Teligent, Inc.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017 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 ý 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 ý 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 of1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ý 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 ý 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. ý 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 ýNon-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 ý The aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant (without admitting thatany person 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 ofthe last business day of the registrant’s most recently completed second fiscal quarter was $394.8 million. As of March 6, 2018, the registrant had 53,496,889 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 May21, 2018.PART I Item 1. BUSINESSOur Company Strategic Overview Teligent, Inc., is a specialty generic pharmaceutical company. All references to "Teligent," the "Company," "we," "us," and "our" refer to Teligent, Inc. Ourmission is to become a leader in the specialty generic pharmaceutical market. Under our own label, we currently market and sell generic topical and brandedgeneric and generic injectable pharmaceutical products in the United States and Canada. In the United States we are currently marketing 25 generic topicalpharmaceutical products and four branded generic pharmaceutical products. In Canada, we sell over 30 generic and branded generic injectable products andmedical devices. Generic pharmaceutical products are bioequivalent to their brand name counterparts. We also provide contract manufacturing services to thepharmaceutical, over-the-counter, ("OTC"), and cosmetic markets. We operate our business under one segment.Our common stock is trading on the NASDAQ Global Select Market under the trading symbol “TLGT.” Our principal executive office, laboratories andmanufacturing facilities are located at 105 Lincoln Avenue, Buena, New Jersey. We have additional offices located in Iselin, New Jersey, Toronto, Canada,and Tallinn, Estonia. 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. In 2014, we acquired 23 drug products that had been previously approved by the United States Food and Drug Administration, or FDA. Our pipeline includes31 Abbreviated New Drug Applications, or ANDAs, on file with the FDA, for additional pharmaceutical products. In addition, we have four submissions onfile with Health Canada. We have an additional 45 product candidates at various stages of our development pipeline. We submitted four ANDAs in 2017. Weexpect 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. We received nine approvals from our internally developed pipeline of topical genericproducts in 2017. We intend to continue to submit further ANDAs to the FDA and ANDSs to Health Canada in 2018. We will also seek to license or acquirefurther products, intellectual property, or pending applications to expand our portfolio.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. Teligent Canada. On November 13, 2015, we acquired all of the rights, title and interest in the development, production, marketing, import and distributionof all products of Alveda Pharmaceuticals Inc., or Alveda, pursuant to two asset purchase agreements, one relating to the acquisition of all of the intellectualproperty-related assets of Alveda and the other relating to the acquisition of all other assets of Alveda. 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 the Republic of Estonia that is wholly-owned by LuxCo; and Teligent Canada Inc., a company incorporated under the laws of the Provinceof British Columbia that is wholly-owned by LuxCo. Teligent Canada currently has eight 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,2and capital assets. In addition, Teligent Canada acquired Alveda’s existing customer relations, all contracts necessary to execute the Canadian distributionactivities, operational permits, and all intellectual property required to operate the marketing and distribution of products in Canada. Teligent Canada alsotransitioned a majority of the existing workforce as part of the acquisition. Teligent Canada currently markets and distributes over 30 products. Teligentcontinues to transition these products to distribute them under a Teligent Canada label. Teligent OÜ. Teligent OÜ currently has 13 employees, including a general manager of Teligent OÜ. Teligent OÜ is responsible for the development,enhancement, maintenance, protection and exploitation functions related to the intellectual property-related assets acquired from Alveda. In addition,Teligent OÜ is responsible for the management of the supply chain function and procurement of products for sale to Teligent Canada in addition to certainproducts and active pharmaceutical ingredients ("API's") for Teligent Pharma, Inc. in the U.S. We built and developed a laboratory to support analyticalchemistry, quality control, and formulation development to support our Teligent US and Teligent Canada supply chain management and technical servicesteams. Facility Expansion. We completed the first phase of our facility expansion in July 2016, with the complete interior renovation of our building at 101 LincolnAvenue in Buena, New Jersey. This building now houses our new product development laboratory for work on topical and sterile pharmaceuticals. Thislaboratory integrates our formulation and analytical chemistry teams into one lab. This building renovation also houses our regulatory affairs, supply chainand corporate service teams.We continue with the significant expansion and utilities upgrade of our manufacturing facility at 105 Lincoln Avenue in Buena, New Jersey. In December2017, we received the Temporary Certificate of Occupancy (TCO) to begin using the first phase of completed work in our manufacturing facility, whichincludes a state-of-the-art quality control and microbiology lab for the testing of our pharmaceutical products. The expanded facility will increase ourmanufacturing capability for topical products and will also enable the production of sterile injectable products in both vial and ampule presentations. We areusing this facility expansion as an opportunity to upgrade and improve the degree of automation and capacity in our existing topical production suite. Thesterile production area is designed around isolator-based technology. The facility will include a versatile vial and ampule filling line capable of between fourand eight million units per year, with space and critical utilities included in the build-out for a potential future higher-speed filling line. The current plansconsider a total capital outlay for 105 Lincoln Avenue of approximately $60 million. We have been partnering with contract manufacturing organizations, orCMOs, for the development, registration and manufacture of some of our sterile injectable and ophthalmic products. Upon completion of the site expansion,we may transfer the manufacture of some of these injectable products to this facility. We will also use the new sterile production capability to support ourinternal R&D pipeline of sterile injectable products in vial and ampule presentations. 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. Based on IQVIA data, the addressable market, as of January 2018, for the 32 products we have pending at the FDA totals approximately $2.0 billion in annualsales. We expect to continue to expand our presence in the generic topical pharmaceutical market through the submission of additional ANDAs to the FDAand the subsequent launch of products if and when these applications are approved by the FDA. Additionally, we plan to file further ANDSs with HealthCanada in 2018. We also have 45 additional product candidates in various stages of development. 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 18 products, 17 of which are injectable products and onenon-injectable product for pain management. On September 30, 2014, we acquired previously marketed and approved ANDAs associated with twoophthalmic products from Valeant Pharmaceuticals LLC and Valeant Pharmaceuticals Luxembourg SARL, or Valeant, in addition to the exclusive right toacquire three additional previously marketed and approved injectable products from Valeant. In November 2014, we completed the purchase of one of thosethree optioned injectable products and its related NDA from Valeant. In March 2015, we completed the purchase of the final two optioned injectable productsand their related NDAs from Valeant. 3On November 13, 2015, we formed Teligent Canada, and completed the acquisition of Alveda. Teligent Canada currently has eight employees, including ageneral manager located in our offices in Toronto, Canada. Teligent Canada acquired all of the Alveda working capital, including accounts receivable,inventory, accounts payable, and capital assets. In addition, Teligent Canada acquired Alveda’s existing customer relations, all contracts necessary toexecute the Canadian distribution activities, operational permits, and all intellectual property required to operate the marketing and distribution of Alveda’sproducts in Canada. Teligent Canada also transitioned a majority of the existing workforce as part of the acquisition. Teligent Canada currently markets anddistributes 30 injectable products. Our Contract Manufacturing and Development Business We develop, manufacture, fill and package topical semi-solid and liquid products for branded and generic pharmaceutical customers, as well as the OTC andcosmetic markets. These products are used in a wide range of applications from cosmetics and cosmeceuticals to the prescription treatment of conditions likedermatitis, psoriasis and eczema. 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 from the transaction were approximately $139million, after deducting 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 offices are located at 105 Lincoln Avenue, Buena, New Jersey 08310. Our telephonenumber is (856) 697-1441. We maintain a website at www.teligent.com. We make available on or through our website our periodic reports that we file withthe Securities and Exchange Commission, or the SEC. This information is available on our website free of charge as soon as reasonably practicable after weelectronically file the information with or furnish it to the SEC. The contents of our website are not incorporated by reference into this document and shallnot be deemed “filed” under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our Competitive Strategy We develop and market a diversified product portfolio focused on alternative dosage forms. Our goal is to become a leader in the specialty genericpharmaceutical market. Under our own label, we currently market and sell generic topical and branded generic injectable pharmaceutical products in theUnited States and Canada. We also provide contract manufacturing services to the pharmaceutical, OTC, and cosmetic markets. We have been in the contractmanufacturing and development of topical products business since the early 1990s, but our strategy since 2010 has been focused on the growth of our owngeneric pharmaceutical business. In 2014, we started the transformation of our business from working toward being a leader in the topical genericpharmaceutical industry to becoming a leader in the specialty pharmaceutical markets. We believe that expanding our development and commercial basebeyond topical generics to injectable generics, complex generics and ophthalmic generics (what we call our TICO strategy), will leverage existing expertiseand capabilities, diversify our commercial opportunities and broaden our platform for long-term strategic growth. Our TICO Strategy4 Our TICO strategy originated from our opportunity to leverage our value chain, which we have developed and strengthened through our topical portfolio.Our value chain includes our internal expertise in product and molecule selection and development, manufacturing, sales, logistics and distribution, as wellas our relationships with our customers and consumers. With the expansion of our existing manufacturing facility, we see the potential to effectively leverageour existing infrastructure across this value chain and to further expand our strategic reach to the injectable, complex and ophthalmic generic pharmaceuticalmarkets. Topical (T) - Our focus on the topical market has been the foundation for our growth. While we have manufactured topical products since the early1990s, we began to focus our strategy on the topical generic market in 2010. In December 2012, we launched our first generic topical pharmaceuticalproducts under our own label. Currently, we market 25 topical products under our own label. We have received FDA approvals for 20 topical genericproducts from our internally developed pipeline in 2017. In our topical pipeline, we have 29 ANDAs submitted to the FDA that are awaiting approval.We intend to continue to develop topical generic products and utilize our expertise in drug formulation and manufacture to expand our own generictopical prescription drug portfolio, eight of which were approved. We are targeting to develop and file further regulatory submissions with the FDA in2018. Upon regulatory approval, we would market these products under the Teligent label to national chain drug stores and drug wholesalers throughour internal sales efforts. 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 progressing with the significant expansion and utilities upgradein this facility which will increase our manufacturing capacity for topical products to accommodate the expected growth created by the eventualcommercial launch of the 29 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 18 products, 17 of which are injectable products and one of which is a non-injectable product for pain management. Of theproducts we acquired, two of the products are currently on the FDA drug shortage list. We have received FDA approval for our first product in thisportfolio, Cefotan® (Cefotetan for Injection), which we launched in the first quarter of 2016.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 the NDA for one of those three optioned injectable products from Valeant. In March 2015, we completed the purchase of the final two NDAsfor the optioned injectable products from Valeant.On October 5, 2015, we acquired three currently marketed injectable pharmaceutical products (Fortaz®, Zinacef ™ and Zantac® Injection) fromConcordia Pharmaceuticals Inc., S.à.r.l., Barbados Branch. We intend to leverage our existing topical value chain as we build our injectable generic portfolio. We have 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. The facility expansion, which began construction activities in the beginning of 2016, will also enable the production of sterile injectable products inboth vial and ampule presentations. The sterile production area is designed around forward-thinking isolator-based technology. We have a portfolio ofsterile injectable products we acquired in 2014, which upon completion of the site expansion, we may transfer the manufacture of some of these productsto our Buena, New Jersey facility. We will also use the new sterile production capability to support our internal R&D pipeline of sterile injectableproducts in vial and ampule presentations. We plan to continue to pursue 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 filed one ANDA in the fourthquarter of 2017 for a generic version of an oral orphan drug. We consider our focus on complex5products 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, or CRO, to develop a genericequivalent of a pharmaceutical drug product designated for a chronic rare disease. The intent of this opportunity is to provide patients with a lower costalternative of an approved orphan drug. The Orphan Drug Designation program at the FDA provides orphan status to drugs and biologics which aredefined as those intended for the safe and effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people inthe U.S., or that affect more than 200,000 persons, but are not expected to recover the costs of developing and marketing a treatment drug. We willcontinue to seek opportunities 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 forcommercial production. We plan to continue to review business development opportunities to expand our ophthalmic portfolio. We are currentlyworking with a contract research organization to develop three generic ophthalmic products. 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 manufacture and sell topical genericpharmaceutical products under our own label. In October 2015, we acquired and began to sell our first generic injectable products. We currently market over30 products in Canada. As we continue to execute our TICO strategy, we will compete in other markets, including the injectable and ophthalmic genericpharmaceutical markets, and expect to face other competitors. For the years ended December 31, 2017, and 2016, 57% and 41% 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. As of December 31,2017, Cardinal accounted for 47% of our accounts receivable, ABC accounted for 15% of our accounts receivable, and McKesson accounted for 14% of ouraccounts receivable. As of December 31, 2016, Cardinal accounted for 56% of our accounts receivable, McKesson accounted for 20% of our accountsreceivable, and ABC accounted for approximately 11% of our accounts receivable. 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. There are generally three major negotiating entities in the US market. Walgreens Boots AllianceDevelopment (WBAD) consists of Walgreens, AmerisourceBergen’s PRxO Generics program, and Econdisc members. Red Oak Sourcing consists of CVS andCardinal’s source program. Finally, ClarusOne consists of Walmart, RiteAid and McKesson’s OneStop program. A loss of any of these major entities couldresult in a significant reduction in revenue. 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. We continue to analyze the market for other opportunities to expand our current relationships with other customers, while we continue to seek todiversify our existing portfolio of specialty generic drug products through internal research and development. In addition, we continue to explore businessdevelopment opportunities to add additional products and /or capabilities 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, 2017,approximately 86% of our contract services revenue was derived from pharmaceutical customers, as compared to 90% of total contract services revenue forthe year ended December 31, 2016. None of our contract manufacturing services customers represented 10% of total revenue for the year ended December 31,2017, and one of our contract manufacturing services customers represented 10% of total revenue for the year ended December 31, 2016. 6Concentration of Risk. In 2017, we had sales to three customers which individually accounted for more than 10% of our total revenue. These customers hadsales of $18.7 million, $9.9 million and $9.6 million, respectively, and represented 57% of total revenues in the aggregate. Accounts receivable related tothese major customers comprised of 13%, 14% and 43%, respectively, and represented 70% of all accounts receivable as of December 31, 2017. In 2016, wehad sales to three customers which individually accounted for more than 10% of our total revenue. These customers had sales of $13.5 million, $8.6 millionand $6.8 million, respectively, and represented 43% of total revenues in the aggregate. Accounts receivable related to these major customers comprised of20%, 56% and 5%, respectively, and represented 81% of all accounts receivable as of December 31, 2016. In 2015, we had sales to three customers whichindividually accounted for more than 10% of our total revenue. These customers had sales of $12.3 million, $5.8 million and $5.0 million, respectively, andrepresented 52% of total revenues in the aggregate. Accounts receivable related to these major customers comprised of 43%, 33% and 6%, respectively, andrepresented 83% of all accounts receivable as of December 31, 2015.Expansion into foreign operations in the fourth quarter of 2015 has generated net revenues greater than 10% outside of the United States. For the year endedDecember 31, 2017, domestic net revenues were $53.5 million and foreign net revenues were $13.8 million. As of December 31, 2017, domestic net assetswere $117.7 million and foreign assets were $72.3 million. For the year ended December 31, 2016, domestic net revenues were $56.1 million and foreign netrevenues were $10.8 million. As of December 31, 2016, domestic assets were $120.0 million and foreign assets were $63.2 million. For the year endedDecember 31, 2015, domestic net revenues were $42.7 million and foreign net revenues were $1.6 million. As of December 31, 2015, domestic assets were$129.0 million and foreign assets were $51.7 million. Our ProductsWe recorded net revenue from one product, Econazole Nitrate Cream 1%, which accounted for 4%, 8% and 45% of total revenues in 2017, 2016 and 2015,respectively. Lidocaine Ointment 5%, which we launched at the end of the first quarter of 2016, accounted for 17%, 23% and 0% of total revenues in 2017,2016, and 2015, respectively. Zantac for injection, which the Company acquired in the fourth quarter of 2015, accounted for 10%, 3% and 0% of totalrevenues in 2017, 2016 and 2015.7Teligent United States Topical Pharmaceutical ProductsProductFormulationPresentationsBrand equivalentTherapeutic ClassificationBetamethasone Dipropionate(Augmented), 0.05%Ointment15g, 50gDIPROLENE®Topical CorticosteroidBetamethasone Dipropionate(Augmented), 0.05%Lotion30mL, 60mLDIPROLENE®Topical CorticosteroidClindamycin Phosphate 1%Topical Solution30mL, 60mLCleocin®Topical Anti-infectiveClobetasol 0.05%Lotion2oz, 4ozClobetasolTopical CorticosteroidClobetasol Propionate 0.05%Gel15g, 30g, 60gEmbeline®Topical CorticosteroidClobetasol Propionate Emollient 0.05%Cream15g, 30g, 45g, 60gTemovateE®Topical CorticosteroidDesoximetasone 0.25%Ointment15g, 60g, 100gTopicort®Topical CorticosteroidDiclofenac Sodium 1.5%Topical Solution150mLPennsaid®Topical Anti-inflammatoryEconazole Nitrate 1%Cream15g, 30g, 85gSpectazole®Topical Anti-fungalErythromycin 2%Gel30g, 60gErygel®Topical CorticosteroidErythromycin 2%Topical Solution60 mLErythromycin TopicalSolution 2%Topical CorticosteroidFluocinolone Acetonide 0.01%Topical Solution60mLSynalar®Topical CorticosteroidFluocinolone Acetonide 0.01%Cream15g, 60gSynalar®Topical CorticosteroidFluocinolone Acetonide 0.025%Ointment15g, 60gSynalar®Topical CorticosteroidFluocinolone Acetonide 0.025%Cream15g, 60gSynalar®Topical CorticosteroidFlurandrenolide 0.05%Ointment15g, 30g, 60gCordran®Topical CorticosteroidHydrocortisone Butyrate 0.1%Lotion118mL, 59 mLLocoid®Topical CorticosteroidLidocaine 4%Topical Solution50mLXylocaine®Topical AnestheticLidocaine 5%Ointment35.44gXylocaine®Topical AnestheticNystatin/Triam 100,000 Nystatinunits/1mg per gramOintment15g, 30g, 60gMykacet®Topical Anti-fungalTriamcinolone Acetonide 0.025%Lotion60mlTriamcinolone AcetonideTopical CorticosteroidTriamcinolone Acetonide 0.1%Ointment15g, 80g, 1lb jarKenalog®Topical CorticosteroidTriamcinolone Acetonide 0.1%Lotion60mLTriamcinolone AcetonideTopical CorticosteroidTriamcinolone Acetonide 0.1%Cream15g, 30g, 80gKenalog®Topical CorticosteroidTriamcinolone Acetonide 0.5%Ointment15gKenalog®Topical Corticosteroid8Teligent United States Injectable ProductsProductStrengthFormulationPresentationsDossier type held byTeligentTherapeutic ClassificationCefotan (Cefotetan) ®1g, 2gInjectableVialNDAAntibacterial for systemic useFortaz (Ceftazidime) ® 500mg, 1g, 2g, 6gInjectableVial, Twist Vial,Frozen BagNDAAntibacterial for systemic useZantac (Ranitidine) ® 25mg/mlInjectable2ml, 6ml, 40ml VialsNDADrugs for peptic ulcer and gastro-oesophageal related disorders(GORD)Zinacef (Cefuroxime)™ 750mg, 1.5g, 7.5gInjectableVial, Twist VialNDAAntibacterial for systemic use9Teligent Canada Products (1)ProductStrengthFormulationPresentationsBrand equivalentDossier type heldby TeligentTherapeuticClassificationAcetylcysteine200 mg/mlInjectable10ml and 30 ml vialsMucomyst® Parvolex®ANDSAntidoteAtropine0.4 mg/ml, 0.6 mg/mlInjectable1 ml vialsN/ADINAAntimuscarnic,antispasmodicBaclofen0.05 mg/ml, 0.5mg/ml,2mg/mlInjectable1mL, 5mL, 20mLampoulesLioresal®ANDSMuscle RelaxantIbuprofen for IntravenousInfusion100 mg/mlInjectable8 ml vialCaldolor®NDSNonsteroidalAntiinflammatory AgentCyanocobalamin (2)1000 mcg/mlInjectable1 mL ampoule, 10 mlvialN/ADINAHematopoieticDiazepam5 mg/mLInjectable2mL ampoulesValium®ANDSBenzodiazepineDimenhydrinate50 mg, 250 mgInjectable1 ml ampoule, 5 ml vialGravol®DINAAntihistamineDobutamine (2)12.5 mg/mlInjectable20 mL vialN/AANDSSympathomimeticEpinephrine1 mg/mlInjectable1 ml ampouleAdrenalin®DINACardiac StimulantErgonovine Maleate0.25 mg/mlInjectable1 ml ampouleN/ADINAOxytocicFentanyl50 mcg/mLInjectable2mL ampouleSublimaze®ANDSOpiate AnestheticFurosemide10 mg/mlInjectable2 ml ampouleLasix®ANDSDiureticGemcitabine10 mg, 200 mg, 1 gInjectable10 mg, 200 mg, 1 gvialsGemzar®ANDSAntineoplastic agentGentamicin (2)10 mg/ml, 40 mg/mlInjectable2mL ampouleGaramycin®ANDSAntibioticIrinotecan Hydrochloride20 mg/mlInjectable2 ml, 5 ml, 25 ml vialsCamptosar®ANDSAntineoplastic agentLidocaine 1%10 mg/mLInjectable5 ml and 10 mlpolyampouleXylocaine®DINALocal AnestheticLidocaine 1%10 mg/mlInjectable20 ml and 50 ml vialsXylocaine®DINALocal AnestheticLidocaine 2%20 mg/mlInjectable5 ml and 10 mlpolyampouleXylocaine®DINALocal AnestheticLidocaine 2%20 mg/mlInjectable20 ml and 50 ml vialsXylocaine®DINALocal AnestheticLidocaine 2% withepinephrine20 mg/ml & 0.01 mg/mLInjectable20 ml and 50 ml vialsXylocaine®DINALocal AnestheticLidocaine HydrochlorideTopical Solution USP 4%40 mg/mlTopical Solution50mLXylocaine®DINATopical AnestheticLidocaine Ointment USP5%50 mg/gOintment35gXylocaine®DINATopical AnestheticMethylene Blue10 mg/mLInjectable5mL ampouleN/ADINAAntidoteNaloxone0.4mg / mlInjectable1mL ampouleNarcanANDSOpitate AntagonistPiperacillin andTazobactam2g, 0.25 g, 3 g, 0.375 g,4 g, 0.5 gInjectable2.25 g, 3.375 g, 4.5 gvialsTazocin®ANDSAntibacterial for systemicuseSodium Cloride0.9%Injectable10 ml vialsN/ADINADiluentSterile Water for Injection100%Injectable10 ml polyampouleN/ADINADiluentSuccinylcholine Chloride20 mg/mLInjectable10 ml and 20 ml vialsQuelicin®DINAMuscle Relaxant(1) Table does not include Euflexxa®, which is not owned by Teligent Canada but is distributed and sold by Teligent Canada.