, at 5:00 P.M. Eastern Daylight Time. The Company’s office, research and developmentfacilities and manufacturing facilities are located at 105 Lincoln Avenue, Buena, New Jersey. The Company is a specialty generic pharmaceutical company.Under our own label, the Company currently markets and sells generic topical and branded generic injectable pharmaceutical products in the United Statesand Canada. In the US, we are currently marketing eight generic topical pharmaceutical products and four branded generic pharmaceutical products. Throughthe completion of an acquisition, we now sell a total of nineteen generic and branded generic injectable products and medical devices in Canada. Genericpharmaceutical products are bioequivalent to their brand name counterparts. We also provide development, formulation, and manufacturing services to thepharmaceutical, over-the-counter, or OTC, and cosmetic markets. The Company also provides development, formulation and manufacturing services to thepharmaceutical, over-the-counter (“OTC”) and cosmetic markets. We operate our business under one segment. To date, we have filed 31 Abbreviated New Drug Applications, or ANDAs, with the United States Food and Drug Administration, or FDA, for additionalpharmaceutical products. On October 14, 2015, the Company provided written notice to the NYSE MKT LLC (the “NYSE MKT”) that the Company intended to transfer the listing ofthe Company’s common stock from the NYSE MKT to the NASDAQ Global Select Market, and withdraw the listing and registration of the common stockfrom the NYSE MKT. The Company’s common stock ceased trading on the NYSE MKT at the close of business on October 23, 2015, and began trading onthe NASDAQ Global Select Market on October 26, 2015. As discussed in Note 7, on November 13, 2015, the Company acquired all of the rights, title and interest in the development, production, marketing, importand distribution of all pharmaceutical products of Alveda Pharmaceuticals Inc. (“Alveda”) pursuant to two asset purchase agreements, one relating to theacquisition of all of the intellectual property-related assets of Alveda (the “IP-Related APA”) and the other relating to the acquisition of all other assets ofAlveda (the “Non-IP Related APA,” and, together with the IP-Related APA, the “APAs”). Teligent also develops, manufactures, fills, and packages topical semi-solid and liquid products for branded and generic pharmaceutical customers, as well asthe OTC and cosmetic markets. These products are used in a wide range of applications from cosmetics and cosmeceuticals to the prescription treatment ofconditions like dermatitis, psoriasis, and eczema. Teligent is currently exploring various options to enable us to expand our development and manufacturingcapabilities to include sterile injectable and ophthalmic products. Principles of Consolidation The consolidated financial statements include the accounts of Teligent, Inc. and its wholly-owned and majority-owned subsidiaries. All inter-companyaccounts and transactions have been eliminated. The Company consolidated the following entities: Igen, Inc., Teligent Pharma. Inc., Teligent LuxembourgS.à r.l, Teligent OÜ, Teligent Canada Inc., and Teligent Jersey Limited., in addition to the following inactive entities: Microburst Energy, Inc., Blood Cells,Inc. and Flavorsome, Ltd. Cash Equivalents Cash equivalents consist of short-term investments, which have original maturities of 90 days or less. These include direct obligations of the U.S. Treasury,including bills, notes and bonds, as well as obligations issued or guaranteed by agencies or instrumentalities of the U.S. government including government-sponsored enterprises, or GSEs. F-9  Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, trade receivables, restricted cash, notes payable, accounts payable, capital leases and other accruedliabilities at December 31, 2015 approximate their fair value for all periods presented. The Company measures fair value in accordance with ASC 820-10, “Fair Value Measurements and Disclosures”. ASC 820-10 clarifies that fair value is an exitprice, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Assuch, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or aliability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuationmethodologies in measuring fair value: Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurementdate. Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, forsubstantially the full term of the asset or liability. Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, therebyallowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. The fair value hierarchy also requires anentity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company measures its derivative liability at fair value. The derivative convertible option related to Convertible Notes issued December 16, 2014 wasvalued using the “with” and “without” analysis. A “with” and “without” analysis is a standard valuation technique for valuing embedded derivatives by firstconsidering the value of the Convertible Notes with the option and then considering the value of the Convertible Notes without the option. The difference isthe fair value of the embedded derivatives. The convertible note derivative is classified within Level 3 because it is valued using the “with” and “without”method, which does utilize inputs that are unobservable in the market. On May 20, 2015, the Company received approval to increase its authorized shares sufficient to allow for the conversion of the embedded option into equityat the annual shareholders meeting. Therefore, the derivative liability of $18.3 million was reclassified into stockholders equity. Based on the closing price ofthe Company’s common stock as of December 31, 2015, the fair value of the Notes was approximately $107 million compared to their face value of $143.75million as of December 31, 2015. However, this variance is due to the conversion feature in the Notes rather than to changes in market interest rates. TheNotes carry a fixed interest rate and therefore do not subject the Company to interest rate risk. The Company recorded a change in the fair value of thederivative liability through May 20, 2015 $23.1 million for the twelve months ended December 31, 2015 on the condensed consolidated statements ofoperations. On May 20, 2015, the Company recorded the final change in fair value and subsequently reclassified the value of the derivative liability intostockholders equity due to the approval of sufficient shares. Accounts Receivable and Allowance for Doubtful Accounts The Company extends credit to its contract services customers based upon credit evaluations in the normal course of business, primarily with 30-day terms.The Company does not require collateral from its customers. Bad debt provisions are provided for on the allowance method based on historical experienceand management’s evaluation of outstanding accounts receivable. The Company reviews the allowance for doubtful accounts regularly, and past duebalances are reviewed individually for collectability. The Company charges off uncollectible receivables against the allowance when the likelihood ofcollection is remote. The Company extends credit to wholesaler and distributor customers and national retail chain customers, based upon credit evaluations, in the normal courseof business, primarily with 60-day terms. The Company maintains customer-related accruals and allowances that consist primarily of chargebacks, rebates,sales returns, shelf stock allowances, administrative fees and other incentive programs. Some of these adjustments relate specifically to the genericprescription pharmaceutical business. Typically, the aggregate gross-to-net adjustments related to these customers can exceed 50% of the gross sales throughthis distribution channel. Certain of these accruals and allowances are recorded in the balance sheet as current liabilities and others are recorded as areduction to accounts receivable. F-10  Concentration of Credit Risk Financial instruments, which subject the Company to concentrations of credit risk, consist primarily of cash equivalents and trade receivables. These includedirect obligations of the U.S. Treasury, including bills, notes and bonds, as well as obligations issued or guaranteed by agencies or instrumentalities of theU.S. government including GSEs, which are not federally insured. The Company maintains its cash in accounts with quality financial institutions. Although the Company currently believes that the financial institutions withwhich the Company does business will be able to fulfill their commitments to us, there is no assurance that those institutions will be able to continue to doso. In 2015, the Company had sales to three customers which individually accounted for more than 10% of the Company’s total revenue. These customers hadsales of $12.3 million, $5.8 million and $5.0 million, respectively, and represented 52% of total revenues in the aggregate. Accounts receivable related to theCompany’s major customers comprised 83% of all accounts receivable as of December 31, 2015. In 2014, the Company had sales to two customers which individually accounted for more than 10% of the Company’s total revenue. These customers hadsales of $10.5 million and $4.4 million, respectively, and represented 44% of total revenues in the aggregate. Accounts receivable related to the Company’smajor customers comprised 42% of all accounts receivable as of December 31, 2014. In 2013, the Company had sales to three customers which individually accounted for more than 10% of the Company’s total revenue. These customers hadsales of $2.8 million, $2.2 million and $2.1 million, respectively, and represented 39% of total revenues in the aggregate. The Company had net revenue from one product, econazole nitrate cream, which accounted for 45% and 38% of total revenues in 2015 and 2014,respectively. The Company did not have significant revenue from any one product in 2013. Inventories Inventories are valued at the lower of cost, using the first-in, first-out (“FIFO”) method, or market. The Company records an inventory reserve for lossesassociated with dated and expired raw materials. This reserve is based on management’s current knowledge with respect to inventory levels, plannedproduction, and extension capabilities of materials on hand. Management does not believe the Company’s inventory is subject to significant risk ofobsolescence in the near term. Reserve for obsolescence included in inventory at December 31, 2015 and 2014 were $0.1 million and $0.2 millionrespectively. Property, Plant and Equipment Depreciation and amortization of property, plant and equipment is provided for under the straight-line method over the assets’ estimated useful lives asfollows: Useful Lives Buildings and improvements 10 - 30 yearsMachinery and equipment 3 - 15 years Repair and maintenance costs are charged to operations as incurred while major improvements are capitalized. When assets are retired or disposed, the relatedcost and accumulated depreciation thereon are removed and any gains or losses are included in operating results. F-11  Intangible Assets Definite-lived intangible assets are stated at cost less accumulated amortization. Amortization of definite-lived intangible assets is computed on a straight-line basis over the assets’ estimated useful lives, generally for periods ranging from 10 to 15 years. The Company continually evaluates the reasonableness ofthe useful lives of these assets. Indefinite-lived intangible assets are not amortized, but instead are tested at least annually for impairment. Costs to renew orextend the term of a recognized intangible asset are expensed as incurred. In-Process Research and Development Amounts allocated to in-process research and development (“IPR&D”) in connection with a business combination are recorded at fair value and areconsidered indefinite-lived intangible assets subject to the impairment testing in accordance with the Company’s impairment testing policy for indefinite-lived intangible assets. As products in development are approved for sale, amounts will be allocated to product rights and will be amortized over theirestimated useful lives. These valuations reflect, among other things, the