Teligent, Inc.
Annual Report 2018

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, 2018 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, a smaller reporting company or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer¨ Accelerated filer ý Non-accelerated filer¨ [Do not check if a smaller reporting company]Smaller reporting company ýEmerging growth company¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying withany new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No 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 $117.7 million. As of March 25, 2019, the registrant had 53,845,427 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, 2019.PART IItem 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 35 generic topicalpharmaceutical products and four branded generic pharmaceutical products. In Canada, we sell over 27 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, Mississauga,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 includes20 Abbreviated New Drug Applications ("ANDAs"), on file with the FDA, for additional pharmaceutical products. In addition, we have 3 submissions on filewith Health Canada. We have an additional 46 product candidates at various stages of our development pipeline. We submitted three ANDAs in 2018. 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 twelve approvals from our internally developed pipeline of topical genericproducts in 2018. We intend to continue to submit further ANDAs to the FDA and abbreviated new drug submissions ("ANDS") to Health Canada in 2019.We will also seek to license or acquire further 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.2 Teligent Canada currently has 10 employees and located in our offices in Mississauga, 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 to execute the Canadian distribution activities, operational permits, and all intellectual property required to operate the marketing anddistribution of products in Canada. Teligent Canada also transitioned a majority of the existing workforce as part of the acquisition. Teligent Canadacurrently markets and distributes over 27 products. Teligent continues to transition these products to distribute them under a Teligent Canada label. Teligent OÜ. Teligent OÜ currently has 13 employees. Teligent OÜ is responsible for the development, enhancement, maintenance, protection andexploitation functions related to the intellectual property-related assets acquired from Alveda. In addition, Teligent OÜ is responsible for the management ofthe supply chain function and procurement of products for sale to Teligent Canada in addition to certain products and active pharmaceutical ingredients("API's") for Teligent Pharma, Inc. in the U.S. We built and developed a laboratory to support analytical chemistry, quality control, and formulationdevelopment to support our Teligent US and Teligent Canada supply chain management and technical services teams. 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 continued with the significant expansion and utilities upgrade of our manufacturing facility at 105 Lincoln Avenue in Buena, New Jersey. In October2018, we received the Certificate of Occupancy to begin using our manufacturing facility, which includes a state-of-the-art quality control and microbiologylab for the testing of our pharmaceutical products. The expanded facility will increase our manufacturing capability for topical products and will also enablethe production of sterile injectable products in both vial and ampule presentations. We are using this facility expansion as an opportunity to upgrade andimprove the degree of automation and capacity in our existing topical production suite. The sterile production area is designed around isolator-basedtechnology. The facility includes a versatile vial and ampule filling line capable of between four and eight million units per year, with space and criticalutilities included in the build-out for a potential future higher-speed filling line. The current plans consider a total capital outlay for 105 Lincoln Avenuegreater than $60 million. We have been partnering with contract manufacturing organizations, or CMOs, for the development, registration and manufacture ofsome of our sterile injectable and ophthalmic products. Upon successful FDA inspection, we may transfer the manufacture of some of these injectableproducts to this facility. We will also use the new sterile production capability to support our internal R&D pipeline of sterile injectable products in vial andampule 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, for the 20 products we have pending at the FDA totals approximately $1.5 billion in annual sales. We expect tocontinue to expand our presence in the generic topical pharmaceutical market through the submission of additional ANDAs to the FDA and the subsequentlaunch of products if and when these applications are approved by the FDA. Additionally, we plan to file further ANDSs with Health Canada in 2019. We alsohave 46 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 the3exclusive right to acquire three additional previously marketed and approved injectable products from Valeant. In November 2014, we completed thepurchase of one of those three optioned injectable products and its related NDA from Valeant. In March 2015, we completed the purchase of the final twooptioned injectable products and their related NDAs from Valeant. On November 13, 2015, we formed Teligent Canada, and completed the acquisition of Alveda. Teligent Canada currently has ten employees, including ageneral manager located in our offices in Mississauga, 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 27 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, revenue from our contract services business may decrease overtime. Our Financings On December 16, 2014, we issued $125.0 million aggregate principal amount of Convertible 3.75% Senior Notes, due 2019 (the “2019 Notes”). OnDecember 22, 2014, we announced the closing of the initial purchasers’ exercise in full of their option to purchase an additional $18.75 million aggregateprincipal amount of 2019 Notes. The 2019 Notes bear interest at a fixed rate of 3.75% per year, payable semiannually in arrears on June 15 and December 15of each year, beginning on June 15, 2015, and mature on December 15, 2019, unless earlier repurchased, redeemed or converted. The 2019 Notes areconvertible into shares of our common stock, cash or a combination thereof. On May 20, 2015,we received shareholder approval for the increase in thenumber of shares of common stock authorized and available for issuance upon conversion of the 2019 Notes.On April 27, 2018, we entered into separate exchange agreements with certain holders of the 2019 Notes. The agreements gave the holders the right toexchange, in aggregate, $75.1 million of the 2019 Notes for $75.1 million of new Convertible 4.75% Senior Notes due 2023 (the “2023 Notes”). The new2023 Notes bear a fixed interest rate of 4.75% per year, payable semi-annually with the principal payable in May 2023. At the option of the holders, the 2023Notes are convertible into shares of our common stock, cash or a combination thereof. The initial conversion rate is $224.71 per share, subject to certainadjustments, related to either our stock price volatility, or our declaration of a stock dividend, stock distribution, share combination or share split expecteddividends or other anti-dilutive activities. In addition, holders will be entitled to receive additional shares of common stock for a potential increase of theconversion rate up to $280.90 per share under a make-whole provision in some circumstances. We incurred loan issue costs of $1.6 million upon issuance ofthe 2023 Notes. In accordance with accounting for convertible debt within the cash conversion guidance of ASC 470-20, we allocated the principal amountof the 2023 Notes between its liability and equity components. The carrying amount of the liability component was determined by measuring the fair valueof a similar debt instrument of similar credit quality and maturity that did not have the conversion feature. The carrying amount of the equity component,representing the embedded conversion option, was determined by deducting the fair value of the liability component from the principal amount of the 2023Notes as a whole. The equity component was recorded to additional paid-in capital and is not remeasured as long as it continues to meet the conditions forequity classification. The excess of the principal amount of the 2023 Notes over the carrying amount of the liability component was recorded as a debtdiscount of $19.0 million, and is being amortized to interest expense using the effective interest method through the maturity date. We allocated the totalamount of transaction costs incurred to the liability and equity components using the same proportions as the proceeds from the 2023 Notes. Transactioncosts attributable to the liability component were recorded as a direct deduction from the liability component of the 2023 Notes, and are being amortized tointerest expense using the effective interest method through the maturity date. Transaction costs attributable to the equity component were netted with theequity component of the 2023 Notes in additional paid-in capital. The effective interest rate of the 2023 Notes, inclusive of the debt discount and issuancecosts, is 12.10%.4On June 1, 2018, we entered into a credit agreement for $25.0 million secured by all of our assets, due June 1, 2021 (“2021 Term Loan”). The 2021 TermLoan has limited financial and non-financial covenants inclusive of a minimum cash carry balance of $5.0 million. The 2019 Notes and 2023 Notes aresubordinate to the 2021 Term Loan. The first $15.0 million of loan proceeds was received on June 1, 2018. The remaining loan proceeds of $10.0 millionwere subject to closing conditions as defined in the agreement and were received on July 16, 2018. The 2021 Term Loan incurred loan issue costs of $0.5million and a discount of $0.4 million. The discount is due to lender fees paid on the initial drawdown of $15.0 million. The issue costs and discount arerecognized as interest expense over the term of the 2021 Term Loan. The 2021 Term Loan bears interest at a rate of LIBOR plus 9%, with a stated floor of 2%.The effective interest, inclusive of the debt discounts and issue costs is 12.78% as of September 30, 2018. In December 2018 we used $25.6 million ofproceeds from the Senior Credit Facilities (see below) to repay the 2021 Term Loan which was comprised of $25.0 million of principal, $0.5 million oftransaction costs and $0.1 million of interest.. The repayment of the 2021 Term Loan is considered an debt extinguishment under ASC 470-50. We recorded$1.3 million of an extinguishment loss related to the repayment of the 2021 Term Loan in the Consolidated Statement of Operations.On December 13, 2018, pursuant to a Commitment Letter, dated November 12, 2018, between us and Ares Management LLC, we entered into: (i) a First LienRevolving Credit Agreement, by and among the Company, as the borrower, certain subsidiaries of the Company, as guarantors, the lenders from time to timeparty thereto, and ACF Finco I LP, as administrative agent (the “Revolver Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among us, asthe borrower, certain subsidiaries of ours, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent (the“Second Lien Credit Agreement” and, together with the Revolver Credit Agreement, the “New Senior Credit Facilities”).The New Senior Credit Facilities consist of (i) a $25.0 million senior revolving credit facility governed by the Revolver Credit Agreement (the “NewRevolver”); (ii) a $50.0 million second lien initial term loan (the “New Initial Term Loan”); (iii) a $30.0 million second lien delayed draw term loan A (the“Delayed Draw Term Loan A”) and (iv) a $15.0 million second lien delayed draw term loan B (the “Delayed Draw Term Loan B” and, together with theDelayed Draw Term Loan A, the “Delayed Draw Term Loans” and, together with the New Initial Term Loan, the “New Term Loans”). The New Term Loans aregoverned by the Second Lien Credit Agreement. Our ability to borrow under the New Revolver is subject to a “borrowing base” to be determined based uponeligible inventory, eligible equipment, eligible real estate and eligible receivables. The Initial Term Loan of $50.0 million and $15.0 million of the Revolverwere drawn by us on December 13, 2018. On December 21, 2018, we drew $20.0 million of the Delayed Draw Term Loan A. As of December 31, 2018 the$10.0 million of the Delayed Draw Term Loan A, $15.0 million of the Delayed Draw Term Loan B and $10.0 million of the Revolver remain available to theCompany.Use of ProceedsThe proceeds from the New Senior Credit Facility will be used for, among other things, the refinancing of certain of our outstanding indebtedness, includingrepayment of all borrowings under the Credit Agreement, dated as of June 1, 2018 for the 2021 Term Loan, among us, as the borrower, certain subsidiaries ofours, each as a guarantor, the lenders party thereto, and Cantor Fitzgerald Securities, as administrative agent (the “Existing Credit Agreement”), therepurchase or redemption of our outstanding 2019 Notes, as well as a construction project at our Buena, New Jersey facility, working capital, capitalexpenditures and other general corporate purposes, all as further set forth in the Revolver Credit Agreement and the Second Lien Credit Agreement.Interest and FeesThe interest rate under the New Revolver is calculated, at the option of us, at either the one, two, three or six-month London Inter-Bank Offered Rate (orLIBOR) plus 3.75% or the base rate plus 2.75%. The interest rate on the New Term Loans is calculated, at the option of the Company at either LIBOR plus8.75% or the base rate plus 7.75%. Interest on the New Senior Credit Facilities is payable in cash except that interest on the New Term Loans is payable, atthe option of us, in cash or in kind by being added to the principal balance thereof, until the earlier of December 13, 2020 and the date we have provided thelenders of the New Senior Credit Facilities financial statements demonstrating that we have attained twelve months of revenue of at least $125 million. Acommitment fee of 1.0% per annum is payable by us quarterly in arrears on the unused portion of the Delayed Draw Term Loans.Amortization and PrepaymentThe New Senior Credit Facilities are not subject to amortization prior to maturity. Amounts drawn under the New Revolver may be prepaid at the option of uswithout premium or penalty, subject, in the case of acceleration of the New Revolver or termination of the revolving credit commitments thereunder, tocertain call protections which vary depending on the time at which such prepayments are made. Amounts drawn under the New Revolver are subject tomandatory prepayment to the extent that aggregate extensions under the New Revolver exceed the lesser of the revolving credit commitment then in effectand the borrowing base then in effect, and upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt ofcertain insurance proceeds and condemnation awards and issuances of certain debt obligations. Amounts5outstanding under the New Term Loans may be prepaid at the option of us subject to applicable premiums, including a make-whole premium, and certain callprotections which vary depending on the time at which such prepayments are made. Subject to payment of outstanding obligations under the New Revolveras a result of any corresponding mandatory prepayment requirements thereunder, amounts outstanding under the New Term Loans are subject to mandatoryprepayment upon the occurrence of certain events and conditions, including non-ordinary course asset dispositions, receipt of certain insurance proceeds andcondemnation awards, issuances of certain debt obligations and a change of control transaction.Guarantees and CollateralThe New Senior Credit Facilities were issued by the parent and guaranteed by subsidiaries, subject to certain exceptions. The New Revolver and relatedobligations are secured by a first priority security interest in and lien on substantially all of our assets and the assets of our subsidiary guarantors (the"Collateral”), subject to certain exceptions. The New Term Loans and related obligations are secured by a second priority security interest in the Collateral,subject to certain exceptions.Covenants and Other ProvisionsThe New Senior Credit Facilities contain customary borrowing conditions, affirmative, negative and reporting covenants, representations and warranties, andevents of default, including cross-defaults on other material indebtedness, as well as events of default triggered by a change of control and certain actionsinitiated by the FDA. In addition, effective March 31, 2019, we are required to comply at certain times with certain financial covenants consisting of aminimum revenue test, a minimum adjusted EBITDA test and a maximum total net leverage ratio. If an event of default occurs, the lenders of the NewRevolver would be entitled to take enforcement actions, including foreclosure on Collateral and acceleration of amounts owed under the New Revolver, andthe lenders under the New Term Loans would also be entitled to take such actions, subject to any limitations set forth in an intercreditor agreement withrespect to the New Term Loans. 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 Strategy 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 34 topical products under our own label. We have received FDA approvals for 34 topical genericproducts from our internally developed pipeline. In our topical pipeline, we have 20 ANDAs submitted to the FDA that are awaiting approval. We intendto continue to develop topical generic products and utilize our expertise in drug formulation and manufacture to expand our own generic topicalprescription drug portfolio. We are targeting to develop and file further regulatory submissions with the FDA in 2019. Upon regulatory approval, wewould market these products under the Teligent label to national chain drug stores and drug wholesalers through our 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 our6customers. We intend to continue to capitalize on our strong customer relationships to maintain some contract manufacturing and developmentrevenues. 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 34 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 completed construction activities in the fourth quarter of 2018 and is intended to file for and receive FDA approval in2019, will also enable the production of sterile injectable products in both vial and ampule presentations. The sterile production area is designed aroundforward-thinking isolator-based technology. We have a portfolio of sterile injectable products we acquired in 2014, which upon completion of the siteexpansion, we may transfer the manufacture of some of these products to our Buena, New Jersey facility. We will also use the new sterile productioncapability to support our internal R&D pipeline of sterile injectable products 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 secondquarter of 2017 for a generic version of an oral orphan drug and received a complete response letter from the FDA in the third quarter of 2018. TheCompany intends to respond to the FDA’s complete response letter in 2019. We consider our focus on complex products or markets to be broadlydefined to include potential complexity in one of the critical areas of our industry value chain. As part of our complex program, we are researching two505(b)(2) projects. A 505(b)(2) submission is an NDA that contains full safety and effectiveness reports, but permits some of the information required forapproval to come from studies not conducted by or for the applicant, thereby avoiding unnecessary duplication of studies already performed on aproduct. In addition, we are currently working with a contract research organization, or CRO, to develop a generic equivalent of a pharmaceutical drugproduct designated for a chronic rare disease. The intent of this opportunity is to provide patients with a lower cost alternative of an approved orphandrug. The Orphan Drug Designation program at the FDA provides orphan status to drugs and biologics which are defined as those intended for the safeand effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people in the U.S., or that affect more than200,000 persons, but are not expected to recover the costs of developing and marketing a treatment drug. We will continue to seek opportunities relevantto 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.7 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 marketover 27 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, 2018, and 2017, 54% and 52% 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 31,2018, Cardinal accounted for 19% of our accounts receivable, ABC accounted for 19% of our accounts receivable, and McKesson accounted for 30% of ouraccounts receivable. As of December 31, 2017, Cardinal accounted for 44% of our accounts receivable, McKesson accounted for 15% of our accountsreceivable, and ABC accounted for approximately 4% 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, 2018,approximately 79% of our contract services revenue was derived from pharmaceutical customers, as compared to 86% of total contract services revenue forthe year ended December 31, 2017. None of our contract manufacturing services customers represented 10% of total revenue for the years endedDecember 31, 2018 and December 31, 2017. Concentration of Risk. In 2018, we had sales to three customers which individually accounted for more than 10% of our total revenue. These customers hadsales of $21.2 million, $7.3 million and $6.9 million, respectively, and represented 54% of total revenues in the aggregate. Accounts receivable related tothese major customers comprised of 30%, 19% and 19%, respectively, and represented 68% of all accounts receivable as of December 31, 2018. In 2017, wehad sales to three customers which individually accounted for more than 10% of our total revenue. These customers had sales of $17.0 million, $7.4 millionand $6.9 million, respectively, and represented 52% of total revenues in the aggregate. Accounts receivable related to these major customers comprised of15%, 4% and 44%, respectively, and represented 63% of all accounts receivable as of December 31, 2017. In 2016, we had sales to three customers whichindividually accounted for more than 10% of our total revenue. These customers had sales of $12.3 million, $7.2 million and $6.8 million, respectively, andrepresented 41% of total revenues in the aggregate.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, 2018, domestic net revenues were $45.6 million and foreign net revenues were $20.2 million. As of December 31, 2018, domestic net assetswere $132.7 million and foreign assets were $58.2 million. For the year ended December 31, 2017, domestic net revenues were $47.0 million and foreign netrevenues were $13.2 million. As of8December 31, 2017, domestic assets were $112.6 million and foreign assets were $72.0 million. For the year ended December 31, 2016, domestic net revenueswere $52.8 million and foreign net revenues were $10.2 million. Our ProductsLidocaine Ointment 5%, which we launched at the end of the first quarter of 2016, accounted for 7%, 17% and 23% of total revenues in 2018, 2017, and2016, respectively. Zantac for injection, which the Company acquired in the fourth quarter of 2015, accounted for 5%, 10% and 3% of total revenues in2018, 2017 and 2016, respectively.Corporate InformationWe 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.9Teligent United States Topical Pharmaceutical Products 10ProductFormulationPresentationsBrand equivalentTherapeutic ClassificationBetamethasone Dipropionate(Augmented), 0.05%Ointment15g, 50gDIPROLENE®Topical CorticosteroidBetamethasone Dipropionate(Augmented), 0.05%Lotion30mL, 60mLDIPROLENE®Topical CorticosteroidCiclopirox 1%Shampoo120mLLoproxAnti-fungalClindamycin Phosphate 1%Topical Solution30mL, 60mLCleocin®Topical Anti-infectiveClobetasol 0.05%Lotion2oz, 4ozClobetasolTopical CorticosteroidClobetasol Propionate 0.05%Gel15g, 30g, 60gEmbeline®Topical CorticosteroidClobetasol Propionate 0.05%Cream15g, 30g, 45g, 60gTemovate CreamTopical CorticosteroidClobetasol Propionate Emollient 0.05%Cream15g, 30g, 45g, 60gTemovateE®Topical CorticosteroidDesoximetasone 0.25% (1)Ointment15g, 60g, 100gTopicort®Topical CorticosteroidDesoximetasone 0.05%Ointment15g, 30g, 60g, 100gTopicort®Topical CorticosteroidDiclofenac Sodium 1.5%Topical Solution150mLPennsaid®Topical Anti-inflammatoryDiflorasone Diacetate 0.05%Ointment15g, 30g, 60gPSORCONCorticosteroidEconazole 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 CorticosteroidFluocinonide 0.05%Gel15g, 30g, 60gFluocinonide GelTopical CorticosteroidFluocinonide 0.05%Ointment15g, 30g, 60gLidexTopical CorticosteroidFluocinonide 0.05%Cream15g, 30g, 60g, 120gFluocinonide CreamTopical CorticosteroidFlurandrenolide 0.05%Ointment15g, 30g, 60gCordran®Topical CorticosteroidGentamicin Sulfate 0.1%Ointment15g, 30gGentamicin OintmentTopical Anti-infectiveHalobetasol Propionate 0.05%Ointment15g, 50gUltravateTopical CorticosteroidHydrocortisone Butyrate 0.1%Lotion118mL, 59 mLLocoid®Topical CorticosteroidHydrocortisone 2.5%Cream30g, 1lb jarHydrocortisone CreamTopical SteroidHydrocortisone 2.5%Lotion2ozHydrocortisone LotionTopical SteroidLidocaine 4%Topical Solution50mLXylocaine®Topical AnestheticLidocaine 5%Ointment35.44gXylocaine®Topical AnestheticLidocaine/Prilocaine 2.5% / 2.5%Cream5g, 30gEMLA CreamLocal 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 Corticosteroid11Teligent United States Injectable ProductsProductStrengthFormulationPresentationsDossier type heldby TeligentTherapeutic ClassificationCefotan (Cefotetan) ®1g, 2gInjectableVialNDAAntibacterial for systemic useFortaz (Ceftazidime) ®500mg, 1g, 2g, 6gInjectableVial, Twist Vial, FrozenBagNDAAntibacterial 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 useTeligent Canada Products (1)12ProductStrengthFormulationPresentationsBrand equivalentDossier typeheld by TeligentTherapeutic ClassificationAcetylcysteine200 mg/mLInjectable10mL and 30 mL vialMucomyst®ANDSAntidoteAtropine0.4 mg/mL, 0.6mg/mLInjectable1 mL ampouleN/ADINAAntimuscarnic, antispasmodicBaclofen0.05 mg/mL,0.5mg/mL, 2mg/mLInjectable1mL, 5mL, 20mLampouleLioresal®ANDSMuscle RelaxantIbuprofen for IntravenousInfusion100 mg/mLInjectable8 mL vialCaldolor®NDSNonsteroidalAntiinflammatory AgentClindamycin PhosphateTopical Solution USP1% w/vTopical Solution30 mL and 60 mL bottleDalacinT®ANDSTopical AntibioticCyanocobalamin1000 mcg/mLInjectable1 mL ampoule, 10 mLvialN/ADINAHematopoieticDiazepam5 mg/mLInjectable2mL ampouleValium®ANDSAxiolytic - sedativeDiclofenac Sodium Solution1.5% w/wTopical Solution150 mL, 60 mL bottlePennsaid®ANDSTopical Anti-inflammatoryDimenhydrinate50 mg/mL, 250mg/mLInjectable1 mL ampoule, 5 mL vialGravol®DINAAntiemticDobutamine12.5 mg/mLInjectable20 mL vialN/AANDSSympathomimeticEpinephrine1 mg/mLInjectable1 mL ampouleAdrenalin®DINASympathomimeticErgonovine 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 g vialGemzar®ANDSAntineoplastic agentGentamicin10 mg/mL, 40 mg/mLInjectable2mL ampouleGaramycin®ANDSAntibioticIrinotecan Hydrochloride20 mg/mLInjectable2 mL, 5 mL, 15 mL, 25mL vialCamptosar®ANDSAntineoplastic agentLidocaine 1%10 mg/mLInjectable5 mL and 10 mLpolyampoule, 5 mL glassXylocaine®DINALocal AnestheticLidocaine 1% multidose10 mg/mLInjectable20 mL and 50 mL vialXylocaine®DINALocal AnestheticLidocaine 2%20 mg/mLInjectable5 mL and 10 mLpolyampouleXylocaine®DINALocal AnestheticLidocaine 2% multidose20 mg/mLInjectable20 mL and 50 mL vialXylocaine®DINALocal AnestheticLidocaine 2% withepinephrine20 mg/mL & 0.01mg/mLInjectable20 mL and 50 mL vialXylocaine®DINALocal AnestheticLidocaine HydrochlorideTopical Solution USP 4%40 mg/mLTopical Solution50mL bottleXylocaine®DINATopical AnestheticLidocaine Ointment USP5%50 mg/gOintment35g tubeXylocaine®DINATopical AnestheticMethylene Blue10 mg/mLInjectable5mL ampouleN/ADINAAntidoteNaloxone0.4mg / ml Injectable1mL ampouleNarcan®ANDSOpitate AntagonistPiperacillin and Tazobactam2g/0.25 g, 3 g/0.375 g,4 g/0.5 gInjectable2.25 g, 3.375 g, 4.5 gvialTazocin®ANDSAntibacterial for systemic useSodium Cloride0.009Injectable10 mL polyampouleN/ADINADiluentSterile Water for Injection1Injectable10 mL polyampouleN/ADINADiluentSuccinylcholine Chloride20 mg/mLInjectable10 mL and 20 mL vialQuelicin®DINAMuscle RelaxantSufentanil Citrate Injection50 mcg/mLInjectable1 mL, 5 mL and 20 mLampouleN/AANDSOpiate Anesthetic13(1) Table does not include Euflexxa®, which is not owned by Teligent Canada but is distributed and sold by Teligent Canada.