(2) Product approved in 201710Teligent United States Other ProductsBelow 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.ProductStrengthFormulationPresentationsBrand equivalentDossier type heldby TeligentTherapeuticClassificationCiprofloxacin0.3%Ophthalmic Solution2.5ml, 5ml, 10ml bottlesCiloxan ®ANDAAntibacterial forsystemic useBetaxolol0.5%Ophthalmic Solution5ml, 7.5ml, 15ml bottlesBetopic ®ANDABeta Blocking AgentPhytonadione10mg, 1mgInjectable0.5ml, 1ml ampoules; 3cc, 6ccvialsAquaMephyton ®NDAHemostaticAmikacin Sulfate50mg/ml, 250mg/mlInjectable2ml, 4ml vialsAmikacin Sulfate ®ANDAAntibacterial forsystemic useCalcitonin Salmon 200IU/mlInjectable2ml vialsMiacalcin ®ANDAAnti-parathyroid AgentCefotetan Disodium 20mg/mlInjectable (bag)50ml bagsCefotetan ®NDAAntibacterial forsystemic useClindamycin Phosphate150mg/mlInjectable2ml, 4ml, 6ml, 60ml vials Cleocin ®ANDAAntibacterial forsystemic useDobutamine HCl12.5mg/mlInjectable20ml, 40ml vialsDobutamine HCl ®ANDACardiac StimulantDopamine HCl40mg/mlInjectable5ml, 10ml (vials and syringes)Dopamine HCl ®NDA / ANDACardiac StimulantDopamine HCl80mg/mlInjectable5ml, 10ml (vials, ampoules,and syringes)Dopamine HCl ®NDA / ANDACardiac StimulantDopamine HCl160mg/mlInjectable5ml (vials and ampoules)Dopamine HCl ®NDA / ANDACardiac StimulantDroperidol 2.5mg/mlInjectable10ml vials, 2ml and 5mlampoules, and 2ml syringesInapsine ®ANDAAnti-PsychoticFurosemide10mg/mlInjectable2ml, 4ml, 8ml, and 10ml vials,4ml and 10ml syringesFurosemide ®ANDADiureticMannitolUSP 25%Injectable50ml (vials and syringes)Mannitol ®ANDADiureticMeperidine HCl25mg/ml, 50mg/ml,75mg/ml, 100mg/mlInjectable1ml and 30ml vials, 1ml and1.5ml ampoules, and 1mlsyringesDemerol ®ANDASystemic analgesicMidazolam HCl5mg/mlInjectable2ml syringeMidazolam ®ANDASedativeOrphenadrine30 mg/mLInjectable2 mL ampuleOrphenadrine CitrateANDAMuscle RelaxantEdrophonium10 mg/mLInjectable1 mL ampule and 10 mL vialEnlon®NDAAcetylcholinesteraseinhibitorMVI-12N/AInjectable10 mL ampules and 5 mL vialsN/ANDASystemic multivitaminNaloxone HCl0.4 mg/mL, 1 mg/mLInjectable1 mL 5 mLand 10 mL vialsN/AANDAOpitate AntagonistNaloxone HCl(preservative free)0.4 mg/mLInjectable1 mL vialsN/AANDAOpitate AntagonistTobramycin Sulfate10 mg/mL, 40 mg/mLInjectable2 mLand 35 mL vialsN/AANDAAntibacterial forsystemic useNalbuphine10 mg/mL and 20mg/mLInjectable1 mL and 10 mL vialsNubain®ANDASystemic analgesic11 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 raw materials or componentssuppliers represented 10% or more of our purchases in 2017, 2016 or 2015. 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 38 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 injectable products and topical products in a wide range of dosage forms, including simple solutions through complexcreams. All ANDA topical development is conducted in-house except for bioequivalence testing, which is performed by a contract research organization("CRO"). Our injectable development is primarily conducted in house with some assistance from certain CRO's. We have been steadily increasing our investment in R&D as we believe that R&D is the future of the Company. We incurred $19.3, $17.1, and $13.2 millionin R&D expenses in 2017, 2016 and 2015, respectively. As the business continues to grow over the next three to five years, we expect research anddevelopment costs as a 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 are patent protected, which provides aperiod of market exclusivity during which time they are sold with little or no competition for the compound, although there typically are other participants inthe therapeutic area. Additionally, brand products may benefit from other periods of non-patent market exclusivity. Exclusivity normally provides brandproducts with the ability to maintain their profitability for a period of time and brand products typically continue to play a significant role in the market dueto 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 anew dosage form, a new delivery system or a new indication for a previously approved drug.12•Abbreviated New Drug Application — An ANDA is filed when approval is sought to market a generic equivalent of a drug product previouslyapproved under an NDA and listed in 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 a reference NDA product beforethe expiration of three years. Certain other periods of exclusivity may be available if the RLD is indicated for treatment of a rare disease or the sponsorconducts pediatric 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 the 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. FDASIA also included GDUFA, a novel user fee program focused on three key aims: 13•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. We currently do not have anyapplications in development that would utilize this track. 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. In addition, Health Canada conducts pre-approval and post-approval reviews and plant inspections to determine whether our systems are in compliance with the Good Manufacturing Practices inCanada, Drug Establishment Licensing requirements and other provisions of the Regulations. 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 to a Canadian facility once Health Canada has approved the facilities in which thepharmaceuticals are manufactured, distributed or imported. A key requirement for EL-issuance is compliance with the Good Manufacturing Practices as setout by Health Canada. For pharmaceuticals that are imported into Canada, the license for the Canadian importing facility must list all foreign sites at whichimported pharmaceuticals, and their14active ingredients, are manufactured and tested. To be listed on our EL, all our foreign sites must demonstrate compliance with relevant Good ManufacturingPractices recognized by Health Canada. Sales and Marketing We manufacture, sell, distribute and market our prescription drug products to national chain drug stores and drug wholesalers and distributors and grouppurchasing organizations, or GPOs, in the United States and Canada. This commercialization infrastructure includes satisfying our state, provincial,territorial, or national licensing requirements, implementing procedures with our third-party logistics partners, and maintaining appropriate sales order tocash administrative processes 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 five dominant companies in the topical generic drug market are: Perrigo Company, Sandoz (the generic pharmaceutical division ofNovartis AG), Taro Pharmaceutical Industries, Ltd., Mylan N.V., and Teva Pharmaceutical Industries, Ltd. Collectively, these five competitors controlapproximately 59% of the generic topical market by value based on IQVIA data from December 2017. We believe the concentrated nature of the topicalgeneric drug market creates an opportunity for us to be able to compete based on a variety of factors, including our focus on niche opportunities within themarket segment and our dedication to quality in every area of our business. 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 three dominant companies in the injectable generic drug market in the United States consist ofFresenius Kabi USA, Hospira, Inc. (a subsidiary of Pfizer, Inc.) and Sandoz (the generic pharmaceutical division of Novartis AG). Collectively, these threecompetitors control approximately 55% of the generic injectable market by value based on IQVIA data from December 2017. In Canada, we face competitionfrom largely the same firms as in the United States as well as certain Canada-only firms. The Canadian generic injectable market is dominated by Sandoz (thegeneric pharmaceutical division of Novartis AG), Pfizer Injectables 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. Although this market is competitive, the competition is limited due to the needfor specific expertise in topical formulations and cGMP facilities. We believe that we have the expertise required and we will continue to service our existingcustomers in this market by providing high quality, customer-oriented service, complemented by our contract development 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 12 to the Company’s Consolidated Financial Statements included elsewhere in this Annual Report. Intellectual Property15 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. 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. In 2017 we acquired an additional 3.0 acres of adjacent land in support of our facility expansion. We now own a total of 11.44acres at our Buena facility. This facility is used for production, product development, marketing and warehousing for our pharmaceutical, cosmeceutical andcosmetic products. We are in the process of expanding our facility to total approximately 100,000 square feet. The expanded facility will increase ourmanufacturing capability for topical products and will also enable the production of sterile injectable products in both vial and ampule presentations. We areusing this facility expansion as an opportunity to upgrade and improve the degree of automation and capacity in our existing topical production suite. Thesterile production area is designed around isolator-based technology. Our capabilities encompass a full suite of competencies, including manufacturing,regulatory, quality assurance and in-house validation. 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 lease an additional 11,000 square feet of warehouse space in Vineland, New Jersey. The Company also leases approximately 9,500 square feet of corporate office space in Iselin, New Jersey, approximately 4,000 square feet of office space inToronto, Canada and approximately 3,000 square feet of office and laboratory space in Tallinn, Estonia. Employees On December 31, 2017, we had a total of 183 full-time employees, including eight full-time employees in Canada and 13 full-time employees in Estonia. Inaddition, as the need arises, we occasionally utilize short-term, part-time employees who are paid on an hourly basis. We also utilize temporary employeesprovided by third-parties on a regular basis, primarily in our production department. We do not have a collective bargaining agreement with our employeesand we believe that our employee relations are good. Item 1B. UNRESOLVED STAFF COMMENTSNone. Item 1A. RISK FACTORSOur 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 risks16actually occur, our business, results of operations and financial condition could suffer. The risks discussed below also include forward-looking statementsand our actual results may differ substantially from those discussed in these forward-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. With the exception of 2015, our expenses exceeded our revenue in each of the last 12 years, and no net income has been available to common stockholdersduring each of these years. As of December 31, 2017, our stockholders’ equity was $44.8 million and we had an accumulated deficit of $60.1 million. Ourfuture profitability 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 57% of our revenue for the year endedDecember 31, 2017, and three of our customers accounted for 43% of our revenue for the year ended December 31, 2016. 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 17% and 23% of our revenue for the years ended December 31, 2017 and 2016,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.Most of the products that we are developing are either generic drugs or products without patent protection. These drugs and are therefore more subject to therisk of competition than patented products. In addition, because many of our competitors have substantially greater financial, production and research anddevelopment resources, substantially larger sales and marketing organizations, and substantially greater name recognition than we have, we are particularlysubject to the risks inherent in competing with them. For example, many of our competitors may be able to develop products and processes competitive with,or superior to, our own. Furthermore, we may not be able to successfully develop or introduce new products that are less costly than those of our competitorsor offer purchasers of our products payment and other commercial terms as favorable as those offered by our competitors. Furthermore, in the current political climate in which drug prices are a focus of the current administration, Congress, government and private payors, and thepublic more broadly, we cannot predict whether new legislative, regulatory, or other measures related to drug pricing may be enacted. If enacted, such drugpricing measures could have an impact on our gross margins from product sales, which could significantly and adversely impact our financial condition andcash flows. 17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.Our strategy depends on our ability to successfully develop and launch new pharmaceutical products ahead of our competitors.Our continued growth is dependent upon our ability to develop and commercialize products in a timely manner. We may encounter delays in testing andmanufacturing new pharmaceutical products, submitting applications for regulatory approval, receiving approval from the relevant authorities andcommercializing new products. This process is costly and time-consuming. Delays at any stage could prevent us from successfully launching new productsahead of our competitors and could have a material adverse effect on our business, financial condition and results of operations. 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 protection foradditional 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 on productsthat 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. 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 the18introduction of generic products and decrease the impact of generic competition, such as filing new patents on drugs whose original patent protection isabout to expire, developing patented controlled-release products, changing product claims and product labeling, or developing and marketing as over-the-counter products those branded products that are about to face generic competition, when feasible. Our competitors, which include major multinationalcorporations, are consolidating in both the branded and generics industries, and the strength of the combined companies could affect our competitiveposition in all of our business areas. Furthermore, if one of our competitors or its customers acquires any of our customers or suppliers, we may lose businessfrom 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.Our business and operations have experienced rapid growth, and if we do not appropriately manage any future growth, our business will be adverselyaffected.We have experienced, and are continuing to experience, rapid growth over the last several years, and additional growth through acquisitions is possible inthe future. Such growth has put significant demands on our management and infrastructure. Our success will depend in part upon our ability to manage thisgrowth effectively. As we continue to grow, we must improve our operational, financial and management controls and our reporting systems and procedures.We must ensure that our policies and procedures evolve to reflect our current operations. We must also continue to effectively manage existing employeesand to hire, train and manage new employees as needed. Any failure to expand these areas and implement appropriate procedures and controls in an efficientmanner and at a pace consistent with our business objectives could have a material adverse effect on our business, financial condition and results ofoperations. 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 common stock 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 ourcommon stock 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. 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 certain19raw materials, and finished goods purchased by us are limited, or are available from one or only a few suppliers that have been pre-approved by FDA for usein the manufacture of our products. In this type of limited-supplier situation, increased prices, rationing and/or shortages can occur. In response to thesituation, we try to identify alternative materials or suppliers for such raw materials and finished goods like containers and closures. However, FDArequirements for products approved through the ANDA or NDA process could substantially lengthen the time for approval of an alternate material source.Certain material shortages and approval of alternate sources could adversely affect our financial results. The rapid increase in cost of many raw materials frominflationary forces, such as increased energy costs, and our ability or inability to pass on these increases to our customers, could have a material impact on ourfinancial 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. 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 accidental20contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages andany such liability could exceed 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, 2017, and remaining costs accrued at December 31, 2017 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. 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. 21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 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. 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.Our global operations expose us to certain risks, including challenges associated with political and economic instability, major hostilities and acts ofterrorism.We are a global company with operations outside of the United States. We face numerous risks inherent in conducting business internationally, includingterrorist acts, acts of war, political unrest, public health concerns, labor disputes and national disasters. Such events may lead to economic and politicaluncertainties and contribute to global economic instability. We may not be successful in developing and implementing policies and strategies to address theforegoing events in a timely and effective manner. Consequently, the occurrence of one or more of the foregoing events could have a material adverse impacton our business, operating results and financial condition, including loss of sales or customers. Violations of cGMP and other government regulations could have a material adverse effect on our reputation, business, financial condition and resultsof operations. 22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.We are currently in the process of expanding our manufacturing facilities. Any delays in the expansion process or in the receipt of certain regulatoryapprovals in connection therewith could have a material adverse effect on our business and results of operations.We are in the process of expanding and upgrading our existing manufacturing facilities in Buena, New Jersey. Upon the completion of this expansion, weintend to transfer the manufacture of certain sterile injectable, for which we currently rely on CMOs, to this facility. Any delays in the expansion processcould increase the overall cost of the expansion and could force us to postpone the planned transfer of our manufacturing to this facility. In addition, anydelays or denials of the regulatory approvals needed to begin manufacturing products at this facility could have a material adverse effect on our business.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 quarterly basis to the government agencies that administer the programs. Because our processes forcalculating 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 submit quarterly AMPand 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 beyond the due date. Failure tomake necessary disclosures and/or to identify overpayments could result in allegations against us under the Federal False Claims Act and other laws andregulations.23 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 and if contractually obligated, we issue a credit on the products that the customer is holding in inventory, which could reduce sales revenue and grossmargin for 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 tosupply a certain product and are unable to meet the needs of our customers, we may incur failure to supply penalties which may be significant. Like ourcompetitors, we also give credits for chargebacks to wholesalers with whom we have contracts for their sales to hospitals, group purchasing organizations,pharmacies or other customers. A chargeback is the difference between the price at which we invoice the wholesaler and the price that the wholesaler’s end-customer pays for a product. Although we establish reserves based on prior experience and our best estimates of the impact that these policies may have insubsequent periods, we cannot ensure that our reserves are adequate or that actual product returns, allowances, and chargebacks will not exceed our estimates.As we continue to experience the consolidation of our customers, which may result in changes to previous patterns of ordering and/or pricing of our products,this could 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 or payingremuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, anygood or service for which payment may be made under federal healthcare programs, such as Medicare and Medicaid. In addition, the government mayassert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim forpurposes of the False Claims Act;•the federal False Claims Act, or FCA, which imposes civil liability and criminal fines on individuals or entities that knowingly submit, or cause to besubmitted, false or fraudulent claims for payment to the government. The FCA also allows private individuals to bring a suit on behalf of the governmentagainst an individual or entity for violations of the FCA. These suits, also known as qui tam actions, may be brought by, with only a few exceptions, anyprivate citizen who believes that he has material information of a false claim that has not yet been previously disclosed. These suits have increasedsignificantly in recent years because the FCA allows an individual to share in any amounts paid to the federal government in fines or settlement as aresult 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 to healthcarematters;•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 and investmentinterests held by physicians (as defined above) and their immediate family members and payments or other “transfers of value” to such physician ownersand their immediate family members;•the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economicand Clinical Health Act, or HITECH Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy ofprotected health information;•the Foreign Corrupt Practices Act (FCPA) including its anti-bribery provisions, which make it unlawful for certain classes of persons and entities to makepayments to foreign government officials to assist in obtaining or retaining business; 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 require24pharmaceutical companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by thefederal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that requiredrug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketingexpenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other insignificant ways and may 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. 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 other25quality issues. Any recall or product field alert has the potential of damaging our reputation or the reputation of the product. Any significant recalls couldmaterially 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. 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, CROs or independent research facilities). Our ability toobtain regulatory approval of the products being tested is dependent upon the quality of the work performed by these third parties, the quality of the thirdparties’ facilities, and the accuracy of the information provided to us by third parties. We have little or no control over any of these factors. If this testing isnot performed properly, our ability to obtain regulatory approvals could be restricted or delayed. In addition, if third party fraud or other recordkeepingproblems are discovered after our products are approved for marketing, any government investigations or findings could result in any products thatincorporated 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 take longer thanwe 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;•other companies may challenge patents licensed or issued to us or our collaborators;26•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. 