impact of changes to the development programs, the projected development andregulatory time frames and the current competitive environment. Changes in any of the Company’s assumptions may result in a reduction to the estimatedfair value of the IPR&D asset and could result in future impairment charges. Goodwill Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is tested for impairment on anannual basis during the fourth quarter of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired.The Company first performs a qualitative assessment to determine if the quantitative impairment test is required. If changes in circumstances indicate an assetmay be impaired, the Company performs the quantitative impairment test. In accordance with accounting standards, a two-step quantitative method is usedfor determining goodwill impairment. In the first step, the Company determines the fair value. If the net book value exceeds its fair value, the second step ofthe impairment test which requires allocation of the fair value to all of its assets and liabilities using the acquisition method prescribed under authoritativeguidance for business combinations would then be performed. Any residual fair value is allocated to goodwill. An impairment charge is recognized only ifthe implied fair value of our reporting unit’s goodwill is less than its carrying amount. The carrying value of goodwill at December 31, 2015 was $0.4 million. We believe it is unlikely that there will be a material change in the future estimates orassumptions used to test for impairment losses on goodwill. However, if actual results were not consistent with our estimates or assumptions, we could beexposed to an impairment charge that could be material. Acquisitions The Company accounts for acquired businesses using the acquisition method of accounting, which requires with limited exceptions, that assets acquired andliabilities assumed be recognized at their estimated fair values as of the acquisition date. Transaction costs are expensed as incurred. Any excess of theconsideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When net assets that do not constitute a business areacquired, no goodwill is recognized. Contingent consideration, if any, is included as part of the acquisition cost and is recognized at fair value as of the acquisition date. Any liability resultingfrom contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. These changes in fair value are recognizedin earnings. Long-Lived Assets In accordance with the provisions of ASC 360-10-55, the Company reviews its long-lived assets for impairment whenever events or changes in circumstancesindicate that the carrying amount of the assets may not be recoverable. In performing such review for recoverability, the Company compares expected futurecash flows of assets to the carrying value of the long-lived assets and related identifiable intangibles. If the expected future cash flows (undiscounted) are lessthan the carrying amount of such assets, the Company recognizes an impairment loss for the difference between the carrying value of the assets and theirestimated fair value, with fair values being determined using projected discounted cash flows at the lowest level of cash flows identifiable in relation to theassets being reviewed. As of December 31, 2015, no impairments existed. Foreign Currency Translation The net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S. dollarsusing current exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries at changing rates are recorded in the foreigncurrency translation account, which is included in Accumulated other comprehensive income (loss) (AOCI) and reflected as a separate component of equity.For those subsidiaries where the U.S. dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities aretranslated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S. dollar effects of rate changes included inOther (income) expense, net. F-12  Accrued Expenses Accrued expenses represent various obligations of the Company including certain operating expenses and taxes payable. For the fiscal year ended December 31, 2015, and 2014, the largest components of accrued expenses were: 2015 2014 (in thousands) Wholesaler fees $2,523 $1,721 Payroll 1,167 1,414 Royalties 744 707 Consulting fees 432 300 Interest expense 240 213 Capital expenditures 482 - Director's fees - 133 Other 679 653 $6,267 $5,141 License Fee License fee is amortized on a straight-line basis over the life of the agreement (10 years). Accounting for Environmental Costs Accruals for environmental remediation are recorded when it is probable a liability has been incurred and costs are reasonably estimable. The estimatedliabilities are recorded at undiscounted amounts. Environmental insurance recoveries are included in the statement of operations in the year in which theissue is resolved through settlement or other appropriate legal process. Income Taxes The Company records income taxes in accordance with ASC 740-10, “Accounting for Income Taxes,” under the asset and liability method of accounting forincome taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applyingenacted statutory tax rates applicable to future years to operating loss and tax credit carry forwards and differences between the financial statement carryingamounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period thatincludes the enactment date. A valuation allowance is recorded based on a determination of the ultimate realizability of future deferred tax assets. Avaluation allowance equal to 100% of the net deferred tax assets has been recognized due to uncertainty regarding the future realization of these assets. The Company complies with the provisions of ASC 740-10-25 that clarifies the accounting for uncertainty in income taxes recognized in an entity’sfinancial statements in accordance with ASC 740-10, “Accounting for Income Taxes,” and prescribes a recognition threshold and a measurement attribute forthe financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a taxposition must be more-likely-than-not to be sustained upon examination by taxing authorities. Additionally, ASC 740-10 provides guidance onderecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. There were no unrecognized tax benefits as ofthe date of adoption. As such, there are no unrecognized tax benefits included in the balance sheet that would, if recognized, affect the effective tax rate. F-13  Revenue Recognition The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred or contractualservices rendered, the sales price is fixed or determinable, and collection is reasonably assured in conformity with ASC 605, Revenue Recognition. The Company derives its revenues from three basic types of transactions: sales of its own generic pharmaceutical topical products, sales of manufacturedproduct for its customers included in product sales, and research and product development services performed for third parties. Due to differences in thesubstance of these transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each. Product Sales: Product Sales includes Company Product Sales and Contract Manufacturing Sales. Company Product Sales: The Company records revenue from Company product sales when title and risk of ownership have been transferred to the customer,which is typically upon delivery of products to the customer. Revenue and Provision for Sales Returns and Allowances As is customary in the pharmaceutical industry, the Company’s gross product sales from Company label products are subject to a variety of deductions inarriving at reported net product sales. When the Company recognizes revenue from the sale of products, an estimate of sales returns and allowances (“SRA”)is recorded, which reduces product sales. Accounts receivable and/or accrued expenses are also reduced and/or increased by the SRA amount. Theseadjustments include estimates for chargebacks, rebates, cash discounts and returns and other allowances. These provisions are adjusted as estimates are basedon historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with direct andindirect customers. The estimation process used to determine our SRA provision has been applied on a consistent basis and no material adjustments havebeen necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying estimates. The Company will use a variety ofmethods to assess the adequacy of our SRA reserves to ensure that our financial statements are fairly stated. These will include periodic reviews of customerinventory data, customer contract programs and product pricing trends to analyze and validate the SRA reserves. The provision for chargebacks is our most significant sales allowance. A chargeback represents an amount payable in the future to a wholesaler for thedifference between the invoice price paid to the Company by our wholesale customer for a particular product and the negotiated contract price that thewholesaler’s customer pays for that product. The Company’s chargeback provision and related reserve varies with changes in product mix, changes incustomer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expectedwholesaler sell-through levels to indirect customers at contract prices. The Company will validate the chargeback accrual quarterly through a review of theinventory reports obtained from our largest wholesale customers. This customer inventory information is used to verify the estimated liability for futurechargeback claims based on historical chargeback and contract rates. These large wholesalers represent 90% - 95% of the Company’s chargeback payments.The Company continually monitors current pricing trends and wholesaler inventory levels to ensure the liability for future chargebacks is fairly stated. Net revenues and accounts receivable balances in the Company’s consolidated financial statements are presented net of SRA estimates. Certain SRA balancesare included in accounts payable and accrued expenses. F-14  Gross-To-Net Sales Deductions Twelve months ended December 31, 2015 2014 Gross Teligent product sales $99,721 $51,136 Reduction to gross product sales: Chargebacks and billbacks 50,127 26,940 Sales discounts and other allowances 17,974 4,366 Total reduction to gross product sales $68,101 $31,306 Net Teligent product sales $31,620 $19,830 The annual activity in the Company's allowance for customer deductions accounts for the three years ended December 31, 2015 is as follows (in thousands): Returns Chargebacks &Rebates Discounts DoubtfulAccounts TOTAL Balance at December 31, 2012 $- $- $- $16 $16 Provision 218 7,704 315 - 8,237 Charges processed (162) (5,958) (173) - (6,293)Balance at December 31, 2013 $56 $1,746 $142 $16 $1,960 Provision 767 31,040 1,060 - 32,867 Charges processed (149) (28,234) (857) - (29,240)Balance at December 31, 2014 $674 $4,552 $345 $16 $5,587 Provision 1,640 65,901 2,171 - 69,712 Charges processed (1,464) (57,815) (1,754) - (61,033)Balance at December 31, 2015 $850 $12,638 $762 $16 $14,266 Accounts receivable are presented net of SRA balances of $14.2 million and $5.6 at December 31, 2015 and 2014, respectively. Accounts payable andaccrued expenses include $2.5 million and $1.7 at December 31, 2015 and 2014, respectively, for certain fees related to services provided by the wholesalers.Wholesale fees of $6.3 million, $3.1 million and $0.9 million for the years ended December 31, 2015, 2014 and 2013, respectively, were included in cost ofgoods sold. In addition, in connection with four of the six products the Company currently manufactures, markets and distributes in its own label, in accordance with anagreement entered into in December of 2011, the Company is required to pay a royalty calculated on the basis of net sales to one of its pharmaceuticalpartners. The royalty is calculated based on contracted terms of 40% of net sales for the four products which is to be paid quarterly to the pharmaceuticalpartner. In accordance with the agreement, net sales excludes fees related to services provided by the wholesalers. Accounts payable and accrued expensesinclude $0.7 million at December 31, 2015 and 2014, respectively, related to these royalties. Royalty expense of $3.6 million, $3.6 million and $2.6 millionwas included in cost of goods sold for the twelve months ended