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 typeheld byTeligentTherapeutic ClassificationCiprofloxacin0.3% Ophthalmic Solution2.5ml, 5ml, 10ml bottlesCiloxan ®ANDAAntibacterial for systemic useBetaxolol0.5% Ophthalmic Solution5ml, 7.5ml, 15ml bottlesBetopic ®ANDABeta Blocking AgentPhytonadione10mg, 1mgInjectable0.5ml, 1ml ampoules; 3cc,6cc vialsAquaMephyton ®NDAHemostaticAmikacin Sulfate50mg/ml, 250mg/mlInjectable2ml, 4ml vialsAmikacin Sulfate ®ANDAAntibacterial for systemic useCalcitonin Salmon200IU/mlInjectable2ml vialsMiacalcin ®ANDAAnti-parathyroid AgentCefotetan Disodium20mg/mlInjectable (bag)50ml bagsCefotetan ®NDAAntibacterial for systemic useClindamycin Phosphate150mg/mlInjectable2ml, 4ml, 6ml, 60ml vials Cleocin ®ANDAAntibacterial for systemic useDobutamine HCl12.5mg/mlInjectable20ml, 40ml vialsDobutamine HCl ®ANDACardiac StimulantDopamine HCl40mg/mlInjectable5ml, 10ml (vials andsyringes)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 StimulantDroperidol2.5mg/mlInjectable10ml vials, 2ml and 5mlampoules, and 2ml syringesInapsine ®ANDAAnti-PsychoticFurosemide10mg/mlInjectable2ml, 4ml, 8ml, and 10mlvials, 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®NDAAcetylcholinesterase inhibitorMVI-12N/AInjectable10 mL ampules and 5 mLvialsN/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, 40mg/mLInjectable2 mLand 35 mL vialsN/AANDAAntibacterial for systemic useNalbuphine10 mg/mL and 20mg/mL Injectable1 mL and 10 mL vialsNubain®ANDASystemic analgesic14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.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 is responsible for formulation, reverse engineering, methodsdevelopment, analytical and microbiologic testing and scale up, and regulatory expertise. Our employees have specific expertise in developing injectableproducts and topical products in a wide range of dosage forms, including simple solutions through complex creams. All ANDA topical development isconducted in-house except for bioequivalence testing, which is performed by a contract research organization ("CRO"). Our injectable development isprimarily conducted in house with some assistance from certain CRO's. We incurred $14.1 million, $19.3 million, and $17.1 million in R&D expenses in 2018, 2017 and 2016, respectively. As the business continues to grow overthe next three to five years, we expect research and development 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: 15•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.•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.16 FDASIA also included GDUFA, a novel user fee program focused on three key aims: •Safety – Ensure that industry participants, foreign or domestic, are held to consistent quality standards and are inspected with parity using a risk-based approach.•Access – Expedite the availability of generic drugs by bringing greater predictability to the review times for abbreviated new drug applications,amendments and supplements and improving timeliness in the review process.•Transparency – Enhance FDA’s visibility into the complex global supply environment by requiring the identification of facilities involved in themanufacture of generic drugs and associated APIs, and improve FDA’s communications and feedback with industry.Under GDUFA, 62% 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 38% 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 a 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. 17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 their active ingredients, are manufactured and tested. To be listed on our EL, all our foreign sites must demonstratecompliance with relevant Good Manufacturing Practices 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. 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). In Canada, we facecompetition from largely the same firms as in the United States as well as certain Canada-only firms. The Canadian generic injectable market is dominated bySandoz (the generic 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 we18have recorded appropriate reserves as needed. For example, two of the Company’s facilities have undergone remediation of environmental contamination. Intellectual Property To compete effectively, we need to develop and maintain a proprietary position with regard to our technology, product candidates and business. Our goal isto safeguard our trade secrets and know-how, attain, maintain and enforce patent protection for our product candidates, formulations, processes, methods andother proprietary technologies, and operate without infringing on the proprietary rights of others. We seek to obtain, where appropriate, the broadestintellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietarytechnology. 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 which originally were approximately 33,000 square feetbuilt on 8.44 acres 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 nowown a total of 11.44 acres at our Buena facility. This facility is used for production, product development, marketing and warehousing for ourpharmaceutical, cosmeceutical and cosmetic products. We completed construction on an expansion of our Buena, New Jersey facility to total approximately110,000 square feet. Although the injectable manufacturing lines installed have yet to receive FDA approval, we received a Certificate of Occupancy in thefourth quarter of 2018 and are currently occupying the space. Once FDA approved, the expanded facility will increase our manufacturing capability fortopical products and will also enable the production of sterile injectable products in both vial and ampule presentations. We are using this facility expansionas an opportunity to upgrade and improve the degree of automation and capacity in our existing topical production suite. The sterile production area isdesigned around isolator-based technology. Our capabilities encompass a full suite of competencies, including manufacturing, regulatory, quality assuranceand in-house validation. We operate our facility in accordance with cGMP. 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 operations are focused on regulatory compliance, continuous improvement,process standardization and excellence in quality and execution across the organization.We lease additional warehouse space in Vineland, New Jersey, as needed to complement our existing warehouse capacity. 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 inMississauga, Canada and approximately 3,000 square feet of office and laboratory space in Tallinn, Estonia. Employees On December 31, 2018, we had a total of 189 full-time employees, including ten 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. 19 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 risks actually occur, our business, results of operations and financial conditioncould suffer. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in theseforward-looking statements. Risks Related to Our Business We have a history of losses and cannot assure you that we will become profitable. As a result, we may have to cease operations and liquidate ourbusiness. With the exception of 2015, our expenses exceeded our revenue in each of the last 13 years, and no net income has been available to common stockholdersduring each of these years. As of December 31, 2018, our stockholders’ equity was $18.4 million and we had an accumulated deficit of $96.4 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 54% of our revenue for the year endedDecember 31, 2018, and three of our customers accounted for 52% of our revenue for the year ended December 31, 2017. 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 7% and 17% of our revenue for the years ended December 31, 2018 and 2017, respectively.Any material adverse developments, including increased competition, loss of customers, pricing pressures and supply shortages, with respect to the sale oruse of our products and prospective products, or our failure to successfully introduce such products, could have a material adverse effect on our revenues andgross margin. The pharmaceutical industry in which we operate is intensely competitive. We are particularly subject to the pressures of direct competition. Forexample, the competition we encounter may have a negative impact upon the prices we may charge for our products, the market share of our productsand our revenue 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 costly20than those of our competitors or 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. 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, and ithas recently finalized policies to implement the Competitive Generic Therapy (“GCT”) designation pathway created by Congress in 2017 as part of FDARA.Based on these trends and regulatory developments, competitors could potentially enter the markets in which we compete more quickly. We cannot provideassurance that we will be able to continue to develop such products or that the number of competitors with such products will not increase to such an extentthat we may stop marketing a product for which we previously obtained approval, which may have a material adverse impact on our revenues and grossmargin.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.21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 the introduction of generic products and decrease the impact of generic competition, such as filing newpatents on drugs whose original patent protection is about to expire, developing patented controlled-release products, changing product claims and productlabeling, or developing and marketing as over-the-counter products those branded products that are about to face generic competition, when feasible. Ourcompetitors, which include major multinational corporations, are consolidating in both the branded and generics industries, and the strength of the combinedcompanies could affect our competitive position in all of our business areas. Furthermore, if one of our competitors or its customers acquires any of ourcustomers or suppliers, we may lose business from the customer or lose a supplier of a critical raw material. We may need to raise additional capital that will be required to operate and grow our business, and we may not be able to raise capital on termsacceptable to us or at all. Operating our business and maintaining our growth efforts will require additional cash outlays and capital expenditures. If cash on hand and cash generatedfrom operations are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through debt or equity financings, tofund our growth. We cannot assure you that we will be able to raise needed cash on terms acceptable to the Company, our significant stockholders, or at all.Financings may be on terms that are dilutive or potentially dilutive to our stockholders, and the prices at which new investors would be willing to purchaseour securities may be lower than the current price per share of our common stock. The holders of new securities may also have rights, preferences or privilegeswhich are senior to those of existing holders of common stock. If new sources of financing are required, but are insufficient or unavailable, we will be requiredto modify our growth and operating plans based on available funding, if any, which would harm our ability to grow our business or even stay in business.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.22 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 certain raw materials, and finished goods purchased by usare limited, or are available from one or only a few suppliers that have been pre-approved by the FDA for use in the manufacture of our products. In this typeof limited-supplier situation, increased prices, rationing and/or shortages can occur. In response to the situation, we try to identify alternative materials orsuppliers for such raw materials and finished goods like containers and closures. However, FDA requirements for products approved through the ANDA orNDA process could substantially lengthen the time for approval of an alternate material source. Certain material shortages and approval of alternate sourcescould adversely affect our financial results. The rapid increase in cost of many raw materials from inflationary forces, such as increased energy costs, and ourability or inability to pass on these increases to our customers, could have a material impact on our financial results. In addition, raw materials purchased from third parties, including those from foreign countries, may contain counterfeit ingredients or other adulterants. Wemaintain a strict program of verification and product testing throughout the ingredient sourcing and manufacturing process to identify potential counterfeitingredients, adulterants and toxic substances. Nevertheless, discovery of previously unknown problems with the raw materials or product manufacturingprocesses or new data suggesting an unacceptable safety risk associated therewith, could result in a voluntary or mandatory withdrawal of a potentiallycontaminated product from the marketplace, either temporarily or permanently. In addition, because regulatory authorities must generally approve rawmaterial sources for pharmaceutical products, changes in raw material suppliers or the quality of their products may result in production delays or higher rawmaterial costs. Also, any future recall or removal would result in additional costs to us, and may give rise to product liability or other litigation, either ofwhich could have a material adverse effect on our operating results. Our products, and the raw materials used to make those products, generally have limited shelf lives. Our inventory levels are based, in part, on expectationsregarding future sales. We may experience build-ups in inventory if sales slow. Any significant shortfall in sales may result in higher inventory levels of rawmaterials and finished products, thereby increasing the risk of inventory spoilage and corresponding inventory write-downs and write-offs, which maymaterially and adversely affect our results of operations. Additionally, labeling changes required for regulatory compliance could render packaginginventories obsolete. Cargo thefts and/or diversions and economically or maliciously motivated product tampering in store shelves may be experienced fromtime to time, causing unexpected shortages. We depend on a limited number of suppliers for API. Generally, only a single source of API is qualified for use in each product due to the costs and timerequired to validate a second source of supply. Changes in API suppliers must usually be approved by the FDA through a Prior Approval Supplement toeach ANDA. 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.23 We are subject to stringent regulatory requirements related to environmental protection and hazardous waste disposal. Failure to adhere to suchrequirements could harm our business and results of operations.In the United States, we and our suppliers of raw materials are also subject to regulation under the Occupational Safety and Health Act, the Toxic SubstancesControl Act, the Resource Conservation and Recovery Act and other current and potential future federal, state or local regulations. Failure to adhere to suchregulations, by either us or our suppliers, could harm our business and results of operations. In addition, our analytical department uses certain hazardousmaterials and chemicals in limited and controlled quantities. We have implemented safety procedures for handling and disposing of such materials, however,such procedures may not comply with the standards prescribed by federal, state and local regulations. Even if we follow such safety procedures for handlingand disposing of hazardous materials and chemicals and such procedures comply with applicable law, the risk of accidental contamination or injury fromthese materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages and any such liability couldexceed our resources. Our operations and properties are also subject to a wide variety of increasingly complex and stringent federal, state and local environmental laws andregulations, including those governing the remediation of contaminated soil and groundwater. Such environmental laws may apply to conditions atproperties and facilities presently or formerly owned or operated by us, as well as to conditions at properties at which wastes or other contaminationattributable to us have been sent or otherwise come to be located. One of our facilities has undergone remediation of environmental contamination, and oneof our facilities is currently undergoing remediation of environmental contamination. The total estimated costs for the clean-up and remediation is $0.9million as of December 31, 2018, and remaining costs accrued at December 31, 2018 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 the 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 U.S. Pharmacopeia, or USP, a scientific nonprofitorganization that sets standards for the identity, strength, quality, and purity of medicines, food ingredients, and dietary supplements manufactured,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 product24candidate has the same active ingredient, strength, dosage form, route of administration and intended use as a corresponding approved drug product and isbioequivalent to the branded drug product (approved under a New Drug Application, or NDA), meaning that there is no significant difference between thedrugs in their rate and extent of absorption in the body. However, if the FDA determines that an ANDA 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 FDA approval through the ANDA process, the labeling claims and marketing statements that we can make for our genericdrugs are generally limited to the claims approved by the FDA for use in the brand-name product’s label. In addition, following regulatory approval, thelabeling, packaging, adverse event reporting, storage, advertising and promotion for the product will be subject to extensive and ongoing regulatoryrequirements. As a manufacturer of pharmaceutical products, we must also comply with cGMPs, or current Good Manufacturing Practices, which include requirementsrelated to production processes, quality control and assurance and recordkeeping. Our manufacturing facilities and procedures and those of our suppliers aresubject to periodic inspection by the FDA and foreign regulatory agencies. Any material deviations from pharmaceutical cGMPs or other applicablerequirements identified during such inspections may result in recalls or other enforcement actions, including warning letters, a delay or suspension inmanufacturing operations, consent decrees or civil or criminal penalties. Further, discovery of previously unknown problems with a product or manufacturermay result in restrictions or sanctions, including suspension or withdrawal of marketing approvals, seizures or recalls of products from the market, or civil orcriminal fines or penalties, any of which could significantly and adversely affect supplies of our products. We are subject to extensive government regulation by Health Canada and other federal, state provincial/territorial and local regulatory authoritiesthat increases our costs and could prevent us from marketing or selling our products. The manufacturing, processing, formulation, packaging, labeling, testing, storing, distributing, marketing, advertising and sale of our products, among otherthings, are subject to extensive regulation by one or more Canadian agencies, including Health Canada, as well as by several state and local agencies inlocalities where our products are stored, distributed or sold. In addition, we market certain of our products in accordance with standards set by organizations,such as the United States Pharmacopeial Convention, or USP, and the British Pharmacopeia, or BP, scientific nonprofit organizations that sets standards forthe identity, strength, quality, and purity of medicines, food ingredients, and dietary supplements manufactured, distributed and consumed worldwide.Adherence to USP and BP published drug standards are prescribed by the Canadian 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.25Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and otherpersonnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies fromperforming normal business functions on which the operation of our business may rely, which could negatively impact our business.The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, abilityto hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency havefluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely,including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary governmentagencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S.government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and othergovernment employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timelyreview and process our regulatory submissions, which could have a material adverse effect on our business. Further in our operations as a public company,future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continueour operations.We may be subject to, or may in the future become subject to, U.S. federal and state, and foreign laws and regulations imposing obligations on how wecollect, use, disclose, store and process personal information. Our actual or perceived failure to comply with such obligations could result in liability orreputational harm and could harm our business. Ensuring compliance with such laws could also impair our efforts to maintain and expand ourcustomer base, and thereby decrease our revenue.In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-relatedand other personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis,modification, storage, transfer, security breach notification, destruction and disposal of personal data. We must comply with laws and regulations associatedwith the international transfer of personal data based on the location in which the personal data originates and the location in which it is processed. Althoughthere are legal mechanisms to facilitate the transfer of personal data from the European Economic Area, or EEA, and Switzerland to the United States, thedecision of the European Court of Justice that invalidated the safe harbor framework has increased uncertainty around compliance with EU privacy lawrequirements. As a result of the decision, it was no longer possible to rely on safe harbor certification as a legal basis for the transfer of personal data from theEuropean Union to entities in the United States. In February 2016, the European Commission announced an agreement with the Department of Commerce, orDOC, to replace the invalidated safe harbor framework with a new EU-U.S. “Privacy Shield.” On July 12, 2016, the European Commission adopted a decisionon the adequacy of the protection provided by the Privacy Shield. The Privacy Shield is intended to address the requirements set out by the European Courtof Justice in its recent ruling by imposing more stringent obligations on companies, providing stronger monitoring and enforcement by the DOC and FederalTrade Commission and making commitments on the part of public authorities regarding access to information.The privacy and security of personally identifiable information stored, maintained, received or transmitted, including electronically, subject to significantregulation in the United States and abroad. While we strive to comply with all applicable privacy and security laws and regulations, legal standards forprivacy continue to evolve and any failure or perceived failure to comply may result in proceedings.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. 26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. The U.S. Department of Health and Human Services (“DHHS”) has issued a proposed rule that wouldremove safe harbor protections for certain rebates, which if finalized as released would go into effect in January 2020. Given the complexity of the drugpricing systems in the United States, DHHS is also soliciting input on multiple issues and other proposals as part of this formal rulemaking process, and thetimeline for any final government action could be lengthy. It is unclear what changes a DHHS final rule, if any, would make to the current drug rebate rulesfor Medicare and Medicaid programs, and what the potential impact of such changes would be to our business or operations. 27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. 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 a “covered recipient,” which include physicians (defined to include doctors,dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and beginning in 2022, physician assistants, nurse practitioners, clinicalnurse specialists, certified registered nurse anesthetists, and certified nurse-midwives following an expansion of the law by Congress in 2018. Applicablemanufacturers and group purchasing organizations also must report annually ownership and investment interests held by physicians (as defined above)and their immediate family members and payments or other “transfers of value” to such physician owners and their immediate family members;28•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, or FCPA, including its anti-bribery provisions, which make it unlawful for certain classes of persons and entities tomake payments 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 require pharmaceutical companies to comply with the industry’svoluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict payments thatmay be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related topayments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy andsecurity of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thuscomplicating 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.There also continues to be uncertainty that any provisions of the Affordable Care Act will continue to exist in their current form. Certain legislators arecontinuing their efforts to repeal the Act, although there is little clarity on how such a repeal would be implemented and what an Affordable Care Actreplacement might look like, and there continue to be lawsuits in federal courts seeking to invalidate parts or all of the Act. For the immediate future, therecontinues to be significant uncertainty regarding the health care, health care coverage and health care insurance markets. The 116th Congress convened inJanuary 2019 is expected to focus on health care markets broadly and also to target widely publicized cases of product failures as well as corporatemisconduct in the health care industry writ large. The 116th Congress has a much different House of Representatives than the prior 115th Congress, and theseand other political changes create additional uncertainty for all industries offering goods and services to medical professionals, including genericpharmaceuticals like ours.We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal andstate governments will 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;29•the timing of our market entry;•the ability to market our products effectively to the different levels in the distribution chain;•other competitor actions; and•the continued acceptance of and/or reimbursement for our products by government and private formularies and/or third party payors.Additionally, studies of the proper utilization, safety, and efficacy of pharmaceutical products are being conducted by the industry, government agencies,and others. Such studies, which increasingly employ sophisticated methods and techniques, including methods to investigate the comparative effectivenessof different products used for similar indications, can call into question the utilization, safety, and efficacy of previously marketed as well as future products.In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk management programs, such as theneed for a patient registry, as well as delays in approvals. The occurrence of any of the above risks could adversely affect our profitability, business, financialposition, results of operations and/or cash flow, and could cause the market value of our common stock to decline. Product recalls could harm our business. Product recalls or product field alerts may be issued at our discretion or required by the FDA and Health Canada, other governmental agencies or othercompanies having regulatory authority for pharmaceutical product sales. From time to time, we may recall products for various reasons, including failure ofour products to maintain their stability through their expiration dates or other quality issues. Any recall or product field alert has the potential of damagingour reputation or the reputation of the product. Any significant recalls could materially affect our sales. In these cases, our business, financial condition,results of operations and cash flows could be materially adversely affected. We are susceptible to product liability claims that may not be covered by insurance and could require us to pay substantial sums. We face the risk of loss resulting from, and adverse publicity and reputational harm associated with, product liability lawsuits, whether or not such claims arevalid. We may not be able to avoid such claims. In addition, our product liability insurance may not be adequate to cover such claims and we may not be ableto obtain adequate insurance coverage in the future at acceptable costs. A successful product liability claim that exceeds our policy limits could require us topay substantial sums. In addition, product liability coverage for pharmaceutical companies is becoming more expensive and increasingly difficult to obtainand, as a result, we may not be able to obtain the type and amount of coverage we desire or to maintain our current coverage. The manufacture and storage of pharmaceutical and other products are subject to inherent risk. Because chemical ingredients are used in the manufacture of our products and due to the nature of the manufacturing process itself, there is a risk of incurringliability for damages caused by or during the storage or manufacture of both the chemical ingredients and the finished products. Although we have neverincurred any material liability for damages of that nature, we may be subject to liability in the future. In addition, while we believe our insurance coverage isadequate, it is possible that a successful claim would exceed our coverage, requiring us to pay a substantial sum. 