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•license patented technology from the third party claiming infringement, which license may not be available on commercially reasonable terms, or maynot 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.27 A significant amount of our total assets is related to goodwill and intangible assets, including in-process research and development. As of December 31, 2017the value of our goodwill and intangible assets net of accumulated amortization was $56.0 million. Goodwill and other intangible assets are tested forimpairment annually when events occur or circumstances change that could potentially reduce the fair value of the reporting unit or intangible asset.Impairment testing compares the fair value of the reporting unit or intangible asset to its carrying amount. Any future goodwill or other intangible assetimpairment, if any, would be recorded in operating income and could have a material adverse effect on our results of operations and financial condition. 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.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;28•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 other thirdparties.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. 29After the FDA or Health Canada approves 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 the FDA or Health Canada and,depending on the scope of a potential product issue that the FDA or Health Canada may decide to pursue, potentially also result in a request from the agencyto conduct 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. 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 or retain 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. We have identified material weaknesses in our internal control over financial reporting, and if we are unable to satisfy regulatory requirementsrelating 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. We haveidentified material weaknesses in our internal control over financial reporting, and if additional material weaknesses are found in our internal controls in thefuture, if we fail to remediate our existing material weaknesses, 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.We have identified material weaknesses in our internal control over financial reporting, which could continue to impact negatively our ability to reportour results of operations and financial condition accurately and in a timely manner. As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has conducted an evaluation of the effectiveness of our internal control overfinancial reporting at December 31, 2017. We identified a number of material weaknesses in our internal30control over financial reporting and concluded that, as of December 31, 2017, we did not maintain effective control over financial reporting based on criteriaestablished in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. For a detaileddescription of these material weaknesses, see Item 9A, "Controls and Procedures." Each of our material weaknesses results in more than a remote likelihoodthat a material misstatement of the annual or interim financial statements that we prepare will not be prevented or detected. As a result, we must performextensive additional work to obtain reasonable assurance regarding the reliability of our financial statements. As described in Item 9A, "Controls andProcedures" we restated our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. Moreover, other material weaknesses may beidentified. We are in the process of remedying all of the identified material weaknesses, and this work will continue during fiscal 2018 and beyond. For a detaileddescription of our remedial efforts, see Item 9A, "Controls and Procedures." There can be no assurance as to when all of the material weaknesses will beremedied. Until our remedial efforts are completed, management will continue to devote significant time and attention to these efforts, and we will continueto incur expenses associated with the additional procedures and resources required to prepare our Consolidated Financial Statements. Certain of our remedialactions, such as hiring additional qualified personnel to implement our reconciliation and review procedures, will be ongoing and will result in our incurringadditional costs even after our material weaknesses are remedied. If we are unsuccessful in implementing or following our remediation plan, or fail to update our internal control over financial reporting as our businessevolves or to integrate acquired businesses into our controls system, we may not be able to timely or accurately report our financial condition, results ofoperations or cash flows or to maintain effective disclosure controls and procedures. If we are unable to report financial information in a timely and accuratemanner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by theSEC, an inability for us to be accepted for listing on any national securities exchange in the near future, securities litigation and a general loss of investorconfidence, any one of which could adversely affect our business prospects and the market value of our Common Stock. Further, there are inherent limitationsto the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention or overriding of the controlsand procedures. We could face additional litigation exposure and a greater likelihood of an SEC enforcement or other regulatory action if further restatementswere to occur or other accounting-related problems emerge. In addition, any future restatements or other accounting-related problems may adversely affectour financial condition, results of operations and cash flows.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 share price.The Company is exposed to market risk from fluctuations in currency exchange rates.The Company operates in multiple jurisdictions denominated in currencies of the local jurisdiction. Additionally, the Companymay enter into acquisition, licensing, borrowing or other financial transactions that may give rise to currency exposure. Sincethe Company cannot, with certainty, foresee and mitigate against such adverse fluctuations, fluctuations in currency exchangerates could negatively affect the Company’s results of operations, financial position and cash flows. Our ability to use our net operating loss carry forwards and certain other tax attributes may be limited. As of December 31, 2017, we had federal net operating loss carry forwards, or NOLs, of approximately $41.7 million which expire from 2020 through 2037.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 $23.1million) 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.31We are subject to the provisions of ASC 740-10-25, Income Taxes (ASC 740). ASC 740 prescribes a more likely-than-not threshold for the financial statementrecognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurementattribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. On a quarterly basis, weundergo a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions. For federal purposes, (exceptfor the years 2014 and 2015, which have been examined by the Internal Revenue Services), post 1998 tax years remain open to examination as a result of netoperating loss carryforwards. We are currently open to audit by the appropriate state income taxing authorities for tax years 2013 through 2016.The recently passed comprehensive federal tax reform bill could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law the “Tax Cuts and Jobs Act,” or TCJA, which significantly reforms the Internal Revenue Code of1986, as amended, or the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on thedeductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a“worldwide” system of taxation to a territorial system. Our net deferred tax assets and liabilities have been revalued at the newly enacted U.S. corporate rate,and the impact was recognized in our tax expense in the year of enactment. We continue to examine the impact this tax reform legislation may have on ourbusiness. The overall impact of the TCJA is uncertain and our business and financial condition could be adversely affected.We are currently involved in antitrust litigation related to our pricing practices.Complaints have been filed against us in each of the U.S. District Court for the District of New Jersey and the U.S. District Court for the Eastern District ofPennsylvania alleging violations of various provisions of federal and state antitrust laws in connection with the sale of our antifungal skin cream EconazoleNitrate 1% product. While we intend to vigorously defend our position in connection with both lawsuits, the outcome of the litigation could result in seriousfines being levied on us, along with harm to our reputation. Any negative outcome from this or any other investigation related to our pricing could have amaterial adverse effect on our business, financial condition and results of operations. 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 year ended December 31, 2017, the average daily trading volume of our common stock on the NASDAQ Global Select Market was approximately430,788 shares. As a result of our relatively small public float, our common stock may be less liquid than the stock of companies with broader publicownership. Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price for our shares thanwould 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 could32subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. In addition, we are required underapplicable law and regulations to integrate our systems of disclosure controls and procedures and internal control over financial reporting. Our managementassessed our existing disclosure controls and procedures as of December 31, 2017, and our management concluded that our disclosure controls andprocedures were not effective as of December 31, 2017, solely because of the material weakness in our internal control over financial reporting describedherein in Item 9A(ii). 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. 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.If such stockholders sold a significant amount of stock it could have an adverse effect on the price of the 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 $2.82 in the fourth quarter of 2017 and a high of $9.54 in the second quarter of 2017. The volatile price of our stock makes itdifficult for 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 varietyof factors may 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;•regulatory developments in the U.S. and foreign countries;•economic or other crises in the markets in which we compete, and other external factors;33•stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in the cosmetic, pharmaceutical andconsumer 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; and•speculation about our business in the press or the investment community.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.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, 2017, our total consolidatedindebtedness was $143.75 million. The Notes are due in December 2019. Our substantial level of indebtedness increases the possibility that we may beunable to generate cash sufficient to pay, when due, the principal of, interest on, or other amounts due in respect of our indebtedness. Our substantialindebtedness, combined with our other financial obligations 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;34•require us to dedicate a substantial portion of our cash flows to the payment to our financing sources, thereby reducing the availability of our cash flowsto fund working capital, investments, acquisitions and other general corporate purposes; and•place us at a disadvantage compared to our competitors. 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. 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 2. PROPERTIES The Company’s executive administrative offices are located in Buena, New Jersey, in two facilities totaling approximately 33,000 square feet built on 8.44acres of land in 1995, which we own. In 2017 we acquired an additional 3.0 acres of adjacent land in support of our facility expansion. We now own a total of11.44 acres at our Buena facility. One of those facilities is used for production, product development, marketing and warehousing for our own genericprescription pharmaceutical products and pharmaceutical, cosmeceutical and cosmetic products. In July 2016, the Company completed the first phase of thefacility expansion in the Buena, New Jersey location. The facility now houses our new product development laboratory for work on topical and sterilepharmaceuticals. The other facility is currently being expanded to increase our manufacturing capacity for topical products, and will also enable theproduction of sterile injectable products in both vial and ampule presentations. We lease an additional 11,000 square feet of warehouse space in Vineland,New Jersey, lease approximately 9,500 square feet of corporate office space in Iselin, New Jersey, and lease approximately 4,000 square feet of office space inToronto, Canada. The Company also leases approximately 3,000 square feet of office and laboratory space in Tallinn, Estonia. 35Item 3. LEGAL PROCEEDINGS On March 2, 2001, we became aware of environmental contamination resulting from an unknown heating oil leak at our former manufacturing facility. Weimmediately notified the New Jersey Department of Environmental Protection, or NJ DEP, and the local authorities, and hired a contractor to assess theexposure and required clean up. The total estimated costs for the clean-up and remediation was $889,000, of which approximately $118,000 remains accruedas of December 31, 2017. Based on information provided to us from our environmental consultant and what is known to date, we believe the reserve issufficient for the remaining remediation of the environmental contamination. There is a possibility, however, that the remediation costs may exceed ourestimates. The restricted cash, included in other assets on the Consolidated Balance Sheet of $120,000 as of December 31, 2017 and $122,000 as of December 31, 2016,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 us upon the NJDEP 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 is collectively referred 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 receivedapproval to sell our diclofenac sodium topical solution 1.5% from the FDA in July 2015. On May 21, 2015, Horizon Pharma Ireland Limited, HZNP Limited and Horizon Pharma USA, Inc., which is collectively referred 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 Abbreviated New Drug Application, or 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 us alleging infringement of other of its United Statespatents in relation to the Company’s submission of the same ANDA. On July 21, 2015, September 11, 2015, October 6, 2015, October 21, 2015, December 17,2015 and March 17, 2016, we filed answers, affirmative defenses and counterclaims with respect to the complaints filed by Horizon. In those filings, weasserted that the patents alleged to be infringed in the complaints filed by Horizon are invalid and not infringed by us. On April 27, 2016, we filed along withHorizon a stipulation of dismissal to dismiss the cases. The court entered an order dismissing the cases on May 2, 2016. On May 9, 2016, we along withHorizon entered into a settlement agreement. Under the settlement agreement, we obtained a license to market diclofenac topical solution 2% no later thanJanuary 10, 2029 or earlier in certain circumstances, including the resolution by settlement or court decision of other third party litigation involvingdiclofenac topical solution 2% or the market entry by other third party generic versions of diclofenac topical solution 2%. At this time, we cannot estimate ifor when any of those earlier events might occur. No consideration was exchanged as part of the settlement. We have not recorded accruals related to this caseand have not yet received final approval. On December 4, 2015, Galderma Laboratories, L.P. and Galderma S.A., which is collectively referred 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, we entered into a Settlement and License Agreement with Galderma, the terms of which are confidential. On January 22, 2016, the case was dismissedwith prejudice. To date, twelve putative class action antitrust lawsuits were filed against us, along with co-defendants including Taro Pharmaceuticals U.S.A., Inc. andPerrigo New York Inc. One “opt-out” action has additionally been filed against us along with thirty-five generic manufacturer co-defendants regarding thepricing of econazole nitrate cream and twenty-nine additional drug products not manufactured or sold by us. All actions have been transferred by the JudicialPanel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part of the In re Generic Pharmaceuticals Pricing AntitrustLitigation matter, and the class actions have been consolidated into direct purchaser, end payer and indirect reseller actions.The class plaintiffs seek to represent nationwide or state classes consisting of persons who directly purchased, indirectly purchased or reimbursed patients forthe purchase of generic econazole from any of the defendants from June 1, 2014 until the time the defendants’ allegedly unlawful conduct ceased or willcease.The class plaintiffs allege a conspiracy by thirty-six generic manufacturers, including us, to fix prices for thirty drug products including econazole nitratecream, in violation of federal antitrust laws or state antitrust, consumer protection, and other laws. The36opt-out plaintiffs seek treble damages for alleged price overcharges for the thirty drug products identified in the complaint during the alleged period ofconspiracy, and also seek injunctive relief against the defendants.All of these cases are in their initial stages and motions to dismiss have been filed with respect to each of the complaints. Due to the early stage of these cases,we are unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the amount orrange of potential loss. We believe these cases are without merit, and we intend to vigorously defend against these claims.On October 20, 2017, a Demand for Arbitration was filed with the American Arbitration Association by Stayma Consulting Services, Inc. (“Stayma”) againstthe Company regarding the Company’s development and manufacture for Stayma of two generic drug products, one a lotion and one a cream, containing0.05% of the active pharmaceutical ingredient flurandrenolide. The Company developed the two products and Stayma purchased commercial quantities ofeach; however, Stayma now alleges that the Company breached agreements between the parties by developing an additional and different generic drugproduct, an ointment, containing flurandrenolide, and failing to meet certain contractual requirements. Stayma seeks monetary damages. Due to the earlystage of this matter, we are unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimateof the amount or range of potential loss. We believe this case is without merit, and we intend to vigorously defend against these claims. We filed a counter-claim against Stayma for its failure to pay several past due invoices of approximately $1.7 million relating to the development and commercial supply of thetwo subject products.Item 4. MINE SAFETY DISCLOSURES Not applicable. 37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 NASDAQ Global SelectMarket, as applicable. Common Stock High Low2016 First Quarter 8.88 4.46Second Quarter 7.39 4.79Third Quarter 8.66 6.96Fourth Quarter 7.99 5.752017 First Quarter 8.30 6.46Second Quarter 9.54 7.60Third Quarter 9.27 5.97Fourth Quarter 7.34 2.82 Stockholders As of March 6, 2018, there were approximately 359 stockholders of record of our 53,496,889 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. 38Performance Graph Comparison of Cumulative Total Return among Teligent, Inc.,the S&P 500 Index and the Dow Jones - US Health Care IndexUnregistered Sales of Securities None. Issuer Purchases of Equity Securities None. 39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 audited consolidated financial statements of the Company,certain of which are included elsewhere in this Annual Report on Form 10-K. The information below should be read in conjunction with the consolidatedfinancial 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, 2017 2016 2015 2014 2013(In thousands, except per sharedata) Revenues $67,251 $66,881 $44,250 $33,740 $18,224Gross profit 27,372 34,687 21,315 16,972 6,145Operating income (loss) (11,797) 2,542 (3,192) 3,906 (82)Interest and other non-operatingincome (expense) (3,479) (14,240) 9,895 1,518 (199)Foreign currency exchange gain(loss) 7,719 (936) 109 — —Pretax income (loss) (15,276) (11,698) 6,703 5,424 (281)Income tax provision (benefit) (85) 287 35 173 (197)Net income (loss) $(15,191) $(11,985) $6,668 $5,251 $(84)Preferred stock dividend — — — — (1,308)Net income (loss) attributable tocommon stockholders $(15,191) $(11,985) $6,668 $5,251 (1,392)Weighted average sharesoutstanding: Basic 53,324 53,078 52,873 49,818 43,518Diluted 53,324 53,078 67,112 64,207 43,518PER SHARE: Net income (loss): Basic (0.28) (0.23) 0.13 0.11 (0.03)Diluted (0.28) (0.23) (0.07) 0.09 (0.03) BALANCE SHEET DATA: Current assets $64,532 $103,296 $116,801 $177,218 $10,558Net property, plant & equipment 68,355 26,215 8,706 3,262 2,623Total assets 189,986 183,226 184,762 197,078 15,427Current liabilities 24,097 14,963 10,768 13,002 5,221Long-term obligations, lesscurrent installments 121,136 111,596 107,235 144,942 3,015Shareholders’ equity 44,753 56,667 66,759 39,134 7,191CASH FLOW DATA: Cash provided by (used in)operating activities $400 $(798) $(15,513) $(3,891) $(618)Cash used in investing activities (40,429) (20,076) (53,068) (3,792) (2,113)Cash provided by (used in)financing activities 269 (10) (3,111) 164,465 2,296Increase/(Decrease) in cash andcash equivalents (39,760) (20,884) (71,692) 156,782 (435) 40Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSForward-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. and its subsidiaries (collectively the "Company") is a specialty generic pharmaceutical company. Our mission is to become a leader in thespecialty generic pharmaceutical market. Under our own label, we currently market and sell generic topical and generic and branded generic injectablepharmaceutical products in the United States and Canada. In the United States we currently market 25 generic topical pharmaceutical products and fourbranded generic pharmaceutical products. In Canada we sell a total of over 30 generic and branded generic injectable products and medical devices. Genericpharmaceutical products are bioequivalent to their brand name counterparts. We also provide contract manufacturing services to the pharmaceutical, over-the-counter, ("OTC"), and cosmetic markets. We operate our business under one segment. Our common stock is trading on the NASDAQ Global Select Marketunder the trading symbol “TLGT.” Our principal executive office, laboratories and manufacturing facilities are located at 105 Lincoln Avenue, Buena, NewJersey. We have additional offices located in Iselin, New Jersey, Toronto, Canada, and Tallinn, Estonia. 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, to include injectable generics,complex generics and ophthalmic generics (what we call our “TICO strategy”), will leverage our existing expertise and capabilities, and broaden our platformfor more diversified strategic growth. In 2014, we acquired 23 drug products that had been previously approved by the United States Food and Drug Administration, or FDA. Our pipeline includes31 Abbreviated New Drug Applications, or ANDAs filed with the FDA, for additional pharmaceutical products. In addition, we have five submission filingson file with Health Canada. We have an additional 45 product candidates at various stages of our development pipeline. We submitted four ANDAs in 2017.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. We received nine approvals from our internally developed pipeline of topical generalproducts in 2017. We intend to continue to submit further ANDAs to the FDA and ANDSs to Health Canada in 2018. We will also seek to license or acquirefurther products, intellectual property, or pending applications to expand our portfolio.