December 31, 2015, 2014, and 2013 respectively. The Company includes significantestimates to arrive at net product sales arising from wholesaler chargebacks, Medicaid and Medicare rebates, allowances and other pricing and promotionalprograms. Contract Manufacturing Sales: The Company recognizes revenue when title transfers to its customers, which is generally upon shipment of products. Theseshipments are made in accordance with sales commitments and related sales orders entered into with customers either verbally or in written form. Therevenues associated with these transactions, net of appropriate cash discounts, product returns and sales reserves, are recorded upon shipment of the productsincluded in product sales, net in the statement of operations. Research and Development Income: The Company establishes agreed upon product development agreements with its customers to perform productdevelopment services. Product development revenues are recognized in accordance with the product development agreement upon the completion of thephases of development and when the Company has no future performance obligations relating to that phase of development. Revenue recognition requiresthe Company to assess progress against contracted obligations to assure completion of each stage. These payments are generally non-refundable and arereported as deferred until they are recognizable as revenue. If no such arrangement exists, product development fees are recognized ratably over the entireperiod during which the services are performed. In making such assessments, judgments are required to evaluate contingencies such as potential variances in schedule and the costs, the impact of changeorders, liability claims, contract disputes and achievement of contractual performance standards. Changes in total estimated contract cost and losses, if any,are recognized in the period they are determined. Billings on research and development contracts are typically based upon terms agreed upon by theCompany and customer and are stated in the contracts themselves and do not always align with the revenues recognized by the Company. F-15  Licensing and Royalty Income: Revenues earned under licensing or sublicensing contracts are recognized as earned in accordance with the terms of theagreements. The Company recognizes royalty revenue based on royalty reports received from the licensee. The Company does not have current plans to havemeaningful revenue from licensing and royalty agreements in 2016. Stock-Based Compensation ASC 718-10 defines the fair-value-based method of accounting for stock-based employee compensation plans and transactions used by the Company toaccount for its issuances of equity instruments to record compensation cost for stock-based employee compensation plans at fair value as well as to acquiregoods or services from non-employees. Transactions in which the Company issues stock-based compensation to employees, directors and advisors and forgoods or services received from non-employees are accounted for based on the fair value of the equity instruments issued. The Company utilizes pricingmodels in determining the fair values of options and warrants issued as stock-based compensation. These pricing models utilize the market price of theCompany’s common stock and the exercise price of the option or warrant, as well as time value and volatility factors underlying the positions. Stock-basedcompensation expense is recognized over the vesting period of the grant. Debt Issuance Costs Expenses related to debt financing activities are capitalized and amortized on an effective interest method, over the term of the loan. See detailed amountsper year in Notes 6 and 9. Product Development and Research The Company’s research and development costs are expensed as incurred. Shipping and Handling Costs Costs related to shipping and handling is comprised of outbound freight and the associated labor. These costs are recorded in costs of sales. Net Income (Loss) per Common Share Basic net income (loss) per share of common stock is computed based on the weighted average number of shares of common stock outstanding during theperiod. Diluted net income (loss) per share of common stock is computed using the weighted average number of shares of common stock and potentialdilutive common stock equivalents outstanding during the period. Potential dilutive common stock equivalents include shares issuable upon the conversionof the convertible 3.75% senior notes and the exercise of options and warrants and the conversion of preferred stock. Due to the net loss for the years endedDecember 31, 2013, the effect of the Company’s potential dilutive common stock equivalents was anti-dilutive; as a result, the basic and diluted weightedaverage number of common shares outstanding and net loss per common share are the same. As of December 31, 2013, the shares of common stock issuable inconnection with stock options and warrants of 2,998,406 were not included in the diluted net income (loss) per common share calculation since their effectwas anti-dilutive. F-16  For the years ended December 31, 2015, 2014 and 2013(in thousands except shares and per share data) 2015 2014 2013 Basic net income (loss) per share computation: Net income (loss) attributable to common stockholders —basic $6,668 $5,251 $(1,392)Weighted average common shares —basic 52,872,814 49,817,721 43,517,640 Basic net income (loss) per share $0.13 $0.11 $(0.03) Dillutive net income (loss) per share computation: Net income (loss) attributable to common stockholders —basic $6,668 $5,251 $(1,392)Interest expense related to convertible 3.75% senior notes 5,391 224 - Amortization of discount related to convertible 3.75% senior notes 6,680 $- $- Change in the fair value of derivative (23,144) $- $- Net income (loss) attributable to common stockholders —diluted $(4,405) $5,475 $(1,392)Share Computation: Weighted average common shares —basic 52,872,814 49,817,721 43,517,640 Effect of convertible 3.75% senior notes 12,732,168 12,732,168 - Effect of dilutive stock options and warrants 1,507,013 1,657,301 - Weighted average common shares outstanding —dilluted 67,111,995 64,207,190 43,517,640 Dilluted net income (loss) per share $(0.07) $0.09 $(0.03) Derivatives The Company accounts for its derivative instruments in accordance with ASC 815-10, “Derivatives and Hedging” (“ASC 815-10”). ASC 815-10 establishesaccounting and reporting standards requiring that derivative instruments, including derivative instruments embedded in other contracts, be recorded on thebalance sheet as either an asset or liability measured at its fair value. ASC 815-10 also requires that changes in the fair value of derivative instruments berecognized currently in results of operations unless specific hedge accounting criteria are met. The Company has not entered into hedging activities to date.The Company’s derivative liability is the embedded convertible option of its Convertible Notes issued December 16, 2014 (as defined in Note 6), all ofwhich have been recorded as a liability at fair value, and are revalued at each reporting date, with changes in the fair value of the instruments included in theconsolidated statements of operations as non-operating income (expense). Due to the approval of the sufficient shares at the Company’s annual shareholdermeeting, the liability for the embedded derivative was reclassified to equity on May 20, 2015. The Company has no derivatives at December 31, 2015. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation ofthe derivative liability, SRA allowances, allowances for excess and obsolete inventories, allowances for doubtful accounts, provisions for income taxes andrelated deferred tax asset valuation allowances, stock based compensation, the impairment of long-lived assets (including intangibles and goodwill) andaccruals for environmental cleanup and remediation costs. Actual results could differ from those estimates. Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842): “Recognition and Measurement of Financial Assetsand Financial Liabilities”. The update supersedes Topic 840, Leases and requires the recognition of lease assets and lease liabilities by lessees for thoseleases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases, with cash paymentsfrom operating leases classified within operating activities in the statement of cash flows. The amendments in this update are effective for fiscal yearsbeginning after December 15, 2018 for public business entities, which for the Company means January 1, 2019. The Company is currently evaluating theimpact of this ASU on its consolidated financial statements. F-17  In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): “Simplifying the Accounting for Measurement-PeriodAdjustments”. The update eliminates the requirement to retrospectively adjust the provisional amounts recognized at the acquisition date with acorresponding adjustment to goodwill during the measurement period when new information is obtained about the facts and circumstances that existed as ofthe acquisition date, that if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition ofadditional assets or liabilities. The amendments in this update are effective for fiscal years beginning after December 15, 2015, which for the Company meansJanuary 1, 2016, and should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update. Earlyapplication is permitted for financial statements that have not been issued. The Company does not expect the adoption of this ASU will have any significantimpact on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): “Simplifying the Measurement of Inventory”. ASU 2015-11 requires inventorymeasured using any method other than last-in, first out (“LIFO”) or the retail inventory method to be subsequently measured at the lower of cost or netrealizable value, rather than at the lower of cost or market. Under this ASU, subsequent measurement of inventory using the LIFO and retail inventory methodis unchanged. ASU 2015-11 is effective prospectively for fiscal years, and for interim periods within those years, beginning after December 15, 2016. Earlyapplication is permitted. The Company does not expect the adoption of this ASU will have any significant impact on its consolidated financial statements. In April 2015, the FASB issued ASU 2015-3, “Simplifying the Presentation of Debt Issuance Costs.” The new guidance specifies that debt issuance costsunder the new standard are to be netted against the carrying value of the financial liability. Under current guidance, debt issuance costs are recognized as adeferred charge and reported as a separate asset on the balance sheet. The new guidance aligns the treatment of debt issuance costs and debt discounts in thatboth reduce the carrying value of the liability. Amortization of debt issuance costs is to be recorded as interest expense on the income statement. ASU 2015-3is effective fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statementsthat have not been issued previously. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. In May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This ASU is a comprehensive new revenue recognition model thatrequires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects toreceive in exchange for those goods or services. This ASU is effective for annual reporting periods beginning after December 15, 2016 and early adoption isnot permitted. Accordingly, the Company will adopt this ASU on January 1, 2017. Companies may use either a full retrospective or modified retrospectiveapproach to adopt this ASU and management is currently evaluating which transition approach to use. The Company is currently evaluating the impact ofASU 2014-09 and expect to complete its assessment of the impact as a result of the adoption in the second half of 2016. In August 2014, FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern: Disclosure of Uncertainties about an Entity’s Ability toContinue as a Going Concern”. This ASU requires management to evaluate, in connection with preparing financial statements for each annual and interimreporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as agoing concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements areavailable to be issued when applicable) and provide related disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, andfor annual and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2014-15. F-18  2. Liquidity The Company’s principal sources of liquidity are cash and cash equivalents of approximately $87,191,000 at December 31, 2015 and the $10,000,000available under the $10,000,000 credit facility. This facility was terminated in February 2016. See Note 9. On December 10, 2014, the Company entered into a purchase agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell its3.75% Convertible Senior Notes due 2019 (the “Notes”). The Company received net proceeds of approximately $139 million after expenses ofapproximately $4.8 million upon completion of the transaction. See Note 6. The Company may require additional funding and this funding will depend, in part, on the timing and structure of potential business arrangements. Ifnecessary, the Company may continue to seek to raise additional capital through the sale of its equity or through a strategic alliance with a third party. Theremay also be additional acquisition and growth opportunities that may require external financing. There can be no assurance that such financing will beavailable on terms acceptable to the Company, or at all. The Company also has the ability to defer certain product development and other programs, ifnecessary. The Company believes that our existing capital resources will be sufficient to support its current business plan and operations beyond March2017. 3. License Fee On December 12, 2005, the Company extended its license agreement for an additional ten years with Novavax, Inc. for $1,000,000. This extension entitlesthe Company to exclusive use of the Novasome® lipid vesicle encapsulation and certain other technologies in the fields of (i) animal pharmaceuticals,biologicals and other animal health products; (ii) foods, food applications, nutrients and flavorings; (iii) cosmetics, consumer products and dermatologicalover-the-counter and prescription products (excluding certain topically delivered hormones); (iv) fragrances; and (v) chemicals, including herbicides,insecticides, pesticides, paints and coatings, photographic chemicals and other specialty chemicals, and the processes for making the same through 2015.This payment is being amortized ratably over the ten-year period. For the years ended, December 31, 2015, 2014 and 2013, the Company recorded a$100,000 expense in each year related to the amortization of the license. 4. Inventories Inventories as of December 31, 2015 and 2014 consisted of: 2015 2014 (in thousands) Raw materials $4,833 $2,299 Work in progress 128 140 Finished goods 4,024 345 $8,985 $2,784 5. Property, Plant and Equipment Property, plant and equipment, at cost, as of December 31, 2015 and 2014, consisted of: 2015 2014 (in thousands) Land $257 $257 Building and improvements 5,296 3,775 Machinery and equipment 5,270 4,156 Construction in progress 3,594 225 14,417 8,413 Less accumulated depreciation and amortization (5,711) (5,151) Property, plant and equipment, net $8,706 $3,262 F-19  The Company recorded depreciation and amortization expense of $560,000, $415,000 and $375,000 in 2015, 2014 and 2013, respectively. 6. Convertible 3.75% Senior Notes On December 16, 2014, the Company issued $125 million aggregate principal amount of 3.75% Convertible Senior Notes due 2019, or the Notes. OnDecember 22, 2014, the Company announced the closing of the initial purchasers’ exercise in full of their option to purchase an additional $18.75 millionaggregate principal amount. The Notes were offered and sold only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933,as amended (the “Securities Act”). The net proceeds from the sale of the Notes were approximately $139 million, after deducting underwriting fees and otherrelated expenses of approximately $4.8 million. Accrued interest in the amount of $0.1 million related to the Notes was included in accrued expenses. The Notes bear interest at a fixed rate of 3.75% per year, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15,2015 and mature on December 15, 2019, unless earlier repurchased, redeemed or converted. The Notes are convertible into shares of the Company’s commonstock, cash or a combination thereof. On May 20, 2015, the Company received shareholder approval for the increase in the number of shares of common stock authorized and available forissuance upon conversion of the Notes. As a result, the conversion option can now be share-settled in full, and now qualifies for equity classification, and thebifurcated derivative liability no longer needs to be accounted for as a separate derivative on a prospective basis as of May 20, 2015. The remainingunamortized debt discount that arose at the date of debt issuance from the original bifurcation will continue to be amortized using the effective interestmethod through interest expense. After adjusting the derivative liability to market value on May 20, 2015, the Company reclassified the remaining $18.3million value of the derivative liability to stockholders equity due to the approval of additional authorized shares will be sufficient to cover the fullsettlement of the embedded conversion feature and therefore the previously bifurcated conversion option no longer required bifurcation. The Notes are convertible at an initial conversion price of approximately $11.29 per share, which is equivalent to an initial conversion rate of 88.5716 sharesper $1,000 principal amount of Notes, subject to adjustment in certain events, such as distributions of dividends or stock splits. Holders may convert theirNotes at their option prior to September 15, 2019, when or if certain conditions have been met or circumstances have occurred, such as the Company’s stockprice exceeds 130% of the conversion price under the Notes for a designated period of time, or the trading price of the Notes is, for a designated period oftime, less than 98% of the closing sale price of the Company’s common stock multiplied by the then-current conversion rate of the Notes, or the Companycalls Notes for redemption, or certain specified corporate events occur. Holders may also convert their Notes at their option at any time on or afterSeptember 15, 2019 and prior to the close of business on the business day immediately preceding the stated maturity date. In addition, following theoccurrence of certain changes of control of the Company described in the Indenture governing the Notes or termination of trading of the Company’s commonstock or other securities into which the Notes are convertible (a “make-whole fundamental change”) or the delivery by the Company of a notice ofredemption, the conversion rate for a holder who elects to convert its Notes in connection with such make-whole fundamental change or such notice ofredemption will increase in certain circumstances. Additionally, subject to certain conditions, the Company may redeem for cash any or all outstanding Noteson or after December 19, 2017 in an amount equal to the outstanding principal amount of such Notes, plus accrued and unpaid interest. The Notes and any common stock issuable upon conversion of the Notes have not been registered under the Securities Act, applicable state securities laws orthe securities laws of any other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption fromregistration requirements. The Company does not intend to file a registration statement for the resale of the Notes or any common stock issuable uponconversion of the Notes, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful. F-20  Since the Company did not have sufficient authorized shares available to share-settle the conversion option in full prior to May 20, 2015, the embeddedconversion option did not qualify for equity classification and instead was separately valued and accounted for as a derivative liability. On December 16,2014, the initial value allocated to the derivative liability was $43.7 million of the $143.75 million principal amount of the Notes, which represents adiscount to the debt to be amortized through interest expense using the effective interest method through the maturity of the Notes. Accordingly, theeffective interest rate used to amortize the debt discount on the Notes is 12.94%. During each reporting period, the derivative liability was marked to fairvalue through May 20, 2015 with the change in fair value recorded in the consolidated statement of operations. This resulted in a change in the fair value ofthe derivative liability of $23.1 million for the year ended December 31, 2015. The remaining unamortized discount and unamortized debt financing costs will be amortized over the remaining term of the debt of 4.0 years. At December31, 2015 the net carrying amount of the liability component and the remaining unamortized debt discount were as follows: December 31, 2015 (in thousands) Face Amount of the Notes $143,750 Unamortized discount 36,759 Carrying amount of the Notes $106,991 Deferred financing costs associated with the Notes, include fees of $4.0 million at December 31, 2015. The assumptions used in connection with thevaluation of the convertible option of the Notes issued December 16, 2014 utilizing the “with” and “without” method, discussed in Note 2 was as follows: Initial Measurement Measurement Measurement December 16, December 31, May 20, 2014 2014 2015 Issue date 12/17/2014 12/17/2014 12/17/2014 Maturity date 12/15/2019 12/15/2019 12/15/2019 Term 4.99 4.92 4.57 Principal (millions) 143.75 143.75 143.75 Coupon 3.75% 3.75% 3.75%Seniority Senior unsecured Senior unsecured Senior unsecured Conversion shares 88.572 88.572 88.572 Conversion price $11.29 $11.29 $11.29 Stock price $9.45 $8.80 $5.73 Risk free rate 1.61% 1.64% 1.44% Volatility (rounded) 40.00% 40.00% 46.00% The table below provides a reconciliation of beginning and ending balances for the liability measured at fair value using significant observable andunobservable inputs (Level 3). The table reflects the gains associated with the decrease in fair value and the reclassification of the balance of the derivativeliability. F-21  InitialMeasurementDecember 16, 2014 Decrease inFair Value December 31, 2014 Decrease inFair ValueJanuary 1,2015 to May 20, 2015 Reclassificationof derivativeliability toequity on May 20, 2015 December 31, 2015 Fair value of convertible feature of 3.75% senior notes $43,700 $2,300 $41,400 $23,144 $18,256 $- For the year ended December 31, 2015, the Company recorded the following expenses in relation to the Notes: December 31, 2015 (in thousands) Interest Expense at 3.75% coupon rate $5,391 Debt Discount Amortization 6,680 Amortization of deferred financing costs 728 Total interest expense (1) $12,799 (1) Included within “Interest and other expense, net” on the Consolidated Statements of Operations F-22  7. Acquisitions On November 13, 2015, the Company completed its acquisition of all of the rights, title and interest in the development, production, marketing, import anddistribution of all pharmaceutical products of Alveda. In connection with the closing of the Acquisition, the Company formed three subsidiaries: Teligent Luxembourg S.