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. 30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;•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;31•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. A significant amount of our total assets is related to goodwill and intangible assets, including in-process research and development. As of December 31, 2018the value of our goodwill and intangible assets net of accumulated amortization was $48.8 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;32•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 such factor arises, our profitability, business, financial position and results of operations could bematerially adversely affected. Future acquisitions and investments could disrupt our business and harm our financial condition and operating results. Our growth will depend, in part, on our continued ability to develop, commercialize and expand our drug products, including in response to changingregulatory and competitive pressures. In some circumstances, we accelerate our growth through the acquisition of complementary products and technologiesrather than through internal development. The identification of suitable products to be acquired can be difficult, time-consuming and costly, and we may notbe able to successfully complete or successfully execute strategies for identified acquisitions. The risks faced in connection with acquisitions include: •diversion of management time and focus from operating our business to addressing acquisition and/or product integration challenges;•coordination of research and development and sales and marketing functions;•retention of key employees from the acquired company;•integration of the acquired company’s accounting, management information, human resources and other administrative systems;•the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked effective controls,procedures and policies;•liability for activities of the acquired company and/or products before the acquisition, including patent infringement claims, violations of laws,commercial disputes, tax liabilities and other known and unknown liabilities;•unanticipated write-offs or charges; and•litigation or other claims in connection with the acquired company or product, including claims from product users, former stockholders or 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 theFDA. 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.33 In the normal course of business, we periodically enter into employment agreements, legal settlements, and other agreements which incorporateindemnification provisions. We maintain insurance coverage which we believe will effectively mitigate our obligations under these indemnificationprovisions. However, should our obligation under an indemnification provision exceed our coverage or should coverage be denied, it could have a materialadverse effect on our business, financial position and results of operations. Our business and operations would suffer in the event of system failures. Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access,natural disasters, terrorism, war and telecommunication and electrical failures. Any system failure, accident or security breach that causes interruptions in ouroperations could result in a material disruption of our product development programs. To the extent that any disruption or security breach results in a loss ordamage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability and the further developmentof our product candidates may be delayed. In addition, we rely on complex information technology systems, including Internet-based systems, to support our supply chain processes as well as internaland external communications. The size and complexity of our systems make them potentially vulnerable to breakdown or interruption, whether due tocomputer viruses or other causes that may result in the loss of key information or the impairment of production and other supply chain processes. Suchdisruptions and breaches of security could adversely affect our business. Compliance with ongoing post-marketing obligations for our approved ANDAs, NDAs, NDSs, and ANDSs may uncover new safety information thatcould give rise to a product recall, updated warnings, or other regulatory actions that could have an adverse impact on our business. After 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 adverse eventsto the appropriate regulatory agency or agencies, 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 ongoing compliance with these types of mandatory reporting requirements could result in additional requests for information from theFDA 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 resultin a request from the agency to conduct a product recall or to strengthen warnings and/or revise other label information about the product. Any of these post-marketing regulatory actions could materially affect our sales and, therefore, they have the potential to adversely affect our business, financial condition,results of operations and cash flows. 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.34 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, 2018. We identified a number of material weaknesses in our internal control over financial reporting and concluded that,as of December 31, 2018, we did not maintain effective control over financial reporting based on criteria established in Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission. For a detailed description of these material weaknesses, seeItem 9A, "Controls and Procedures." Each of our material weaknesses results in more than a remote likelihood that a material misstatement of the annual orinterim financial statements that we prepare will not be prevented or detected. As a result, we must perform extensive additional work to obtain reasonableassurance regarding the reliability of our financial statements. In addition, on March 15, 2018, we filed an amendment to our Quarterly Report on Form 10-Qfor the quarter ended September 30, 2017 and on December 12, 2018, we filed an amendment to our Quarterly Report on Form 10-Q for the quarter endedJune 30, 2018, in each case in order to revise and restate certain items disclosed in such reports. Moreover, other material weaknesses may be identified. We are in the process of remedying all of the identified material weaknesses, and this work will continue during fiscal 2019 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, if additional material weaknesses are found in our internal controls in the future, or if ourexternal auditors cannot attest to the effectiveness of our internal control over financial review we may not be able to timely or accurately report our financialcondition, results of operations or cash flows or to maintain effective disclosure controls and procedures. If we are unable to report financial information in atimely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory orenforcement actions by the SEC, an inability for us to be accepted for listing on any national securities exchange in the near future, securities litigation and ageneral loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our Common Stock. Further, thereare inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention oroverriding of the controls and procedures. We could face additional litigation exposure and a greater likelihood of an SEC enforcement or other regulatoryaction if further restatements were to occur or other accounting-related problems emerge. In addition, any future35restatements or other accounting-related problems may adversely affect our 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, 2018, we had federal net operating loss carry forwards, or NOLs, of approximately $45.1 million which expire from 2020 through 2037.Federal operating losses arising during and after 2018 are not subject to expiration; however, their usage is limited to 80% of taxable income during the yearof use. Our ability to utilize our NOLs may be limited under Section 382 of the Internal Revenue Code. The limitations apply if an ownership change, asdefined by Section 382, occurs. Generally, an ownership change occurs when certain shareholders increase their aggregate ownership by more than 50percentage points over their lowest ownership percentage in a testing period (typically three years). Our ability to use net operating loss carry forwards issubject to substantial limitation in future periods under certain provisions of Section 382 of the Internal Revenue Code, which limit the utilization of netoperating losses upon a more than 50% change in ownership of our stock that is held by 5% or greater stockholders. We examined the application of Section382 with respect to an ownership change that took place during 2010, as well as the limitation on the application of net operating loss carry forwards. Webelieve that operating losses subsequent to the change date in 2010 (aggregating $26.5 million) are not subject to Section 382 limitations. We haveestimated that the annual limitation starting in 2010 aggregates from $1.0 million to $2.3 million per year including the effect of amortization of built ingains.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 2014 through 2017.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 “United States Tax Cuts and Jobs Act,” or U.S. TCJA, significantly revising the Internal RevenueCode of 1986, as amended, or the Code. The U.S. TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additionallimitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect themigration from a “worldwide” system of taxation to a territorial system. Our net deferred tax assets and liabilities have been revalued at the newly enactedU.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 legislationmay have on our business. We urge investors to consult with their legal and tax advisers regarding the implications of the U.S. TCJA on an investment in ourcommon stock.We are currently involved in antitrust litigation related to our pricing practices. which is also part of a larger investigation by the attorneys general offorty-five states into alleged generic drug price fixing schemes and asserting claims under federal antitrust law (specifically, section 1 of the ShermanAct).36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.We may be subject to, or may in the future become subject to, U.S. federal and state, and foreign laws and regulations imposing obligations on how wecollect, use, disclose, store and process personal information. Our actual or perceived failure to comply with such obligations could result in liability orreputational harm and could harm our business. Ensuring compliance with such laws could also impair our efforts to maintain and expand ourcustomer base, and thereby decrease our revenue.In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-relatedand other personal information. These laws and regulations govern our processing of personal data, including the collection, access, use, analysis,modification, storage, transfer, security breach notification, destruction and disposal of personal data. We must comply with laws and regulations associatedwith the international transfer of personal data based on the location in which the personal data originates and the location in which it is processed. Althoughthere are legal mechanisms to facilitate the transfer of personal data from the European Economic Area, or EEA, and Switzerland to the United States, thedecision of the European Court of Justice that invalidated the safe harbor framework has increased uncertainty around compliance with EU privacy lawrequirements. As a result of the decision, it was no longer possible to rely on safe harbor certification as a legal basis for the transfer of personal data from theEuropean Union to entities in the United States. In February 2016, the European Commission announced an agreement with the Department of Commerce, orDOC, to replace the invalidated safe harbor framework with a new EU-U.S. “Privacy Shield.” On July 12, 2016, the European Commission adopted a decisionon the adequacy of the protection provided by the Privacy Shield. The Privacy Shield is intended to address the requirements set out by the European Courtof Justice in its recent ruling by imposing more stringent obligations on companies, providing stronger monitoring and enforcement by the DOC and FederalTrade Commission and making commitments on the part of public authorities regarding access to information.Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and otherpersonnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies fromperforming normal business functions on which the operation of our business may rely, which could negatively impact our business.The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, abilityto hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency havefluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely,including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary governmentagencies, which would adversely affect our business. For example, over the last several years, including beginning on December 22, 2018, the U.S.government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and othergovernment employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timelyreview and process our regulatory submissions, which could have a material adverse effect on our business. Further in our operations as a public company,future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continueour 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, 2018, the average daily trading volume of our common stock on the Nasdaq Global Select Market was approximately518,868 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.37 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. We did not timely file our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, which quarterly report wasfiled on December 12, 2018. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws,expose us to lawsuits and restrict our ability to access financing. In addition, we are required under applicable law and regulations to integrate our systems ofdisclosure controls and procedures and internal control over financial reporting. Our management assessed our existing disclosure controls and procedures asof December 31, 2018, and our management concluded that our disclosure controls and procedures were not effective as of December 31, 2018, solelybecause of the material weaknesses in our internal control over financial reporting described herein 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. 38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 $1.13 in the fourth quarter of 2018 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;•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. On November 13, 2018, we received a notification letter from The Nasdaq Stock Market advising that, because we did not timely file ourQuarterly Report on Form 10-Q for the period ended September 30, 2018, we were not in compliance with Listing Rule 5250(c)(1), which requires timelyfiling of all required periodic financial reports with the SEC. While we regained compliance with Listing Rule 5250(c)(1) on December 12, 2018, if in thefuture we fail to meet this or any other continued listing standard 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 our Notes and Credit Facilities 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 2019Notes, to Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC as the initial purchasers and on December 22, 2014, we issued to the initialpurchasers an additional $18.75 million aggregate principal amount of the39Notes. On May 1, 2018, we entered into separate, privately negotiated exchange agreements with certain holders of the Notes to exchange an aggregateprincipal amount of approximately $75 million of the 2019 Notes in exchange for an equal amount of our 4.75% Convertible Senior Notes due 2023, or the2023 Notes (together with the 2019 Notes, the “Notes”). Pursuant to the terms of the indentures governing the Notes, following certain events, holders ofNotes 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 inthe acceleration of the maturity of, our then-existing indebtedness. We cannot assure you that we will have sufficient financial resources, or will be able toarrange financing, to pay the purchase price in cash with respect to any Notes surrendered by holders for purchase at that time, make cash payments uponconversions or pay the redemption price for any Notes we redeem. In addition, restrictions in our then existing credit facilities or other indebtedness, if any,may not allow us to purchase the Notes (even if required pursuant to the terms of the indentures), make cash payments upon conversions of the Notes or paythe 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 under theterms 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. As of December 31, 2018, our total consolidated indebtedness was $175.8 million. Our substantial level of indebtedness coupled with our net loss increasesthe possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on, or other amounts due in respect of ourindebtedness. Our substantial indebtedness, combined with our other financial obligations and contractual commitments, may have a material adverse impacton us. For example, it could •make it difficult for us to satisfy our obligations with respect to our outstanding and other future debt obligations;•increase our vulnerability to general adverse economic conditions or a downturn in the industries in which we operate;•impair our ability to obtain additional financing in the future for working capital, investments, acquisitions and other general corporate purposes;•require us to dedicate a substantial portion of our cash flows to the payment to our financing sources, thereby reducing the availability of our 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 and New Senior Credit Facilities, depends on our future performance, which is subject to economic, financial, competitive and otherfactors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and makenecessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets,restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness willdepend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activitieson desirable terms, which could result in a default on 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.40Our ability to make scheduled payments and satisfy our other obligations pursuant to our Senior Credit Facility depends on our future operatingperformance and on economic, financial, competitive, and other factors beyond our control.On December 13, 2018, pursuant to a previously disclosed commitment letter by and between us and Ares Management LLC, we entered into: (i) a First LienRevolving Credit Agreement, by and among us, as the borrower, certain subsidiaries of ours, as guarantors, the lenders from time to time party thereto, andACF Finco I LP, as administrative agent (the “Revolver Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among us, as the borrower,certain subsidiaries of ours, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrative agent (the “SecondLien Credit Agreement” and, together with the Revolver Credit Agreement, the “Senior Credit Facilities”). The Senior Credit Facilities consist of a $25.0million senior revolving credit facility governed by a Revolver Credit Agreement, a $50.0 million second lien initial term, a $30.0 million second liendelayed draw term loan A and a $15.0 million second lien delayed draw term loan B. The interest rate under the revolver is calculated at either the one, two,three or six-month London Inter-Bank Offered Rate, or LIBOR plus 3.75%, or the base rate plus 2.75%. The interest rate on the new term loans is calculated ateither LIBOR plus 8.75% or the base rate plus 7.75%.We may not generate sufficient cash flow from operations to cover required interest and principal payments, which could result in an event of default andacceleration of our obligations under these agreements, which may require us to seek additional financing or restructure existing debt on unfavorable terms.In addition, adverse changes in credit markets could increase our cost of borrowing and make it more difficult for us to obtain financing.Restrictive covenants in our Senior Credit Facilities may interfere with our ability to obtain additional advances under existing credit facilities or toobtain new financing or to engage in other business activities.Our Senior Credit Facilities contain certain affirmative, negative, and financial covenants, including cross-defaults on other material indebtedness, as well asevents of default triggered by a change of control and certain actions initiated by the FDA. In addition, we are required to comply with certain financialcovenants consisting of a minimum revenue test, a minimum adjusted EBITDA test and a maximum total net leverage ratio.These restrictions may interfere with our ability to obtain additional advances under our credit facilities or to obtain restrictions may interfere with our abilityto obtain additional advances under existing credit facilities or to obtain new financing or to engage in other business activities, which may inhibit ourability to grow our business and increase revenue. In addition, If an event of default occurs, the lenders of the revolver would be entitled to take enforcementactions, including foreclosure on collateral and acceleration of amounts owed under the revolver, and the lenders under the new term loans would also beentitled to take such actions, subject to any limitations set forth in an inter creditor agreement with respect to the new term loans, which in each case couldhave a material adverse effect on our business, financial condition and results of operations. 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 and the Senior Credit Facilities. 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, to paythe principal of and interest on our Senior Credit Facilities, and our creditworthiness generally.Item 1B. UNRESOLVED STAFF COMMENTSNone. Item 2. PROPERTIES The Company’s executive administrative offices are located in Buena, New Jersey, in two facilities now totaling approximately 110,000 square feet with theexpansion of the facility completed in the fourth quarter of 2018 is built on 8.44 acres of land in 1995, which we own. In 2017 we acquired an additional 3.0acres of adjacent land in support of our facility expansion. We now own a total of 11.44 acres at our Buena facility. One of those facilities is used forproduction, product development, marketing and warehousing for our own generic prescription pharmaceutical products and pharmaceutical, cosmeceuticaland cosmetic products. In July 2016, the Company completed the first phase of the facility expansion in the Buena, New Jersey location. The facility nowhouses our new product development laboratory for work on topical and sterile pharmaceuticals. The other facility41is currently being expanded to increase our manufacturing capacity for topical products, and will also enable the production of sterile injectable products inboth vial and ampule presentations. We lease additional square feet of warehouse space as needed in Vineland, New Jersey, lease approximately 9,500 squarefeet of corporate office space in Iselin, New Jersey, and lease approximately 4,000 square feet of office space in Mississauga, Canada. The Company alsoleases approximately 3,000 square feet of office and laboratory space in Tallinn, Estonia. 42Item 3. LEGAL PROCEEDINGSTo date, twelve putative class action antitrust lawsuits have been filed against the Company along with co-defendants, including Taro PharmaceuticalsU.S.A., Inc. and Perrigo New York Inc., regarding the pricing of generic econazole nitrate cream (“econazole”). The class plaintiffs seek to representnationwide or state classes consisting of persons who directly purchased, indirectly purchased, paid and/or reimbursed patients for the purchase of genericeconazole from July 1, 2014 until the time the defendants’ allegedly unlawful conduct ceased or will cease. The class plaintiffs seek treble damages foralleged overcharges for econazole during the alleged period of conspiracy, and certain of the class plaintiffs also seek injunctive relief against the defendants.All actions have been consolidated by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part ofthe In re Generic Pharmaceuticals Pricing Antitrust Litigation matter. On October 16, 2018 the court dismissed the class plaintiffs’ claims against theCompany with leave to replead. On December 21, 2018 the class plaintiffs filed amended complaints, which the Company moved to dismiss on February 21,2019. This motion remains pending.Three “opt-out” antitrust lawsuits have additionally been filed against the Company by Humana Inc.; The Kroger Co. et al.; and United HealthCare Services,Inc., and consolidated into the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter by the Judicial Panel on Multidistrict Litigation. Each of theopt-out complaints names between thirty-six and forty-three defendants (including the Company) and involves allegations regarding the pricing ofeconazole along with between twenty-four and twenty-nine other drug products that were not manufactured or sold by the Company during the period atissue. The opt-out plaintiffs seek treble damages for alleged overcharges for the drug products identified in the complaint during the alleged period ofconspiracy, and two of the complaints also seek injunctive relief. A motion to dismiss the Humana Inc. and The Kroger Co., et al. opt-out complaints was filedon February 21, 2019. A motion to dismiss the United HealthCare Services, Inc. opt-out complaint has not yet been filed.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 toprovide an estimate of the amount or range of potential loss. We believe these cases are without merit, and we intend to vigorously defend against theseclaims.