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.41 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.Results of Operations Fiscal year ended December 31, 2017 compared to fiscal year ended December 31, 2016 We had a net loss of $15.2 million, or $0.28 per share, in 2017 compared to net loss of $12.0 million, or $0.23 per share, in 2016. Revenues (in thousands): Year Ended December 31, Increase/(Decrease)Components of Revenue: 2017 2016 $ %Product sales, net $66,999 $65,904 $1,095 2 %Research and development servicesand other income 252 977 (725) (74)%Total Revenues $67,251 $66,881 $370 1 %The increase in product sales for the year ended December 31, 2017 as compared to the same period in 2016 was primarily due to increased revenue from theexpansion of our own generic pharmaceutical product line, increased revenue from Lidocaine Hydrochloride topical solution and Zantac injectable andincreased revenue from our specialty generic injectable portfolio in Canada. These increases were offset by a decrease in contract manufacturing revenues of$8.0 million from the same period in the prior year, specifically related to a decline in sales to one of our customers. Consistent with our strategy, we continueto expect contract manufacturing revenue as a percentage of total revenue to decline over time.Research and development services and other income will not be consistent and will vary, from period to period, depending on the required timeline of eachdevelopment project and/or agreement. Costs and expenses (in thousands): Year Ended December 31, Increase/(Decrease) 2017 2016 $ %Cost of revenues $39,879 $32,194 $7,685 24%Selling, general and administrative 19,904 15,005 4,899 33%Product development and research 19,265 17,140 2,125 12%Totals costs and expenditures $79,048 $64,339 $14,709 23% Cost of revenues increased for the year ended December 31, 2017 as compared to the same period in 2016 as a result of the increase in total revenue. Cost ofrevenues increased as a percentage of total revenue to 59% for the year ended December 31, 2017 as compared to 48% for the same period in 2016. Theincrease in cost of revenue as a percentage of sales was primarily due to the increased revenue from our own generic pharmaceutical product line. Increase incost of sales as a percentage of revenue was driven by new product launches as well as changes in product mix, pricing and related fees, such as wholesalefees, in addition to customer and product mix for our contract services revenue. For the year ended December 31, 2017, cost of revenues included $0.6million of costs related to the write off of inventory related to two presentations of our frozen bag products. For the year ended December 31, 2017, cost ofrevenues also included an increase in inventory reserves of $1.5 million of costs related to inventory and raw materials that were expected to expire in lessthan six months. Consistent with our strategy, we have increased headcount in our production and quality groups to support our growth and expansion intoinjectable manufacturing. Total employee related costs increased by $0.3 million, headcount increased from 87 at December 31, 2016 to 117 at December 31,2017. In addition, our rapid growth has contributed to some production inefficiencies, as we are expanding our manufacturing footprint and capacity intopical manufacturing, and adding sterile manufacturing capabilities at the existing facility. In addition, costs as a percentage of sales increased as revenuefrom contract services decreased by $8.0 million as compared to the same period in 2016, and the change in product mix resulted in an increase in costs as apercentage of sales42 Selling, general and administrative expenses for the year ended December 31, 2017 increased by $4.9 million as compared to the same period in 2016. In2017, there was an increases of $1.4 million in bad debt expense, $1.6 million in professional fees primarily related to increased legal costs associated withtwelve putative class action lawsuits filed against us along with others regarding pricing of econazole nitrate cream. In addition, there were increases of $1.3million in salaries and related costs, $0.4 million in corporate expenses, $0.1 million in recruiting fees, $0.1 million from the issuance of stock-basedcompensation related to options and restricted stock, $0.1 million in amortization expense offset by a decrease of $0.1 million in conferences and seminars. Product development and research expenses for the year ended December 31, 2017 increased by $2.1 million as compared to the same period in 2016.Consistent with our strategy to expand our portfolio of generic prescription pharmaceutical products, we increased headcount, which resulted in an increaseof $1.2 million in salaries and related costs, $0.8 million in clinical studies, $0.5 million in overhead costs, $0.1 million related to the impairment of anintangible asset, $0.1 million in stock based compensation related to options and restricted stock and $0.1 million in GDUFA and associated fees. These werepartially offset by decreases in exhibit and pilot batch costs of $0.4 million and consulting fees of $0.3 million, Interest and Other Expense, net (in thousands): Year Ended December 31, Increase/(Decrease) 2017 2016 $ %Interest and other expense, net $(11,198) $(13,304) $2,106 16%Foreign exchange (loss) / gain $7,719 $(936) $8,655 100%Interest expense decreased for the year ended December 31, 2017 as compared to the same period in 2016. The decrease is related to the interest expense,amortization of debt discount and amortization of debt issuance costs of the Notes (see Note 5), partially offset by capitalized interest of $3.6 million relatedto our facility expansion. Foreign exchange gain of $7.7 million was recorded for the year ended December 31, 2017, primarily related to the foreign currencytranslation of our intercompany loans denominated in U.S. dollars to our foreign subsidiaries. These loans are to be repaid in November 2022. Depending onthe changes in foreign currency exchange rates, we will continue to record a non-cash gain or loss on translation for the remainder of the term of these loans.Due to the nature of this transaction, there is no economic benefit to the Company to hedge this transaction. Net loss attributable to common stockholders (in thousands, except per share numbers): Year Ended December 31, Increase/(Decrease) 2017 2016 $ %Net loss attributable to commonstockholders $(15,191) $(11,985) $(3,206) 27%Basic loss per share $(0.28) $(0.23) $(0.05) 22%Diluted loss per share $(0.28) $(0.23) $(0.05) 22%Net loss for the year ended December 31, 2017 was $15.2 million as compared to net loss of $12.0 million for the year ended December 31, 2016. Theincrease is due to increases in costs and expenses in 2017 offset by foreign currency exchange gain of $7.7 million.Fiscal year ended December 31, 2016 compared to fiscal year ended December 31, 2015 We had a net loss of $12.0 million, or $0.23 per share, in 2016 compared to net income of $6.7 million, or $0.13 per share, in 2015. Revenues (in thousands): 43 Year Ended December 31, Increase/(Decrease)Components of Revenue: 2016 2015 $ %Product sales, net $65,904 $43,497 $22,407 52%Research and development servicesand other income 977 753 224 30%Total Revenues $66,881 $44,250 $22,631 51%The increase in product sales for the year ended December 31, 2016 as compared to the same period in 2015 was primarily due to the increased revenue fromour own generic pharmaceutical product line and our entry into the specialty generic injectable market in the U.S. and Canada. In addition, our contractmanufacturing revenues increased over the same period in the prior year, primarily due to our acquisition of two new customers, one in the fourth quarter of2015 and one in the first six months of 2016, for which we manufactured one of our generic topical products in a private label, offset by a slight decline inpurchase orders. We do not expect revenue from these two contract manufacturing customers in 2017 and beyond.Research and development services and other income will not be consistent and will vary, from period to period, depending on the required timeline of eachdevelopment project and/or agreement. Costs and expenses (in thousands): Year Ended December 31, Increase/(Decrease) 2016 2015 $ %Cost of revenues $32,194 $22,935 $9,259 40%Selling, general and administrative 15,005 11,336 3,669 32%Product development and research 17,140 13,171 3,969 30%Totals costs and expenditures $64,339 $47,442 $16,897 36% Cost of revenues increased for the year ended December 31, 2016 as compared to the same period in 2015 as a result of the increase in total revenue. Cost ofrevenues decreased as a percentage of total revenue to 48% for the year ended December 31, 2016 as compared to 52% for the same period in 2015. Thedecrease in cost of revenue as a percentage of sales was primarily due to the increased revenue from our own generic pharmaceutical product line driven bynew product launches and our entry in to the specialty generic injectable market. Sales related to our own label products generally have lower cost ofrevenues percentages than our contract manufacturing product revenues; however, sales to one new contract manufacturing customer, where we sold more ofour generic products in a private label, did reduce cost of revenues as a percentage of sales. In addition, our costs of revenue include the provision for thewrite-down of inventory of $1.4 million. This write-down includes the write-down of the inventory step up in basis in the amount of $0.5 million. Theinventory step-up was initially recorded in connection with our acquisition of Alveda Pharmaceuticals, Inc. in November 2015. Our research anddevelopment income results primarily from services rendered under contractual agreements and, therefore, cost of revenues as a percentage of our researchand development income is relatively low. Consistent with our strategy, we expect cost of revenues as a percentage of total revenue to decline over time. Selling, general and administrative expenses for the year ended December 31, 2016 increased by $3.7 million as compared to the same period in 2015. In2016, there were increases of $2.3 million in amortization expense related to assets acquired in the fourth quarter of 2015, $1.3 million in expenses related toour Canadian operations, $0.8 million in salaries and related costs, $0.5 million in expenses related to our Estonia operations, $0.4 million in recruiting fees,other corporate expenses of $0.3 million, bad debt expense of $0.3 million, $0.1 million from the issuance of stock-based compensation related to optionsand restricted stock, $0.1 million in conferences and seminars and $0.1 million in board of directors fees, offset by a decrease of $2.5 million in professionalfees. Product development and research expenses for the year ended December 31, 2016 increased by $4.0 million as compared to the same period in 2015.Consistent with our strategy to expand our portfolio of generic prescription pharmaceutical products, we increased headcount, which resulted in an increaseof $1.8 million in salaries and related costs, $1.4 million in exhibit and pilot batch costs, $0.7 million in clinical studies, $0.5 million in expenses related toCanadian operations, $0.4 million in stock based compensation related to options and restricted stock and $0.3 million in overhead costs. These werepartially offset by decreases in consulting fees of $0.9 million, $0.1 million in fees related to Generic Drug User Fee Act, or GDUFA, and the associated filingof our applications with the FDA and technology license fees of $0.1 million.44 Interest and Other Expense, net (in thousands): Year Ended December 31, Increase/(Decrease) 2016 2015 $ %Interest and other expense, net $(13,304) $(13,358) $54 — %Foreign exchange (loss) / gain $(936) $109 $(1,045) 100 %Change in the fair value ofderivative liability $— $23,144 $(23,144) (100)%Interest expense increased for the year ended December 31, 2016 as compared to the same period in 2015. The increase is related to the interest expense,amortization of debt discount and amortization of debt issuance costs of the Notes (see Note 5), partially offset by capitalized interest related to our facilityexpansion. Foreign exchange loss of $0.9 million was recorded for the year ended December 31, 2016, primarily related to the foreign currency translation ofour intercompany loans denominated in U.S. dollars to our foreign subsidiaries. These loans are to be repaid in November 2022. Depending on the changes inforeign currency exchange rates, we will continue to record a non-cash gain or loss on translation for the remainder of the term of these loans. Due to thenature of this transaction, there is no economic benefit to the Company to hedge this transaction. During the year ended December 31, 2015, we recorded a$23.1 million change in the fair value of the derivative liability as a result of the change in the fair value of our derivative liability, caused primarily by thedecrease in the price of our common stock. Due to the approval of the sufficient shares at the Company's annual shareholder meeting, the liability for theembedded derivative was reclassified to equity on May 20, 2015, and as such there is no change in the fair value of the derivative liability recorded for theyear ended December 31, 2016. Net (loss) income attributable to common stockholders (in thousands, except per share numbers): Year Ended December 31, Increase/(Decrease) 2016 2015 $ %Net (loss) income attributable tocommon stockholders $(11,985) $6,668 $(18,653) (280)%Basic (loss) earnings per share $(0.23) $0.13 $(0.36) (277)%Diluted loss per share $(0.23) $(0.07) $(0.16) 229 %Net loss for the year ended December 31, 2016 was $12.0 million as compared to net income of $6.7 million for the year ended December 31, 2015. Thedecrease is due to increases in costs and expenses in 2016, foreign currency exchange loss of $0.9 million, and the absence of change in the fair value of thederivative liability that occurred in 2015 in the amount of $23.1 million, partially offset by increases in revenues in 2016. Liquidity and Capital ResourcesOur principal sources of liquidity were cash and cash equivalents of approximately $26.7 million at December 31, 2017 and cash from operations. We hadworking capital of $40.4 million at December 31, 2017. We may require additional funding and this funding will depend in part, on the timing and structureof potential business arrangements. If necessary, we may continue to seek to raise additional capital through the sale of our equity or through a strategicalliance with a third party. There may also be additional acquisition and growth opportunities that may require external financing. There can be no assurancethat such financing will be available or terms acceptable to us, or at all. We believe that our existing capital resources will be sufficient to support our currentbusiness plan beyond March 2019.Our operating activities provided $0.4 million of cash during the year ended December 31, 2017 compared to $0.8 million of cash used during the year endedDecember 31, 2016 and $15.5 million of cash used during the year ended December 31, 2015. The cash provided for the year ended December 31, 2017 wasmostly due to to collections of accounts receivable in 2017, which contributed to a net decline in accounts receivable of $1.9 million, in addition to otherchanges in operating assets and liabilities, offset by $5.4 million of interest expense paid in 2017 related to our Notes. The cash provided for the year endedDecember 31, 2016 was mostly due to the collection of the Canadian goods and services tax (GST) and the harmonized sales tax (HST), of $5.2 million, inaddition to other changes in operating assets and liabilities, offset by $7.6 million of interest expense related to our Notes. The use of cash for the year endedDecember 31, 2015 was a result of $5.2 million paid related to Canadian GST and HST45and interest expense in the amount of $6.7 million related to our Notes. In connection with the acquisition of Alveda, we paid $2.2 million in acquisitioncosts. The remaining use of cash was primarily a result of the $3.8 million in changes in operating assets and liabilities, which included a $6.0 millionpayment related to the AstraZeneca assets acquired in September of 2015, offset by the net income for the year.Our investing activities used $40.4 million during the year ended December 31, 2017 compared to $20.1 million and $53.1 million of cash used in the yearsended December 31, 2016 and December 31, 2015, respectively. The funds used for the year ended December 31, 2017 included $40.4 million in capitalexpenditure, the majority of which were for the facility expansion in Buena. The funds used for the year ended December 31, 2016 included $16.7 million incapital expenditures, for which the majority were for the facility expansion in Buena, as well as expenditures for the Estonian lab, and $3.4 million in productacquisition costs including Sebela and the buyout of the royalty stream related to AstraZeneca. The funds used for the year ended December 31, 2015included $35.4 million in cash paid to acquire the assets of Alveda in November 2015. We completed the acquisition of five products, which used $11.7million in cash in 2015. We also used $6.0 million for the purchase of capital expenditures related to additional scientific and manufacturing equipment andcosts related to the planning phase of our expansion.Our financing activities provided $0.3 million of cash during the year ended December 31, 2017 compared to $10,000 and $3.1 million of cash used infinancing activities in the year ended December 31, 2016 and December 31, 2195, respectively. The cash provided during the year ended December 31, 2017consisted of proceeds from the exercise of common stock options and warrants. The cash used during the year ended December 31, 2016 was mainly $70,000of principal payments on capital lease obligations offset by $96,000 in proceeds from the exercise of common stock warrants and options. The cash usedduring the year ended December 31, 2015 in the amount of $3.1 million was used to pay down debt.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 a warehouse in Vineland, New Jersey, office space in Iselin, New Jersey, office space in Toronto,Canada and office and laboratory space in Tallinn, Estonia. Our remaining obligations under these leases are summarized in the table below. Payments Due by Period(in thousands)Contractual Obligations Total Less than 1 Year 1-3 Years 3-5 Years More than 5YearsConvertible Senior Notes $143,750 $— $143,750 $— $—Operating Lease 2,513 491 877 730 415 Total $146,263 $491 $144,627 $730 $415As of December 31, 2017, our principal outstanding debt obligation related to our Notes is a total of $143.75 million and are due in December of 2019. TheNotes bear interest at a fixed rate of 3.75% per year, payable semi-annually in arrears on June 15 and December 15 each year, until the notes mature onDecember 15, 2019. At December 31, 2017, we have a future obligation to pay the interest related to these notes of a total amount of $10.6 million, payablesemi-annually in arrears on June 15 and December 15 each year, through December 19, 2019, unless the notes are earlier repurchased, redeemed or converted.We have certain licensing and development agreement in place under which we will pay certain licensing fees and milestones over the lives of certainprojects. These commitments totaled approximately $2.4 million as of December 31, 2017, and will be paid over the next several years in accordance withagreed upon milestones. Critical Accounting Policies and Estimates 46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 carrying amounts of cash and cash equivalents, trade receivables, restricted cash, notes payable, accounts payable and other accrued liabilities atDecember 31, 2017 approximate their fair value for all periods presented. The Company measures fair value in accordance with ASC 820-10, "Fair ValueMeasurements and Disclosures". ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined basedon assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820-10 establishes athree-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. 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. We measure our derivative liability at fair value. The derivative convertible option related to the aggregate of $143.75 million in principal notes issued onDecember 16, 2014, to Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, as the initial purchasers, or the Notes, was valued using the “with” and“without” analysis. A “with” and “without” analysis is a standard valuation technique for valuing embedded derivatives by first considering the value of theNotes with the option and then considering the value of the Notes without the option. The difference is the fair value of the embedded derivatives. Theembedded derivative is classified within Level 3 because it is valued using the “with” and “without” method, which does utilize inputs that are unobservablein the market. On May 20, 2015, we received approval to increase our authorized shares sufficiently to allow for the conversion of the Notes into equity at the annualshareholders meeting. Therefore, the derivative liability of $18.3 million was reclassified into stockholders equity. We recorded a change in the fair value ofthe derivative liability through May 20, 2015 of $23.1 million for the year ended December 31, 2015. On May 20, 2015, we reclassified the fair value of thederivative liability into stockholders equity due to the approval of sufficient shares. Based on the closing price of our common stock as of December 31,2017, the net carrying value of the Notes was approximately $121 million compared to their face value of $143.75 million as of December 31, 2017.However, this variance is due to the conversion feature in the Notes rather than to changes in market interest rates. The Notes carry a fixed interest rate andtherefore do not subject us to interest rate risk. Accounts Receivable and Allowance for Doubtful Accounts We extend credit to our contract services customers, based upon credit evaluations, in the normal course of business, primarily with 30-day terms. We do notrequire collateral from our customers. Bad debt provisions are provided for on the allowance method based on historical experience and management’sevaluation of outstanding accounts receivable. We review the allowance for doubtful accounts regularly, and past due balances are reviewed individually forcollectability. We charge off uncollectible receivables against the allowance when the likelihood of collection is remote. We extend credit to wholesaler and distributor customers and national retail chain customers, based upon credit evaluations, in the normal course of business,primarily with 60 to 90 day terms. We maintain customer-related accruals and allowances that consist primarily of chargebacks, rebates, sales returns, shelfstock allowances, administrative fees and other incentive programs. Some of these adjustments relate specifically to the generic prescription pharmaceuticalbusiness. Typically, the aggregate gross-to-net adjustments related to these customers can exceed 70% of the gross sales through this distribution channel.Certain of these accruals and allowances are recorded in the balance sheet as current liabilities and others are recorded as a reduction to accounts receivable. 47Revenue Recognition We consider revenue realized or realizable and earned when it has persuasive evidence of an arrangement, delivery has occurred or contractual servicesrendered, the sales price is fixed or determinable, and collection is reasonably assured in conformity with ASC 605, Revenue Recognition. We derive our revenues from three basic types of transactions: sales of our own pharmaceutical products, sales of manufactured product for our customersincluded in product sales, and research and product development services and other services performed for third parties. Due to differences in the substance ofthese transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each.Product Sales: Product Sales, net, include Company Product Sales and Contract Manufacturing Sales. Company Product Sales: We record revenue from Company product sales when title and risk of ownership have been transferred to the customer,which is generally upon shipment of products. Revenue and Provision for Sales Returns and Allowances As is customary in the pharmaceutical industry, our gross product sales from Company label products are subject to a variety of deductions in arriving atreported net product sales. When we recognize revenue from the sale of products, an estimate of sales returns and allowances, or SRA, is recorded, whichreduces product sales. Accounts receivable and/or accrued expenses are also reduced and/or increased by the SRA amount. These adjustments includeestimates for chargebacks, rebates, cash discounts and returns and other allowances. These provisions are estimates based on historical payment experience,historical relationship to revenues, estimated customer inventory levels and current contract sales terms with direct and indirect customers. The estimationprocess used to determine our SRA provision has been applied on a consistent basis and no material adjustments have been necessary to increase or decreaseour reserves for SRA as a result of a significant change in underlying estimates. We will use a variety of methods to assess the adequacy of our SRA reservesto ensure that our financial statements are fairly stated. These will include periodic reviews of customer inventory 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 us by our wholesale customer for a particular product and the negotiated contract price that the wholesaler’scustomer pays for that product. Our chargeback provision and related reserve varies with changes in product mix, changes in customer pricing and changes toestimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of the expected wholesaler sell-through levels to indirectcustomers at contract prices. We will validate the chargeback accrual quarterly through a review of the inventory reports obtained from our largest wholesalecustomers. This customer inventory information is used to verify the estimated liability for future chargeback claims based on historical chargeback andcontract rates. These large wholesalers represent 90% - 95% of our chargeback payments. We continually monitor current pricing trends and wholesalerinventory levels to ensure the liability for future chargebacks is fairly stated. Net revenues and accounts receivable balances in our consolidated financial statements are presented net of SRA estimates. Certain SRA balances areincluded in accounts payable and accrued expenses. Contract Manufacturing Sales: We recognize revenue when title transfers to our customers, which is generally upon shipment of products. These shipmentsare made in accordance with sales commitments and related sales orders entered into with customers either verbally or in written form. The revenuesassociated with these transactions, net of appropriate cash discounts, product returns and sales reserves, are recorded upon shipment of the products includedin product sales, net in our Consolidated Statement of Operations. Research and Development Services and Other Income: We establish agreed upon product development agreements with our 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 we have no future performance obligations relating to that phase of development. Revenue recognition requires us to assessprogress against contracted obligations to assure completion of each stage. These payments are generally non-refundable and are reported as deferred untilthey are recognizable as revenue. If no such arrangement exists, product development fees are recognized ratably over the entire period during which theservices are performed. Other types of revenue include royalty or licensing revenue, and would be recognized based upon the contractual agreement uponcompletion of the earnings process. 