à.r.l., a private limited companyincorporated under the laws of the Grand Duchy of Luxembourg and wholly-owned by the Company (“LuxCo“); Teligent OÜ, a private limited companyincorporated under the laws of Estonia that is wholly-owned by LuxCo (“EstoniaCo“); and Teligent Canada Inc., a company incorporated under the laws ofthe Province of British Columbia that is wholly-owned by LuxCo (“CanadaCo“). Effective immediately prior to the closing, the Company assigned its rightsand obligations under the IP-Related APA to EstoniaCo and assigned its rights and obligations under the Non-IP Related APA to CanadaCo, The Companycapitalized these subsidiaries and funded the Acquisition as follows: the Company funded LuxCo by way of an equity contribution in the amount of$3,374,549 in accordance with the terms and conditions of the Contribution Agreement, by and between the Company and LuxCo, dated as of November 13,2015 (the “Contribution Agreement“), and extended a loan in a principal amount of $28,185,847 in accordance with the terms and provisions of a loanagreement, by and between the Company and LuxCo dated as of November 13, 2015 (the “LuxCo Loan Agreement“). The LuxCo Loan Agreement has amaturity date of November 4, 2022. The initial interest rate under the LuxCo Loan Agreement is 0.49% per annum, which shall reset annually to be equal tothe short-term Applicable Federal Rate published by the Internal Revenue Service (the “AFR”). LuxCo, in turn, extended a loan to EstoniaCo in the sameprincipal amount on the same terms (except that the interest rate is increased by 25 basis points). In addition, the Company funded CanadaCo by extending aloan in a principal amount of $3,746,094 in accordance with the terms and provisions of a loan agreement, by and between the Company and CanadaCodated as of November 13, 2015 (the “CanadaCo Loan Agreement”). The initial interest rate under the CanadaCo Loan Agreement is 0.49% per annum, whichshall reset annually to be equal to the short-term AFR. Also in connection with the closing of the Acquisition, CanadaCo and EstoniaCo entered into a distribution agreement pursuant to which CanadaCo hasagreed to purchase from EstoniaCo certain products and act as the exclusive distributor of such products in Canada (the “Distribution Agreement”). Inconsideration for the supply of the products, CanadaCo agrees to pay an established per-unit amount for each packaging configuration unit of the product,with such price to be negotiated by the parties from time to time throughout the effective period. As a result, EstoniaCo shall manage all contractmanufacturing arrangements with third parties and the sale of all such manufactured products to CanadaCo, which, in turn, shall manage the sale to thirdparties of all such finished products in Canada. The Distribution Agreement shall have an initial term of two years from the effective date, with automaticone-year renewals, unless terminated earlier by either party. The Company has the right to use licenses and product registrations, access to intellectual property rights (“IPR”) (including know-how, and patents) to use,import, have imported, offer for sale, sell, manufacture and commercialize the devices in Canada. The Alveda Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilitiesassumed in a business combination be recognized at their fair values as of the acquisition date. Acquisition related costs were expensed as incurred. The Company utilized the Multi-Period Excess Earnings Method (MPEEM) income approach to value intangible assets. Key assumptions utilized in theanalysis of the intangibles were the revenue base, cost of goods sold, operating expenses, income tax rate and discount rate. F-23  The following table summarizes the consideration paid for Alveda, the total acquisition related costs incurred by the Company during 2015 in connectionwith the acquisition, and the fair values of the assets acquired and liabilities assumed (amounts in thousands): Consideration: Fair value of total consideration transferred $35,418 Acquisition-related costs* : $2,256 Estimated fair value of identifiable assets acquired and liabilities assumed: Accounts receivable $911 Inventories 2,673 Prepaid expenses and other current assets 4 Property and equipment 6 Goodwill, deductible 440 Developed Technology 24,858 In-process research and development 3,816 Customer relationships 3,615 Accounts payable and other assumed liabilities (661)Deferred tax liability (244) *At closing, the Company also paid $5.2 million related to Canadian goods and services tax (GST) and the harmonized sales tax (HST), which is not includedin the above table as consideration or acquisition related costs, and the Company expects to be refunded in the second quarter of 2016 and is recorded inPrepaid expenses and other receivables. The following sets forth the major categories of the Company’s intangible assets acquired from Alveda and the weighted-average remaining amortizationperiod as of December 31, 2015 for those assets that are not already fully amortized (dollar amounts in thousands): Gross Carrying Net Carrying Weighted Average Amount at Accumulated Amount at Remaining Amortization 12/31/15 Amortization at 12/31/15 12/31/15 Period Technology 25,243 (210) 25,033 14.9 In-process research and development(“IPR&D”) 3,875 - 3,875 N/A - Indefinite lived Customer relationships 3,460 (43) 3,417 9.9 Total 32,578 (253) 32,325 As of December 31, 2015, $1.5 million of revenues and $0.1 million net loss from CanadaCo are included in the Company’s earnings. Pro Forma Information (unaudited): The following pro forma information presents the results of operations for the years ended December 31, 2015, andDecember 31, 2014, as if the Alveda acquisition occurred on January 1, 2014: (amounts in thousands, except for per share amounts) For the Years Ended December 31, 2015 December 31, 2014 Total Revenue $55,767 $47,284 Net income $8,443 $6,525 Basic earnings per share $0.16 $0.13 Diluted earnings (loss) per share $(0.04) $0.11 The above pro forma results are presented for illustrative purposes and are not intended to represent or be indicative of the actual results of operations of themerged companies that would have been achieved had the acquisition occurred at January 1, 2014, nor are they intended to represent or be indicative offuture results of operations. These pro forma results require significant estimates and judgments. 8. Goodwill and Intangible Assets Goodwill As a result of the acquisition of Alveda, the Company recorded goodwill of $0.4 million. Changes in goodwill during the two years ended December 31, 2015 were as follows (in thousands): Goodwill December 31, 2013 $- Acquisition - Impairments - Foreign currency translation - December 31, 2014 - Acquisition 440 Impairments - Foreign currency translation (14)December 31, 2015 $426 F-24  Intangible Assets The following sets forth the major categories of the Company’s intangible assets and the weighted-average remaining amortization period as of December 31,2015 for those assets that are not already fully amortized (dollar amounts in thousands): Gross Carrying Net Carrying Weighted Average Amount at Accumulated Amount at Remaining Amortization 12/31/15 Amortization at 12/31/15 12/31/15 Period Trademarks and Technology 47,679 (651) 47,028 14.8 In-process research and development(“IPR&D”) 3,875 - 3,875 N/A - Indefinite lived Customer relationships 3,460 (43) 3,417 9.9 Total 55,014 (694) 54,320 Changes in intangibles during the two years ended December 31, 2015 were as follows (in thousands): Trademarks and Customer Technology IPR&D Relationships December 31, 2013 $1,766 $- $- Acquisition - - - Amortization (120) - - Foreign currency translation - - - December 31, 2014 1,646 - - Acquisition 45,468 3,816 3,615 Amortization (471) - (43)Foreign currency translation 385 59 (155)December 31, 2015 $47,028 $3,875 $3,417 The amortization expense of acquired intangible assets for each of the following five years will be as follows (in thousands): Year ending Amortization December 31, Expense * 2016 2,814 2017 2,814 2018 2,814 2019 2,814 2020 2,814 *IPR&D amounts will be amortized once products become saleable, and are not included in the table The useful lives of the Company’s intangibles is as follows: Intangibles Category Amortizable LifeTrademarks and Technology 15 yearsCustomer Relationships 10 years F-25  9. Note Payable - General Electric Capital Corporation On November 18, 2014, the Company entered into an asset-based revolving senior secured credit facility (the “Credit Agreement”) with General ElectricCapital Corporation, as agent (the “Agent”), and GE Capital Bank and the other financial institutions party thereto, as lenders (the “Lenders”), pursuant towhich the Lenders agreed to extend credit facilities to the Company (the “Financing”). To secure payment of the amounts financed under the Credit Agreement, the Company and the Agent entered into a Guaranty and Security Agreement (the“Guaranty and Security Agreement”). Under the terms of the Guaranty and Security Agreement, the Company granted to the Agent, for the benefit of theLenders and other secured parties, a continuing security interest in and against substantially all of its tangible and intangible assets, except intellectualproperty, and each of the Company’s direct and indirect future subsidiaries shall guarantee the Company’s’ obligations under the Credit Agreement. Under the Credit Agreement, the Company could request revolving loan advances up to an aggregate total amount of $10 million which may be increased to$15 million at the request of the Company if certain conditions are met. The Company may also request an incremental facility for revolving loancommitments of up to $10 million. Borrowings under the Credit Agreement may be made as prime rate loans with an applicable margin of 3.0% per annum or1, 2, 3 or 6 month LIBOR loans with an applicable margin of 4.0% per annum. At December 31, 2015, the interest rate in effect was 4.2%. Availability underthe Credit Agreement is calculated as 85% of the book value of eligible accounts at such time multiplied by a liquidity factor, less any reserves establishedby the Agent. We had $3.2 million outstanding loans under our GE Capital Credit Agreement at December 31, 2014. The Company paid the balance of $3.2million on August 24, 2015 and as of December 31, 2015, the outstanding balance of the credit facility was $0. In accordance with the Credit Agreement, theCompany is required to provide the Lenders information related to working capital by which the Lenders will calculate the available line of credit, defined inthe agreement as the Borrowing Base Certificate. As of December 31, 2015, the Company had a remaining availability of $10 million. The term of the Credit Agreement is up to five years from November 18, 2014. The Credit Agreement contains customary representations and warranties andcustomary affirmative and negative covenants, including, among others, covenants that limit or restrict the Company’s ability to incur indebtedness, grantliens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into certain transactions with affiliates, pay dividends or makedistributions, or repurchase stock, in each case, subject to customary exceptions for a loan facility of this size and type. In addition, the Credit Agreementcontains customary events of default (subject to customary cure periods for certain events of default), including, among others, non-payment, inaccuracy ofrepresentations and warranties, covenant defaults, cross-default to material agreements, cross-default to material indebtedness, bankruptcy and insolvencyand material judgment defaults. The Company must meet certain financial reporting and audit requirements, as defined by the credit agreement. TheCompany was in compliance with all other covenants of the Credit Agreement as of December 31, 2015. The Credit Agreement was amended on September 16, 2015 to reduce the unused line fee from 0.5% to 0.375%. Debt issuance costs of $432,000 were being amortized over the life of the Credit Agreement. In December 2015, the Company terminated the line of credit.The Company included the unamortized financing costs at December 31, 2015 in the amount of $351,000 in interest expense, net in 2015. On February 10,2016, the Company formally terminated the line of credit. 10. Series A Convertible Preferred Stock On December 5, 2007, pursuant to a subscription agreement entered into with an accredited investor, the Company sold (i) 50 shares of Series A ConvertiblePreferred Stock with a liquidation preference of $10,000 per share, with each share of preferred stock, convertible into 10,000 shares of common stock of theCompany, subject to customary adjustments; and (ii) a warrant to purchase 175,000 shares of common stock at an exercise price of $1.25 per share thatexpired on December 5, 2009, two years from issuance, for aggregate consideration of $500,000. F-26  The Series A Convertible Preferred Stock was convertible, at the option of the holders, into shares of the Company’s common stock at a conversion price of$1.00 per share. Based on the original purchase price of $10,000 per share of preferred, each share of Series A Convertible Preferred Stock was convertibleinto 10,000 shares of common stock. The Series A Convertible Preferred Stock also contained an automatic conversion wherein the shares wouldautomatically convert into shares of common stock when the closing price of the Company’s common stock is $2.50 for ten consecutive trading days. The Company has a total of 1,000,000 of authorized shares of preferred stock, par value $0.01, of which 100 shares were designated as Series A ConvertiblePreferred Stock. On September 5, 2013, at the option of the holder, all of the issued and outstanding shares of the Series A Convertible Preferred Stock were converted into500,000 shares of the Company’s common stock, at a conversion price of $1.00 per share. 