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 alleges that the Company breached agreements between the parties by developing an additional and different generic drug product,an ointment, containing flurandrenolide, and failing to meet certain contractual requirements. Stayma seeks monetary damages. Because discovery in thismatter is ongoing, the Company is unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide anestimate of the amount or range of potential loss. The Company believes this case is without merit, and the Company intends to vigorously defend againstthese claims. The Company filed three counter-claims against Stayma for its failure to pay several past due invoices of approximately $1.7 million relating tothe development and commercial supply of the two subject products and for breaching the confidentiality provisions and exclusivity provisions of theparties’ agreements.On December 13, 2018, Valdepharm SA filed a lawsuit alleging that the Company breached contracts regarding two drug products that the Company hadsought to have Valdepharm manufacture. On February 12, 2019 the Company answered the complaint and counterclaimed, alleging that Valdepharmbreached the contracts by failing to perform its work in compliance with FDA regulations and current Good Manufacturing Practices. Each party seeksdamages associated with the alleged breach and related claims. Due to the early stage of the case we are unable to form a judgment at this time as to whetheran unfavorable outcome is either probable or remote or to provide an estimate of the amount or range of potential loss. We believe the claims against Teligentare without merit, and we intend to vigorously defend against them.Item 4. MINE SAFETY DISCLOSURES Not applicable. 43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. Stockholders As of March 25, 2019, there were approximately 345 stockholders of record of our 53,845,427 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. Unregistered Sales of Securities None. Issuer Purchases of Equity Securities None. 44Item 6. SELECTED FINANCIAL DATA As discussed in Note 1, Correction of Previously Issued Consolidated Financial Statements, in the Company’s consolidated financial statements included inItem 8, the consolidated financial statements of the Company for years ended December 31, 2017 and 2016 have been revised to give effect to the correctionof certain immaterial accounting errors described therein. Accordingly, the 2017 and 2016 selected consolidated financial data presented in the table belowhas been revised to give effect to the correction of these immaterial accounting errors, as derived from the Company's audited consolidated financialstatements included in Item 8. In addition, the immaterial accounting errors discussed in Note 1 originated prior to fiscal year 2016 and as such, the 2015 and2014 selected consolidated financial data presented in the table below has also been revised to give effect to the correction of these immaterial accountingerrors. The revised selected consolidated financial data presented below should be read in conjunction with the Company's consolidated financial statementsincluded in Item 8 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 31,2018 2017 2016 2015 2014 (In thousands, except per share data)Revenues$65,865 $60,202 $63,012 $37,940 $30,647 Gross profit22,385 27,372 34,687 21,315 16,972 Operating (loss) income(15,099)(11,797)2,542 (3,192)3,906 Interest and other non-operating income (expense)(21,219)(3,479)(14,240)9,895 1,518 Foreign currency exchange (loss) gain(3,371)7,719 (936)109 — Loss before income tax expense(36,318)(15,276)(11,698)6,703 5,424 Income tax (benefit) provision(62)(85)287 35 173 Net (loss) income(36,256)(15,191)(11,985)6,668 5,251 Net (loss) income attributable to common stockholders(36,256)(15,191)(11,985)6,668 5,251 Weighted average shares outstanding:Basic53,593 53,324 53,078 52,873 49,818 Diluted53,593 53,324 53,078 67,112 64,207 PER SHARE:Net (loss) income:Basic(0.68)(0.28)(0.23)0.13 0.11 Diluted(0.68)(0.28)(0.23)(0.07)0.09 BALANCE SHEET DATA:Current assets$48,386 $59,131 $101,965 $115,542 $176,743 Property, plant and equipment, net91,775 68,355 26,215 8,706 3,262 Total assets190,892 184,585 181,895 183,503 196,603 Current liabilities32,612 18,696 13,632 9,509 12,527 Long-term obligations, less current installments139,859 121,136 111,596 107,235 144,942 Stockholders’ equity18,421 44,753 56,667 66,759 39,134 CASH FLOW DATA:Net cash (used in) provided by operating activities$(13,275)$398 $(447)$(15,459)$(3,767)Net cash used in investing activities(25,294)(40,429)(20,076)(53,068)(3,792)Net cash provided by (used in) financing activities25,333 269 (10)(3,111)164,465 Net (decrease)/increase in cash, cash equivalents andrestricted cash(13,236)(39,762)(20,533)(71,638)156,906 Revenues for the years ended December 31, 2015 and 2014 have been adjusted by $6.3 million and $3.1 million respectively. Current assets, Total assets and Current liabilitiesas of December 31, 2015 have been adjusted by $1.3 million respectively and Current assets, Total assets and Current45liabilities as of December 31, 2014 have been adjusted by $0.5 million respectively to correct for the immaterial errors described in footnote 1 to the consolidated financialstatements.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.As discussed in Note 1, Correction of Previously Issued Consolidated Financial Statements, in the Company’s consolidated financial statements included inItem 8, the Company’s consolidated financial statements for years ended December 31, 2017 and 2016 have been revised to give effect to the correction ofcertain immaterial accounting errors described therein. Accordingly, the discussion and analysis presented below for the years ended December 31, 2017 and2016 has also been revised to give effect to the correction of these immaterial accounting errors. The revised discussion and analysis presented belowprovides information to assist in understanding the Company's financial condition and results of operations and, as such, should be read in conjunction withthe Company's consolidated financial statements included in Item 8. 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 35 generic topical pharmaceutical products and fourbranded generic pharmaceutical products. In Canada we sell a total of over 27 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, Mississauga, 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 pipelineincludes 20 Abbreviated New Drug Applications ("ANDAs") for additional pharmaceutical products filed with the FDA. We have six abbreviated new drugsubmissions ("ANDSs") on file with Health Canada. In addition, we have 46 46product candidates at various stages of our development pipeline. We expect to continue to expand our presence in the generic pharmaceutical marketthrough the filing of additional ANDAs with the FDA, the filing of applications to Health Canada and the subsequent launch of products as theseapplications are approved. We will also seek to license or acquire further products, intellectual property, or pending applications to expand our portfolio. OnNovember 13, 2015, we acquired all of the rights, title and interest in the development, production, marketing, import and distribution of all products ofAlveda Pharmaceuticals Inc., or Alveda, pursuant to two asset purchase agreements, one relating to the acquisition of all of the intellectual property-relatedassets of Alveda and the other relating to the acquisition of all other assets of Alveda. We also develop, manufacture, fill, and package topical semi-solid and liquid products for branded and generic pharmaceutical customers, as well as the OTCand cosmetic markets. These products are used in a wide range of applications from cosmetics and cosmeceuticals to the prescription treatment of conditionslike dermatitis, psoriasis, and eczema.Product and Pipeline ApprovalsThe following is a summary of approvals received in 2018:On February 14, 2018, we announced approval of an ANDA for Betamethasone Dipropionate Lotion USP (Augmented), 0.05%. This was our first approval for2018 and our twentieth approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in May of2018.On March 21, 2018, we announced approval of an ANDA for Halobetasol Propionate Ointment, 0.05%. This was our second approval for 2018 and ourtwenty-first approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in April of 2018.On April 6, 2018, we announced approval of an ANDA for Ciclopirox Shampoo, 1%. This was our third approval for 2018 and our twenty-second approvalfrom our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in May of 2018.On April 17, 2018, we announced approval of an ANDA for Clobetasol Propionate Cream USP, 0.05%. This was our fourth approval for 2018 and our twenty-third approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in May of 2018.On June 13, 2018, we announced approval of an ANDA for Diflorasone Diacetate Ointment, 0.05%. This was our fifth approval for 2018 and our twenty-fourth approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in August of 2018.On June 20, 2018, we announced approval of an ANDA for Fluocinonide Gel USP, 0.05%. This was our sixth approval for 2018 and our twenty-fifth approvalfrom our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in October 2018.On July 2, 2018, we announced approval of an ANDA for Lidocaine and Prilocaine Cream USP, 2.5%/2.5%. This was our seventh approval for 2018 and ourtwenty-sixth approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in November of 2018.On July 24, 2018, we announced approval of an ANDA for Hydrocortisone Cream USP, 2.5%. This was our eighth approval for 2018 and our twenty-seventhapproval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the third quarter of 2019.On July 30, 2018, we announced approval of an ANDA for Hydrocortisone Lotion USP, 2.5%. This was our ninth approval for 2018 and our twenty-eighthapproval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the second quarter of2019.On October 2, 2018, we announced approval of an ANDA for Fluocinonide Ointment USP, 0.05%. This was our tenth approval for 2018 and our twenty-ninthapproval from our internally-developed pipeline of topical generic pharmaceutical medicines. We launched this product in November of 2018.On October 17, 2018, we announced approval of an ANDA for Fluocinonide Cream USP, 0.05%. This was our eleventh approval for 2018 and our thirtiethapproval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the fourth quarter of 2019.47On October 24, 2018, we announced approval of an ANDA for Desoximetasone Ointment USP, 0.05%. This was our twelfth approval for 2018 and our thirty-first approval from our internally-developed pipeline of topical generic pharmaceutical medicines. We expect to launch this product in the first quarter of2019.Results of Operations Fiscal Year ended December 31, 2018 compared to year ended December 31, 2017 We had a net loss of $36.3 million, or $0.68 per share, during the year ended December 31, 2018 ("Current Year") compared to net loss of $15.2 million, or$0.28 per share, during the year ended December 31, 2017 ("Prior Year"). Product Sales, net, include Company Product Sales and Contract ManufacturingSales, as follows: Revenues (in thousands): Year Ended December 31,Increase/(Decrease)Components of Revenue:2018 2017 $%Product sales, net$65,638 $59,950 $5,688 9 %Research and development services and otherincome227 252 (25)(10)%Total Revenues$65,865 $60,202 $5,663 9 %Total revenues increased 9%, or $5.7 million, to $65.9 million Current Year from $60.2 million Prior Year. The increase was primarily due to (i) increasedrevenue from the expansion of our own generic pharmaceutical product line of $1.6 million, (ii) increased revenues from our specialty generic injectableportfolio in Canada of $7.0 million, partially offset by (iii) decreased contract manufacturing revenues of $3.0 million.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) 2018 2017 $%Cost of revenues$43,480 $32,830 $10,650 32 %Selling, general and administrative23,408 19,904 3,504 18 %Product development and research14,076 19,265 (5,189)(27)%Totals costs and expenditures$80,964 $71,999 $8,965 12 % Total costs and expenditures increased 12%, or $9.0 million to $81.0 million in the Current Year from $72.0 million in the Prior Year. Cost of revenuesincreased as a percentage of total revenue to 66% in the Current Year as compared to 55% in the Prior Year. Cost of revenues increased $10.7 million in theCurrent Year mainly due to $8.2 million increase from incremental sales volume and $1.9 million increase from incremental material price. Our rapid growthhas contributed to some production inefficiencies, as we have expanded our manufacturing footprint and capacity in topical manufacturing and have addedsterile manufacturing capabilities to our facility. Cost of revenues included an incremental change in inventory reserves of $1.5 million related to inventoryand raw materials that were expected to expire in less than six months.Selling, general and administrative expenses in the Current Year increased by $3.5 million as compared to the Prior Year. The changes primarily consist of(i) $1.9 million impairment loss in the Current Year as compared to $0.1 million from the Prior year, (ii) $2.5 million incremental professional fees in theCurrent Year including ongoing legal litigation, and audit fees, partially offset by (iii) a reduction of $1.2 million in bad debt related expenses in the CurrentYear.Product development and research expenses decreased by $5.2 million as compared to the Prior Year. As we shift focus from our portfolio of topical genericprescription pharmaceutical products to injectable generic pharmaceutical products with the addition of our new facility, we saw a lower investment in R&Dfor 2018. This was mainly due to (i) $4.1 million decrease in clinical studies, (ii) $0.7 million decrease in salaries and related costs inclusive of stock basedcompensation related to options48and restricted stock, (iii) $1.3 million decrease in exhibit and pilot batch costs, partially offset by (iv) $0.6 million increase to overhead costs related to theR&D department as we expand in order to utilize our new facilities and injectable pipeline of products and $0.3 million increase in GDUFA and associatedfees. Other (Expense) Income, net (in thousands): Year Ended December 31,Increase/(Decrease) 2018 2017 $%Interest and other expense, net$(12,298)$(11,198)$1,100 10 %Foreign exchange (loss) / gain$(3,371)$7,719 $11,090 144 %Debt partial extinguishment of 2019 Notes$(4,235)$— $4,235 100 %Debt extinguishment of 2021 term loan$(1,315)$— $1,315 100 %Other (Expense) income, net increased in the Current Year primarily as a result of a $4.2 million loss on debt extinguishment from the 2019 Notes and $1.3million from the loss on debt extinguishment from the 2021 Term Loan in addition to $1.5 million of interest expense from the 2021 Term loan and $0.5million of interest expense from the Ares financings partially offset by an increase in capitalized interest of $0.8 million. Foreign exchange loss of $3.4 million in the Current Year is related to the foreign currency translation of our intercompany loans denominated in U.S. dollarsto our foreign subsidiaries to be repaid in November 2022. Depending on the changes in foreign currency exchange rates, we will continue to record a non-cash gain or loss on translation for the remaining term of these loans. Net loss attributable to common stockholders (in thousands, except per share numbers): Year Ended December 31,Increase/(Decrease) 2018 2017 $%Net loss attributable to common stockholders$(36,256)$(15,191)$21,065 (139)%Basic and diluted loss per share$(0.68)$(0.28)$0.40 (143)%Net loss for the Current Year was $36.3 million as compared to net loss of $15.2 million for the Prior Year. The increase is primarily due to increase i) in costsand expenses of $9.0 million, ii) in interest and other expenses of $1.1 million, iii) in foreign exchange loss of $11.1 million, (iv) debt extinguishment lossesof $5.5 million, partially offset by an increase in revenues of $5.7 million in the Current Year as discussed above.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$59,950 $62,035 $(2,085)(3)%Research and development services and otherincome252 977 (725)(74)%Total Revenues$60,202 $63,012 $(2,810)(4)%The decrease in product sales for the year ended December 31, 2017 as compared to the same period in 2016 was primarily due to a decrease in contractmanufacturing revenues of $8.0 million, specifically related to a decline in sales to one of our49customers, partially offset by increased revenue from the expansion of our own generic pharmaceutical product line, increased revenue from LidocaineHydrochloride topical solution and Zantac injectable and increased revenue from our specialty generic injectable portfolio in Canada.Research and development services and other income will not be consistent and will vary, from period to period, depending onthe required timeline of each development project and/or agreement. Costs and expenses (in thousands): Year Ended December 31,Increase/(Decrease) 2017 2016 $%Cost of revenues$32,830 $28,325 $4,505 16 %Selling, general and administrative19,904 15,005 4,899 33 %Product development and research19,265 17,140 2,125 12 %Totals costs and expenditures$71,999 $60,470 $11,529 19 % Cost of revenues increased as a percentage of total revenue to 55% for the year ended December 31, 2017 as compared to 45% for the same period in 2016.The increase in cost of revenue as a percentage of sales was primarily due to the increased revenue from our own generic pharmaceutical productline. Increase in cost of sales as a percentage of revenue was driven by new product launches as well as changes in product mix, pricing and related fees, inaddition to customer and product mix for our contract services revenue. For the year ended December 31, 2017, cost of revenues included $0.6 million ofcosts related to the write off of inventory related to two presentations of our frozen bag products. For the year ended December 31, 2017, cost of revenues alsoincluded an increase in inventory reserves of $0.9 million of costs related to inventory and raw materials that were expected to expire in less than six months.Consistent with our strategy, we have increased headcount in our production and quality groups to support our growth and expansion into injectablemanufacturing. Total employee related costs increased by $0.3 million, headcount increased from 87 at December 31, 2016 to 117 at December 31, 2017. Inaddition, our rapid growth has contributed to some production inefficiencies, as we are expanding our manufacturing footprint and capacity in topicalmanufacturing, and adding sterile manufacturing capabilities at the existing facility. In addition, costs as a percentage of sales increased as revenue fromcontract 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 sales. 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 increase 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.Other (Expense) Income, 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 gain/ (loss)$7,719 $(936)$8,655 100 %Other (expense) income decreased for the year ended December 31, 2017 as compared to the same period in 2016. The decrease is related to the interestexpense, amortization of debt discount and amortization of debt issuance costs of the Notes (see Note506), partially offset by capitalized interest of $3.6 million related to our facility expansion. Foreign exchange gain of $7.7 million was recorded for the yearended December 31, 2017, primarily related to the foreign currency translation of our intercompany loans denominated in U.S. dollars to our foreignsubsidiaries. These loans are to be repaid in November 2022. Depending on the 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.Net loss attributable to common stockholders (in thousands, except per share numbers): Year Ended December 31,Increase/(Decrease) 2017 2016 $%Net loss attributable to common stockholders$(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. The changeis due to increases in costs and expenses in 2017 offset by foreign currency exchange gain of $7.7 million. Liquidity and Capital Resources Our capital resources were comprised of cash and cash equivalents of $9.7 million and $26.7 million as of December 31, 2018 and December 31, 2017,respectively. We had working capital of $15.8 million at December 31, 2018. Our liquidity needs have typically arisen from the funding of our newmanufacturing facility, product manufacturing costs, research and development programs and the launch of new products. In the past, we have met these cashrequirements through cash inflows from operations, working capital management, and proceeds from borrowings discussed in Note 6. Although theconstruction of our new manufacturing facility was completed in October of 2018, additional investment will be needed to prepare the facility and ouremployees for a prior approval inspection from the FDA. In addition, we expect to continue to incur significant expenditures for the development of newproducts in our pipeline, and the manufacturing and sales and marketing of our existing product. While we rely heavily on cash flows from operatingactivities and borrowings from outside sources to execute our operational strategy and meet our financial commitments and other short-term financial needs,we cannot be certain that sufficient capital will be generated through operations or will be available to the Company to the extent required and on acceptableterms.The $13.2 million reduction in our cash during the twelve months ended December 31, 2018 was largely due to additional investment in the Company's newmanufacturing facility located in Buena, New Jersey as evidenced by the $25.3 million increase of property, plant and equipment, net, along with the timingof our accounts receivable collections and expense payments associated with our launch of eight new products in the U.S. market. In addition, we had anaccumulated deficit of $96.4 million as of December 31, 2018, and incurred a $36.3 million net loss and used $13.3 million in net cash from operatingactivities during the twelve months ended December 31, 2018.On April 27, 2018, we entered into separate exchange agreements with certain holders of the 2019 Notes. The agreements gave the holders the right toexchange, in aggregate, $75.1 million of the 2019 Notes for $75.1 million of new Convertible 4.75% Senior Notes due 2023 (the “2023 Notes”). The 2023Notes bear a fixed interest rate of 4.75% per year, payable semi-annually with the principal payable in May 2023. At the option of the holders, the 2023Notes are convertible into shares of our common stock, cash or a combination thereof. The initial conversion rate is $224.71 per share, subject to certainadjustments, related to either our stock price volatility, or the Company's declaration of a stock dividend, stock distribution, share combination or share splitexpected dividends or other anti-dilutive activities. In addition, holders will be entitled to receive additional shares of common stock for a potential increaseof the conversion rate up to $280.90 per share under a make-whole provision in some circumstances. We incurred debt issue costs of $1.6 million uponissuance of the 2023 Notes.In addition, on May 4, 2018, we filed a Registration Statement on Form S-3 ("the Form S-3") pursuant to the Securities Act of 1933, as amended. The Form S-3 registration allows us to issue, from time to time and at prices to be determined at or prior to the offering, up to $50.0 million of any combination of thesecurities described in the prospectus, either individually or in units should the need to raise cash arise. We did not timely file our financial statements for thequarter ended September 30, 2018. As a result, our access to offer up to $50.0 million of the identified securities was suspended for twelve months.51On December 13, 2018, we entered into a $25.0 million Revolving Credit Agreement (the “Revolver”) and Term Loan Agreement (the “2023 Term Loan”,and together with the Revolver, the “Senior Credit Facilities”). The Term Loan consists of (i) a $50.0 million initial term loan (the “Initial Term Loan”); (ii) a$30.0 million delayed draw term loan A (the “Delayed Draw Term Loan A”) and (iii) a $15.0 million delayed draw term loan B (the “Delayed Draw TermLoan B” and, together with the Delayed Draw Term Loan A, the “Delayed Draw Term Loans”). The Initial Term Loan matures on the earlier to occur of (a)three months prior to maturity of the 2023 Notes and (b) June 13, 2024. Commitments related to undrawn amounts of the Delayed Draw Term Loan Aterminate on June 30, 2019, and drawn amounts under the Delayed Draw Term Loans mature at the same time as the Initial Term Loan. The Revolver matureson the earlier to occur of (a) six months prior to the maturity of the 2023 Notes and (b) December 13, 2023. Our ability to borrow under the Revolver issubject to a borrowing base determined based upon eligible inventory, eligible equipment, eligible real estate and eligible receivables. The Senior CreditFacilities are secured by substantially all of our assets. All of our debt is subordinated to the Senior Credit Facilities. The 2023 Term Loan is subordinated tothe Revolver. The Senior Credit Facilities have customary financial and non-financial covenants, including affirmative, negative and reporting covenants,representations and warranties, and events of default, including cross-defaults on other material indebtedness, as well as events of default triggered by achange of control and certain actions initiated by the FDA. The financial covenants consist of a minimum revenue test, a minimum adjusted EBITDA test anda maximum total net leverage ratio.In December 2018 the Company used $52.8 million of proceeds from the Senior Credit Facilities to repurchase the 2019 Notes as well as $0.3 million ofproceeds to pay for transaction costs. The repurchase of the 2019 Notes for is considered a debt extinguishment under ASC 470-50. The 2019 Notes areaccounted for under cash conversion guidance ASC 470-20, which requires us to allocate the fair value of the consideration transferred upon settlement to theextinguishment of the liability component and the reacquisition of the equity component upon derecognition. We allocated the total amount of unamortizeddebt issuance costs incurred to the liability and equity components using the same proportions as the consideration transferred to extinguish the 2019 Notes.In accordance with the guidance above, we recorded $1.7 million as an extinguishment loss related to the repurchase of the 2019 Notes in the ConsolidatedStatement of Operations. In addition, we recorded a $2.9 million reduction of Additional Paid in Capital in connection with the extinguishment of the 2019Notes.In the event the Company needs liquidity beyond what is available from the Senior Credit Facilities, in order to continue normal business operations andexecution of the Company’s growth strategy, the Company will need to exercise its ability to significantly defer or reduce planned discretionary investmentsin research and development and capital projects or seek other financing alternatives. Other financing alternatives may include raising additional capitalthrough the sale of its equity, a strategic alliance with a third party or securing additional debt. If additional acquisition and growth opportunities arise,external financing will be required.Our operating activities used $13.3 million of cash during the year ended December 31, 2018 compared to $0.4 million of cash provided during the yearended December 31, 2017 and $0.5 million of cash used during the year ended December 31, 2016. The cash used for the year ended December 31, 2018 wasmostly due to an increase in accounts receivable of $4.0 million and inventories of $1.6 million, and a reduction in accounts payable of $3.4 million, inaddition to $7.3 million of interest paid on our Notes, Revolver, and Term Loans. The cash provided by operating activities for the year ended December 31,2017 was mostly due to the collections of accounts receivable in 2017, which contributed to a net decline in accounts receivable of $6.0 million offset by$5.4 million of interest expense paid in 2017 related to our Notes. The cash provided for the year ended December 31, 2016 was mostly due to the collectionof the Canadian goods and services tax (GST) and the harmonized sales tax (HST), of $5.2 million, in addition to other changes in operating assets andliabilities, offset by $5.4 million of interest expense related to our Notes. Consolidated revenue growth of 10% in 2018 was primarily driven by increased sales in Canada. Competitors in Canada experienced drug shortages andTeligent was able to capitalize on these opportunities, increasing sales volume and cash flow from operating activities by $7.4 million more than anticipated.During the year some products had some production constraints which resulted in a delay in shipping of the manufactured products, this had a negativeimpact on the statement of operations and operating cash flows as Teligent had to absorb the cost of this delay. Overall economic conditions of the marketwere not favorable during 2018 as the pharmaceutical industry was under scrutiny and market pressure to not increase prices. Sales for U.S. operations werealso negatively impacted due to the delay in supply from suppliers, which in turn impacted sales to our customers.Our investing activities used $25.3 million during the year ended December 31, 2018 compared to $40.4 million and $20.1 million of cash used in the yearsended December 31, 2017 and December 31, 2016, respectively. The funds used for the year ended December 31, 2018 included $25.3 million in capitalexpenditure, the majority of which were for the facility expansion in Buena, NJ. The funds used for the year ended December 31, 2017 included $40.4 millionin capital expenditures, the majority of which were also for the facility expansion in Buena. The funds used for the year ended December 31, 2016 included$16.7 million in capital expenditures, for which the majority were also for the facility expansion in Buena, as well as52expenditures for the Estonian lab, and $3.4 million in product acquisition costs including Sebela and the buyout of the royalty stream related toAstraZeneca. Our financing activities provided $25.3 million of cash during the year ended December 31, 2018 compared to $0.3 million of cash provided by and no cashused or provided by financing activities in the year ended December 31, 2017 and December 31, 2016, respectively. The cash provided during the year endedDecember 31, 2018 consisted of proceeds from the 2021 Term Loan which was later replaced by the Senior Credit Facilities with Ares Capital Management.The cash provided during the year ended December 31, 2017 consisted of proceeds from the exercise of common stock options and warrants. The cash usedduring the year ended December 31, 2016 was mainly due to principal payments on capital lease obligations offset by proceeds from the exercise of commonstock warrants and options.