48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 us and thecustomer and are stated in the contracts themselves and do not always align with the revenues recognized. Derivatives We account for our derivative instruments in accordance with ASC 815-10, Derivatives and Hedging, or ASC 815-10. ASC 815-10 establishes accountingand reporting standards requiring that derivative instruments, including derivative instruments embedded in other contracts, be recorded on the balance sheetas either an asset or liability measured at its fair value. ASC 815-10 also requires that changes in the fair value of derivative instruments be recognizedcurrently in results of operations unless specific hedge accounting criteria are met. We have not entered into hedging activities to date. Our derivativeliability was the embedded convertible option of its Notes issued December 16, 2014 (see Note 5), which has been recorded as a liability at fair value untilMay 20, 2015, and was revalued at each reporting date, with changes in the fair value of the instruments included in the consolidated statements ofoperations as non-operating income (expense). Due to the approval of the sufficient shares at our annual shareholder meeting, the liability for the embeddedderivative was reclassified to equity on May 20, 2015. We had no derivatives at December 31, 2017 and December 31, 2016. 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 SRAallowances, allowances for excess and obsolete inventories, allowances for doubtful accounts, provisions for income taxes and related deferred tax assetvaluation allowances, stock based compensation, the impairment of long-lived assets (including intangibles, goodwill, and property, plant and equipment),property, plant and equipment and legal accruals for environmental cleanup and remediation costs. Actual results could differ from those estimates.Adoption of Recent Accounting Pronouncements 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. Ouradoption of this ASU, effective January 1, 2017, did not have any significant impact on our consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): “Improvements to Employee Share-Based PaymentAccounting”. The update includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including theincome tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in thisupdate are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. We haveadopted this ASU, effective January 1, 2017, and are recognizing windfall tax benefits in additional paid in capital on a prospective basis.Recently Issued Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): “Recognition and Measurement of Financial Assets and Financial Liabilities”. Theupdate supersedes Topic 840, Leases and requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leasesunder previous GAAP. Topic 842 retains a distinction between finance leases and operating leases, with cash payments from operating leases classifiedwithin operating activities in the statement of cash flows. The amendments in this update are effective for fiscal years beginning after December 15, 2018 forpublic business entities, which for the Company means January 1, 2019. The Company is currently evaluating the impact of this ASU on its consolidatedfinancial statements.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): "Restricted Cash (a consensus of the FASB Emerging Issues TaskForce)". The update addresses the diversity in the industry with respect to classification and presentation of changes in restricted cash on the statement ofcash flows. These amendments require that a statement of cash flows49explain the restricted cash change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restrictedcash equivalents. It affects those reporting entities that are required to evaluate whether they should consolidate a variable interest entity "VIE". Theamendments in this update are effective for fiscal years beginning after December 15, 2017 for public business entities, including interim periods withinthose fiscal years. For us, the amendments are effective January 1, 2018. We are currently evaluating the impact of this ASU on our consolidated financialstatements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): “Clarifying the Definition of a Business”. The update clarifies thedefinition of a business, specifically for companies to better evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets orbusinesses. The amendments in this update are effective for public companies for annual periods beginning after December 15, 2017, including interimperiods within those annual periods. For us, the amendments are effective January 1, 2018. We are currently evaluating the impact of this ASU on ourconsolidated financial statements.In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and JointVentures (Topic 323): “Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITFMeetings”. The update shows amendments to two SEC Announcements made late in 2016 regarding four specific standards as follows: ASU 2014-09,Revenue from Contracts with Customers (Topic 606), ASU 2016-02, Leases (Topic 842), ASU 2016-13, Financial Instruments - Credit Losses (Topic 326),and ASU 2014-01, Investments - Equity Method and Joint Ventures (Topic 323). The amendments in this update require changes to the U.S. GAAP FinancialReporting Taxonomy and the changes will be incorporated into the proposed 2018 Taxonomy which are available for public comment and finalized as partof the annual release process. We are currently evaluating the impact of this ASU on our consolidated financial statements.In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”. The updatesimplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwillimpairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities thathave goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. Apublic entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interimgoodwill impairment tests in fiscal years beginning after December 15, 2019. For us, the amendments are effective January 1, 2020. We are currentlyevaluating the impact of this ASU on our consolidated financial statements.In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20):“Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. This update addresses guidance for partialsales of nonfinancial assets. It affects (i) an entity that enters into a contract to transfer to a customer a nonfinancial asset, group of nonfinancial assets, orownership interest in a consolidated subsidiary that is not a business or nonprofit entity, (ii) an entity that historically had transactions within the scope ofthe real estate-specific derecognition guidance, and (iii) an entity that contributes nonfinancial assets that are not a business or a nonprofit activity to a jointventure or other noncontrolled investee. The amendments are effective at the same time as the amendments in ASU 2014-09. Therefore, for the Company, theamendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.Public entities may apply the guidance earlier but only as of annual reporting periods beginning after December 15, 2016, including interim reportingperiods within that reporting period. We do not currently expect to enter into any such nonfinancial asset or ownership interest in our consolidatedsubsidiaries agreements but will refer to the guidance in ASU 2017-05 should that occur. We are currently evaluating the impact of this ASU on ourconsolidated financial statements.In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): “Scope of Modification Accounting”. This update providesguidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718,Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments affect any entity that changesthe terms or conditions of a share-based payment award. The amendments are effective for fiscal years beginning after December 15, 2017. For us, theamendments are effective January 1, 2018. We have not made any changes to the terms or conditions of share-based payment awards but will refer to theguidance in ASU 2017-09 should that occur. Our adoption of this ASU is not expected to have any significant impact on our consolidated financialstatements.In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earningsfor stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance is effective for all entities for fiscal years, and interim periods within thoseyears, beginning after December5015, 2018, with early adoption permitted. The amendments in ASU 2018-02 should be applied either in the period of adoption or retrospectively to eachperiod in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The adoption of thisguidance is not expected to have a material impact on our Consolidated Financial Statements and related disclosures.Revenue Topic 606 Recent Accounting PronouncementsIn May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard, including subsequently issuedamendments, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The key focus of the new standard is that anentity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which theentity expects to be entitled in exchange for those goods or services. To achieve this key focus, there is a five-step approach outlined in the standard. Entitiesare permitted to apply the new standard either retrospectively, subject to certain practical expedients, or the modified retrospective method that requires theapplication of the guidance only to contracts that are uncompleted on the date of initial application. For us, Topic 606 and subsequently issued amendmentswill be effective January 1, 2018.We have performed a comprehensive review of our existing revenue arrangements as of December 31, 2017 following the five-step model. Our analysisindicates that there will be no significant changes to how the amount and timing of revenue will be recognized under the new guidance as compared toexisting guidance. Additionally, our analysis indicates that there will be no significant changes to how costs to obtain and fulfill our customer contracts willbe recognized under the new guidance as compared to existing guidance. We will adopt this guidance as of January 1, 2018 using the modified retrospectivemethod and we expect that the impact of adoption on our consolidated balance sheet, statement of operations, statement of changes in stockholders’ equityand statement of cash flows will not be material. The adoption of the new guidance will impact the way we analyze, document, and disclose revenuerecognition under customer contracts beginning on January 1, 2018; will require reclassification of certain amounts on the balance sheet and will result inadditional disclosures in our financial statements.Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2017, 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. We had a revolving Credit and Security Agreement with General Electric Capital Corporation that called for interest to accrue based on a premium aboveeither the current prime rate or current LIBOR rates. We terminated this credit facility in February 2016. 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, 2017, the fair value of our Notes was approximately $121 million compared to their face value of $144 millionas of December 31, 2017. However, this variance is due to the conversion feature in the Notes rather than to changes in market interest rates. As noted 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 millionchange in the fair value of the derivative liability on our consolidated statements of operations in 2015. At December 31, 2017, 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. Item 9a. CONTROLS AND PROCEDURES 51(i) Evaluation of Disclosure Controls and ProceduresOur disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under theSecurities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in theSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information requiredto be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to our management, including the ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.As of December 31, 2017, an evaluation was conducted under the supervision and with the participation of our management, including our Chief ExecutiveOfficer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of theExchange Act). Based on this evaluation, such officers have concluded that our disclosure controls and procedures were not effective as of December 31,2017, because of the material weaknesses in our internal control over financial reporting described below.(ii) Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed by, or under the supervision of, our ChiefExecutive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles.Management, including our Chief Executive Officer and Chief Financial Officer, assessed the Company’s internal control over financial reporting andconcluded that they were not effective as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in Internal Control‑Integrated Framework (2013). Management identified materialweaknesses in internal control over financial reporting as of December 31, 2017, as described below.We identified material weaknesses resulting from the lack of timely and effective review of the Company’s period-end closing process. Specifically,management concluded that the material weakness relates to the Company not having adequate personnel and resources in place for its implementation of anew enterprise-wide financial system (“ERP”). Management evaluated the impact in our assessment of our reporting procedures and has concluded that thecontrol deficiencies represented a material weakness in relation to the Company’s internal controls over financial reporting. Consequently, the same financialreporting personnel were not able to perform a timely and effective review of our period-end closing process.Additionally, we identified material weaknesses resulting from control deficiencies related to Information Technology General Controls (“ITGC”).Management evaluated the impact in our assessment of our reporting procedures and has concluded that the control deficiencies represented a materialweakness in relation to the Company’s internal controls over financial reporting. The factors that contributed to this included the following:•The absence of a formal policy to assess the adequacy of the design and operating effectiveness of controls related to the Company’s key ERP third partyservice provider.•The absence of or breakdown of Information Security, Change Management and System Development Life Cycle controls related to the company’s keyfinancial systems.On March 12, 2018, after discussions with the Company’s Audit Committee, management concluded that the restatement of the Form 10-Q for the quarterended September 30, 2017 was necessary. Management concluded that the material weaknesses related to (i) the ineffective management review, processand controls related to price concessions of a certain product in Canada, specifically, we have inadequate controls to ensure that the information necessary toproperly record transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for financial reporting; and (ii) the proper application of accounting guidance and the Company's policy related to the allowance for doubtful accounts.(iii) Remediation Plan for Material Weaknesses in Internal Control over Financial ReportingRemediationTo remediate the material weaknesses, the Company has begun to implement new procedures and employ additional resources, including the following:52•Hiring new team members and engaging external resources with significant prior experience with systems similar to the Company's new ERP system toprovide additional capacity, analytical and functional capabilities, and cross-training.•Implementing business process improvements, that are anticipated to both strengthen controls governing management review and approvals and enablea more efficient and effective month end close.•Conducting regular reviews of all information system access to validate that access is appropriate and appropriate segregation of duties exist.•Recruiting a new senior leader in one of its foreign affiliates who, among other responsibilities, will ensure customer contract terms are reviewed with keymembers of the Finance Department on a timely basis to ensure customer price concessions are reflected appropriately in the financial records.•Establishing formal policies and procedures for the accounting and internal audit function.•Developing policies and procedures addressing the internal control framework of the Company’s ERP service provider. Item 9B. OTHER INFORMATION In the interest of maintaining consistency with the Company's 2016 Equity Incentive Plan, on March 13, 2017, the Company entered into (i) an amendmentto the option agreements governing each option grant currently outstanding under the Company's 2009 Equity Incentive Plan, and (ii) an amendment to therestricted stock unit, or RSU, agreements governing each RSU grant currently outstanding under the 2009 Plan. The amendments provide for the automaticvesting upon a change of control of the Company of each option grant and RSU grant, as applicable, outstanding under the 2009 Plan. The forms ofamendment are Exhibits 10.31 and 10.32 and are incorporated by reference herein.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 2018Annual Meeting of Stockholders. Item 11. EXECUTIVE COMPENSATIONThe 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 2018 Annual Meeting of Stockholders. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe 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 2018 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 2018 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 2018 Annual Meeting of Stockholders. 53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 Teligent, Inc., dated October 23, 2015 (incorporated by reference to Exhibit 3.1 to theCompany’s Report on Form 8-K, filed October 23, 2015). (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 Statement onForm 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 on FormS-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). (10.8)#Form of Indemnification Agreement for Certain Directors (incorporated by reference to Exhibit 10.11 to the March 19, 2009 8-K).54 (10.9)#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). (10.10)#Employment Agreement dated July 30, 2012 between IGI Laboratories, Inc. and Jason Grenfell-Gardner (incorporated by reference to Exhibit10.1 to the Company’s Report on Form 8-K, filed July 30, 2012). (10.11)+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 Quarterly Report on Form 10-Q/A, filed August 9, 2013). (10.12)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 on Form8-K, filed October 1, 2014). (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 10.2 to the Company’s Report on Form8-K, filed October 1, 2014). (10.14)+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). (10.15)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 Bank asa Lender, and the other financial institutions party thereto as Lenders (incorporated by reference to Exhibit 10.1 to the Company’s Report onForm 8-K, filed November 24, 2014). (10.16)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). (10.17)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). (10.18)Second Amendment to Credit Agreement, dated as of August 14, 2015, by and among Teligent, Inc., Igen, Inc. and Teligent Pharma, Inc. asBorrowers, General Electric Capital Corporation as Agent, and the Lenders signatory thereto (incorporated by reference to Exhibit 10.1 to theCompany’s Report on Form 10-Q, filed November 9, 2015). (10.19)Third Amendment to Credit Agreement, dated as of September 16, 2015, by and among Teligent, Inc., Igen, Inc. and Teligent Pharma, Inc. asBorrowers, General Electric Capital Corporation as Agent, and the Lenders signatory thereto (incorporated by reference to Exhibit 10.2 to theCompany’s Report on Form 10-Q, filed November 9, 2015). (10.20)+Asset Purchase Agreement, dated as of October 5, 2015, by between Concordia Pharmaceuticals Inc., S.à.r.l., Barbados Branch, on the onehand, and Teligent, Inc. and Teligent Jersey Limited, on the other hand (incorporated by reference to Exhibit 10.3 to the Company’s Reporton Form 10-Q, filed November 9, 2015). (10.21)Asset Purchase Agreement, dated October 12, 2015, between IGI Laboratories, Inc. and Alveda Pharmaceuticals, Inc. (incorporated byreference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed October 13, 2015). (10.22)Asset Purchase Agreement, dated October 12, 2015, between IGI Laboratories, Inc. and Alveda Pharmaceuticals, Inc. (incorporated byreference to Exhibit 10.2 to the Company’s Report on Form 8-K, filed October 13, 2015).55 (10.23)Contribution Agreement, by and between the Teligent, Inc. and Teligent Luxembourg S.à.r.l., dated as of November 13, 2015 (incorporatedby reference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed November 16, 2015). (10.24)Loan Agreement, by and between Teligent, Inc. and Teligent Luxembourg S.à.r.l., dated as of November 13, 2015 (incorporated by referenceto Exhibit 10.2 to the Company’s Report on Form 8-K, filed November 16, 2015). (10.25)Loan Agreement, by and between Teligent, Inc. and Teligent Canada Inc., dated as of November 13, 2015 (incorporated by reference toExhibit 10.3 to the Company’s Report on Form 8-K, filed November 16, 2015). (10.26)Distribution Agreement, by and between Teligent OÜ and Teligent Canada Inc., dated as of November 13, 2015 (incorporated by reference toExhibit 10.4 to the Company’s Report on Form 8-K, filed November 16, 2015). (10.27)First Amendment to Asset Purchase Agreement, by and between Teligent, Inc. and AstraZeneca Pharmaceuticals, LP, dated as of November30, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed December 4, 2015). (10.28)First Amendment to Asset Purchase Agreement, dated December 10, 2015, by and between Concordia Pharmaceuticals Inc., S.à.r.l., BarbadosBranch, on the one hand, and Teligent, Inc. and Teligent Jersey Limited, on the other hand (incorporated by reference to Exhibit 10.1 to theCompany’s Report on Form 8-K, filed December 15, 2015). (10.29)Trademark Assignment Agreement, dated December 10, 2015, by and between Concordia Pharmaceuticals Inc., S.