11. Series C Convertible Preferred Stock - 2010 Offering On March 29, 2010, the Company completed a $1,550,000 private placement with certain investors, including investment funds affiliated with SignetHealthcare Partners, G.P. and Jane E. Hager (the “Series C Offering”). As part of the Series C Offering, the Company issued 1,550 shares of Series CConvertible Preferred Stock. The Series C Convertible Preferred Stock has a par value of $0.01 per share and the holders were entitled to quarterly dividendsat an annual rate of 5%, when and if declared by the Board of Directors. Furthermore, each share of Series C Convertible Preferred Stock was convertible intoshares of common stock equal to (i) 1,000 plus any accrued and unpaid dividends, divided by (ii) $0.69 (the closing price of the Company’s common stockon the date of issuance of the Series C Convertible Preferred Stock). The Company has a total of 1,000,000 shares of authorized shares of preferred stock, of which 1,550 shares were designated as Series C Convertible PreferredStock. Pursuant to the terms of the Certificate of Designation, the shares of Series C Preferred Stock automatically converted into shares of the Company’s CommonStock upon the date that the closing price of the Company’s Common Stock exceeded three times the closing price on the issuance date for a period of 25consecutive trading days immediately preceding such date. Accordingly, on December 6, 2013, all of the shares of Series C Convertible Preferred Stockautomatically converted into shares of the Company’s Common Stock. On December 6, 2013, the Company recognized a deemed dividend as a component of net loss attributable to common stockholders for the fair value of theadditional shares issued to the former preferred stockholders. All of the issued and outstanding shares of the Series C Convertible Preferred Stock, of theCompany, as well as accrued dividends of $1,308,000 automatically converted into an aggregate of 2,661,494 shares of the Company’s common stock, parvalue $0.01 per share, in accordance with the terms and conditions set forth in the original Certificate of Designation of the Rights and Preferences of Series CConvertible Preferred Stock, which specified a $0.69 conversion ratio. 12. Stock-Based Compensation The 1999 Director Stock Option Plan, as amended (the “Director Plan”), provides for the grant of stock options to non-employee directors of the Company atan exercise price equal to the fair market value per share on the date of the grant. An aggregate of 1,975,000 shares have been approved and authorized forissuance pursuant to this plan. A total of 2,514,798 options have been granted to non-employee directors through December 31, 2015 and 807,782 of thosehave been forfeited through December 31, 2015 and returned to the option pool. The options granted under the Director Plan vest in full one year after theirrespective grant dates and have a maximum term of ten years. The 1999 Stock Incentive Plan, as amended (“1999 Plan”), replaced all previously authorized employee stock option plans, and no additional options maybe granted under those previous plans. Under the 1999 Plan, options or stock awards may be granted to all of the Company’s employees, officers, directors,consultants and advisors to purchase a maximum of 3,200,000 shares of common stock. However, pursuant to the terms of the 1999 Plan, no awards may begranted after March 16, 2009. A total of 2,892,500 options, having a maximum term of ten years, have been granted at 100% of the fair market value of theCompany’s common stock at the date of grant. Options outstanding under the 1999 Plan are generally exercisable in cumulative increments over four yearscommencing one year from date of grant. F-27  On June 26, 2009, the Board of Directors adopted, and the Company’s stockholders subsequently approved, the IGI Laboratories, Inc. 2009 Equity IncentivePlan (the “2009 Plan”). The 2009 Plan allows the Company to continue to grant options and restricted stock, as under the 1999 Plan, but also authorizes theBoard of Directors to grant a broad range of other equity-based awards, including stock appreciation rights, restricted stock units and performance awards.The 2009 Plan has been created, pursuant to and consistent with the Company’s current compensation philosophy, to assist the Company in attracting,retaining and rewarding designated employees, directors, consultants and other service providers of the Company and its subsidiaries and affiliates, in amanner that will be cost efficient to the Company from both an economic and financial accounting perspective. On April 12, 2010, the Board of Directorsadopted, and the Company’s stockholders subsequently approved, an amendment and restatement of the 2009 Plan to increase the number of shares ofCommon Stock available for grant under such plan by adding 2,000,000 shares of Common Stock. The 2009 Plan, as amended on May 19, 2010, authorizesup to 4,000,000 shares of the Company’s common stock for issuance pursuant to the terms of the 2009 Plan. The maximum number of shares that may besubject to awards made to any individual in any single calendar year under the 2009 Plan is 1,000,000 shares. As of December 31, 2015, options to purchase3,062,734 shares of common stock were outstanding under the 2009 Plan. As of December 31, 2015, 1,506,248 shares of restricted stock had been grantedunder the 2009 Plan and 230,420 of those have been forfeited through December 31, 2015 and returned to the pool. In summary, there are 3,592,734 options outstanding under the Director Plan and the 2009 Plan, collectively as of December 31, 2015. There are 639,404 options available for issuance under the Director Plan, and the 2009 Plan collectively as of December 31, 2015. Stock Options The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula that uses assumptions noted in thefollowing table. Expected volatilities and risk-free interest rates are based upon the expected life of the grant. Assumptions 2015 2014 2013 Dividend yield 0% 0% 0%Risk free interest rate 1.11% 0.74 – 1.2% 0.48%Estimated volatility factor 52.7% - 68.3% 44.0% - 53.0% 36.9% -43.1%Expected life 3.2 – 3.3 years 3.2 - 3.3 years 3.2 – 3.3years Estimated volatility was calculated using the historical volatility of the Company’s stock over the expected life of the options. The expected life of theoptions was estimated based on the Company’s historical data. The forfeiture rates are estimated based on historical employment/directorship terminationexperience. The risk free interest rate is based on U.S. Treasury yields for securities with terms approximating the terms of the grants. The assumptions used inthe Black-Scholes option valuation model are highly subjective, and can materially affect the resulting valuation. F-28  Stock option transactions in each of the past three years under the aforementioned plans in total were: Shares Exercise Price Per Share WeightedAverageExercisePrice January 1, 2013 shares issuable under options 2,606,500 $ .55 - 1.74 $1.10 Granted 247,000 1.04 - 3.03 1.35 Exercised (129,336) 1.02 - 1.27 1.08 Expired - - - Forfeited (80,664) 1.10 - 1.74 1.30 December 31, 2013 shares issuable under options 2,643,500 .55 - 3.03 1.12 Granted 397,500 2.96 - 10.55 5.89 Exercised (443,166) .55 - 1.95 1.15 Expired - - - Forfeited (161,000) 1.10 – 5.65 2.71 December 31, 2014 shares issuable under options 2,436,834 .76 - 10.55 1.79 Granted 1,357,000 5.55 - 10.67 9.20 Exercised (75,766) 0.76 - 3.62 1.10 Expired - Forfeited (125,334) 1.40 - 10.67 8.99 December 31, 2015 shares issuable under options 3,592,734 0.79 - 10.67 4.36 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2015: Options Outstanding Options Exercisable Range ofExercise Price Number ofOptions WeightedAverageRemainingLife (Years ) WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice $ 0.79 to $ 1.00 50,000 4.01 $0.79 50,000 $0.79 1.01 to 1.50 1,862,400 6.14 1.07 1,851,400 1.07 1.51 to 10.67 1,680,334 8.96 8.10 289,997 4.02 $0.79 to $10.67 3,592,734 7.43 $4.36 2,191,397 $1.45 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2014: Options Outstanding Options Exercisable Range ofExercise Price Number ofOptions WeightedAverageRemainingLife (Years ) WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice $.76 to $1.00 97,000 3.04 $.78 97,000 $.78 1.01 to 1.50 1,887,500 7.14 1.07 1,448,664 1.08 1.51 to 10.55 452,334 8.68 5.02 110,333 1.78 $.76 to $10.55 2,436,834 7.26 $1.79 1,655,997 $1.11 F-29  The following table summarizes information concerning outstanding and exercisable options as of December 31, 2013: Options Outstanding Options Exercisable Range ofExercise Price Number ofOptions WeightedAverageRemainingLife (Years ) WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice $.55 to $1.00 218,000 4.83 $.76 214,000 $.75 1.01 to 2.00 2,418,000 7.90 1.14 1,238,496 1.19 2.01 to 3.03 7,500 9.87 2.83 - - $.55 to $3.03 2,643,500 7.65 $1.12 1,452,496 $1.13 The Company has recorded an aggregate of $1,652,300, $316,200 and $206,500 related to its stock option based expenses in cost of sales, productdevelopment and research expenses, and selling, general and administrative expenses on the accompanying Consolidated Statements of Operations for theyears ended December 31, 2015, 2014 and 2013, respectively. The aggregate intrinsic value of options outstanding was $17,380,012 at December 31, 2015, $17,103,045 at December 31, 2014 and $5,109,925 atDecember 31, 2013. The aggregate intrinsic value of the options exercisable was $16,323,878 at December 31, 2015, $12,738,143 at December 31, 2014 and$2,789,901 at December 31, 2013. The total intrinsic value of the options exercised during 2015, 2014 and 2013 was $591,226, $3,391,030 and $254,779,respectively. A summary of non-vested options at December 31, 2015 and changes during the year ended December 31, 2015 is presented below: WeightedAverage Options Grant DateFair Value Non-vested options at January 1, 2015 780,837 $1.12 Granted 1,357,000 3.73 Vested (615,166) 0.78 Forfeited (121,334) 3.37 Non-vested options at December 31, 2015 1,401,337 $3.60 As of December 31, 2015, there was $3,674,700 of total unrecognized compensation cost related to non-vested share-based compensation arrangementsunder the Plan. The costs will be recognized through December 2018. Restricted Stock and RSUs The Company periodically grants restricted stock and RSU awards to certain officers and other employees that typically vest one to three years from theirgrant date. On December 30, 2013, in accordance with the terms of the employment agreement between Jason Grenfell-Gardner, President and CEO, and theCompany executed on July 30, 2012, a restricted stock award in the amount of 325,000 shares was granted to Jason Grenfell-Gardner, with one third of theshares of restricted stock vested on December 30, 2013, and the remaining two thirds of the shares of restricted stock vesting in equal amounts on July 30,2014 and July 30, 2015. The Company recognized $620,500, $507,100 and $329,400, respectively, of compensation expense during the years endedDecember 31, 2015, 2014 and 2013 related to restricted stock awards and RSUs. Stock compensation expense is recognized over the vesting period of therestricted stock and RSUs. At December 31, 2015, the Company had approximately $1,362,300 of total unrecognized compensation cost related to non-vested restricted stock and RSUs, all of which will be recognized through September 2018. F-30  A summary of non-vested shares of restricted stock and changes during each of the past three years is as follows: Number ofRestricted Stock Weighted AverageIssuance Price Non-vested balance at January 1, 2013 29,334 $1.00 Changes during the period: Shares granted 325,000 2.86 Shares vested (108,333) 2.86 Shares forfeited - Non-vested balance at January 1, 2014 246,001 $2.64 Changes during the period: Shares granted - Shares vested (137,667) 2.46 Shares forfeited - Non-vested balance at December 31, 2014 108,334 $2.86 Changes during the period: Shares granted 32,500 10.67 Shares vested (140,834) 4.66 Shares forfeited - Non-vested balance at December 31, 2015 - $0.00 A summary of non-vested RSU’s and changes during each of the past three years is as follows: Number ofRSUs Weighted AverageIssuance Price Non-vested balance at January 1, 2015 - $- Changes during the period: Shares granted 230,250 10.32 Shares vested (32,500) 10.67 Shares forfeited (15,000) 10.67 Non-vested balance at December 31, 2015 182,750 $0.00 There was no RSU activity for the years ended December 31, 2013 and 2014. 