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 Our contractual obligations and commitments as of December 31, 2018 are presented below. Outstanding debt and interest obligation is discussed in Note 6of our Consolidated Financial Statements. As more fully described under Item 2 - Properties, we lease a warehouse in Vineland, New Jersey, office space inIselin, New Jersey, office space in Mississauga, Canada and office and laboratory space in Tallinn, Estonia. Our remaining obligations under these leases aresummarized below. Payments Due by Period(in thousands)Contractual ObligationsTotalLess than 1 Year1-3 Years3-5 YearsMore than 5YearsShort term debt obligations$15,702 $15,702 $— $— $— Long term debt obligations160,090 — — 160,090 — Interest on debt obligations37,583 9,063 18,150 10,370 — Operating Lease3,234 573 1,244 1,217 200 Total$216,609 $25,338 $19,394 $171,677 $200 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, 2018, and will be paid over the next several years in accordance withagreed upon milestones. Critical Accounting Policies and EstimatesOur 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, accounts payable and other accrued liabilities at December 31, 2018approximate their fair value for all periods presented. The Company measures fair value in accordance with ASC 820-10, “Fair Value Measurements andDisclosures”. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptionsthat market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier valuehierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:53 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 AccountsThe 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 RecognitionThe Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which theentity expects to receive in exchange for those goods or services. The Company’s revenue is recorded net of accruals for estimated chargebacks, rebates, cashdiscounts, other allowances, and returns. The Company derives its revenues from three types of transactions: sales of its own pharmaceutical products(Company product sales), sales of manufactured product for its customers (contract manufacturing sales), and research and product development servicesperformed for third parties. Due to differences in the substance of these transaction types, the transactions require, and the Company utilizes, different revenuerecognition policies for each. Taxes collected from customers and remitted to government authorities and that are related to the sales of the Company’sproducts are excluded from revenues.Adoption of ASC Topic 606, "Revenue from Contracts with Customers”In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard, including subsequently issuedamendments, replaces most existing revenue recognition guidance in U.S. GAAP. The key focus of the new standard is that an entity should recognizerevenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to beentitled in exchange for those goods or services.The Company performed a comprehensive review of its existing revenue arrangements as of January 1, 2018 following the five-step model. Based on theCompany's analysis, there were no changes identified that impacted the amount or timing of revenues recognized under the new guidance as compared to theprevious guidance. Additionally, the Company's analysis indicated that there were no changes to how costs to obtain and fulfill our customer contracts wouldbe recognized under the new guidance as compared to the previous guidance. The impact of the adoption of this standard on the Company's ConsolidatedBalance Sheet, Consolidated Statement of Operations, and Consolidated Statement of Cash Flows was not material. The adoption of the new guidanceimpacted the way the Company analyzes, documents, and discloses revenue recognition under customer contracts beginning on January 1, 2018 and resultedin additional disclosures in the Company's financial statements.Company Product Sales54Revenue from Company product sales is recognized upon transfer of control of a product to a customer at a point in time, generally as the Company'sproducts are sold on an FOB destination basis and because inventory risk and risk of ownership passes to the customer upon delivery.Company product sales are recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and returns.Revenue and Provision for Sales Returns and Allowances As is customary in the pharmaceutical industry, the Company’s product sales are subject to a variety of deductions including chargebacks, rebates, cashdiscounts, other allowances, and returns. Product sales are recorded net of accruals for returns and allowances ("SRA"), which are established at the time ofsale. The Company analyzes the adequacy of its accruals for returns and allowances quarterly. Amounts accrued for sales deductions are adjusted when trendsor significant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. These provisions are estimates based onhistorical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with direct andindirect customers. The Company uses a variety of methods to assess the adequacy of its returns and allowances reserves to ensure that its financial statementsare fairly stated. These include periodic reviews of customer inventory data, customer contract programs, subsequent actual payment experience, and productpricing trends to analyze and validate the return and allowances reserves.Chargebacks are one of the Company's most significant estimates for recognition of product sales. A chargeback represents an amount payable in the future toa wholesaler for the difference between the invoice price paid to the Company by its wholesale customer for a particular product and the negotiated contractprice that the wholesaler’s customer pays for that product. The Company’s chargeback provision and related reserve varies with changes in product mix,changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of theexpected wholesaler sell-through levels to indirect customers at contract prices. The Company validates the chargeback accrual quarterly through a review ofthe inventory reports obtained from its largest wholesale customers. This customer inventory information is used to establish the estimated liability for futurechargeback claims based on historical chargeback and contract rates. These large wholesalers represent a majority 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.Rebates are used for various discounts and rebates provided to customers. This account has been used for various one-time discounts given to customers. TheCompany reviews the percentage of products sold through these programs by reviewing chargeback data and uses the appropriate percentages to calculatethe rebate accrual. Rebates are invoiced monthly, quarterly or annually and reviewed against the accruals. Other items that could be included in accruedrebates would be price protection fees, shelf stock adjustments (SSAs), or other various amounts that would serve as one time discounts on specific products. 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. 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.Accounting PronouncementsSee Note 3 to the Consolidated Financial Statements for Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements.Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 55As of December 31, 2018, our principal debt obligation was related to our 2019 and 2023 Notes and New Senior Credit Facilities. Interest accrues at a fixedrate of 3.75% on the outstanding principal amount of the 2019 Notes and is paid semi-annually every June 15 and December 15 until the 2019 Notes matureon December 15, 2019. Interest accrues at a fixed rate of 4.75% on the outstanding principal amount of the 2023 Notes and is paid semi-annually every May1 and November 1 until the 2023 Notes mature on May 1, 2023. Since the interest rate is fixed, we have no market risk related to the 2019 and 2023 Notes. On December 13, 2018, pursuant to a Commitment Letter, dated November 12, 2018, between us and Ares Management LLC, we entered into: (i) a First LienRevolving Credit Agreement, by and among us, as the borrower, certain subsidiaries of the ours, as guarantors, the lenders from time to time party thereto, andACF Finco I LP, as administrative agent (the “Revolver Credit Agreement”) and (ii) a Second Lien Credit Agreement, by and among the Company, as theborrower, certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, and Ares Capital Corporation, as administrativeagent (the “Second Lien Credit Agreement” and, together with the Revolver Credit Agreement, the “New Senior Credit Facilities”).The New Senior Credit Facilities consist of an asset based revolving credit facility of $25.0 million due November 2022 ("Revolver"), a term loan of $80.0million due February 2023 (“2023 Term Loan”), and a delayed draw term loan of $15.0 million also due in February 2023 (“2023 Delayed Draw TermLoan”). The Revolver bears interest at a rate of one, two, three or six-month LIBOR plus 3.75% or base rate plus 2.75%, whereas the 2023 Term Loan and2023 Delayed Draw Term Loan bear interest at a rate of LIBOR plus 8.75% or base rate plus 2.75% with a 24-month paid-in-kind interest option available tous should it choose to defer cash payments in order to maintain the liquidity needed to continue launching new products. All three tranches of funding aresubject to market risk.Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable and Notes. The fair values of cash and cash equivalents,accounts receivable and accounts payable approximate book value because of the short maturity of these instruments. As of December 31, 2018, based onlevel 2 inputs, the fair value of our Notes (2019 Notes and 2023 Notes) was approximately $67.6 million compared to their carrying value of $71.3million. For description of the fair value hierarchy and the Company's fair value methodologies, see Note 3 " Summary of Significant AccountingPolicies." In addition, the value of our Senior Credit Facilities was stated at carrying value at December 31, 2018. The Company believes it could obtainborrowings at December 31, 2018 with comparable terms as the December 13, 2018 Senior Credit Facilities, therefore, the carrying value approximates fairvalue. At December 31, 2018, the majority 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 Evaluation of Disclosure Controls and Procedures Our 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, 2018, 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 31,2018 (the “Evaluation Date”), because of the material weaknesses in our internal control over financial reporting described below.56Management's Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)under the Exchange Act and based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission (“the COSO framework”). Our internal control over financial reporting is a process designed to providereasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordancewith GAAP.An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls,and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, our internal control overfinancial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, orfraud. Effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.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, 2018. In making this assessment, management used the criteria set forth by the COSO framework.Based on evaluation under these criteria, management determined, based upon the existence of the material weaknesses described below, that we did notmaintain effective internal control over financial reporting as of the Evaluation Date.A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists thata material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.Control EnvironmentWe did not maintain an effective control environment based on the criteria established in the COSO framework. We have identified deficiencies in theprinciples associated with the control environment of the COSO framework. Specifically, these control deficiencies constitute material weaknesses, eitherindividually or in the aggregate, relating to: (i) appropriate organizational structure, reporting lines, and authority and responsibilities in pursuit ofobjectives, (ii) our commitment to attract, develop, and retain competent individuals, and (iii) holding individuals accountable for their internal controlrelated responsibilities. As disclosed in the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data”, thesematerial weaknesses contributed to accounting errors.We did not maintain an effective control environment to enable the identification and mitigation of risks of accounting errors based on the contributingfactors to material weakness in the control environment, including:•We did not attract, develop, and retain competent management, accounting, financial reporting, internal audit, and information systems personnel orresources to ensure that internal control responsibilities were performed and that information systems were aligned with internal control objectives.•Our oversight processes and procedures that guide individuals in applying internal control over financial reporting were not adequate in preventingor detecting accounting errors.Risk AssessmentWe did not design and implement an effective risk assessment based on the criteria established in the COSO framework. We have identified deficiencies inthe principles associated with the risk assessment component of the COSO framework. Specifically, these control deficiencies constitute material weaknesses,either individually or in the aggregate, relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risksto achieve these objectives, and (iii) identifying and assessing changes in the business that could impact our system of internal controls.Control ActivitiesWe did not design and implement effective control activities based on the criteria established in the COSO framework. We have identified deficiencies in theprinciples associated with the control activities component of the COSO framework. Specifically, these control deficiencies constitute material weaknesses,either individually or in the aggregate, relating to: (i) selecting and developing control activities and information technology that contribute to themitigation of risks and support achievement of57objectives and (ii) deploying control activities through policies that establish what is expected and procedures that put policies into action.The following deficiencies in control activities, among others, contributed to accounting errors or the potential for there to have been accounting errors insubstantially all financial statements account balances and disclosures:•Lack of sufficient resources within the accounting and financial reporting department to review the accounting for non-recurring complex debttransactions;•Ineffective controls over price concessions in Canada specifically, we have inadequate controls to ensure that the information necessary to properlyrecord transactions is adequately communicated on a timely basis from non-financial personnel to those responsible for accounting and financialreporting;•Ineffective controls over the application of accounting guidance and the Company’s policy including the allowance for doubtful accounts; and•Ineffective controls over the transition, implementation and disclosure of the new accounting standard related to revenue recognition, specificallyrelated to accounting for wholesaler fees, Medicaid and Medicare payments, and other rebatesInformation and CommunicationWe did not generate and provide quality information and communication based on the criteria established in the COSO framework. We have identifieddeficiencies in the principles associated with the information and communication component of the COSO framework. Specifically, these control deficienciesconstitute material weaknesses, either individually or in the aggregate, relating to: (i) obtaining, generating, and using relevant quality information tosupport the function of internal control, and (ii) communicating accurate information internally and externally, including providing information pursuant toobjectives, responsibilities, and functions of internal control.Monitoring ActivitiesWe did not design and implement effective monitoring activities based on the criteria established in the COSO framework. We have identified deficiencies inthe principles associated with the monitoring component of the COSO framework. Specifically, these control deficiencies constitute material weaknesses,either individually or in the aggregate, relating to: (i) selecting, developing, and performing ongoing evaluation to ascertain whether the components ofinternal controls are present and functioning, and (ii) evaluating and communicating internal control deficiencies in a timely manner to those partiesresponsible for taking corrective action.The following were contributing factors to the material weaknesses in monitoring activities:• Internal audit staffing levels were insufficient which limited our ability to effectively monitor internal controls.• Failure to effectively communicate relevant information and internal control deficiencies to our Audit Committee for appropriate oversight, monitoring andenforcement of corrective action.• Not communicating relevant information within our organization.Deloitte & Touche LLP, our independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as ofDecember 31, 2018. Deloitte &Touche LLP's opinion, as stated in their report which appears in Item 8 of this Form 10-K, is consistent with management'sreport on internal control over financial reporting as set forth above.Changes in Internal Control Over Financial ReportingExcept for the identification of the material weaknesses described above, there were no changes during the year ended December 31, 2018 in our internalcontrol over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Accounting errors corrected during the quarter were systemic to the material weaknesses previously identified by the Company.Remediation Plan and StatusOur remediation efforts are ongoing and we will continue our initiatives to implement and document policies, procedures, and internal controls.Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2019 andbeyond, as necessary. We will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot beconsidered completely remediated until the applicable controls58have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.While we believe the steps taken to date and those planned for implementation will improve the effectiveness of our internal control over financial reporting,we have not completed all remediation efforts identified herein. Accordingly, as we continue to monitor the effectiveness of our internal control overfinancial reporting in the areas affected by the material weaknesses described above, we have and will continue to perform additional procedures prescribedby management, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensurethat our consolidated financial statements are fairly stated in all material respects. The following remediation activities highlight our commitment toremediating our identified material weaknesses:Control EnvironmentWe have undertaken steps to address material weaknesses in the control environment. The control environment, which is the responsibility of management,sets the tone of the organization, influences the control consciousness of its people, and is the foundation for all other components of internal control overfinancial reporting. Our Audit Committee and management have emphasized and continued to emphasize the importance of internal control over financialreporting, as well as the integrity of our financial statements.Our management has taken and will continue to take steps to ensure that previously identified control deficiencies will be remediated through theimplementation of uniform accounting and internal control policies and procedures with the proper oversight to promote compliance with GAAP andregulatory requirements.To date, we hired a new senior leader in one of our foreign affiliates who, among other responsibilities, ensures customer contract terms and price concessionsare reviewed with key members of the accounting and financial reporting department on a timely basis to appropriately reflect in the financial records. Inaddition, we hired new accounting and financial reporting team members and engaged external resources with significant experience with systems similar tothe Company's ERP system and infrastructure to provide additional capacity, analytical and functional capabilities, and cross-training. The addition ofskilled personnel will allow us to select and develop appropriate policies, procedures, and controls to strengthen our control environment. Management willcontinue to evaluate and hire additional resources within our accounting and financial reporting, internal audit, and information technology functions withthe appropriate experience, certifications, education, and training for key financial reporting and accounting positions. Management believes this will reducethe risk of a material misstatement resulting from the material weaknesses described above. However, it will require a period of time to determine theoperating effectiveness of these newly implemented internal controls over financial reporting.Risk AssessmentWe have begun implementing a process for performing detailed reviews of financial records at our corporate headquarters for the purpose of identifying andcorrecting accounting errors. We will continue to enhance risk assessment procedures and conduct a comprehensive risk assessment to enhance overallcompliance. The results of this effort are expected to enable us to effectively identify, develop, and implement controls and procedures to address risks.Control ActivitiesWe have begun the process of redesigning and implementing internal control activities. We also plan to establish policies and procedures and enhancecorporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability toenable remediating our material weaknesses.Information and CommunicationWe have taken various steps to enhance our practices as it relates to information and communication, including conducting periodic reviews of the ERPsystem access to ensure appropriate segregation of duties exists for functional and administrative users and establishing policies and procedures addressingthe internal control framework and operating effectiveness of the Company’s third-party ERP service provider.Monitoring ActivitiesIn addition to the items noted above, as we continue to evaluate, remediate, and improve our internal control over financial reporting, executive managementmay elect to implement additional measures to address control deficiencies or may determine that the remediation efforts described above requiremodification. Executive management, in consultation with and at the59direction of our Audit Committee, will continue to assess the control environment and the above-mentioned efforts to remediate the underlying causes of theidentified material weaknesses, including through the following:• We will increase internal audit, finance, accounting, and information technology staffing levels.• We are also developing effective communication plans relating to, among other things, identification of deficiencies and recommendations for correctiveactions. These plans will apply to all parties responsible for remediation.Inherent Limitations on Effectiveness of ControlsManagement, including our CEO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent allerrors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives ofthe control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that allcontrol issues, misstatements, errors, and instances of fraud, if any, within our organization have been or will be prevented or detected.These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error ormistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of thecontrols. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance thatany design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to futureperiods are subject to risks. Over time, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of thedegree of compliance with policies or procedures. 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 2019Annual 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 2019 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 2019 Annual Meeting of Stockholders. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 60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 2019 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 2019 Annual Meeting of Stockholders. 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 tothe Company’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 onForm S-8 (Registration No. 333-160342), filed June 30, 2009).(10.2)#IGI, Inc. 1999 Director Stock Option Plan, as amended (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statementon Form S-8 (Registration No. 333-160342, filed June 30, 2009).(10.3)#IGI, Inc. 1999 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement onForm S-8 (Registration No. 333-160342), filed June 30, 2009).(10.4)#IGI Laboratories, Inc. 2009 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Company’sReport on Form 8-K, filed June 4, 2014).(10.5)#Form of Non-Qualified Stock Option Agreement under the IGI Laboratories, Inc. 2009 Equity Incentive Plan (incorporated by reference toExhibit 10.2 to the Company’s Report on Form 8-K, filed July 2, 2009).(10.6)#Form of Stock Option Award Agreement under the IGI Laboratories, Inc. 2009 Equity Incentive Plan (incorporated by reference to Exhibit10.2 to the Company’s Report on Form 8-K, filed July 20, 2011).61(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).