à.r.l., Barbados Branch, onthe one hand, and Teligent Jersey Limited, on the other hand (incorporated by reference to Exhibit 10.2 to the Company’s Report on Form 8-K, filed December 15, 2015). (10.30)#Teligent, Inc. 2016 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed May 27,2016). (10.31)#Form of Amendment to Outstanding Option Agreements under the Company’s 2009 Equity Incentive Plan. (incorporated by reference toExhibit 10.31 to the Company 10-K, filed March 12, 2017). (10.32)#Form of Amendment to Outstanding RSU Agreements under the Company’s 2009 Equity Incentive Plan. (incorporated by reference toExhibit 10.32 to the Company 10-K, filed March 12, 2017). (21)List of Subsidiaries (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 10-K, filed March 16, 2017). (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, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (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, 2017, 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.56 *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 19, 2018 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 19, 2018Jason Grenfell-Gardner (Principal Executive Officer) /s/ Damian Finio Chief Financial Officer March 19, 2018Damian Finio (Principal Financial Officer) /s/ Steven Koehler Director March 19, 2018Steven Koehler /s/ James Gale Director March 19, 2018James Gale /s/ Bhaskar Chaudhuri Director March 19, 2018Bhaskar Chaudhuri /s/ John Celentano Director March 19, 2018John Celentano /s/ Carole Ben-Maimon Director March 19, 2018Carole Ben-Maimon /s/ Thomas Sabatino Director March 19, 2018Thomas Sabatino 58INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2017 and 2016 F-5 Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015 F-6 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015 F-8 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2017, 2016 and 2015 F-9 Notes to Consolidated Financial Statements F-10 Financial Statement Schedule: Quarterly Results (Unaudited) F-35 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts F-36F-1REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and StockholdersTeligent, Inc. and subsidiaries (formerly known as IGI Laboratories, Inc.) Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Teligent, Inc. and subsidiaries (the "Company") as of December 31, 2017 and 2016, 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, 2017and the related notes and schedule II (collectively referred to as the “financial statements”). In our opinion, the financialstatements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2017 and 2016, and theconsolidated results of their operations and their cash flows for each of years in the three-year period ended December 31, 2017, in conformity withaccounting 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) ("PCAOB"), the Company’sinternal control over financial reporting as of December 31, 2017, based on criteria established in the Internal Control - Integrated Framework (2013) issuedby the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 19, 2018 expressed an adverse opinion.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ EISNERAMPER LLP We have served as the Company’s auditor since August 2010.Iselin, New JerseyMarch 19, 2018F-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and StockholdersTeligent, Inc. and subsidiaries (formerly known as IGI Laboratories, Inc.) Opinion on the Internal Control over Financial ReportingWe have audited Teligent, Inc. and Subsidiaries' (the "Company") internal control over financial reporting as of December 31, 2017, based on criteriaestablished in the 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission("COSO"). In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria,Teligent, Inc. and Subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2017, based on criteria established inthe Internal Control - Integrated Framework (2013) issued by COSO.A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonablepossibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Thefollowing material weaknesses have been identified and included in management’s assessment.(i) a lack of timely and effective review of the Company’s period-end closing process due to the Company not having adequate personnel andresources in place for its implementation of the new enterprise-wide financial system;(ii) an aggregation of control deficiencies related to the Company’s information technology general controls;(iii) an ineffective management review of the process and controls over price concessions inCanada and;(iv) the proper application of accounting guidance and the Company’s policy related to the allowance for doubtful accounts.These material weaknesses were considered in determining the nature, timing, and extent of the audit tests applied in our audit of the December 31, 2017financial statements, and this report does not affect our report dated March 19, 2018, on those financial statements.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidatedbalance sheets of Teligent, Inc. and Subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of operations, comprehensiveincome, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes and schedules, andour report dated March 19, 2018 expressed an unqualified opinion.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design andoperating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary inthe circumstances. We believe that our audit provides a reasonable basis for our opinion.F-3Definition and Limitations of Internal Control over Financial ReportingAn entity’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. An entity’s internal control overfinancial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only inaccordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the entity’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./s/ EISNERAMPER LLP Iselin, New JerseyMarch 19, 2018F-4TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share and per share information) December 31,2017 December 31,2016ASSETS Current assets: Cash and cash equivalents $26,692 $66,006Accounts receivable, net 18,143 21,735Inventories 16,075 12,708Prepaid expenses and other receivables 3,622 2,847Total current assets 64,532 103,296 Property, plant and equipment, net 68,355 26,215Intangible assets, net 56,017 52,465Goodwill 471 446Other 611 804Total assets $189,986 $183,226 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $10,595 $4,614Accrued expenses 13,502 10,349Total current liabilities 24,097 14,963 Convertible 3.75% senior notes, net of debt discount and debt issuance costs (face of $143,750) 120,977 111,391Deferred tax liability 159 205Total liabilities 145,233 126,559 Stockholders’ equity: Common stock, $0.01 par value, 100,000,000 shares authorized; 53,400,281 and 53,148,441 shares issuedand outstanding as of December 31, 2017 and December 31, 2016, respectively 554 551Additional paid-in capital 106,312 102,624Accumulated deficit (60,094) (44,903)Accumulated other comprehensive loss, net of taxes (2,019) (1,605)Total stockholders’ equity 44,753 56,667Total liabilities and stockholders’ equity $189,986 $183,226The accompanying notes are an integral part of the consolidated financial statements.F-5TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFor the years ended December 31, 2017, 2016 and 2015(in thousands, except shares and per share information) 2017 2016 2015Components of Revenue: Product sales, net $66,999 $65,904 $43,497Research and development services and other income 252 977 753Total revenues 67,251 66,881 44,250 Costs and Expenses: Cost of revenues 39,879 32,194 22,935Selling, general and administrative expenses 19,904 15,005 11,336Product development and research expenses 19,265 17,140 13,171Total costs and expenses 79,048 64,339 47,442Operating (loss) income (11,797) 2,542 (3,192) Other Income (Expense): Change in the fair value of derivative liability — — 23,144Foreign currency exchange gain (loss) 7,719 (936) 109Interest and other expense, net (11,198) (13,304) (13,358)(Loss) income before income tax expense (15,276) (11,698) 6,703 Income tax (benefit) expense (85) 287 35 Net (loss) income attributable to common stockholders $(15,191) $(11,985) $6,668 Basic (loss) earnings per share $(0.28) $(0.23) $0.13Diluted (loss) earnings per share $(0.28) $(0.23) $(0.07) Weighted average shares of common stock outstanding: Basic 53,323,954 53,078,158 52,872,814Diluted 53,323,954 53,078,158 67,111,995 The accompanying notes are an integral part of the consolidated financial statements.F-6TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)For the years ended December 31, 2017, 2016 and 2015(in thousands) 2017 2016 2015Net income (loss) $(15,191) $(11,985) $6,668 Other comprehensive loss, net of tax Foreign currency translation adjustment (414) (1,475) (130)Other comprehensive loss (414) (1,475) (130) Comprehensive income (loss) $(15,605) $(13,460) $6,538The accompanying notes are an integral part of the consolidated financial statements.F-7TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2017, 2016 and 2015 2017 2016 2015Cash flows from operating activities: Net income (loss) $(15,191) $(11,985) $6,668Reconciliation of net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of fixed assets 1,711 946 560Amortization of license fee — — 100Provision for write down of inventory 2,132 1,400 50Provision for bad debt 1,767 327 —Issuance of stock to consultant — 189 —Stock based compensation 3,295 2,999 2,273Amortization of debt issuance costs 943 828 1,132Amortization of intangibles 2,930 2,833 514Foreign currency exchange loss (gain) (7,719) 936 (109)Amortization of debt discount on convertible 3.75% senior notes 8,643 7,599 6,680Change in the fair value of derivative liability — — (23,144)Loss on disposal of property/impairment 113 16 —Changes in operating assets and liabilities: Accounts receivable 1,894 (8,008) 1,250Inventories (5,275) (5,042) (3,578)Prepaid expenses and other current receivables (748) 3,427 (5,408)Other assets 194 316 (14)Accounts payable and accrued expenses 5,711 2,897 (2,849)Deferred income — (476) 362 Net cash provided by (used in) operating activities 400 (798) (15,513) Cash flows from investing activities: Capital expenditures (40,429) (16,655) (5,998)Acquisition of product rights and other related assets — — (35,418)Product acquisition costs, net — (3,421) (11,652)Net cash used in investing activities (40,429) (20,076) (53,068) Cash flows from financing activities: Proceeds from issuance of stock, net — — (3)Principal payments on note payable, bank — — (3,160)Proceeds from exercise of common stock options and warrants 269 96 165Principal payments on capital lease obligations — (70) (132)Payment (recovery) from stockholder, net — (36) 19Net cash provided by (used in) financing activities 269 (10) (3,111) Effect of exchange rate on cash and cash equivalents 446 (301) —Net decrease in cash and cash equivalents (39,760) (20,884) (71,692)Cash and cash equivalents at beginning of year 66,006 87,191 158,883 Cash and cash equivalents at end of year $26,692 $66,006 $87,191 Supplemental Cash flow information: Cash payments for interest $5,391 $5,393 $5,517Cash payments for income taxes 126 113 123 Non cash investing and financing transactions: Reclassification of derivative liability to equity — — 18,256Acquisition of capital expenditures in accounts payable and accrued expenses 3,186 1,805 —Capitalized stock compensation in capital expenditures 127 91 —Issuance of stock to consultant — 189 31Issuance of restricted stock — — 347The accompanying notes are an integral part of the consolidated financial statements.F-8TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the years ended December 31, 2017, 2016 and 2015(in thousands, except share information) Series AConvertible Series CConvertible Additional AccumulatedOther Total Preferred Stock Preferred Stock Common Stock Paid-In Accumulated Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Loss EquityBalance, December 31, 2014 — — — $— 52,819,787 $548 $78,172 $(39,586) $— $39,134 Issuance of stock pursuant to apublic offering, net of associatedfees of $1,868 —Issuance of stock to consultant 5,000 31 31Stock based compensation expense 2,273 2,273Stock warrants exercised 67,636 82 82Stock options exercised 75,766 1 82 83Issuance of restricted stock 32,500 346 346Reclassification of derivativeliability to equity 18,256 18,256Recovery from stockholder, net 19 19Costs related to stock issuance (3) (3)Cumulative translation adjustment (130) (130)Net income — — — — — — — 6,668 — 6,668 Balance, December 31, 2015 — — — $— 53,000,689 $549 $99,258 $(32,918) $(130) $66,759 Issuance of stock to consultant 25,000 189 189Stock based compensation expense 3,090 3,090Stock warrants exercised —Stock options exercised 61,834 1 95 96Issuance of stock for vestedrestricted stock units 60,918 1 1Recovery from stockholder, net (36) (36)Tax benefit related to stock options 28 28Cumulative translation adjustment (1,475) (1,475)Net loss — — — — — — — (11,985) — (11,985) Balance, December 31, 2016 — — — $— 53,148,441 $551 $102,624 $(44,903) $(1,605) $56,667 Issuance of stock to consultant —Stock based compensation expense 3,422 3,422Stock options exercised 171,566 2 267 269Issuance of stock for vestedrestricted stock units 80,274 1 (1) —Cumulative translation adjustment (414) (414)Net loss — — — — — — — (15,191) — (15,191) Balance, December 31, 2017 — — — $— 53,400,281 $554 $106,312 $(60,094) $(2,019) $44,753 The accompanying notes are an integral part of the consolidated financial statements.F-9TELIGENT, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of the Business and Liquidity Nature of the BusinessTeligent, Inc. is a Delaware corporation incorporated in 1977 and is a specialty generic pharmaceutical company. Under its own label, the Company marketsand sells generic topical and branded generic and generic injectable pharmaceutical products in the United States and Canada. In the United States, theCompany currently markets 25 generic topical pharmaceutical products and four branded generic pharmaceutical products. In Canada, the Company sellsover 30 generic and branded generic injectable products and medical devices. Generic pharmaceutical products are bioequivalent to their brand namecounterparts. The Company also provides contract manufacturing services to the pharmaceutical, over-the-counter, ("OTC"), and cosmetic markets. TheCompany operates its business under one segment. Our common stock is trading on the NASDAQ Global Select Market, under the trading symbol “TLGT.” 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 has continued to make progress on its facility expansion in Buena, New Jersey, to support theincreased capacity demand expected from future product approvals from the FDA. As the Company continues to execute the expansion of our developmentand commercial base beyond topical generics to include injectable generics, complex generics and ophthalmic generics (what we call our “TICO strategy”), itwill compete in other markets, including the ophthalmic generic pharmaceutical market, and expects to face other competitors.LiquidityThe Company’s principal sources of liquidity are cash and cash equivalents of approximately $26.7 million at December 31, 2017 and cash from operations.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 March2019. 2. Summary of Significant Accounting Policies 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 include cash on hand and money market funds. The carrying amounts approximate the fair value due to the short term maturity of theseinvestments. Money market funds are 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 includinggovernment-sponsored enterprises, or GSEs.The Company has restricted cash, consisting of escrow accounts (see Note 12) and letter of credits, totaling $0.5 million as of December 31, 2017 andDecember 31, 2016. These balances are included within Other Assets on the Consolidated Balance Sheet.Fair Value of Financial Instruments F-10The carrying amounts of cash and cash equivalents, trade receivables, restricted cash, notes payable, accounts payable and other accrued liabilities atDecember 31, 2017 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. 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 to 90 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 70% 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 and other services performed for third parties. Due todifferences in the substance of these transaction types, the transactions require, and the Company utilizes, different revenue recognition policies for each. Product Sales: Product Sales, net, include 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 thecustomer, 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,F-11cash discounts and returns and other allowances. These provisions are estimates based on historical payment experience, historical relationship to revenues,estimated customer inventory levels and current contract sales terms with direct and indirect customers. The estimation process used to determine our SRAprovision has been applied on a consistent basis and no material adjustments have been necessary to increase or decrease our reserves for SRA as a result of asignificant change in underlying estimates. The Company will use a variety of methods to assess the adequacy of our SRA reserves to ensure that ourfinancial statements are fairly stated. These will include periodic reviews of customer inventory data, customer contract programs, subsequent actual paymentexperience, 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. Accounts receivable are presented net of SRA balances of $28.5 million and $41.5 million at December 31, 2017 and 2016, respectively. Accounts payableand accrued expenses include $7.0 million and 3.5 million at December 31, 2017 and 2016, respectively, for certain fees related to services provided by thewholesalers. Wholesale fees of $7.0 million, $3.7 million and $6.3 million for the years ended December 31, 2017, 2016 and 2015, respectively, wereincluded in cost of goods sold. In addition, in connection with four of the 29 products the Company currently manufactures, markets and distributes in its own label in the U.S., inaccordance with an agreement entered into in December of 2011, the Company is required to pay a royalty calculated based on net sales to one of itspharmaceutical partners. The royalty is calculated based on contracted terms of 40% of net sales for the four products, which is to be paid quarterly to thepharmaceutical partner that the agreement is with. In accordance with the agreement, net sales exclude fees related to services provided by the wholesalers.Accounts payable and accrued expenses include $0.9 million and $0.8 million at December 31, 2017 and 2016, respectively, related to these royalties.Royalty expense of $2.2 million, $3.0 million and $3.6 million was included in cost of goods sold for the years ended December 31, 2017, 2016, and 2015respectively. The Company includes significant estimates to arrive at net product sales arising from wholesaler chargebacks, Medicaid and Medicare rebates,allowances and other pricing and promotional programs. 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 productsand are included in product sales, net on the Company's Consolidated 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. Other types of revenue include royalty or licensing revenue, and would be recognized based upon thecontractual agreement upon completion of the earnings process. 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.Concentration of RiskF-12 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 2017, the Company had sales to three customers which individually accounted for more than 10% of the Company’s total revenue. These customers hadsales of $18.7 million, $9.9 million and $9.6 million, respectively, and represented 57% of total revenues in the aggregate. Accounts receivable related to theCompany’s major customers comprised of 47%, 15% and 14%, respectively, and represented 76% of all accounts receivable as of December 31, 2017. In2016, the Company had sales to three customers which individually accounted for more than 10% of the Company’s total revenue. These customers had salesof $13.5 million, $8.6 million and $6.8 million, respectively, and represented 43% of total revenues in the aggregate. Accounts receivable related to theCompany’s major customers comprised of 20%, 56% and 11%, respectively, and represented 81% of all accounts receivable as of December 31, 2016. In2015, the Company had sales to three customers which individually accounted for more than 10% of the Company’s total revenue. These customers had salesof $12.3 million and $5.8 million and $6.5 million, respectively, and represented 52% of total revenues in the aggregate. Accounts receivable related to theCompany’s major customers comprised of 43%, 33% and 6%, respectively, and represented 83% of all accounts receivable as of December 31, 2015. The Company had net revenue from one product, Econazole Nitrate Cream 1%, which accounted for 4%, 8%, and 45% of total revenues in 2017, 2016 and2015, respectively. Lidocaine Ointment 5%, which the Company launched at the end of the first quarter of 2016 accounted for 17% and 23% of totalrevenues in 2017 and 2016. Zantac for injection, which the Company acquired in the fourth quarter of 2015, accounted for 10%, 3% and 0% of total revenuesin 2017, 2016 and 2015. For the year ended December 31, 2017, domestic net revenues were $53.5 million and foreign net revenues were $13.8 million. As of December 31, 2017,domestic assets were $117.7 million and foreign assets were $72.3 million. For the year ended December 31, 2016, domestic net revenues were $56.1 millionand foreign net revenues were $10.8 million. As of December 31, 2016, domestic assets were $120.0 million and foreign assets were $63.2 million. For theyear ended December 31, 2015, domestic net revenues were $42.7 million and foreign net revenues were $1.6 million. As of December 31, 2015, domesticassets were $129.0 million and foreign assets were $51.7 million. While the company purchases raw materials to manufacture certain products, it also utilizes contract manufacturing organizations (CMO's) to purchasefinished products. The Company currently purchases from numerous sources which therefore reduces the risk of delays or difficulties in getting materialsand/or products.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, expired, excess and obsolete raw materials. This reserve is based on management’s current knowledge with respect to inventory levels,planned production, 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. 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 - 40 yearsMachinery and equipment 5 - 15 yearsComputer hardware and software 3 - 5 yearsFurniture and fixtures 5 years F-13Leasehold improvements are amortized over the shorter of estimated useful life or the lease term. Repair and maintenance costs are charged to operations asincurred while major improvements are capitalized. Construction in progress ("CIP") costs are amortized based on the asset class when they are put intoservice. When assets are retired or disposed, the related cost and accumulated depreciation thereon are removed and any gains or losses are included inoperating results.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. An impairment is recognized in the amount, if any, by which the carrying amountof such assets exceeds their respective fair values and would be recorded in the selling, general and administrative expense on the Consolidated Statements ofOperations. 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.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, 2017, no impairments existed.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, 2017 was $0.5 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. 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. F-14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. 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.Foreign exchange gain of $7.7 million was recorded for the year ended December 31, 2017, primarily related to the foreign currency translation of ourintercompany loans denominated in U.S. dollars to our foreign subsidiaries. These loans are to be repaid in November 2022. Depending on the changes inforeign currency exchange rates, we will continue to record a non-cash gain or loss on translation for the remainder of the term of these loans. Due to thenature of this transaction, there is no economic benefit to the Company to hedge this transaction. 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. 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. TheCompany records interest and penalties relating to uncertain tax positions as a component of income tax expense.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, RSU's 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 requisite service period of the award, which usually coincides with the vesting period of the grant. Debt Issuance Costs F-15Expenses related to debt financing activities are capitalized and amortized on an effective interest method, over the term of the loan. For more details, refer toNote 5.ASU 2015-3 specifies that debt issuance costs are to be netted against the carrying value of the financial liability. Under prior guidance, debt issuance costswere recognized as a deferred charge and reported as a separate asset on the balance sheet. The updated guidance aligns the treatment of debt issuance costsand debt discounts in that both reduce the carrying value of the liability. Amortization of debt issuance costs is to be recorded as interest expense on theincome statement. 