13. Stock Warrants Stock warrants as of December 31, 2015, 2014 and 2013 consisted of: 2015 2014 2013 Warrants WeightedAverageExercise Price Warrants WeightedAverageExercise Price Warrants WeightedAverageExercise Price Beginning balance 84,000 $1.21 354,546 $1.21 782,259 $0.85 Stock warrants granted - - - - - - Stock warrants expired (16,364) 1.21 - - - - Stock warrants exercised (67,636) 1.21 (270,546) 1.21 (427,713) 0.55 Ending balance - $- 84,000 $1.21 354,546 $1.21 F-31  In connection with the private placement of the Company’s Common Stock on December 8, 2010, the Company granted common stock warrants to purchase338,182 and 16,364 shares, respectively, to each of its two placement agents for $1.21 per share which expired on December 8, 2015. In 2015, 67,636 of thesewarrants were exercised and 16,364 expired. 14. Income Taxes The Company’s current tax expense (benefit) was $35,000, $173,000 and $(197,000) for the years ended December 31, 2015, 2014 and 2013, respectively.The provision for (benefit from) income taxes attributable to continuing operations before income taxes for the years ended December 31, 2015, 2014 and2013 is as follows: 2015 2014 2013 (in thousands) Current tax expense (benefit): Federal $- $97 $- State and local 19 76 (197)Foreign 28 Total current tax expense (benefit) 47 173 (197)Deferred tax expense (benefit): Federal - - - State and local - - - Foreign (12) Total deferred tax expense (benefit) (12) - - Total income tax expense (benefit) $35 $173 $(197) In 2013 the Company sold the remainder of its New Jersey operating loss carry forwards under a program of the New Jersey Economic Development Authority(NJEDA) in exchange for net proceeds of $197,000. In order to have realized this benefit, the Company applied to the NJEDA and met various requirementsfor eligibility. The provision for (benefit from) income taxes differed from the amount of income taxes determined by applying the applicable federal tax rate (34%) topretax income (loss) from continuing operations as a result of the following: 2015 2014 2013 (in thousands) Expected Statutory expense (benefit) $2,244 $1,844 $(95) Gain on derivative and amortization of debt discount (5,597) (693) - Other non-deductible expenses 7 3 2 Change in valuation allowance 3,254 (1,031) 30 Rate differential - foreign vs. US 114 (197)State income taxes, net of federal benefit 13 50 - Federal tax impact of state tax benefit, net - - 63 $35 $173 $(197) F-32  Deferred tax assets included in the Consolidated Balance Sheets as of December 31, 2015 and 2014 consisted of the following: 2015 2014 (in thousands) Current Assets: Allowance for doubtful accounts $6 $6 Inventory reserve 157 113 Accrued expenses 1,005 566 Total current assets 1,168 685 Long Term Assets (Liabilities): Property, plant and equipment 348 245 Intangible assets (256) 2 Tax operating loss carry forwards 11,283 9,068 Tax credit carry forwards 291 293 Non-employee stock options 1,238 682 Other (7) (5)Total Long Term Assets (Liabilities) 12,897 10,285 Gross Deferred Tax Asset (Liability) 14,065 10,970 Less Valuation Allowance (14,309) (10,970)Deferred taxes, net $(244) $- The Company evaluates the recoverability of its net deferred tax assets based on its history of operating results, its expectations for the future, and theexpiration dates of the net operating loss carry forwards. Based on the preponderance of the evidence, the Company has concluded that it is more likely thannot that it will be unable to realize the net deferred tax assets in the immediate future and has established a valuation allowance for all such net deferred taxassets. Accordingly, the Company has provided a valuation allowance of $14.3 million and $11.0 million for the years ended December 31, 2015 and 2014,respectively, on its net deferred tax assets. The valuation allowance increased during the year 2015 by $3.4 million related to pre-tax income for the yearended December 31, 2015. Operating loss and tax credit carry forwards as of December 31, 2015 were as follows: 2015 2014 (in thousands) Federal: Net operating losses (expiring through 2035) $32,870 $26,602 Research tax credits (expiring through 2025) 168 168 Alternative minimum tax credits (available without expiration) 70 123 State: Net Operating Losses: Tennessee (expiring in 2030) 568 322 New Jersey (expiring in 2035) 822 1 Illinois (expiring in 2035) 255 - Foreign Net operating losses (no expiration) 10 - F-33  December 31, 2015, the Company’s U.S. federal net operating loss carryforwards will expire as follows: Year Net Operating Loss (in thousands) 2019 $1,009 2020 6,670 2021 1,157 2022 - 2023 1,232 2024 974 2025 1,850 2026 1,070 2027 308 2028 1,414 2029 3,447 2030 3,455 2031 2,749 2032 3,721 2035 6,579 Total $35,635 The above excludes net operating losses of $2.8 million which, if realized would be accounted for as additional paid-in capital. The Company’s ability to use net operating loss carry forwards is subject to substantial limitation in future periods under certain provisions of Section 382 ofthe Internal Revenue Code, which limit the utilization of net operating losses upon a more than 50% change in ownership of the Company’s stock that isheld by 5% or greater stockholders. The Company examined the application of Section 382 with respect to an ownership change that took place during 2010,as well as the limitation on the application of net operating loss carry forwards. The Company believes that operating losses subsequent to the change date in2010 (aggregating $15.1 million) are not subject to Section 382 limitations. The Company has estimated that the annual limitation starting in 2010aggregates from $1.0 million to $2.3 million per year including the effect of amortization of built in gains. The Company is subject to the provisions of ASC 740-10-25, Income Taxes (ASC 740). ASC 740 prescribes a more likely-than-not threshold for the financialstatement recognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold andmeasurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. On a quarterlybasis, the Company undergoes a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions. Forfederal purposes, post 1998 tax years remain open to examination as a result of net operating loss carryforwards. The Company is currently open to audit bythe appropriate state income taxing authorities for tax years 2011 to 2014. F-34  15. Lease Commitments The Company’s commitments and contingencies consisted of operating leases for warehouse and office space and equipment. Future minimum leasepayments under non-cancelable operating leases are as follows: Commitments 2016 $408 2017 439 2018 355 2019 315 2020 317 2021 322 2022 327 2023 332 2024 83 $2,898 Rent expense was $360,000, $216,200 and $121,700 for the years ended December 31, 2015, 2014 and 2013, respectively. 16. Legal and U.S. Regulatory Proceedings On March 2, 2001, the Company became aware of environmental contamination resulting from an unknown heating oil leak at its former manufacturingfacility. The Company immediately notified the New Jersey Department of Environmental Protection (“NJ DEP”) and the local authorities, and hired acontractor to assess the exposure and required clean up. The total estimated costs for the clean-up and remediation is $889,000, of which approximately$123,000 remains accrued as of December 31, 2015. Based on information provided to the Company from its environmental consultant and what is known todate, the Company believes the reserve is sufficient for the remaining remediation of the environmental contamination. There is a possibility, however, thatthe remediation costs may exceed the Company’s estimates. The restricted cash, included in other assets on the Consolidated Balance Sheet of $124,000 as of December 31, 2015 and $54,000 as of December 31, 2014represents a restricted escrow account set up on the requirement of the NJ DEP for the soil remediation work. These funds will be released to the Companyupon the NJ DEP’s approval when the remediation is completed. On December 19, 2013, the Company filed a complaint in the United States District Court for the District of Delaware against Mallinckrodt LLC,Mallinckrodt, Inc. and Nuvo Research Inc., collectively refer to as Mallinckrodt, seeking a declaration of non-infringement of United States Patent Nos.8,217,078 and 8,546,450 so that the Company can bring our generic diclofenac sodium topical solution 1.5% to market at the earliest possible date underapplicable statutory and FDA regulatory provisions. On January 10, 2014, Mallinckrodt filed an answer and counterclaim alleging that the Companyinfringed the patents at issue. On June 26, 2014, the Company entered into a settlement agreement with Mallinckrodt, pursuant to which Mallinckrodtgranted us a non-exclusive license to launch the Company’s diclofenac sodium topical solution 1.5% product on March 28, 2015. There was no materialimpact on the Company’s financial statements as a result of the settlement. We received tentative approval to sell the diclofenac sodium topical solution1.5% from the FDA on May 7, 2014. F-35  On May 21, 2015, Horizon Pharma Ireland Limited, HZNP Limited and Horizon Pharma USA, Inc. (collectively, “Horizon”) filed a complaint in the UnitedStates District Court for the District of New Jersey against the Company alleging infringement of certain United States patents based upon to the Company’ssubmission to the FDA of an Abbreviated New Drug Application (“ANDA”) seeking FDA approval to market diclofenac topical solution 2% w/w before theexpiration of the patents asserted in the complaint. On June 30, 2015, August 11, 2015, September 17, 2015, October 27, 2015 and February 5, 2016, Horizonfiled additional complaints in the United States District Court for the District of New Jersey against the Company alleging infringement of other of its UnitedStates patents in relation to the Company’s submission of the same ANDA. On July 21, 2015, September 11, 2015, October 6, 2015, October 21, 2015 andDecember 17, 2015, the Company filed answers, affirmative defenses and counterclaims with respect to the first five complaints filed by Horizon. In thosefilings, the Company asserted that the patents alleged to be infringed in the complaints filed by Horizon are invalid and not infringed by the Company. On December 4, 2015, Galderma Laboratories, L.P. and Galderma S.A. (collectively, “Galderma”) filed a complaint in the United States District Court for theNorthern District of Texas against the Company alleging infringement of United States Patent No. 6,106,848 based upon the Company’s submission to theFDA of an ANDA seeking FDA approval to market clobetasol propionate lotion 0.05% before the expiration patent asserted in the complaint. On January 5,2016, Galderma and Teligent entered into a Settlement and License Agreement the terms of which are confidential. On January 22, 2016, the case wasdismissed with prejudice. 17. Employee Benefits The Company has a 401(k) contribution plan, pursuant to which employees may elect to contribute to the plan, in whole percentages, up to 100% ofcompensation. Employees’ contributions are subject to a minimum contribution by participants of 1% of compensation and a maximum contribution of$18,000 for 2015, $17,500 for 2014 and $17,500 for 2013, plus a catch-up contribution of up to $5,500 for 2015, 2014 and 2013, if a participant qualifies.The Company matches 100% of the first 3% of compensation contributed by participants and 50% of the next 2% of compensation contributed byparticipants. The Company contribution is in the form of cash, which is vested immediately. The Company has recorded charges to expense related to thisplan of approximately $172,965, $126,600 and $93,000 in 2015, 2014 and 2013, respectively. 