(10.9)#Employment Agreement dated July 14, 2011 between IGI Laboratories, Inc. and Jenniffer Collins (incorporated by reference to Exhibit10.1 to 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 toExhibit 10.1 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 onForm 8-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 onForm 8-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, theother Persons party thereto that are designated as Credit Parties, General Electric Capital Corporation as Agent for all Lenders, GE CapitalBank as a Lender, and the other financial institutions party thereto as Lenders (incorporated by reference to Exhibit 10.1 to the Company’sReport on Form 8-K, filed November 24, 2014).(10.16)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 (incorporatedby reference 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 tothe Company’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.as Borrowers, General Electric Capital Corporation as Agent, and the Lenders signatory thereto (incorporated by reference to Exhibit 10.2to the Company’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’sReport on Form 10-Q, filed November 9, 2015).62(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).(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 byreference to 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 referenceto Exhibit 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.,Barbados Branch, on the one hand, and Teligent, Inc. and Teligent Jersey Limited, on the other hand (incorporated by reference to Exhibit10.1 to the Company’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,on the one hand, and Teligent Jersey Limited, on the other hand (incorporated by reference to Exhibit 10.2 to the Company’s Report onForm 8-K, filed December 15, 2015).(10.30)#Teligent, Inc. 2016 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K,filed August 9, 2018.(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). (10.33)#Indenture, dated May 1, 2018, by and between the Company and Wilmington Trust, National Association, as trustee (incorporated byreference to Exhibit 10.1 to the Company’s Report on Form 8-K, filed May 2, 2018).(10.34)#Form of Exchange Agreement Related to 4.75% Convertible Senior Notes (incorporated by reference to Exhibit 99.1 to the Company’sReport on Form 8-K, filed May 2, 2018).(10.35)#Credit Agreement, dated June 1, 2018, by and among the Company, the guarantors party thereto from time to time, each lender from timeto time party thereto and Cantor Fitzgerald Securities (incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K,filed June 5, 2018).(10.36)#Commitment Letter, dated November 12, 2018, by and between the Company and Ares Management LLC (incorporated by reference toExhibit 10.1 to the Company’s Report on Form 8-K, filed November 13, 2018).63(10.37)#First Lien Revolving Credit Agreement, dated December 13, 2018, by and among the Company, certain Subsidiaries thereof, the Lendersfrom time to time party thereto, and ACF Finco LLP, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’sReport on Form 8-K, filed December 14, 2018).(10.38)#Second Lien Credit Agreement, dated December 13, 2018, by and among the Company, certain Subsidiaries thereof, the Lenders from timeto time party thereto, and Ares Capital Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company’sReport as Form 8-K, filed December 14, 2018).(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.(23.2)*Consent of Deloitte & Touche LLP(31.1)*Certification of the President and Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(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, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(33.1)*Separation Agreement, dated May 7, 2018, by and between the Company and Jenniffer Collins (incorporated by reference to Exhibit 33.1to the Company’s Report on Form 10-Q, filed May 15, 2018).(101)*The following financial information from this Annual Report on Form 10-K for the year ended December 31, 2018, formatted in XBRL(Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Statements of Operations; (ii) theConsolidated Balance Sheets; (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to Consolidated Financial Statements,tagged as blocks of text.*Filed herewith.#Indicates management contract or compensatory plan.+Portions of this Exhibit were omitted and filed separately with the Secretary of the SEC pursuant to a request for confidential treatment that has been grantedby the SEC.64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: April 1, 2019 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 April 1, 2019Jason Grenfell-Gardner (Principal Executive Officer) /s/ Damian Finio Chief Financial Officer April 1, 2019Damian Finio (Principal Financial Officer) /s/ Steven Koehler Director April 1, 2019Steven Koehler /s/ James Gale Director April 1, 2019James Gale /s/ Bhaskar Chaudhuri Director April 1, 2019Bhaskar Chaudhuri /s/ John Celentano Director April 1, 2019John Celentano /s/ Carole Ben-Maimon Director April 1, 2019Carole Ben-Maimon /s/ Thomas Sabatino Director April 1, 2019Thomas Sabatino 65INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firms F-2 Consolidated Balance Sheets as of December 31, 2018 and 2017 F-6 Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 F-7 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2018, 2017 and 2016 F-8 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 F-9 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2018, 2017 and 2016 F-11 Notes to Consolidated Financial Statements F-12 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts F-421REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the stockholders and the Board of Directors of Teligent, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheet of Teligent, Inc. and subsidiaries (the "Company") as of December 31, 2018, and the relatedconsolidated statement of operations, comprehensive income (loss), stockholders' equity, and cash flows, for the year ended December 31, 2018, and therelated notes and the schedule listed in the Index to Consolidated Financial Statements (collectively referred to as the "financial statements "). In our opinion,the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of itsoperations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States ofAmerica.We have also 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, 2018, based on criteria established in Internal Control — Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 1, 2019 expressed an adverse opinion on the Company'sinternal control over financial reporting.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 audit. 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 audit 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 audit included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audit provide a reasonable basis for our opinion./s/ Deloitte & Touche LLPParsippany, New JerseyApril 1, 2019 We have served as the Company’s auditor since 2018.2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Teligent, Inc.Opinion on the Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Teligent, Inc and subsidiaries (the “Company”) as of December 31, 2018, based on criteriaestablished in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Companyhas not maintained effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control — IntegratedFramework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedfinancial statements as of and for the year ended December 31, 2018, of the Company and our report dated April 1, 2019 expressed an unqualified opinion onthose financial statements.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 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, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.Material WeaknessesA material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibilitythat a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The followingmaterial weaknesses have been identified and included in management's assessment:Control Environment - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) appropriateorganizational structure, reporting lines, and authority and responsibilities in pursuit of objectives, (ii)3commitment to attract, develop, and retain competent individuals, and (iii) holding individuals accountable for their internal control related responsibilities.Risk Assessment - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) identifying, assessing, andcommunicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in thebusiness that could impact the system of internal controls.Control Activities - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) selecting and developingcontrol activities and information technology that contribute to the mitigation of risks and support achievement of objectives and (ii) deploying controlactivities through policies that establish what is expected and procedures that put policies into action.Information and Communication - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) obtaining,generating, and using relevant quality information to support the function of internal control, and (ii) communicating accurate information internally andexternally, including providing information pursuant to objectives, responsibilities, and functions of internal control.Monitoring - control deficiencies constituting material weaknesses, either individually or in the aggregate, relating to: (i) selecting, developing, andperforming ongoing evaluation to ascertain whether the components of internal controls are present and functioning, and (ii) evaluating and communicatinginternal control deficiencies in a timely manner to those parties responsible for taking corrective action.These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financialstatements as of and for the year ended December 31, 2018, of the Company, and this report does not affect our report on such financial statements./s/ DELOITTE & TOUCHE LLP Parsippany, New JerseyApril 1, 20194REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the stockholders and the Board of Directors of Teligent, Inc.Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheet of Teligent, Inc. and subsidiaries (the “Company”) as of December 31, 2017, and the relatedconsolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the years ended December 31, 2017 and 2016,and the related notes and schedule II (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financialstatements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cashflows for the years ended December 31, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (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 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 consolidated 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 consolidated financial statements, whether due to error or fraud,and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresin the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ EisnerAmper LLPWe served as the Company’s auditor from 2010 to 2018.EISNERAMPER LLPIselin, New JerseyMarch 19, 20185TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share and per share information) 12/31/201812/31/2017ASSETSCurrent assets:Cash and cash equivalents$9,705 $26,692 Restricted cash2,892 — Accounts receivable, net of allowance for doubtful accounts of $2,636 and $2,185, as of December 31,2018 and December 31, 2017, respectively16,120 12,742 Inventories16,296 16,075 Prepaid expenses and other receivables3,373 3,622 Total current assets48,386 59,131 Property, plant and equipment, net91,775 68,355 Intangible assets, net48,375 56,017 Goodwill470 471 Other1,886 611 Total assets$190,892 $184,585 LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:Accounts payable$5,933 $10,595 Accrued expenses9,842 8,101 Deferred income, current2,426 — Convertible 3.75% Senior Notes, net of debt discount and debt issuance costs (face of $15,702 as ofDecember 31, 2018 )14,411 — Total current liabilities32,612 18,696 Convertible 3.75% Senior Notes, net of debt discount and debt issuance costs (face of $143,750 as ofDecember 31, 2017)— 120,977 Convertible 4.75% Senior Notes, net of debt discount and debt issuance costs (face of $75,090 as ofDecember 31, 2018)56,909 — Revolver, net of debt issuance costs (face of $15,000 as of December 31, 2018)15,000 — 2023 Term Loan, net of debt issuance costs (face of $70,000 as of December 31, 2018)67,662 — Deferred tax liability215 159 Other long term liabilities73 — Total liabilities172,471 139,832 Commitments and ContingenciesStockholders’ equity:Common stock, $0.01 par value, 100,000,000 shares authorized; 53,774,221 and 53,400,281 shares issuedand outstanding as of December 31, 2018 and December 31, 2017, respectively557 554 Additional paid-in capital116,864 106,312 Accumulated deficit(96,350)(60,094)Accumulated other comprehensive loss, net of taxes(2,650)(2,019)Total stockholders’ equity18,421 44,753 Total liabilities and stockholders’ equity$190,892 $184,585 The accompanying notes are an integral part of the consolidated financial statements.6TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSFor the years ended December 31, 2018, 2017 and 2016(in thousands, except shares and per share information) 2018 2017 2016 Revenue, net$65,865 $60,202 $63,012 Costs and Expenses:Cost of revenues43,480 32,830 28,325 Selling, general and administrative expenses23,408 19,904 15,005 Product development and research expenses14,076 19,265 17,140 Total costs and expenses80,964 71,999 60,470 Operating (loss) income(15,099)(11,797)2,542 Other (Expense) Income:Foreign currency exchange (loss) gain(3,371)7,719 (936)Debt partial extinguishment of 2019 Notes(4,235)— — Debt extinguishment of 2021 Term Loan(1,315)— — Interest and other expense, net(12,298)(11,198)(13,304)Loss before income tax expense(36,318)(15,276)(11,698)Income tax (benefit) expense(62)(85)287 Net loss attributable to common stockholders$(36,256)$(15,191)$(11,985)Basic and diluted loss per share$(0.68)$(0.28)$(0.23)Weighted average shares of common stock outstanding:Basic and diluted53,592,930 53,323,954 53,078,158 The accompanying notes are an integral part of the consolidated financial statements.7TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)For the years ended December 31, 2018, 2017 and 2016(in thousands) 2018 2017 2016 Net loss$(36,256)$(15,191)$(11,985)Other comprehensive loss, net of tax Foreign currency translation adjustment(631)(414)(1,475)Other comprehensive loss(631)(414)(1,475)Comprehensive loss$(36,887)$(15,605)$(13,460)The accompanying notes are an integral part of the consolidated financial statements.8TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2018, 2017 and 20162018 2017 2016 Cash flows from operating activities:Net loss$(36,256)$(15,191)$(11,985)Reconciliation of net loss to net cash provided by (used in) operating activities:Depreciation of fixed assets2,579 1,711 946 Gain on sale of assets(20)— — Provision for write down of inventory1,363 2,132 1,400 Provision for bad debt452 1,767 327 Issuance of stock to consultant102 — 189 Stock based compensation1,970 3,295 2,999 Amortization of debt costs and debt discount9,226 9,586 8,427 Amortization of intangibles3,096 2,930 2,833 Deferred income taxes73 — — Foreign currency exchange loss (gain)3,371 (7,719)936 Partial extinguishment of 3.75% senior notes4,235 — — Extinguishment of 2021 term loan1,315 — — Loss on impairment of intangible assets1,924 113 16 Changes in operating assets and liabilities:Accounts receivable(4,047)5,964 (7,936)Inventories(1,877)(5,275)(5,042)Prepaid expenses and other current receivables224 (748)3,427 Other assets(26)192 667 Accounts payable and accrued expenses(3,405)1,641 2,825 Deferred income2,426 — (476)Net cash (used in) provided by operating activities(13,275)398 (447)Cash flows from investing activities:Capital expenditures(25,332)(40,429)(16,655)Disposal of fixed assets38 — — Product acquisition costs, net— — (3,421)Net cash used in investing activities(25,294)(40,429)(20,076)Cash flows from financing activities:Proceeds from 2021 term loan25,000 — — Proceeds from 2023 term loan70,000 — — Proceeds from 2021 revolver15,000 — — Repayment of 2021 term loan, net(25,550)— — Debt issuance costs(6,239)— — Repurchase of 3.75% senior notes(53,123)— — Proceeds from exercise of common stock options and warrants251 269 96 Principal payments on capital lease obligations(6)— (70)Payment (recovery) from stockholder, net— — (36)Net cash provided by (used in) financing activities25,333 269 (10)Effect of exchange rate on cash, cash equivalents and restricted cash(860)446 (301)Net decrease in cash, cash equivalents and restricted cash(13,236)(39,762)(20,533)Cash, cash equivalents and restricted cash at beginning of year27,165 66,481 87,315 Cash, cash equivalents and restricted cash at end of year$13,069 $27,165 $66,481 Supplemental Cash flow information:Cash payments for interest$7,340 $5,391 $5,393 Cash payments for income taxes89 126 113 Non cash investing and financing transactions:Acquisition of capital expenditures in accounts payable and accrued expenses568 3,186 1,805 Capitalized stock compensation in capital expenditures96 127 91 Issuance of stock to consultant102 — 189 9The accompanying notes are an integral part of the consolidated financial statements.10TELIGENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYFor the years ended December 31, 2018, 2017 and 2016(in thousands, except share information)AdditionalAccumulatedOtherTotal Common StockPaid-InAccumulatedComprehensiveStockholders’ SharesAmountCapitalDeficitLossEquityBalance, December 31, 201553,000,689 $549 $99,258 $(32,918)$(130)$66,759 Issuance of stock to consultant25,000 189 189 Stock based compensation expense 3,090 3,090 Stock options exercised61,834 1 95 96 Issuance of stock for vested restrictedstock units60,918 1 1 Recovery from stockholder, net(36)(36)Tax benefit related to stock options28 28 Cumulative translation adjustment(1,475)(1,475)Net loss— — — (11,985)— (11,985)Balance, December 31, 201653,148,441 $551 $102,624 $(44,903)$(1,605)$56,667 Stock based compensation expense 3,422 3,422 Stock options exercised171,566 2 267 269 Issuance of stock for vested restrictedstock units80,274 1 (1) — Cumulative translation adjustment(414)(414)Net loss— — — (15,191)— (15,191)Balance, December 31, 201753,400,281 $554 $106,312 $(60,094)$(2,019)$44,753 Issuance of stock to consultant25,000 102 102 Stock based compensation expense2,066 2,066 Stock options exercised239,000 2 249 251 Issuance of stock for vested restrictedstock units109,940 1 (1) — Fair value of conversion feature onConvertible 4.75% Senior Notes 18,658 18,658 Partial extinguishment of equitycomponent of Convertible 3.75% SeniorNotes(10,522)(10,522)Cumulative translation adjustment(631)(631)Net loss(36,256)(36,256)Balance, December 31, 201853,774,221 $557 $116,864 $(96,350)$(2,650)$18,421 The accompanying notes are an integral part of the consolidated financial statements.11TELIGENT, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.Correction of Previously Issued Consolidated Financial StatementsSubsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, management determined adjustments wereneeded to correct the presentation of certain immaterial accounting errors in the Company’s previously reported consolidated financial statements for theyears ended December 31, 2017 and 2016. Accordingly, the accompanying consolidated financial statements as of and for the years ended December 31,2017 and 2016, and the related notes hereto (including the Company’s quarterly results disclosed in Note 15, Quarterly Results), have been revised to correctthese immaterial accounting errors (the “Revision”). A summary of these immaterial accounting errors, and their impact on the accompanying consolidatedfinancial statements are, as follows:(1) The Company pays wholesalers certain fees associated with the sale of the Company's product. The payment of these fees had been historically classifiedby the Company as cost of revenues and accrued expenses prior to the adoption of ASC 606, Revenue from Contracts with Customers ("ASC 606"). Asdisclosed in Note 7, Revenues, Recognition and Allowances, the Company adopted ASC 606 on January 1, 2018 using the modified retrospective method, atwhich time the Company began classifying the payment of wholesaler fees as a reduction of revenue and accounts receivable. Upon further analysis,however, management determined that these fees should have always been classified as a reduction of revenue and accounts receivable, rather than as costs ofrevenues and accrued expenses, because the services provided by the Company’s wholesalers cannot generally be provided by third parties and theunderlying fees are not specifically identifiable from other services. As a result, the accompanying Consolidated Statement of Operations, Consolidated Balance Sheet and Consolidated Statements of Cash Flows for the yearsended December 31, 2017 and 2016 have been revised to correct the presentation of wholesaler fees as a reduction of revenue rather than as cost of revenues.The correction of this immaterial error resulted in a reduction in previously reported revenue and cost of revenue of approximately $7.0 million and$3.9 million, respectively, for the years ended December 31, 2017 and 2016. In addition, the correction of this error resulted in a reduction in previouslyreported accounts receivable and decrease in previously reported accrued expenses of approximately $7.0 million, respectively, as of December 31, 2017.(2) Prior to the adoption of ASC 606, the Company classified Medicaid, Medicare and other rebates (the "Rebates") as a reduction of accounts receivable,whereas subsequent to adoption of ASC 606 the Company began classifying the Rebates as accrued expenses. Upon further analysis, managementdetermined that the Rebates should have always been classified as accrued expenses because their terms require cash settlement and are payable to thirdparties that are other than the Company's customer. The correction of this immaterial error resulted in an increase in previously reported accounts receivableand increase in previously reported accrued expenses of $1.6 million, respectively, as of December 31, 2017. The following tables summarize the effects of the Revision on the accompanying consolidated financial statements of the Company (in thousands):Consolidated Statements of OperationsYear Ended December 31, 2017Year Ended December 31, 2016As PreviouslyAs PreviouslyReportedAdjustmentAs RevisedReportedAdjustmentAs RevisedRevenue, net$67,251 $(7,049)(1)$60,202 $66,881 $(3,869)(1)$63,012 Cost of revenues39,879 (7,049)(1)32,830 32,194 (3,869)(1)28,325 Total costs and expenses79,048 (7,049)(1)71,999 64,339 (3,869)(1)60,470 12Consolidated Balance SheetDecember 31, 2017As PreviouslyReportedAdjustmentAs RevisedAccounts receivable, net$18,143 $(5,401)(1),(2) $12,742 Total current assets64,532 (5,401)(1),(2) 59,131 Total assets189,986 (5,401)(1),(2) 184,585 Accrued expenses13,502 (5,401)(1),(2) 8,101 Total current liabilities24,097 (5,401)(1),(2) 18,696 Total liabilities145,233 (5,401)(1),(2) 139,832 Total liabilities and stockholders' equity189,986 (5,401)(1),(2) 184,585 Consolidated Statement of Cash FlowsConsolidated Statement of Cash FlowsTwelve Months Ended December 31, 2017Twelve Months Ended December 31, 2016As PreviouslyAs PreviouslyReportedAdjustmentAs RevisedReportedAdjustmentAs RevisedCash flows from operatingactivitiesAccounts receivable$1,894 $4,070 (1),(2) $5,964 $(8,008)$72 (1),(2) $(7,936)Accounts payable and accruedexpenses5,711 (4,070)(1),(2) 1,641 2,897 (72)(1),(2) 2,825 2. 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 35 generic topical pharmaceutical products and four branded generic pharmaceutical products. In Canada, the Company sellsover 27 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 completed the facility expansion in Buena, New Jersey, to support the increased capacitydemand expected from future product approvals from the FDA and is planning for a plant approval inspection in 2019. As the Company continues toexecute the expansion of our development and commercial base beyond topical generics to include injectable generics, complex generics and ophthalmicgenerics (what we call our “TICO strategy”), it will compete in other markets, including the ophthalmic generic pharmaceutical market, and expects to faceother competitors.13LiquidityThe Company’s principal sources of liquidity are cash and cash equivalents of approximately $9.7 million at December 31, 2018 and ongoing cash fromoperations. The Company has access to an additional $10.0 million on its Revolver and an additional $25.0 million still available on its 2023 Term Loans, ineach case at December 31, 2018, as part of the credit facilities executed with Ares Capital Management in December 2018. In January 2019, the Companydrew $5.0 million from its remaining $10.0 million Revolver. The Company also has the ability to defer certain product development and other programs, aswell as exercise its option to defer the payment of interest on its 2023 Term Loans, if necessary.However, the Company may require additional funding and this funding will depend, in part, on the timing and structure of potential business arrangements.If necessary, 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,subject to certain restrictions in the Ares Credit Facility agreements. There may also be additional acquisition and growth opportunities that may requireexternal financing. There can be no assurance that such financing will be available on terms acceptable to the Company, or at all. The Company believes thatits existing capital resources will be sufficient to support its current business plan and operations beyond March 2020. 3. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the UnitedStates of America (“GAAP”). The Company consolidates the following entities: Igen, Inc., Teligent Pharma. Inc., Teligent Luxembourg S.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. All inter-company accounts and transactions have been eliminated. Certain amounts in the prior periods presented have been reclassified to conform tothe current period financial statement presentation. These reclassifications have no effect on previously reported net income.Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Significant estimates include the historical valuation of the derivative liability, sales returns and allowances,allowances for excess and obsolete inventories, allowances for doubtful accounts, provisions for income taxes and related valuation allowances, stock basedcompensation, the assessment for the impairment of long-lived assets (including intangibles, goodwill and property, plant and equipment), property, plantand equipment and legal accruals for environmental cleanup and remediation costs. Actual results could differ from those estimates.Cash Equivalents The Company considers all highly liquid instruments purchased with the original maturity of three months or less to be cash equivalents to the extent thefunds are not being held for investment purposes. Cash and cash equivalents include cash on hand and bank demand deposits used in the Company’s cashmanagement program.The Company has restricted cash, consisting of escrow accounts and letter of credits, which is included within other assets, non-current on the ConsolidatedBalance Sheet. In addition, pursuant to the New Credit Facilities agreement, proceeds from the 2023 Term Loan are deposited in a blocked bank account andrestricted for use with the exception of repurchasing remaining 2019 Notes, which is included within restricted cash at December 31, 2018 in the table below. The Company presents restricted cash with cash and cash equivalents in the Consolidated Statement of Cash Flows. The following table provides areconciliation of cash and cash equivalents and restricted cash reported in the Consolidated Balance Sheet to the total amounts in the ConsolidatedStatement of Cash Flows as follows (in thousands):14December 31, 2018December 31, 2017December 31, 2016Cash and cash equivalents$9,705 $26,692 $66,006 Restricted cash2,892 — — Restricted cash in other assets472 473 475 Cash, cash equivalents and restricted cash in the statement of cash flows$13,069 $27,165 $66,481 InventoriesInventories 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 EquipmentDepreciation and amortization of property, plant and equipment is provided for under the straight-line method over the assets’ estimated useful lives asfollows:DescriptionsUseful Lives Buildings and improvements10 - 40 yearsMachinery and equipment5 - 15 yearsComputer hardware and software3 - 5 yearsFurniture and fixtures5 yearsLeasehold 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 AssetsDefinite-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 DevelopmentAmounts 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. The Company had a third party perform a valuation of the intangible assets included inIPR&D as of December 31, 2018. IPR&D are solely those assets acquired in the 2015 business combination of Alveda. Due to changing market conditions,the Company recorded an impairment loss of $1.2 million in the fourth quarter. Going forward,15changes in any of the Company’s assumptions may result in a further reduction to the estimated fair value of IPR&D assets and could result in futureimpairment charges. Long-Lived AssetsIn 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. Product Acquisition CostsProduct acquisition costs represent ANDAs and NDAs acquired in asset acquisitions, which are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of these assets may not be recoverable. The Company expects to amortize these costs over a ten year usefullife commencing when the product is sold. At December 31, 2018, product acquisition costs included assets acquired from AstraZeneca, Valeant and Sebala.The Company recorded an impairment loss of $0.7 million in the fourth quarter of 2018 related to product acquisition costs.GoodwillGoodwill, 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 on October 1, 2018 of each fiscal year or more frequently if events or changes in circumstances indicate that the asset might be impaired. TheCompany first performs a qualitative assessment to determine if the quantitative impairment test is required. If changes in circumstances indicate an asset maybe impaired, the Company performs the quantitative impairment test. In accordance with accounting standards, a two-step quantitative method is used fordetermining goodwill impairment. In the first step, the Company determines the fair value. If the net book value exceeds its fair value, the second step of theimpairment 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, 2018 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.Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, trade receivables, restricted cash, accounts payable and other accrued liabilities at December 31, 2018approximate their fair value for all periods presented. The Company measures fair value in accordance with ASC 820-10, “Fair Value Measurements andDisclosures”. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptionsthat market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC 820-10 establishes a three-tier valuehierarchy, 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 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.16As of December 31, 2018, based on level 2 inputs, the fair value of our Notes (2019 Notes and 2023 Notes) was approximately $67.6 million compared totheir carrying value of $71.3 million. In addition, the value of our Senior Credit Facilities was stated at carrying value at December 31, 2018. The Companybelieves it could obtain borrowings at December 31, 2018 with comparable terms as the December 13, 2018 Senior Credit Facilities, therefore, the carryingvalue approximates fair value. Debt Issuance Costs Expenses related to debt financing activities are capitalized and amortized on an effective interest method, over the term of the loan and are to benetted against the carrying value of the financial liability, as required by ASU 2015-3. This standard aligns the treatment of debt issuance costs and debtdiscounts in that both reduce the carrying value of the liability. Amortization of debt issuance costs are recorded as interest expense on the ConsolidatedStatement of Operations.Revenue RecognitionThe Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which theentity expects to receive in exchange for those goods or services. The Company’s revenue is recorded net of accruals for estimated chargebacks, rebates, cashdiscounts, other allowances, and returns. The Company derives its revenues from three types of transactions: sales of its own pharmaceutical products(Company product sales), sales of manufactured product for its customers (contract manufacturing sales), and research and product development servicesperformed for third parties. Due to differences in the substance of these transaction types, the transactions require, and the Company utilizes, different revenuerecognition polices for each. Taxes collected from customers and remitted to government authorities and that are related to the sales of the Company’sproducts are excluded from revenues.Adoption of ASC Topic 606, "Revenue from Contracts with Customers”In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The standard, including subsequently issuedamendments, replaces most existing revenue recognition guidance in U.S. GAAP. The key focus of the new standard is that an entity should recognizerevenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to beentitled in exchange for those goods or services.The Company performed a comprehensive review of its existing revenue arrangements as of January 1, 2018 following the aforementioned five-step model.Based on the Company's analysis, there were no changes identified that impacted the amount or timing of revenues recognized under the new guidance ascompared to the previous guidance. Additionally, the Company's analysis indicated that there were no changes to how costs to obtain and fulfill ourcustomer contracts would be recognized under the new guidance as compared to the previous guidance. The impact of the adoption of this standard on theCompany's Consolidated Balance Sheet, Consolidated Statement of Operations, and Consolidated Statement of Cash Flows was not material. The adoption ofthe new guidance impacted the way the Company analyzes, documents, and discloses revenue recognition under customer contracts beginning on January 1,2018 and resulted in additional disclosures in the Company's financial statements.Company Product SalesRevenue from Company product sales is recognized upon transfer of control of a product to a customer at a point in time, generally as the Company'sproducts are sold on an FOB destination basis and because inventory risk and risk of ownership passes to the customer upon delivery.Company product sales are recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and returns. Contract Manufacturing Sales: The Company recognizes revenue for contract manufacturing sales over-time, as milestones are achieved. Shipments are made in accordance with salescommitments and related sales orders entered into with customers either verbally or in written form.Contract manufacturing sales are recognized net of accruals for cash discounts and returns which are established at the time of sale, and are included inRevenue, net in the Company's Consolidated Statement of Operations. Research and Development Income:17The Company establishes agreed upon product development agreements with its customers to perform product development services. Revenuesare recognized in accordance with the agreement upon the completion of the phases of development and when the Company has no futureperformance obligations relating to that phase of development. Other types of revenue include royalty or licensing revenue, and would be recognized overtime, or at a point in time, based upon the contractual term upon completion of the earnings process. Judgments are required to evaluate contingencies suchas potential variances in schedule and the costs, the impact of change orders, liability claims, contract disputes and achievement of contractual performancestandards.Revenue and Provision for Sales Returns and Allowances As is customary in the pharmaceutical industry, the Company’s product sales are subject to a variety of deductions including chargebacks, rebates,cash discounts, other allowances, and returns. Product sales are recorded net of accruals for returns and allowances ("SRA"), which are established at the timeof sale. The Company analyzes the adequacy of its accruals for returns and allowances quarterly. Amounts accrued for sales deductions are adjusted whentrends or significant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. These provisions are estimatesbased on historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms withdirect and indirect customers. The Company uses a variety of methods to assess the adequacy of its returns and allowances reserves to ensure that itsfinancial statements are fairly stated. These include periodic reviews of customer inventory data, customer contract programs, subsequent actualpayment experience, and product pricing trends to analyze and validate the return and allowances reserves.Chargebacks are one of the Company's most significant estimates for recognition of product sales. A chargeback represents an amount payable in the future toa wholesaler for the difference between the invoice price paid to the Company by its wholesale customer for a particular product and the negotiated contractprice that the wholesaler’s customer pays for that product. The Company’s chargeback provision and related reserve varies with changes in product mix,changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of theexpected wholesaler sell-through levels to indirect customers at contract prices. The Company validates the chargeback accrual quarterly through a review ofthe inventory reports obtained from its largest wholesale customers. This customer inventory information is used to establish the estimated liability for futurechargeback claims based on historical chargeback and contract rates. These large wholesalers represent a majority 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.Rebates are used for various discounts and rebates provided to customers. This account has been used for various one-time discounts given to customers. TheCompany reviews the percentage of products sold through these programs by reviewing chargeback data and uses the appropriate percentages to calculatethe rebate accrual. Rebates are invoiced monthly, quarterly or annually and reviewed against the accruals. Other items that could be included in accruedrebates would be price protection fees, shelf stock adjustments (SSAs), or other various amounts that would serve as one time discounts on specific products. 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 $18.1 million and $31.8 million at December 31, 2018 and 2017, respectively. The allowance fordoubtful accounts was $2.6 million and $2.2 million at December 31, 2018 and 2017, respectively. These balances are primarily related to one specificcustomer in the amount of $1.7 million. In addition, in connection with four of the 39 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 itspartner. Accounts payable and accrued expenses include $0.2 million and $0.9 million at December 31, 2018 and 2017, respectively, related to theseroyalties. Royalty expense of $2.2 million, $2.2 million and $3.0 million was included in cost of goods sold for the years ended December 31, 2018, 2017,and 2016 respectively. The Company includes significant estimates to arrive at net product sales arising from wholesaler chargebacks, Medicaid andMedicare rebates, allowances and other pricing and promotional programs. Concentration of Risk Financial instruments, which subject the Company to concentration of credit risk, consist primarily of cash equivalents and trade receivables. The Companymaintains its cash in accounts with quality financial institutions. Although the Company18currently believes that the financial institutions with which the Company does business will be able to fulfill their commitments to us, there is no assurancethat those institutions will be able to continue to do so.Major customers of the Company are defined as those constituting greater than 10% of our total revenue. In 2018, we had sales to three customers whichindividually accounted for more than 10% of our total revenue. These customers had sales of $21.2 million, $7.3 million and $6.9 million, respectively, andrepresented 54% of total revenues in the aggregate. Accounts receivable related to these major customers comprised of 30%, 19% and 19%, respectively, andrepresented 68% of all accounts receivable as of December 31, 2018. In 2017, we had sales to three customers which individually accounted for more than10% of our total revenue. These customers had sales of $17.0 million, $7.4 million and $6.9 million, respectively, and represented 52% of total revenues inthe aggregate. Accounts receivable related to these major customers comprised of 15%, 4% and 44%, respectively, and represented 63% of all accountsreceivable as of December 31, 2017. In 2016, we had sales to three customers which individually accounted for more than 10% of our total revenue. Thesecustomers had sales of $12.3 million, $7.2 million and $6.8 million, respectively, and represented 41% of total revenues in the aggregate. The Company had net revenue from one product, Econazole Nitrate Cream 1%, which accounted for 2%, 4%, and 8% of total revenues in 2018, 2017 and2016, respectively. Lidocaine Ointment 5%, which the Company launched at the end of the first quarter of 2016 accounted for 7%, 17% and 23% of totalrevenues in 2018, 2017 and 2016. Zantac for injection, which the Company acquired in the fourth quarter of 2015, accounted for 5%, 10% and 3% of totalrevenues in 2018, 2017 and 2016. For the year ended December 31, 2018, domestic net revenues were $45.6 million and foreign net revenues were $20.2 million. As of December 31, 2018,domestic assets were $132.7 million and foreign assets were $58.2 million. For the year ended December 31, 2017, domestic net revenues were $47.0 millionand foreign net revenues were $13.2 million. As of December 31, 2017, domestic assets were $112.6 million and foreign assets were $72.0 million. For theyear ended December 31, 2016, domestic net revenues were $52.8 million and foreign net revenues were $10.2 million.While the company purchases raw materials to manufacture certain products, it also utilizes CMO's to purchase finished products. The Company currentlypurchases from numerous sources which therefore reduces the risk of delays or difficulties in getting materials and/or products.Acquisitions The Company accounts for acquired businesses using the acquisition method of accounting, which requires with limited exceptions, that assets acquired andliabilities assumed be recognized at their estimated fair values as of the acquisition date. Transaction costs are expensed as incurred. Any excess of theconsideration transferred over the assigned values of the net assets acquired is recorded as goodwill. When net assets that do not constitute a business areacquired, no goodwill is recognized. Contingent consideration, if any, is included as part of the acquisition cost and is recognized at fair value as of the acquisition date. Any liability resultingfrom contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. These changes in fair value are recognizedin earnings. Accounts Receivable and Allowance for Doubtful AccountsThe 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.Foreign Currency Translation19 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 loss of $3.4 million was recorded for the year ended December 31, 2018, 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. Product Development and Research The Company’s research and development costs are expensed as incurred. Shipping and Handling Costs 20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, 2018, 2017 and 2016, the costs relating to shipping and handling totaled $2.1 million, $1.2 million and $0.7 million, respectively. Loss per Common Share Basic loss per share of common stock is computed based on the weighted average number of shares of common stock outstanding during the period. Dilutedloss per share of common stock is computed using the weighted average number of shares of common stock and potential dilutive common stock equivalentsoutstanding during the period. Potential dilutive common stock equivalents include shares issuable upon the conversion of the notes and the exercise ofoptions and warrants. Due to the net loss for the years ended December 31, 2018, 2017 and 2016, the effect of the Company’s potential dilutive commonstock equivalents was anti-dilutive; as a result, the basic and diluted weighted average number of common shares outstanding and net loss per common shareare the same. As of December 31, 2018, the shares of common stock issuable in connection with stock options and warrants have been excluded from thediluted loss per share, as their effect would have been anti-dilutive.For the years ended December 31, 2018, 2017 and 2016(in thousands except shares and per share data) 2018 2017 2016 Basic loss per share computation: Net loss attributable to common stockholders —basic and diluted$(36,256)$(15,191)$(11,985)Weighted average common shares —basic and diluted53,592,930 53,323,954 53,078,158 Basic and diluted loss per share$(0.68)$(0.28)$(0.23)Adoption of Other Recent Accounting Pronouncements 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. The amendments in this update were effective for fiscal yearsbeginning after December 15, 2017 for public business entities, including interim periods within those fiscal years. For the Company, the amendments areeffective January 1, 2018. The Company's adoption of this ASU was a full retrospective adoption, effective January 1, 2018, which did not have a significantimpact on its consolidated financial statements.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. The Company's adoption of this ASU, effective January 1, 2018, did not have a significant impact on its consolidatedfinancial 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's adoption of this ASU, effective January 1, 2018, did not have a significant impact on its consolidated financialstatements.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 scope21of the real estate-specific derecognition guidance, and (iii) an entity that contributes nonfinancial assets that are not a business or a nonprofit activity to ajoint venture or other noncontrolled investee. The amendments are effective at the same time as the amendments in ASU 2014-09. Therefore, for theCompany, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within thatreporting period. Public entities may apply the guidance earlier but only as of annual reporting periods beginning after December 15, 2016, including interimreporting periods 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. The Company's adoption of this ASU, effectiveJanuary 1, 2018, did not have a significant impact on its consolidated 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 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, effective January 1, 2018, did not have a significant impact onits consolidated financial statements.Recently Issued and Not Yet Adopted Accounting PronouncementsIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing lease guidance under Topic 840. The new standardrequires lessees to recognize Right-of-Use ("ROU") assets and lease liabilities for all leases with terms greater than 12 months, including those leases that werepreviously classified as operating leases. Topic 842 retains a distinction between finance leases and operating leases, with measurement and presentation ofexpenses and cash flows being dependent upon the classification. The Company adopted the new standard on January 1, 2019 utilizing the optionaltransition method allowed under ASU 2018-11, Leases (Topic 842): Targeted Improvements. As a result, the effects of applying the new standard will berecognized as a cumulative effect adjustment to the opening balance of retained earnings on the date of initial adoption without recasting comparativeperiods under ASC 842. The Company elected to adopt the package of practical expedients allowed under the new accounting guidance, which allows theCompany to not reassess previous conclusions regarding 1) whether existing or expired leases are or contain leases 2) the lease classification of existing orexpired leases and 3) initial direct costs for existing leases. In addition, the Company adopted the practical expedient to combine lease and non-leasecomponents. Lastly, the Company elected the short-term lease recognition exemption.The Company reviewed its portfolio of lease agreements, and other service contracts to identify embedded leases, and reached conclusions on keyaccounting assessments related to the standard and is finalizing the related accounting policies. As a result of the implementation of the new standard allleases with a term greater than 12 months previously classified as operating leases and only expensed through the Consolidated Statements of Operations willnow be recorded on the Consolidated Balance Sheets. Per the requirements of the standard the company will record a ROU asset and a lease liabilityrepresenting the present value of future lease payments to be paid in exchange of the use of an asset. However, there will be no impact on the net assets as theassets and the liabilities will off-set each other. Based on the assessment performed the adoption of the new standard is not expected to have a material impacton the financial statements. The value of the ROU asset and lease liability to be recorded upon adoption is less than 5% of total assets and total liabilities.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. For the Company, theamendments are effective January 1, 2020. The Company is currently evaluating the impact of this ASU on its consolidated 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.22In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): “Clarifying the Interaction between Topic 808 and Topic606”. The guidance clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606when the collaborative arrangement participant is a customer. For the company, the amendment will be effective January 1, 2020. The Company isevaluating the impact this guidance will have on its consolidated financial statements and related disclosures. 4. Inventories Inventories as of December 31, 2018 and 2017 consisted of (in thousands): 2018 2017 Raw materials$10,456 $8,231 Work in progress116 616 Finished goods8,391 8,532 Inventories reserve(2,667)(1,304) $16,296 $16,075 5. Property, Plant and Equipment Property, plant and equipment, at cost, as of December 31, 2018 and 2017, consisted of (in thousands): 2018 2017 Land$401 $257 Building and improvements53,813 8,613 Machinery and equipment12,229 9,142 Computer hardware and software4,182 3,244 Furniture and fixtures694 449 Construction in progress30,949 55,017 102,268 76,722 Less accumulated depreciation and amortization(10,493)(8,367)Property, plant and equipment, net$91,775 $68,355 The Company recorded depreciation expense of $2.6 million, $1.7 million and $0.9 million in 2018, 2017 and 2016, respectively.During the twelve months ended December 31, 2018 and 2017 there were $4.4 million of interest and $3.6 million of interest, respectively, capitalized intoconstruction in progress. During the twelve months ended December 31, 2018 and 2017 there were $1.8 million of payroll and $0.8 million of payroll,respectively, capitalized into construction in progress. The Company received certificate of completion of its building in the fourth quarter of 2018 andtherefore reclassified a total of $37.0 million from Construction in process to Building and improvements upon completion. 6. DebtConvertible Notes On December 16, 2014, the Company issued $125.0 million aggregate principal amount of Convertible 3.75% Senior Notes, due 2019, (the "2019 Notes").On December 22, 2014, the Company announced the closing of the initial purchasers’ exercise in full of their option to purchase an additional $18.75million aggregate principal amount of the 2019 Notes. The 2019 Notes bear interest at a fixed rate of 3.75% per year, payable semiannually in arrears on June15 and December 15 of each year, beginning on June 15, 2015 and mature on December 15, 2019, unless earlier repurchased, redeemed or converted. The2019 Notes are convertible into shares of the Company’s common stock, cash or a combination thereof. On May 20, 2015, the Company received shareholderapproval for the increase in the number of shares of common stock authorized and available for issuance upon conversion of the 2019 Notes.On April 27, 2018, the Company entered into separate exchange agreements with certain holders of the 2019 Notes. The agreements gave the holders theright to exchange, in aggregate, $75.1 million of the 2019 Notes for $75.1 million of new23Convertible 4.75% Senior Notes due 2023 (the “2023 Notes”). The new 2023 Notes bear a fixed interest rate of 4.75% per year, payable semi-annually withthe principal payable in May 2023. At the option of the holders, the 2023 Notes are convertible into shares of the Company’s common stock, cash or acombination thereof. The initial conversion rate is $224.71 per share, subject to certain adjustments, related to either the Company's stock price volatility, orthe Company's declaration of a stock dividend, stock distribution, share combination or share split expected dividends or other anti-dilutive activities. Inaddition, holders will be entitled to receive additional shares of common stock for a potential increase of the conversion rate up to $280.90 per share under amake-whole provision in some circumstances. The Company incurred debt issuance costs of $1.6 million upon issuance of the 2023 Notes.In accordance with accounting for convertible debt within the cash conversion guidance of ASC 470-20, the Company allocated the principal amount of the2023 Notes between its liability and equity components. The carrying amount of the liability component was determined by measuring the fair value of asimilar debt instrument of similar credit quality and maturity that did not have the conversion feature. The carrying amount of the equity component,representing the embedded conversion option, was determined by deducting the fair value of the liability component from the principal amount of the 2023Notes as a whole. The equity component was recorded to additional paid-in capital and is not remeasured as long as it continues to meet the conditions forequity classification. The excess of the principal amount of the 2023 Notes over the carrying amount of the liability component was recorded as a debtdiscount of $19.0 million, and is being amortized to interest expense using the effective interest method through the maturity date. The Company allocatedthe total amount of debt issuance costs incurred to the liability and equity components using the same proportions as the proceeds from the 2023 Notes. Thedebt issuance costs attributable to the liability component were recorded as a direct deduction from the liability component of the 2023 Notes, and are beingamortized to interest expense using the effective interest method through the maturity date. Transaction costs attributable to the equity component werenetted with the equity component of the 2023 Notes in additional paid-in capital. The effective interest rate of the 2023 Notes, inclusive of the debt discountand issuance costs, is 11.9%. The exchange of $75.1 million of the 2019 Notes for the 2023 Notes is considered a debt extinguishment under ASC 470-50. The 2019 Notes are accountedfor under cash conversion guidance ASC 470-20, which requires the Company to allocate the fair value of the consideration transferred upon settlement tothe extinguishment of the liability component and the reacquisition of the equity component upon derecognition. In accordance with the aforementionedguidance, the Company allocated a portion of the $75.1 million to the extinguishment of the liability component equal to the fair value of that componentimmediately before extinguishment and recognized a $2.5 million extinguishment loss in the Consolidated Statement of Operations to measure thedifference between (i) the fair value of the liability component and (ii) the net carrying amount of the liability component (which is already net of anyunamortized debt issuance costs). In addition, the Company recorded a $7.6 million reduction of Additional Paid in Capital in connection with theextinguishment of $75.1 million of the 2019 Notes. In December 2018 the Company used $52.8 million of proceeds from the Senior Credit Facilities (see below) to repurchase the 2019 Notes as well as $0.3million of proceeds to pay for transaction costs. The repurchase of the 2019 Notes is considered a debt extinguishment under ASC 470-50. The 2019 Notesare accounted for under cash conversion guidance ASC 470-20, which requires the Company to allocate the fair value of the consideration transferred uponsettlement to the extinguishment of the liability component and the reacquisition of the equity component upon derecognition. In accordance with theguidance above, the Company allocated a portion of the $52.8 million to the extinguishment of the liability component equal to the fair value of thatcomponent immediately before extinguishment and recognized a $1.7 million extinguishment loss in the Consolidated Statement of Operations to measurethe difference between (i) the fair value of the liability component and (ii) the net carrying value amount of the liability component (which is already net ofany unamortized debt issuance costs). In addition, the Company recorded a $2.9 million reduction of Additional Paid in Capital in connection with theextinguishment of the 2019 Notes. In January and February of 2019, the Company used $0.5 million and $2.2 million, respectively, of proceeds from theSenior Credit Facilities to repurchase the 2019 Notes.2021 Term LoanOn June 1, 2018, the Company entered into a credit agreement for $25.0 million secured by all Company assets, due June 1, 2021 (“2021 Term Loan”). The2021 Term Loan has limited financial and non-financial covenants inclusive of a minimum cash carry balance of $5.0 million. The 2019 Notes and 2023Notes are subordinate to the 2021 Term Loan. The first $15.0 million million of loan proceeds was received on June 1, 2018. The remaining loan proceeds of$10.0 million were subject to closing conditions as defined in the agreement and were received on July 16, 2018. The 2021 Term Loan incurred debtissuance costs of $0.5 million and a debt discount of $0.4 million. The debt discount is due to lender fees paid on the initial drawdown of $15.0 million. Thedebt issuance costs and debt discount are amortized to interest expense using the effective interest method through the maturity date. The 2021 Term Loanbears interest at a rate of LIBOR plus 9.0%, with a stated floor of 2.0%. The effective interest, inclusive of the debt discounts and issue costs, was 12.78% asof September 30, 2018. In December 2018, the Company used $25.6 million of proceeds from the Senior Credit Facilities (see below) to repay the 2021 TermLoan which was comprised of $25.0 million of principal, $0.5 million of transaction costs and $0.1 million of interest. 