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. For the yearsended December 31, 2017, 2016 and 2015, the costs relating to shipping and handling totaled $1.2 million, $0.7 million and $0.2 million, respectively. Earnings (Loss) per Common Share Basic earnings (loss) per share of common stock is computed based on the weighted average number of shares of common stock outstanding during theperiod. Diluted earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock and potential dilutivecommon stock equivalents outstanding during the period. Potential dilutive common stock equivalents include shares issuable upon the conversion of thenotes and the exercise of options and warrants. Due to the net loss for the years ended December 31, 2017 and 2016, the effect of the Company’s potentialdilutive common stock equivalents was anti-dilutive; as a result, the basic and diluted weighted average number of common shares outstanding and net lossper common share are the same. As of December 31, 2017, the shares of common stock issuable in connection with stock options and warrants have beenexcluded from the diluted earnings (loss) per share, as their effect would have been anti-dilutive.For the years ended December 31, 2017, 2016 and 2015(in thousands except shares and per share data) 2017 2016 2015Basic earnings (loss) per share computation: Net income (loss) attributable to common stockholders —basic $(15,191) $(11,985) $6,668Weighted average common shares —basic 53,323,954 53,078,158 52,872,814Basic earnings (loss) per share $(0.28) $(0.23) $0.13 Dilutive earnings (loss) per share computation: Net income (loss) attributable to common stockholders —basic $(15,191) $(11,985) $6,668Interest expense related to convertible 3.75% senior notes — — 5,391Amortization of discount related to convertible 3.75% senior notes — $— $6,680Change in the fair value of derivative — $— $(23,144)Net loss attributable to common stockholders —diluted $(15,191) $(11,985) $(4,405)Share Computation: Weighted average common shares —basic 53,323,954 53,078,158 52,872,814Effect of convertible 3.75% senior notes — — 12,732,168Effect of dilutive stock options and warrants — — 1,507,013Weighted average common shares outstanding —diluted 53,323,954 53,078,158 67,111,995Diluted net loss per share $(0.28) $(0.23) $(0.07) 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 815-10F-16also requires that changes in the fair value of derivative instruments be recognized currently in results of operations unless specific hedge accounting criteriaare met. The Company has not entered into hedging activities to date. The Company’s derivative liability is the embedded convertible option of itsConvertible Notes issued December 16, 2014 (as defined in Note 5), which has been recorded as a liability at fair value until May 20, 2015, and was revaluedat each reporting date, with changes in the fair value of the instruments included in the consolidated statements of operations as non-operating income(expense). Due to the approval of the sufficient shares at the Company’s annual shareholder meeting, the liability for the embedded derivative wasreclassified to equity on May 20, 2015. The Company had no derivatives at December 31, 2017 and December 31, 2016. 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 thehistorical valuation of the derivative liability, SRA allowances, allowances for excess and obsolete inventories, allowances for doubtful accounts, provisionsfor income taxes and related deferred tax asset valuation allowances, stock based compensation, the impairment of long-lived assets (including intangibles,goodwill and property, plant and equipment), property, plant and equipment and legal accruals for environmental cleanup and remediation costs. Actualresults could differ from those estimates.ReclassificationCertain prior year amounts were reclassified to conform to current year presentation. For the year ended December 31, 2016, the impact of suchreclassification of the non-cash portion of the capital expenditures would have been a reduction of both cash from operating activities and cash used ininvesting activities, in the amount of $1.9 million.Adoption of Recent Accounting Pronouncements 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. TheCompany's adoption of this ASU, effective January 1, 2017, did not have any significant impact on its consolidated financial statements.In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): “Improvements to Employee Share-Based PaymentAccounting”. The update includes multiple provisions intended to simplify various aspects of the accounting for share-based payments, including theincome tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in thisupdate are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. TheCompany has adopted this ASU, effective January 1, 2017, and is recognizing windfall tax benefits in additional paid in capital on a prospective basis.Recently Issued Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): “Recognition and Measurement of Financial Assets and Financial Liabilities”. Theupdate supersedes Topic 840, Leases and requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leasesunder previous GAAP. Topic 842 retains a distinction between finance leases and operating leases, with cash payments from operating leases classifiedwithin operating activities in the statement of cash flows. The amendments in this update are effective for fiscal years beginning after December 15, 2018 forpublic business entities, which for the Company means January 1, 2019. The Company is currently evaluating the impact of this ASU on its consolidatedfinancial statements.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): "Restricted Cash (a consensus of the FASB Emerging Issues TaskForce)". The update addresses the diversity in the industry with respect to classification and presentation of changes in restricted cash on the statement ofcash flows. These amendments require that a statement of cash flows explain the restricted cash change during the period in the total of cash, cashequivalents, and amounts generally described as restricted cash or restricted cash equivalents. It affects those reporting entities that are required to evaluatewhether they should consolidate a variable interest entity "VIE". The amendments in this update are effective for fiscal years beginning after December 15,2017 for public business entities, including interim periods within those fiscal years. For the Company, the amendments are effective January 1, 2018. TheCompany is currently evaluating the impact of this ASU on its consolidated financial statements. F-17In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): “Clarifying the Definition of a Business”. The update clarifies thedefinition of a business, specifically for companies to better evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets orbusinesses. The amendments in this update are effective for public companies for annual periods beginning after December 15, 2017, including interimperiods within those annual periods. For the Company, the amendments are effective January 1, 2018. The Company's adoption of this ASU, is not expectedto have any significant impact on its consolidated financial statements.In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and JointVentures (Topic 323): “Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITFMeetings”. The update shows amendments to two SEC Announcements made late in 2016 regarding four specific standards as follows: ASU 2014-09,Revenue from Contracts with Customers (Topic 606), ASU 2016-02, Leases (Topic 842), ASU 2016-13, Financial Instruments - Credit Losses (Topic 326),and ASU 2014-01, Investments - Equity Method and Joint Ventures (Topic 323). The amendments in this update require changes to the U.S. GAAP FinancialReporting Taxonomy and the changes will be incorporated into the proposed 2018 Taxonomy which are available for public comment and finalized as partof the annual release process. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): “Simplifying the Test for Goodwill Impairment”. The updatesimplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwillimpairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. It affects public entities thathave goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. Apublic entity that is a U.S. Securities and Exchange Commission ("SEC") filer should adopt the amendments in this update for its annual or any interimgoodwill impairment tests in fiscal years beginning after December 15, 2019. For the Company, the amendments are effective January 1, 2020. The Companyis currently evaluating the impact of this ASU on its consolidated financial statements.In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20):“Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. This update addresses guidance for partialsales of nonfinancial assets. It affects (i) an entity that enters into a contract to transfer to a customer a nonfinancial asset, group of nonfinancial assets, orownership interest in a consolidated subsidiary that is not a business or nonprofit entity, (ii) an entity that historically had transactions within the scope ofthe real estate-specific derecognition guidance, and (iii) an entity that contributes nonfinancial assets that are not a business or a nonprofit activity to a jointventure or other noncontrolled investee. The amendments are effective at the same time as the amendments in ASU 2014-09. Therefore, for the Company, theamendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.Public entities may apply the guidance earlier but only as of annual reporting periods beginning after December 15, 2016, including interim reportingperiods within that reporting period. The Company does not currently expect to enter into any such nonfinancial asset or ownership interest in itsconsolidated subsidiaries agreements but will refer to the guidance in ASU 2017-05 should that occur.In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): “Scope of Modification Accounting”. This update providesguidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718,Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments affect any entity that changesthe terms or conditions of a share-based payment award. The amendments are effective for fiscal years beginning after December 15, 2017. For the Company,the amendments are effective January 1, 2018. The Company has not made any changes to the terms or conditions of share-based payment awards but willrefer to the guidance in ASU 2017-09 should that occur. The Company's adoption of this ASU is not expected to have any significant impact on itsconsolidated financial statements.In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income,” which allows a reclassification from accumulated other comprehensive income to retained earningsfor stranded tax effects resulting from the Tax Cuts and Jobs Act. This guidance is effective for all entities for fiscal years, and interim periods within thoseyears, beginning after December 15, 2018, with early adoption permitted. The amendments in ASU 2018-02 should be applied either in the period ofadoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act isrecognized. The adoption of this guidance is not expected to have a material impact on the Company's Consolidated Financial Statements and relateddisclosures.F-18Revenue Topic 606 Recent Accounting PronouncementsIn May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard, including subsequently issuedamendments, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The key focus of the new standard is that anentity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which theentity expects to be entitled in exchange for those goods or services. To achieve this key focus, there is a five-step approach outlined in the standard. Entitiesare permitted to apply the new standard either retrospectively, subject to certain practical expedients, or the modified retrospective method that requires theapplication of the guidance only to contracts that are uncompleted on the date of initial application. For the Company, Topic 606 and subsequently issuedamendments will be effective January 1, 2018.We have performed a comprehensive review of our existing revenue arrangements as of December 31, 2017 following the five-step model. Our analysisindicates that there will be no significant changes to how the amount and timing of revenue will be recognized under the new guidance as compared toexisting guidance. Additionally, our analysis indicates that there will be no significant changes to how costs to obtain and fulfill our customer contracts willbe recognized under the new guidance as compared to existing guidance. We will adopt this guidance as of January 1, 2018 using the modified retrospectivemethod and we expect that the impact of adoption on our consolidated balance sheet, statement of operations, statement of changes in stockholders’ equityand statement of cash flows will not be material. The adoption of the new guidance will impact the way we analyze, document, and disclose revenuerecognition under customer contracts beginning on January 1, 2018; will require reclassification of certain amounts on the balance sheet and will result inadditional disclosures in our financial statements.F-193. Inventories Inventories as of December 31, 2017 and 2016 consisted of: 2017 2016 (in thousands)Raw materials $8,231 $6,834Work in progress 616 —Finished goods 8,532 6,284Reserve for obsolescence (1,304) (410) $16,075 $12,708 4. Property, Plant and Equipment Property, plant and equipment, at cost, as of December 31, 2017 and 2016, consisted of: 2017 2016 (in thousands)Land $257 $257Building and improvements 8,613 8,515Machinery and equipment 9,142 7,515Computer hardware and software 3,244 724Furniture and fixtures 449 344Construction in progress 55,017 15,496 76,722 32,851Less accumulated depreciation and amortization (8,367) (6,636)Property, plant and equipment, net $68,355 $26,215The Company recorded depreciation and amortization expense of $1.7 million, $0.9 million and $0.6 million in 2017, 2016 and 2015, respectively. Duringthe twelve months ended December 31, 2017 and 2016 there was $3.6 million of interest and $0.4 million of interest, respectively, capitalized intoconstruction in progress. During the twelve months ended December 31, 2017 and 2016 there was $0.8 million of payroll and $0.4 million of payroll,respectively, capitalized into construction in progress. 5. 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 bear interest at a fixed rate of 3.75% per year, payable semiannually in arrears on June 15 and December 15 of eachyear, beginning on June 15, 2015 and mature on December 15, 2019, unless earlier repurchased, redeemed or converted. The Notes are convertible into sharesof the Company’s common stock, cash or a combination thereof. On May 20, 2015, the Company received shareholder approval for the increase in thenumber of shares of common stock authorized and available for issuance upon conversion of the Notes. The remaining unamortized discount and unamortized debt financing costs will be amortized over the remaining term of the debt of 2.0 years. AtDecember 31, 2017 and December 31, 2016, the net carrying amount of the liability component and the remaining unamortized debt discount were asfollows: F-20 December 31, 2017 December 31, 2016 (in thousands) (in thousands) Face amount of the Notes$143,750 $143,750Unamortized discount20,517 29,160Debt issuance costs2,256 3,199Carrying amount of the Notes$120,977 $111,391Debt issuance costs associated with the Notes, include fees of $2.3 million at December 31, 2017 and $3.2 million at December 31, 2016. For the years ended December 31, 2017, December 31, 2016 and December 31, 2015, the Company recorded the following expenses in relation to the Notes: December 31, 2017 December 31, 2016 December 31, 2015 (in thousands) (in thousands) (in thousands) Interest Expense at 3.75% coupon rate$5,391 $5,391 $5,391Debt discount amortization8,643 7,599 6,680Amortization of deferred financing costs942 828 728Less: capitalized interest and other(3,778) (514) 559Total interest expense$11,198 $13,304 $13,358F-216. Gross-to-NetAs 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. The Company's gross-to-net adjustments for the three years ended December 31, 2017, 2016 and 2015 are as follows (inthousands): Years ended December 31, 2017 2016 2015Gross product sales $215,883 $217,633 $99,721 Reduction to gross product sales: Chargebacks and billbacks 125,159 141,343 50,127Sales discounts and other allowances 32,720 27,419 17,974Total reduction to gross product sales $157,879 $168,762 $68,101 Product sales, net $58,004 $48,871 $31,620 Contract manufacturing product sales $8,995 $17,033 $11,877 Total product sales, net $66,999 $65,904 $43,497The annual activity in the Company's allowance for customer deductions and doubtful accounts for the three years ended December 31, 2017, 2016 and 2015is as follows (in thousands): Returns Chargebacks &Rebates Discounts DoubtfulAccounts TOTALBalance at December 31,2014 $674 $4,552 $345 $16 $5,587Provision 1,724 65,713 2,201 74 69,712Charges processed (1,464) (57,815) (1,754) — (61,033)Balance at December 31,2015 $934 $12,450 $792 $90 $14,266Provision 3,568 160,556 4,667 347 169,138Charges processed (2,192) (137,125) (2,156) (20) (141,493)Balance at December 31,2016 $2,310 $35,881 $3,303 $417 $41,911Provision 6,034 148,000 4,398 1,768 160,200Charges processed (7,023) (159,809) (6,737) — (173,569)Balance at December 31,2017 $1,321 $24,072 $964 $2,185 $28,5427. Goodwill and Intangible Assets Goodwill The Company acquired the assets of Canadian pharmaceutical company Alveda Pharmaceuticals, Inc., in November 2015. As a result of the acquisition, werecorded goodwill of $0.4 million. We assess the recoverability of the carrying value of goodwill in the fourth quarter of each year, and whenever eventsoccur or circumstances change that would, more likely than not, reduce the fair value of our reporting unit below its carrying value. There have been noevents or changes in circumstances that would have reduced the fair value of our reporting unit below its carrying value. No impairment losses wererecognized during the year ended December 31, 2017. Changes in goodwill during the two years ended December 31, 2016 and December 31, 2017 were as follows (in thousands):F-22 GoodwillDecember 31, 2015$426Foreign currency translation20December 31, 2016446Foreign currency translation25December 31, 2017$471Intangible Assets The following sets forth the major categories of the Company’s intangible assets and the weighted-average remaining amortization period as of December 31,2017 and December 31, 2016 for those assets that are not already fully amortized (dollar amounts in thousands): December 31, 2017 Gross CarryingAmount AccumulatedAmortization Net CarryingAmount WeightedAverageRemainingAmortizationPeriodTrademarks and Technology $40,380 $(5,684) $34,696 12.8In-process research and development(“IPR&D”) 18,311 — 18,311 N/A - IndefinitelivedCustomer relationships 3,783 (773) 3,010 7.9Total $62,474 $(6,457) $56,017 December 31, 2016 Gross CarryingAmount AccumulatedAmortization Net CarryingAmount WeightedAverageRemainingAmortizationPeriodTrademarks and Technology $35,403 $(3,123) $32,280 13.8In-process research and development(“IPR&D”) 17,024 — 17,024 N/A - IndefinitelivedCustomer relationships 3,565 (404) 3,161 8.9Total $55,992 $(3,527) $52,465 Changes in intangibles during the two years ended December 31, 2016 and December 31, 2017 were as follows (in thousands):F-23 Trademarks andTechnology IPR&D CustomerRelationshipsDecember 31, 2015 $36,552 $14,351 $3,417Acquisition 661 2,811 —Amortization (2,472) — (361)Foreign currency translation (2,461) (138) 105December 31, 2016 32,280 17,024 3,161Acquisition Amortization (2,561) — (369)IPR&D placed in service 834 (834) —Impairment — (113) —Foreign currency translation 4,143 2,234 218December 31, 2017 $34,696 $18,311 $3,010 Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense onproduct rights and other related intangibles for each of the following years is estimated to be as follows (in thousands):Year ending December 31, Amortization Expense *2018 2,9302019 2,9302020 2,9302021 2,9302022 2,930Thereafter 23,058 *IPR&D amounts are assessed for impairment at least annually and will be amortized once products are approved, including the product's respectivemanufacturing process approvals, 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 years8. 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. As of December 31, 2016, an aggregate of 1,975,000 shares had beenapproved and authorized for issuance pursuant to the Director Plan, with no change as of December 31, 2017. A total of 2,634,798 options had been grantedto non-employee directors as of December 31, 2016, with no change as of December 31, 2017. A total of 807,782 of those options had been forfeited as ofDecember 31, 2016 and returned to the option pool for future issuance, with no change as of December 31, 2017. The options granted under the Director Planvest in full one year after their respective grant dates and have a maximum term of ten years. As of December 31, 2017 and December 31, 2016, there were500,000 and 650,000 shares of common stock options outstanding, respectively. As of December 31, 2016, the 147,984 options available were transferred toa plan that has superseded the Director Plan, as discussed further in this section, with no additional options transferred as of December 31, 2017. 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’sF-24common stock at the date of grant. Options outstanding under the 1999 Plan are generally exercisable in cumulative increments over four years commencingone year from date of grant.On June 26, 2009, the Board of Directors adopted, and the Company’s stockholders subsequently approved by partial written consent, the IGI Laboratories,Inc. 2009 Equity Incentive Plan (the “2009 Plan”). The 2009 Plan became effective on July 29, 2009. The 2009 Plan allows the Company to continue togrant options and restricted stock, as under the 1999 Plan, but also authorizes the Board of Directors to grant a broad range of other equity-based awards,including stock appreciation rights, restricted stock units ("RSUs") and performance awards. The 2009 Plan has been created, pursuant to and consistent withthe Company’s current compensation philosophy, to assist the Company in attracting, retaining and rewarding designated employees, directors, consultantsand other service providers of the Company and its subsidiaries and affiliates, in a manner that will be cost efficient to the Company from both an economicand financial accounting perspective. On April 12, 2010, the Board of Directors adopted, and the Company’s stockholders subsequently approved, anamendment and restatement of the 2009 Plan to increase the number of shares of Common Stock available for grant under such plan by adding 2,000,000shares of Common Stock. The 2009 Plan, as amended on May 29, 2010, authorizes up to 5,000,000 shares of the Company’s common stock for issuancepursuant to the terms of the 2009 Plan. The maximum number of shares that may be subject to awards made to any individual in any single calendar yearunder the 2009 Plan is 1,000,000 shares. As of December 31, 2017, there were 99,626 RSUs outstanding, 1,422,020 shares of stock outstanding and3,038,634 shares of common stock options outstanding. As of December 31, 2016, there were 179,900 RSUs outstanding, 1,341,746 shares of stockoutstanding and 3,216,369 shares of common stock options outstanding. As of December 31, 2016, the 92,883 options available were transferred to a planthat has superseded the 2009 Plan, as discussed further in this section. As of December 31, 2017, an additional 156,169 options available were transferred tothe superseded plan. On May 25, 2016, the Board of Directors approved the Company's 2016 Equity Incentive Plan (the "2016 Plan"). The 2016 Plan provides for the issuance ofawards of up to 2,000,000 shares of the Company's common stock, plus any shares of common stock that are represented by awards granted under our DirectorPlan and 2009 Plan that are forfeited, expire or are canceled without delivery of shares of common stock or which result in the forfeiture of shares of commonstock back to the Company on or after May 25, 2016. Generally, shares of common stock reserved for awards under the 2016 Plan that lapse or are canceled,will be added back to the share reserve available for future awards. However, shares of common stock tendered in payment for an award or shares of commonstock withheld for taxes will not be available again for grant. The 2016 Plan provides that no participant may receive awards for more than 1,000,000 sharesof common stock in any fiscal year. As the 2016 Plan supersedes both the Director Plan and the 2009 Plan, any available shares from both are nowincorporated into the 2016 Plan. As of December 31, 2017, there were 89,003 RSU's outstanding, 20,000 shares of common stock outstanding and options topurchase 761,176 shares of common stock outstanding under the 2016 Plan. As compared to 2017, as of December 31, 2016, there were 20,000 shares ofcommon stock outstanding and options to purchase 239,000 shares of common stock outstanding under the 2016 Plan. As of December 31, 2017 andDecember 31, 2016, there were a total of 1,526,857 shares of common stock and 1,981,867 shares of common stock available under the 2016 Plan.As of December 31, 2017 and December 31, 2016, there were options to purchase 4,299,810 shares of common stock and 4,105,369 shares of common stockoutstanding, respectively, collectively in the Director Plan, 2009 Plan, and the 2016 Plan.In the interest of maintaining consistency with the Company's 2016 Equity Incentive Plan, on March 13, 2017, the Company entered into (i) an amendmentto the option agreements governing each option grant currently outstanding under the Company's 2009 Equity Incentive Plan, and (ii) an amendment to therestricted stock unit, or RSU, agreements governing each RSU grant currently outstanding under the 2009 Plan. The amendments provide for the automaticvesting upon a change of control of the Company of each option grant and RSU grant, as applicable, outstanding under the 2009 Plan. The amendments hada de minimis value to the holders as of December 31, 2017, and therefore no additional stock compensation expense was recognized. The forms ofamendment are Exhibits 10.31 and 10.32, respectively, and are incorporated by reference herein.