18. 2014 Public Offering On June 27, 2014, the Company entered into an underwriting agreement with Roth Capital Partners, LLC and Oppenheimer & Co., as representatives of theseveral underwriters named therein (the “Underwriters”), relating to the underwritten public offering and sale of up to an aggregate of 4,650,000 shares of theCompany’s common stock, par value $0.01 (the “shares”), at a price to the public of $5.00 per share (the “Offering”). The Company also granted theunderwriters a 30-day option to purchase up to an aggregate of 697,500 shares to cover over-allotments, if any. The Offering was made pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-196543), filed on June 5, 2014 with theSecurities and Exchange Commission (the “SEC”) and declared effective by the SEC on June 16, 2014, as well as the prospectus supplement describing theterms of the Offering, dated June 27, 2014. On July 2, 2014, the Company closed the Offering, and after giving effect to the underwriters’ exercise of the over-allotment option, the Company sold anaggregate of 5,347,500 shares of common stock in the Offering at a public offering price of $5.00 per share. The net proceeds of the Offering wereapproximately $24.9 million, after deducting underwriting discounts and commissions and other offering expenses paid by the Company. F-36  19. Asset Purchase Agreements Concordia On October 5, 2015, the Company, together with a wholly-owned subsidiary of the Company incorporated under the laws of Jersey (the “CompanySubsidiary”, and together with the Company, the “Purchasers”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) and certain otherancillary agreements with Concordia Pharmaceuticals Inc., S.à.r.l., Barbados Branch (“Concordia”), pursuant to which the Company acquired all rights, titleand interests of Concordia in the existing inventory and certain contracts associated with three currently marketed injectable pharmaceutical products(Fortaz®, Zinacef TM , and Zantac® Injection) (the “Inventory”), and the Company Subsidiary acquired all rights, title and interests of Concordia in, amongother things, certain other contracts, product registrations and books and records associated with those products (together with the Inventory and other assetsacquired by the Company, the “Purchased Assets”). The transaction was also completed on October 5, 2015. The transaction is accounted for as a purchase of the product and product rights, and as such the initial payment and related costs to acquire the assets(excluding inventory) are included as part of product acquisition costs totaling $10,100,000. The Company will amortize the costs over fifteen years, theuseful life of the acquired products and products rights. In addition, Teligent Pharma Inc. purchased approximately $1,200,000 of inventory related to thethree products acquired. On December 10, 2015, the Company, together with Teligent Jersey Limited, a wholly-owned subsidiary of the Company incorporated under the laws ofJersey (the “Company Subsidiary,” and together with the Company, the “Purchasers”) , entered into a First Amendment to the Asset Purchase Agreement (the“First Amendment”) with Concordia, which amends the Asset Purchase Agreement, dated October 5, 2015, by and between the Purchasers and the Seller (the“Purchase Agreement”). The First Amendment amends the Purchase Agreement to include certain additional intellectual property rights in the PurchasedAssets relating to the “TWISTVIAL” trademark. In connection with the First Amendment, on December 10, 2015, the Company Subsidiary also entered into aTrademark Assignment Agreement by and between the Company Subsidiary and the Seller, pursuant to which the Seller sold, conveyed, assigned, transferredand delivered the “TWISTVIAL” trademark associated with certain of the Purchased Assets. Astra Zeneca On September 24, 2014, the Company entered into an Asset Purchase Agreement (the “AZ Purchase Agreement”) with AstraZeneca Pharmaceuticals LP, aDelaware corporation (“AstraZeneca”), pursuant to which the Company acquired all rights, titles and interests of AstraZeneca and its affiliates in AbbreviatedNew Drug Applications and New Drug Applications associated with eighteen products (collectively the “Purchased Regulatory Approvals”) and certaindocuments relating thereto (together with the Purchased Regulatory Approvals, the “Purchased Assets”). In consideration for the purchase of the Purchased Assets, the Company paid AstraZeneca $0.5 million in cash in September 2014 and paid $6 million uponthe compliance of a certain milestone event. In addition, the Company has agreed to pay, for each product manufactured by the Company pursuant to aPurchased Regulatory Approval, a royalty on future gross profits from product sales. On November 30, 2015, the Company entered into a First Amendment(“Amendment”) to the Asset Purchase Agreement dated as of September 24, 2014 with AstraZeneca. Pursuant to the Amendment, the Company andAstraZeneca have agreed to extend the date prior to which the Company may elect to satisfy in full its royalty obligations with a full payment of $3,000,000from December 1, 2015 to June 30, 2016. The transaction is accounted for as a purchase of the product and product rights, and as such the initial payment, milestone payment and related costs toacquire the asset are included as part of product acquisition costs totaling $6,910,000. The Company will amortize the costs over fifteen years, the useful lifeof the acquired products and product rights, commencing when the product can be sold. Valeant On September 30, 2014, the Company entered into two Asset Purchase Agreements (each, a “Valeant Purchase Agreement” and together, the “Valeant AssetPurchase Agreements”) one with Valeant Pharmaceuticals North America LLC and one with Valeant Pharmaceuticals Luxembourg SARL (together,“Valeant”), pursuant to which the Company acquired all rights, titles and interests of Valeant and their respective affiliates in Abbreviated New DrugApplications and New Drug Applications associated with two products (collectively, the “Valeant Purchased Regulatory Approvals”) and certain documentsrelating thereto (together with the Valeant Purchased Regulatory Approvals, the “Valeant Purchased Assets”). Pursuant to the terms of the Valeant AssetPurchase Agreements, the Company also acquired the option (each, an “Option” and, collectively, the “Options”) to purchase Abbreviated New DrugApplications and New Drug Applications associated with three additional products (the “Additional Assets”). The transaction is accounted for as a purchase of the product and product rights, and as such the initial payment and related costs to acquire the asset areincluded as part of product acquisition costs totaling $3,565,000. The Company will amortize the costs over fifteen years, the useful life of the acquiredproducts and products rights, commencing when the product can be sold. F-37  In consideration for the purchase of the Valeant Purchased Assets, the Company paid Valeant an aggregate of $1,500,000 in cash. In consideration for thepurchase of the Additional Assets, the Company may exercise any Option, in its sole discretion, and pay $750,000 for each of two additional products and$500,000 for one additional product, for a total aggregate of $2,000,000 if all Options are exercised. The Company exercised its Option and purchased theone additional product for $0.5 million on November 18, 2014. On March 27, 2015, the Company exercised its Option and purchased the two additionalproducts for a total of $1.5 million in cash. The transaction is accounted for as a purchase of the product and product rights and, as such, the initial paymentand related costs to acquire the Valeant Purchased Assets are included as part of product acquisition costs totaling $3.5 million. The Company will amortizethe costs over fifteen years, the useful life of the acquired product and product rights, commencing when the product can be sold. F-38  20. Quarterly Results (Unaudited) The following is a summary of certain quarterly financial information for the fiscal years 2015 and 2014: First Second Third Fourth Quarter Quarter Quarter Quarter Total (in thousands, except per share data) Year Ended December 31, 2015 Total revenues, net $10,671 $8,893 $11,615 $13,071 $44,250 Gross profit 5,628 3,666 6,077 5,944 21,315 Operating income (loss) 1,098 (1,911) 391 (2,769) (3,192)Net income (loss) 6,555 9,376 (2,888) (6,375) 6,668 Net income (loss) attributable to common stockholders 6,555 9,376 (2,888) (6,375) 6,668 Basic income (loss) per share $0.12 $0.18 $(0.05) $(0.12) $0.13 Diluted income (loss) per share $0.01 $(0.03) $(0.05) $(0.12) $(0.07) Year Ended December 31, 2014 Total revenues, net $6,853 6,483 6,668 13,736 33,740 Gross profit 2,866 2,903 2,632 8,391 16,792 Operating income (loss) 219 (281) (144) 4,112 3,906 Net income (loss) 167 (345) (202) 5,631 5,251 Net income (loss) attributable to common stockholders 167 (345) (202) 5,631 5,251 Basic income (loss) per share $0.00 $(0.01) $0.00 $0.11 $0.11 Diluted income (loss) per share $0.00 $(0.01) $0.00 $0.09 $0.09 F-39 TELIGENT, INC.SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS(in thousands) Additions Balance at Charged to Charged Beginning Costs and other Balance at of Year Expenses Accounts Deductions End of Year Year Ended December 31, 2013 Change in Tax Valuation Allowance $12,358 - - 296 $12,062 Year Ended December 31, 2014 Change in Tax Valuation Allowance $12,062 - - 1,092 $10,970 Year Ended December 31, 2015 Change in Tax Valuation Allowance $10,970 - 3,350 - $14,320 F-40  Exhibit 21 List of Subsidiaries (1)Igen, Inc.(2)Teligent Pharma. Inc.(3)Teligent Luxembourg S.à.r.l(4)Teligent OÜ(5)Teligent Canada Inc.(6)Teligent Jersey Limited.(7)Microburst Energy, Inc. (Inactive)(8)Blood Cells, Inc. (Inactive)(9)Flavorsome, Ltd. (Inactive)  Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statements of Teligent, Inc. and subsidiaries (formerly known as IGI Laboratories, Inc.) onForm S3 (Nos. 333-27173, 333-47006, 333-61716, 333-163524, 333-171446, 333-173615, 333-173148, 333-187221 and 333-196543) and Form S8 (Nos.33-58479, 333-28183, 333-53212, 33-65249, 333-52312, 333-65553, 333-67565, 333-79333, 333-79341, 333-160341, 333-160342, 333-160865, 333-167387 and 333-197811) of our report dated March 14, 2016, on our audits of the consolidated financial statements as of December 31, 2015 and 2014, andfor each of the years in the three-year period ended December 31, 2015, and the effectiveness of Teligent, Inc. and subsidiaries' internal control over financialreporting as of December 31, 2015, which report is included in this Annual Report on Form 10-K, to be filed on or about March 14, 2016. /s/ EisnerAmper LLP Iselin, New JerseyMarch 14, 2016  Exhibit 31.1 CERTIFICATIONS UNDER SECTION 302 I, Jason Grenfell-Gardner, certify that: 1. I have reviewed this annual report on Form 10-K of Teligent, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 14, 2016 /s/ Jason Grenfell-Gardner Principal Executive Officer  Exhibit 31.2 CERTIFICATIONS UNDER SECTION 302 I, Jenniffer Collins, certify that: 1. I have reviewed this annual report on Form 10-K of Teligent, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 14, 2016 /s/ Jenniffer Collins Principal Financial Officer  Exhibit 32.1 CERTIFICATIONS UNDER SECTION 906 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), eachof the undersigned officers of Teligent, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that: The Annual Report for the year ended December 31, 2015 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a)or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-K fairly presents, in all material respects, the financialcondition and results of operations of the Company. Dated: March 14, 2016/s/ Jason Grenfell-Gardner Principal Executive Officer Dated: March 14, 2016/s/ Jenniffer Collins Principal Financial Officer 

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