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. F-25Assumptions 2017 2016 2015Expected dividends 0% 0% 0%Risk free rate 1.56% 1.14% 1.11%Expected volatility 58.0% - 69.7% 68.0% - 71.3% 52.7% - 68.3%Expected term (in years) 3.2 – 3.3 years 3.1 – 3.3 years 3.2 – 3.3 years 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 risk free interest rate is based on U.S. Treasury yields for securities with termsapproximating the terms of the grants. Forfeitures are recognized in the period they occur. The assumptions used in the Black-Scholes option valuationmodel are highly subjective, and can materially affect the resulting valuation.Stock option transactions in each of the past three years under the aforementioned plans in total were: Shares ExercisePrice Per Share WeightedAverageExercisePriceJanuary 1, 2015 shares issuable under options 2,436,834 0.76 - 10.55 $1.79Granted 1,357,000 5.55 - 10.67 9.20Exercised (75,766) 0.76 - 3.62 1.10Expired — — —Forfeited (125,334) 1.40 – 10.67 8.99December 31, 2015 shares issuable under options 3,592,734 0.79 - 10.67 4.36Granted 739,135 4.72 - 8.81 7.26Exercised (61,834) 1.10 - 6.51 1.54Expired — — —Forfeited (164,666) 4.55 - 10.67 8.37December 31, 2016 shares issuable under options 4,105,369 0.79 - 10.67 4.76Granted 577,845 3.38 - 9.28 7.15Exercised (171,566) 0.79 - 5.85 1.92Expired — — —Forfeited (211,838) 4.80 - 10.67 7.70December 31, 2017 shares issuable under options 4,299,810 $0.79 - $10.67 $4.76 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2017: Options Outstanding Options ExercisableRange ofExercise Price Number ofOptions WeightedAverageRemainingLife (Years ) WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice$0.79 - $1.00 25,000 2.01 $0.79 25,000 $0.791.01 - 1.50 1,721,000 4.14 1.06 1,721,000 1.061.51 - 10.67 2,553,810 7.76 7.85 1,369,466 7.92 $0.79 - $10.67 4,299,810 6.28 $5.09 3,115,466 $4.07 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2016: F-26 Options Outstanding Options ExercisableRange ofExercise Price Number ofOptions WeightedAverageRemainingLife (Years ) WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice$0.79 - $1.00 50,000 3.01 $0.79 50,000 $0.791.01 - 1.50 1,808,400 5.11 1.07 1,808,400 1.071.51 - 10.67 2,246,969 8.35 7.82 805,803 7.15 $0.79 - $10.67 4,105,369 6.86 $4.76 2,664,203 $2.90The following table summarizes information concerning outstanding and exercisable options as of December 31, 2015: Options Outstanding Options ExercisableRange ofExercise Price Number ofOptions WeightedAverageRemainingLife (Years ) WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice$0.76 - $1.00 50,000 4.01 $0.79 50,000 $0.791.01 - 1.50 1,862,400 6.14 1.07 1,851,400 1.071.51 - 10.55 1,680,334 8.96 8.10 289,997 4.02 $0.79 - $10.67 3,592,734 7.43 $4.36 2,191,397 $1.45 The Company has recorded an aggregate of $2.3 million, $2.3 million and $1.7 million 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, 2017, 2016 and 2015, respectively. The aggregate intrinsic value of options outstanding was $4.7 million at December 31, 2017, $11.5 million at December 31, 2016 and $17.4 million atDecember 31, 2015. The aggregate intrinsic value of the options exercisable was $4.7 million at December 31, 2017, $11.3 million at December 31, 2016 and$16.3 million at December 31, 2015. The total intrinsic value of the options exercised during 2017, 2016 and 2015 was $0.4 million, $0.3 million and $0.6million, respectively. A summary of non-vested options at December 31, 2017 and changes during the year ended December 31, 2017 is presented below: Options WeightedAverageGrant DateFair ValueNon-vested options at January 1, 2017 1,441,166 $3.58Granted 577,845 3.37Vested (654,156) 3.62Forfeited (180,511) 3.46Non-vested options at December 31, 2017 1,184,344 $3.48 As of December 31, 2017, there was $2.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangementsunder the Plan. The costs will be recognized through December 2019. 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 31, 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 $1 million, $0.8 million and $0.6 million, respectively, of compensation expense during the years endedF-27December 31, 2017, 2016 and 2015 related to restricted stock awards and RSUs. Stock compensation expense is recognized over the vesting period of therestricted stock and RSUs. At December 31, 2017, the Company had approximately $0.7 million of total unrecognized compensation cost related to non-vested restricted stock and RSUs, all of which will be recognized through April 2020.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 PriceNon-vested balance at January 1, 2015 108,334 $2.86 Changes during the period: Shares granted 32,500 10.67Shares vested (140,834) 4.66Shares forfeited — Non-vested balance at January 1, 2016 — $— There have been no restricted stock issuances in the year ended 2016 or 2017.A summary of non-vested RSUs and changes during each of the past three years is as follows: Number ofRSUs Weighted AverageIssuance PriceNon-vested balance at January 1, 2016 182,750 $10.23 Changes during the period: Shares granted 58,068 7.50Shares vested (60,918) 10.13Shares forfeited — —Non-vested balance at December 31, 2016 179,900 $9.35 Changes during the period: Shares granted 93,468 7.26Shares vested (80,274) 9.57Shares forfeited (4,465) 7.09Non-vested balance at December 31, 2017 188,629 $9.35 There was no RSU activity for the year ended December 31, 2015. 9. Accrued Expenses Accrued expenses represent various obligations of the Company including certain operating expenses and taxes payable.For the fiscal years ended December 31, 2017, and 2016 the largest components of accrued expenses were:F-28 2017 2016 (in thousands)Wholesaler fees $7,044 $3,505Capital expenditures 1,947 2,475Payroll 1,580 1,706Royalties 856 843Studies 596 153Professional fees 546 715Interest expense 240 240Income Tax 58 192Other 635 520 $13,502 $10,349 10. Income Taxes On December 22, 2017, the President signed into law the United States Tax Cuts and Jobs Act (U.S. TCJA) significantly revising the Internal Revenue Codeof 1986, as amended. The U.S. TCJA includes, among other items, (1) a permanent reduction of the corporate tax rate from a top marginal rate of 35% to a flatrate of 21%; (2) limitations on the tax deduction for net interest expense to 30% of adjusted earnings’ (3) a one-time transition tax on certain unrepatriatedearnings of foreign subsidiaries; (4) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system; (5)elimination of the Alternative Minimum Tax regulations; (6) recovery of Alternative Minimum Tax Credits over a five year period; and (7) modifying orrepealing many other business deductions and credits.The Company has assessed the impacts of the changes resulting from the U.S. TCJA and has recognized an income tax benefit and a corresponding receivableof $73 thousand related to the recoverability of Alternative Minimum Tax Credits. Deferred tax assets, liabilities and valuation allowances have beenremeasured at the new rate of 21%. There was no income impact from the remeasurement since all U.S. net deferred tax assets are fully reserved by theCompany. At present, we do not estimate any material impacts from the repatriation tax. While we have completed our provisional analysis of the income taxeffects of the U.S.TCJA, the related tax effects may need to be adjusted, possibly materially, due to further refinement of our calculations, changes ininterpretations and assumptions that we have made, additional guidance that may be issued by regulatory bodies, and actions and related accounting policydecision we may take as a result of the new legislation. We will complete our analysis over the one-year measurement period from the enactment of the law asprovided for by SAB 118, and any adjustments during this measurement period will be included in net earnings from continuing operations as an adjustmentto income tax expense in the reporting period(s) when such adjustments are determined.The Company is subject to U.S. federal income tax and files a consolidated federal income tax return which includes all eligible U.S. subsidiary companies.The Company is also subject to tax in the states of Alabama, Illinois, Montana, New Jersey and Tennessee. During the year ended December 31, 2016, theCompany began significant operations in certain foreign countries and is, accordingly, subject to tax in those foreign jurisdictions consisting of Canada(including the province of Ontario), Estonia, Luxembourg and Jersey.Income (Loss) before income tax for the years ended December 31, 2017, 2016 and 2015 consisted of the following (in thousands): 2017 2016 2015 (in thousands)U.S. operations $(21,938) $(9,514) $6,911Foreign operations 6,662 (2,184) (208) Global Total $(15,276) $(11,698) $6,703F-29The Company’s current tax (benefit) expense was $(85,000), $287,000 and $35,000 for the years ended December 31, 2017, 2016 and 2015, respectively.The (credit) provision for income taxes attributable to continuing operations before income taxes for the years ended December 31, 2017, 2016 and 2015 isas follows (in thousands): 2017 2016 2015 Current tax expense (benefit): Federal $(86) $26 $—State and local 20 35 19Foreign 42 272 28Total current tax expense (24) 333 47Deferred tax expense: Federal — — —State and local — — —Foreign (61) (46) (12)Total deferred tax expense (61) (46) (12) Total income tax (benefit)/expense $(85) $287 $35The (benefit from) provision for 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 (in thousands): 2017 2016 2015 Expected Statutory expense (benefit) $(5,195) $(3,977) $2,244U.S. TCJA recovery of alternative minimumtax credits (73) — —Change in the fair values of derivative andamortization of debt discount 2,939 2,584 (5,597)Other non-deductible expenses 24 63 7Change in valuation allowance includingU.S. TCJA rate reduction (2,012) 590 3,254Reduction in deferred tax assets related toU.S. TCJA rate reduction 7,504 — —Shortfalls related to stock compensationexpense 129 154 —Tax rate differential - foreign vs. U.S. (2,276) 822 114State income taxes, net of federal benefit 13 23 13Shortfalls related to stock compensationexpense 129 154 —Prior year true-up (13) — —Exchange gain (13) 28 — $(85) $287 $35Deferred tax balances included in the Consolidated Balance Sheets as of December 31, 2017 and 2016 consisted of the following: F-30 2017 2016 (in thousands)Deferred Tax Assets: Allowance for doubtful accounts $506 $118Inventory reserve 619 467Accrued expenses 664 831Property, plant and equipment 214 317Tax operating loss carryforwards 9,327 10,962Tax credit carryforwards 168 254Stock compensation 1,817 2,301Total deferred tax assets 13,315 15,250Less valuation allowance (13,309) (15,250)Net deferred tax assets 6 —Deferred Tax Liabilities: Intangible assets (165) (205)Total deferred tax liabilities (165) (205)Net deferred tax liability $(159) $(205) The Company evaluates the recoverability of its deferred tax assets based on its history of operating results, its expectations for the future, and the expirationdates of the net operating loss carry forwards. Based on the preponderance of the evidence, the Company has concluded that it is more likely than not that itwill be unable to realize the net deferred tax assets in the immediate future and has established a full valuation allowance for substantially all deferred taxassets. Accordingly, the Company has provided a valuation allowance of $13.3 million and $15.3 million for the years ended December 31, 2017 and 2016,respectively, on its deferred tax assets. The change in the valuation allowance during the year 2017 was $1.9 million, as follows:Valuation allowance at beginning of year $15,250Change in accounting for stock compensation windfalls 1,112Current year operating loss 3,048Change in tax rate to 21% (7,504)Other 1,403Valuation allowance at end of year $13,309Operating loss and tax credit carry forwards as of December 31, 2017 were as follows: 2017 2016 (in thousands)Federal: Net operating losses (expiring through 2037) $41,688 $31,336Research tax credits (expiring through 2025) 168 168Alternative minimum tax credits (available without expiration) — 86State: Net Operating Losses: Tennessee (expiring in 2032) 659 529New Jersey (expiring in 2037) 4,320 1,764Illinois (expiring in 2037) 389 222Alabama (expiring in 2032) 24 —Foreign Net operating losses (no expiration) $255 $232At December 31, 2017, the Company’s U.S. federal net operating loss carryforwards will expire as follows:F-31Year Net Operating Loss (in thousands)2020 - 2023 $8,2282024 - 2029 9,0632030 - 2031 6,2052032 - 2036 10,0162037 8,176Total $41,688 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 of 1986, as amended, which limit the utilization of net operating losses upon a more than 50% change in ownership of theCompany’s stock that is held by 5% or greater stockholders. The Company examined the application of Section 382 with respect to an ownership change thattook place during 2010, as well as the limitation on the application of net operating loss carry forwards. The Company believes that operating lossessubsequent to the change date in 2010 (aggregating $23.1 million) are not subject to Section 382 limitations. The Company has estimated that the annuallimitation starting in 2010 aggregates from $1.0 million to $2.3 million per year including the effect of amortization of built in gains. The Company's losscarryforwards may be further limited in the future if additional ownership changes occur.The Company is subject to the provisions of ASC 740-10-25, Income Taxes (ASC 740). ASC 740 prescribes a more likely-than-not threshold for the financialstatement recognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold andmeasurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. On a quarterlybasis, the Company undergoes a process to evaluate whether income tax accruals are in accordance with ASC 740 guidance on uncertain tax positions.Federal income tax returns for the years 2014 and 2015 have been examined by the U.S. Internal Revenue Service without any income tax expenseconsequences. For federal purposes (except for the years 2014 and 2015), post 1998 tax years remain open to examination as a result of net operating losscarryforwards. The Company is currently open to audit by the appropriate state income taxing authorities for tax years 2013 through 2016. The Company hasnot recorded any liability for uncertain tax positions at December 31, 2017 or December 31, 2016.11. Commitments The Company’s commitments and contingencies consisted of operating leases for warehouse and office space and equipment. Future minimum leasepayments under non-cancelable operating leases are as follows ($ in thousands): Commitments 2018$49120194362020441202140320223272023332Thereafter83 $2,513Rent expense was $0.5 million, $0.9 million and $0.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.The Company has certain licensing and development agreement in place under which the Company will pay certain licensing fees and milestones over thelives of certain projects. These commitments totaled approximately $2.4 million as of December 31, 2017, and will be paid over the next several years inaccordance with agreed upon milestones.12. Legal and U.S. Regulatory Proceedings F-32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$118,000 remains accrued as of December 31, 2017. 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 $120,000 as of December 31, 2017 and $122,000 as of December 31, 2016represents 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 approval to sell the diclofenac sodium topical solution 1.5% from theFDA in July 2015.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 our submission tothe FDA of an Abbreviated New Drug Application (“ANDA”) seeking FDA approval to market diclofenac topical solution 2% w/w before the expiration ofthe patents asserted in the complaint. On June 30, 2015, August 11, 2015, September 17, 2015, October 27, 2015 and February 5, 2016, Horizon filedadditional 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, and March 17, 2016 the Company filed answers, affirmative defenses and counterclaims with respect to the complaints filed by Horizon. In those filings, the Company asserted that the patents alleged to be infringed in the complaints filed by Horizon are invalid and not infringed by us. On April27, 2016, Horizon and the Company filed a stipulation of dismissal to dismiss the cases. The court entered an order dismissing the cases on May 2, 2016. OnMay 9, 2016, Horizon and the Company entered into a settlement agreement. Under the settlement agreement, the Company obtained a license to marketdiclofenac topical solution 2% no later than January 10, 2029 or earlier in certain circumstances, including the resolution by settlement or court decision ofother third party litigation involving diclofenac topical solution 2% or the market entry by other third party generic versions of diclofenac topical solution2%. At this time, the Company cannot estimate if or when any of those earlier events might occur. No consideration was exchanged as part of the settlement.The Company has not recorded accruals related to this case and has not yet received final approval. 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 the Company entered into a Settlement and License Agreement the terms of which are confidential. On January 22, 2016, the case wasdismissed with prejudice.To date, twelve putative class action antitrust lawsuits have been filed against Teligent Inc. along with co-defendants including Taro Pharmaceuticals U.S.A.,Inc. and Perrigo New York Inc. One “opt-out” action has additionally been filed against the Company along with thirty-five generic manufacturer co-defendants regarding the pricing of econazole nitrate cream and twenty-nine additional drug products not manufactured or sold by the Company. All actionshave been transferred by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part of the In reGeneric Pharmaceuticals Pricing Antitrust Litigation matter, and the class actions have been consolidated into direct purchaser, end payer and indirectreseller actions.The class plaintiffs seek to represent nationwide or state classes consisting of persons who directly purchased, indirectly purchased or reimbursed patients forthe purchase of generic econazole from any of the defendants from June 1, 2014 until the time the defendants’ allegedly unlawful conduct ceased or willcease.F-33The case plaintiffs allege a conspiracy to fix prices for generic econazole, in violation of federal antitrust laws or state antitrust, consumer protection, andother laws. The case plaintiffs seek treble damages for alleged price overcharges for generic econazole during the alleged period of conspiracy, and the endpayer and indirect purchaser class plaintiffs seek injunctive relief against the defendants.The opt-out plaintiffs allege a conspiracy by thirty-six generic manufacturers, including the Company, to fix prices for thirty drug products includingeconazole nitrate cream, in violation of federal antitrust laws. The opt-out plaintiffs seek treble damages for alleged price overcharges for the thirty drugproducts identified in the complaint during the alleged period of conspiracy, and also seek injunctive relief against the defendants.All of these cases are in their initial stages and motions to dismiss have been filed with respect to each of the complaints. Due to the early stage of these cases,we are unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimate of the amount orrange of potential loss. We believe these cases are without merit, and we intend to vigorously defend against these claims.On October 20, 2017, a Demand for Arbitration was filed with the American Arbitration Association by Stayma Consulting Services, Inc. (“Stayma”) againstthe Company regarding the Company’s development and manufacture for Stayma of two generic drug products, one a lotion and one a cream, containing0.05% of the active pharmaceutical ingredient flurandrenolide. The Company developed the two products and Stayma purchased commercial quantities ofeach; however, Stayma now alleges that the Company breached agreements between the parties by developing an additional and different generic drugproduct, an ointment, containing flurandrenolide, and failing to meet certain contractual requirements. Stayma seeks monetary damages. Due to the earlystage of this matter, we are unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide an estimateof the amount or range of potential loss. We believe this case is without merit, and we intend to vigorously defend against these claims. We filed a counter-claim against Stayma for its failure to pay several past due invoices of approximately $1.7 million relating to the development and commercial supply of thetwo subject products. 13. 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 2017, $18,000 for 2016 and $18,000 for 2015, plus a catch-up contribution of up to $6,000 for 2017, $6,000 for 2016 and $6,000 for 2015, if aparticipant qualifies. The Company matches 100% of the first 3% of compensation contributed by participants and 50% of the next 2% of compensationcontributed by participants. The Company contribution is in the form of cash, which is vested immediately. The Company has recorded charges to expenserelated to this plan of approximately $311,467, $228,619 and $172,965 in 2017, 2016 and 2015, respectively. F-3414. Quarterly Results (Unaudited) The following is a summary of certain quarterly financial information for the fiscal years 2017 and 2016: FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Total (in thousands, except per share data)Year Ended December 31, 2017 Total revenues, net $19,891 $18,408 $12,851 $16,101 $67,251Gross profit 10,934 8,037 2,538 5,863 27,372Operating income (loss) 2,967 (1,782) (8,039) (4,943) (11,797)Net income (loss) 831 (919) (8,982) (6,121) (15,191)Net income (loss) attributable tocommon stockholders 831 (919) (8,982) (6,121) (15,191)Basic income (loss) per share $0.02 $(0.02) $(0.17) $(0.11) $(0.28)Diluted income (loss) per share $0.02 $(0.02) $(0.17) $(0.11) $(0.28) Year Ended December 31, 2016 Total revenues, net $15,657 $17,138 $16,151 $17,935 $66,881Gross profit 7,955 9,556 8,014 9,162 34,687Operating income 837 1,076 303 326 2,542Net loss (950) (2,901) (2,703) (5,431) (11,985)Net loss attributable to commonstockholders (950) (2,901) (2,703) (5,431) (11,985)Basic loss per share $(0.02) $(0.05) $(0.05) $(0.11) $(0.23)Diluted loss per share $(0.02) $(0.05) $(0.05) $(0.11) $(0.23)F-35TELIGENT, INC.SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS(in thousands) Additions Balance atBeginningof Year Charged toCosts andExpenses ChargedotherAccounts Deductions Balance atEnd of YearYear Ended December 31,2015 Change in Tax ValuationAllowance $10,970 — 3,339 — $14,309Allowance for DoubtfulAccounts $16 74 — — $90Reserve for InventoryObsolescence $212 51 (8) 134 $121Year Ended December 31,2016 Change in Tax ValuationAllowance $14,309 — 941 — $15,250Allowance for DoubtfulAccounts $90 347 — 20 $417Reserve for InventoryObsolescence $121 872 — 583 $410Year Ended December 31,2017 Change in Tax ValuationAllowance $15,250 (61) (1,880) — $13,309Allowance for DoubtfulAccounts $417 1,768 — $2,185Reserve for InventoryObsolescence $410 2,000 9 1,115 $1,304F-36Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements of Teligent, Inc. and Subsidiaries (the "Company") on Form S-3 (Nos. 333-27173,333-47006, 333-61716, 333-163524, 333- 171446, 333-173615, 333-173148, 333-187221 and 333-196543) and Form S-8 (Nos. 33-58479, 333- 28183, 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 reportsdated March 19, 2018, on our audits of the consolidated financial statements and financial statement schedule as of December 31, 2017 and for each of theyears in the three-year period ended December 31, 2017 and the effectiveness of the Company's internal control over financial reporting as of December 31,2017 (which report expresses an adverse opinion on the effectiveness of the Company's internal control over financial reporting because of materialweaknesses), which reports are included in this Annual Report on Form 10-K. /s/ EISNERAMPER LLP Iselin, New JerseyMarch 19, 2018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 19, 2018 /s/ Jason Grenfell-Gardner Principal Executive Officer Exhibit 31.2 CERTIFICATIONS UNDER SECTION 302 I, Damian Finio, 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 19, 2018 /s/ Damian Finio 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, 2017 (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 19, 2018/s/ Jason Grenfell-Gardner Principal Executive Officer Dated: March 19, 2018/s/ Damian Finio Principal Financial Officer

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