24The repayment of the 2021 Term Loan is considered a debt extinguishment under ASC 470-50. The Company recorded $1.3 million of an extinguishmentloss related to the repayment of the 2021 Term Loan in the Consolidated Statement of Operations.Senior Credit FacilitiesOn December 13, 2018, the Company entered into a $25.0 million Revolving Credit Agreement (the “Revolver”) and Term Loan Agreement (the “2023 TermLoan”, and together with the Revolver, the “Senior Credit Facilities”). The Term Loan consists of (i) a $50.0 million initial term loan (the “Initial TermLoan”); (ii) a $30.0 million delayed draw term loan A (the “Delayed Draw Term Loan A”) and (iii) a $15.0 million delayed draw term loan B (the “DelayedDraw Term Loan B” and, together with the Delayed Draw Term Loan A, the “Delayed Draw Term Loans”). The Initial Term Loan matures on the earlier tooccur of (a) three months prior to maturity of the 2023 Notes and (b) June 13, 2024. Commitments related to undrawn amounts of the Delayed Draw TermLoan A terminate on June 30, 2019, and drawn amounts under the Delayed Draw Term Loans mature at the same time as the Initial Term Loan. The Revolvermatures on the earlier to occur of (a) six months prior to the maturity of the 2023 Notes and (b) December 13, 2023. The Company’s ability to borrow underthe Revolver is subject to a borrowing base determined based upon eligible inventory, eligible equipment, eligible real estate and eligible receivables. TheSenior Credit Facilities are secured by substantially all of the Company’s assets. All of the Company’s debt is subordinated to the Senior Credit Facilities.The 2023 Term Loan is subordinate to the Revolver. The Senior Credit Facilities have customary financial and non-financial covenants, includingaffirmative, negative and reporting covenants, representations and warranties, and events of default, including cross-defaults on other material indebtedness,as well as events of default triggered by a change of control and certain actions initiated by the FDA. The financial covenants consist of a minimum revenuetest, a minimum adjusted EBITDA test and a maximum total net leverage ratio.The interest rate under the Revolver and the 2023 Term Loan is calculated, at the option of the Company, at either the one, two, three or six-month LondonInter-Bank Offered Rate (or LIBOR) plus 3.75% or the base rate plus 2.75%. The interest rate on the 2023 Term Loan is calculated, at the option of theCompany, at either LIBOR plus 8.75% or the base rate plus 7.75%. Interest on the Senior Credit Facilities is payable in cash except that interest on the 2023Term Loan is payable, at the option of the Company, in cash or in kind by being added to the principal balance thereof, until the earlier of December 13,2020 and the date the Company has provided the lenders of the Senior Credit Facilities financial statements demonstrating that the Company has attainedtwelve months of revenue of at least $125.0 million. A commitment fee of 1.0% per annum is payable by the Company quarterly in arrears on the unusedportion of the Delayed Draw Term Loans.Amounts drawn under the Revolver may be prepaid at the option of the Company without premium or penalty, subject, in the case of acceleration of theRevolver or termination of the revolving credit commitments thereunder, to certain call protections which vary depending on the time at which suchprepayments are made. Amounts drawn under the Revolver are subject to mandatory prepayment to the extent that aggregate extensions under the Revolverexceed the lesser of the revolving credit commitment then in effect and the borrowing base then in effect, and upon the occurrence of certain events andconditions, including non-ordinary course asset dispositions, receipt of certain insurance proceeds and condemnation awards and issuances of certain debtobligations. Amounts outstanding under the 2023 Term Loan may be prepaid at the option of the Company subject to applicable premiums, including amake-whole premium, and certain call protections which vary depending on the time at which such prepayments are made. Subject to payment ofoutstanding obligations under the Revolver as a result of any corresponding mandatory prepayment requirements thereunder, amounts outstanding under the2023 Term Loan are subject to mandatory prepayment upon the occurrence of certain events and conditions, including non-ordinary course assetdispositions, receipt of certain insurance proceeds and condemnation awards, issuances of certain debt obligations and a change of control transaction.The Initial Term Loan of $50.0 million and $15.0 million of the Revolver were drawn by the Company on December 13, 2018. On December 21, 2018, theCompany drew $20.0 million of the Delayed Draw Term Loan A. As of December 31, 2018, the $10.0 million of the Delayed Draw Term Loan A, $15.0million of the Delayed Draw Term Loan B and $10.0 million of the Revolver remain available to the Company. In addition, in January 2019, the Companydrew $5.0 million from the remaining $10.0 million Revolver. In connection with the Revolver the Company incurred a debt discount of $0.5 million and debt issuance issue costs of $0.3 million. The debt discount isdue to annual fees and lender fees paid on the initial drawdown of $15.0 million. The debt issuance costs and debt discount are recorded as an asset on theConsolidated Balance Sheet and are amortized to interest expense using the straight-line method through the estimated Revolver maturity date. The annualfees related to the Revolver and the Initial Term Loan are amortized to interest expense using the straight-line method over the annual period they relate to.In connection with the Initial Term Loan and Delayed Draw Term Loan A, the Company incurred a debt discount of $1.8 million and debt issuance issuecosts of $0.8 million. The debt discount is due to lender fees paid on the Initial Term Loan of $50.0 million and drawdown of Delayed Draw Term Loan A of$20.0 million. The debt issuance costs and debt discount costs are amortized to interest expense using the effective interest rate method through theestimated maturity date. In addition, the Company incurred $0.5 million of debt issuance costs related to the commitment fees paid to the lenders for theundrawn25amounts of the Delayed Draw Term Loans. These debt issuance costs are recorded as an asset on the balance sheet and amortized on a straight-line basis overthe access period of the Delayed Draw Term Loans through June 30, 2019. As of December 31, 2018, the effective interest, inclusive of the debt discounts andissue costs, of the Revolver and Initial Term Loan and Delayed Draw Term Loan A is 9.3% and 12.4%, respectively.At December 31, 2018 and December 31, 2017, the net carrying amount of the debt and the remaining unamortized debt discounts and debt issuance costswere as follows (in thousands): December 31, 2018December 31, 2017(Current)(Non-current)Face amount of the 2019 Notes (due December 2019)$15,702 $143,750 Less unamortized discounts and debt issuance costs1,291 22,773 Total net carrying value$14,411 $120,977 December 31, 2018December 31, 2017Face amount of the 2023 Notes (due May 2023)$75,090 $— Face amount of the Revolver Credit Facility (due December 2022)15,000 — Face amount of the 2023 Loan (due February 2023)70,000 — Total carrying value, non-current$160,090 $— Less unamortized discounts and debt issuance costs20,519 — Total net carrying value, non-current$139,571 $— Debt Maturities ScheduleAggregate maturities of the Company’s debt are presented below (in thousands):Year Ending December 31,2019$15,702 2020— 2021— 202215,000 2023145,090 Total$175,792 7. Revenues, Recognition and AllowancesRevenue RecognitionAs of January 1, 2018, the Company adopted the ASC 606 guidance for revenue recognition for contracts, using the modified retrospective method. Theimplementation of this guidance had no material impact on the measurement or recognition of revenue from customer contracts of prior periods. Upon adoption of this new guidance, the Company recognizes revenue using the following five steps:•Identification of the contract, or contracts, with a customer;•Identification of the performance obligations in the contract;•Determination of the transaction price, including the identification and estimation of variable consideration;•Allocation of the transaction price to the performance obligations in the contract; and•Recognition of revenue when we satisfy a performance obligation.The Company derives its revenues from three types of transactions: sales of its own pharmaceutical products (Company product sales), sales of manufacturedproduct for its customers (contract manufacturing sales), and research and product development services performed for third parties.26Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expectsto receive in exchange for those goods or services. To the extent the transaction price includes variable consideration, the Company estimates the amount ofvariable consideration that should be included in the transaction price using the expected value method based on historical experience as well as applicableinformation currently available.Company Product SalesRevenue from Company product sales is recognized upon transfer of control of a product to a customer at a point in time, generally as the Company'sproducts are sold on an FOB destination basis and because inventory risk and risk of ownership passes to the customer upon delivery.Company product sales are recorded net of accruals for estimated chargebacks, rebates, cash discounts, other allowances, and returns. Contract Manufacturing SalesThe Company recognizes revenue for contract manufacturing sales over-time, as milestones are achieved. Shipments are made in accordance with salescommitments and related sales orders entered into with customers either verbally or in written form.Contract manufacturing sales are recognized net of accruals for cash discounts and returns which are established at the time of sale, and are included inRevenue, net in the Company's Consolidated Statement of Operations.Research and Development Services and Other IncomeThe Company establishes agreed upon product development agreements with its customers to perform product development services. Revenues arerecognized in accordance with the agreement upon the completion of the phases of development and when the Company has no future performanceobligations relating to that phase of development. Other types of revenue include royalty or licensing revenue, and would be recognized over time, or at apoint in time, based upon the contractual term upon completion of the earnings process. Judgments are required to evaluate contingencies such as potentialvariances in schedule and the costs, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards.Revenues by Transaction TypeThe Company operates in one reportable segment and, therefore, the results of the Company's operations are reported on a consolidated basis, consistent withinternal management reporting for the chief decision maker. Net Sales (in thousands) for the three years ended December 31, 2018, 2017 and 2016 were asfollows (prior-period amounts are not adjusted under the modified-retrospective method of adoption):Years ended December 31,2018 2017 2016 Company product sales$59,591 $50,955 $45,002 Contract manufacturing sales6,047 8,995 17,033 Research and development services and other income227 252 977 Revenue, net$65,865 $60,202 $63,012 Disaggregated information for the Company product sales revenue has been recognized in the accompanying audited Consolidated Statements of Operations,and is presented below according to contract type (in thousands):27Years ended December 31,Company Product Sales2018 2017 2016 Topical$35,118 $29,446 $29,011 Injectables24,473 21,509 15,991 Total$59,591 $50,955 $45,002 In the twelve months ended December 31, 2018, Company did not incur, and therefore did not defer, any material incremental costs to obtain contracts.Returns and AllowancesAs is customary in the pharmaceutical industry, the Company’s product sales are subject to a variety of deductions including chargebacks, rebates, cashdiscounts, other allowances, and returns. Product sales are recorded net of accruals for returns and allowances, which are established at the time of sale. TheCompany analyzes the adequacy of its accruals for returns and allowances quarterly. Amounts accrued for sales deductions are adjusted when trends orsignificant events indicate that an adjustment is appropriate. Accruals are also adjusted to reflect actual results. These provisions are estimates based onhistorical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with direct andindirect customers. The Company uses a variety of methods to assess the adequacy of its returns and allowances reserves to ensure that its financial statementsare fairly stated. These include periodic reviews of customer inventory data, customer contract programs, subsequent actual payment experience, and productpricing trends to analyze and validate the return and allowances reserves.Accounts receivable are presented net of returns and allowances of $18.1 million and $31.8 million at December 31, 2018 and 2017, respectively. Theallowance for doubtful accounts was $2.6 million and $2.2 million at December 31, 2018 and 2017, respectively. These balances are primarily related to onespecific customer in the amount of $1.7 million.Chargebacks are one of the Company's most significant estimates for recognition of product sales. A chargeback represents an amount payable in the future toa wholesaler for the difference between the invoice price paid to the Company by its wholesale customer for a particular product and the negotiated contractprice that the wholesaler’s customer pays for that product. The Company’s chargeback provision and related reserve varies with changes in product mix,changes in customer pricing and changes to estimated wholesaler inventories. The provision for chargebacks also takes into account an estimate of theexpected wholesaler sell-through levels to indirect customers at contract prices. The Company validates the chargeback accrual quarterly through a review ofthe inventory reports obtained from its largest wholesale customers. This customer inventory information is used to establish the estimated liability for futurechargeback claims based on historical chargeback and contract rates. These large wholesalers represent a majority 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.Rebates are used for various discounts and rebates provided to customers. This account has been used for various one-time discounts given to customers. TheCompany reviews the percentage of products sold through these programs by reviewing chargeback data and uses the appropriate percentages to calculatethe rebate accrual. Rebates are invoiced monthly or quarterly and reviewed against the accruals. Other items that could be included in accrued rebates wouldbe price protection fees, shelf stock adjustments (SSAs), or other various amounts that would serve as one time discounts on specific products.In 2018, the Company reduced wholesaler acquisition costs on several products sold to major wholesalers as part of the Company's cash managementstrategy. As a result, its gross product sales and related chargebacks and billbacks are reduced accordingly. The Company's adjustments for the deductions togross product sales for the three years ended December 31, 2018, 2017 and 2016 are as follows (in thousands):28 Years ended December 31, 2018 2017 2016 Gross product sales$158,278 $215,883 $217,633 Reduction to gross product sales: Chargebacks and billbacks60,770 125,159 141,343 Wholesaler fees for service5,503 7,049 3,869 Sales discounts and other allowances32,414 32,720 27,419 Total reduction to gross product sales$98,687 $164,928 $172,631 Product sales, net$59,591 $50,955 $45,002 Contract manufacturing product sales$6,047 $8,995 $17,033 Total product sales, net$65,865 $60,202 $63,012 8. 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 assessed the recoverability of the carrying value of goodwill at October 1, 2018. Whenever events occur orcircumstances change, more likely than not, the company is likely to reduce the fair value of its 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, 2018. Changes in goodwill during the two years ended December 31, 2018 and December 31, 2017 were as follows (in thousands): GoodwillDecember 31, 2016$446 Foreign currency translation25 December 31, 2017471 Foreign currency translation(1)December 31, 2018$470 Intangible AssetsThe following sets forth the major categories of the Company’s intangible assets and the weighted-average remaining amortization period as of December 31,2018 and December 31, 2017 for those assets that are not already fully amortized (in thousands): 29December 31, 2018Gross CarryingAmountAccumulatedAmortizationNet CarryingAmountWeighted AverageRemaining AmortizationPeriodTrademarks and Technology$40,169 $(8,239)$31,930 11.8Product acquisition costs13,308 — 13,308 N/A - See descriptionbelowIn-process research and development(“IPR&D”)719 — 719 N/A - See descriptionbelowCustomer relationships3,557 (1,139)2,418 6.9Total$57,753 $(9,378)$48,375 December 31, 2017Gross CarryingAmountAccumulatedAmortizationNet CarryingAmountWeighted AverageRemaining AmortizationPeriodTrademarks and Technology$40,380 $(5,684)$34,696 12.8Product acquisition costs14,682 — 14,682 N/A - See descriptionbelowIn-process research and development(“IPR&D”)3,629 — 3,629 N/A - See descriptionbelowCustomer relationships3,783 (773)3,010 7.9Total$62,474 $(6,457)$56,017 Changes in intangibles during the year ended December 31, 2018 were as follows (in thousands):Product AcquisitionCostsTrademarks andTechnologyIPR&DCustomerRelationshipsBalance at December 31, 2017$14,682 $34,696 $3,629 $3,010 Amortization— (2,727)— (369)Intangible assets placed in service— 1,346 (1,346)— Loss on impairment(716)(7)(1,201)— Foreign currency translation(658)(1,378)(363)(223)Balance at December 31, 2018$13,308 $31,930 $719 $2,418 The Company recorded amortization expense of $3.1 million, $2.9 million and $2.8 million in 2018, 2017 and 2016, respectively. In addition, the Companyrecorded impairment loss of $0.7 million and $1.2 million related with product acquisition costs and IPR&D respectively in 2018, and nil and $0.1million impairment loss related with IPR&D and product acquisition costs in 2017. During the preparation of the 2018 consolidated financial statements, management identified a misclassification within the product acquisition costs and in-process research and development (“IPR&D”) categories for the year ended December 31, 2017. Accordingly, a reclassification has been made to theDecember 31, 2017 balances to decrease IPR&D and increase product acquisition costs in the amount of $14.7 million. The correction has no impact on theCompany’s consolidated financial statements.30Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense ontrademarks and technology and customer relationships for each of the following years is estimated to be as follows (in thousands):Year ending December 31,Amortization Expense *2019 $3,096 2020 3,096 2021 3,096 2022 3,096 2023 3,096 Thereafter18,868 Total$34,348 *IPR&D and Product Acquisition Costs are assessed for impairment at least annually and will be amortized once products are commercialized, and are notincluded in the table. The useful lives of the Company’s intangible assets are as follows:Intangibles Category Amortizable LifeProduct Acquisition Costs 10 yearsTrademarks & Technology15 yearsCustomer Relationships 10 years9. Stock-Based Compensation Stock OptionsThe 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, 2017, 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, 2018. A total of 2,634,798 options had been grantedto non-employee directors as of December 31, 2017, with no change as of December 31, 2018. A total of 807,782 of those options had been forfeited as ofDecember 31, 2017 and returned to the option pool for future issuance, with no change as of December 31, 2018. 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 each of December 31, 2018 and December 31, 2017, therewere 500,000 shares of common stock options outstanding. As of December 31, 2017, the 147,984 options available were transferred to a plan that hassuperseded the Director Plan, as discussed further in this section, with no additional options transferred as of December 31, 2018. The 1999 Stock Incentive Plan, as amended (“1999 Plan”), replaced all previously authorized employee stock option plans, and no additional options maybe granted under those previous plans. Under the 1999 Plan, options or stock awards may be granted to all of the Company’s employees, officers, directors,consultants and advisors to purchase a maximum of 3,200,000 shares of common stock. However, pursuant to the terms of the 1999 Plan, no awards may begranted after March 16, 2009. A total of 2,892,500 options, having a maximum term of ten years, have been granted at 100% of the fair market value of theCompany’s common stock at the date of grant. Options outstanding under the 1999 Plan were generally exercisable in cumulative increments over four yearscommencing one year from date of grant. As of December 31, 2018, there were no options outstanding under the 1999 Plan.On June 26, 2009, the Board of Directors adopted, and the Company’s stockholders subsequently approved by 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 to grantoptions 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, includingstock appreciation rights, restricted stock units ("RSUs") and performance awards. The 2009 Plan has been created, pursuant to and consistent with theCompany’s current compensation philosophy, to assist the Company in attracting, retaining and rewarding designated employees, directors, consultants andother service providers of the Company and its subsidiaries and affiliates, in a manner that will be cost efficient to the Company from both an economic andfinancial accounting perspective. On April 12, 2010, the Board of Directors adopted, and the Company’s stockholders subsequently approved, an amendmentand restatement of the 2009 Plan to increase31the number of shares of Common Stock available for grant under such plan by adding 2,000,000 shares of Common Stock. The 2009 Plan, as amended onMay 29, 2010, authorizes up to 5,000,000 shares of the Company’s common stock for issuance pursuant to the terms of the 2009 Plan. The maximum numberof shares that may be subject to awards made to any individual in any single calendar year under the 2009 Plan is 1,000,000 shares. As of December 31, 2018,there were 14,377 RSUs outstanding, 1,853,925 shares of stock outstanding and 2,458,106 shares of common stock options outstanding. As of December 31,2017, there were 99,626 RSUs outstanding, 1,422,020 shares of stock outstanding and 3,038,634 shares of common stock options outstanding. As ofDecember 31, 2017, the 249,052 options available were transferred to a plan that has superseded the 2009 Plan, as discussed further in this section. As ofDecember 31, 2018, an additional 346,504 options available were transferred to the superseded plan. On May 25, 2016, the Board of Directors approved the Company's 2016 Equity Incentive Plan (the "2016 Plan"). On May 21, 2018, the Board of Directorsadopted, and the Company's stockholders subsequently approved, an amendment and restatement of the 2016 Plan to increase the number of shares ofCommon Stock available for grant under such plan by adding 2,000,000 shares of Common Stock. The 2016 Plan, as amended, provides for the issuance ofawards of up to 4,000,000 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 up to 2,500,000 shares. Generally, shares of common stock reserved for awards under the 2016 Plan thatlapse 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 awardor shares of common stock withheld for taxes will not be available again for grant. The 2016 Plan provides that no participant may receive awards for morethan 1,000,000 shares of common stock in any fiscal year. As the 2016 Plan supersedes both the Director Plan and the 2009 Plan, any available shares fromboth are now incorporated into the 2016 Plan. As of December 31, 2018, there were 161,214 RSU's outstanding, 74,667 shares of common stock outstandingand options to purchase 1,394,285 shares of common stock outstanding under the 2016 Plan. As of December 31, 2017, there were 89,003 RSU's outstanding,20,000 shares of common stock outstanding and options to purchase 761,176 shares of common stock outstanding under the 2016 Plan. As of December 31,2018 and December 31, 2017, there were a total of 3,113,374 shares of common stock and 1,526,857 shares of common stock available under the 2016 Plan,respectively.As of December 31, 2018 and December 31, 2017, there were options to purchase 4,352,391 and 4,299,810 shares of common stock outstanding,respectively, 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, 2018, and therefore no additional stock compensation expense was recognized related to theamendments. The forms of amendment are Exhibits 10.31 and 10.32, respectively, and are incorporated by reference herein. 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. Assumptions2018 2017 2016 Expected dividends0 %0 %0 %Risk free rate2.44 %1.56 %1.14 %Expected volatility52.7%-72.5%58.0% - 69.7%68.0% - 71.3%Expected term (in years)2.3 – 3.3 years3.2 – 3.3 years3.1 – 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: 32 SharesExercisePrice Per ShareWeightedAverageExercisePriceJanuary 1, 2016 shares issuable under options3,592,734 $0.79 - $10.67$4.36 Granted739,135 4.72 - 8.817.26 Exercised(61,834)1.10 - 6.511.54 Expired— — — Forfeited(164,666)4.55 – 10.678.37 December 31, 2016 shares issuable under options4,105,369 $0.79 - $10.67$4.76 Granted577,845 3.38 - 9.287.15 Exercised(171,566)0.79 - 5.851.92 Expired— — — Forfeited(211,838)4.80 - 10.677.70 December 31, 2017 shares issuable under options4,299,810 $0.79 - $10.67$5.09 Granted839,785 1.73-4.253.34 Exercised(239,000)1.02-1.831.05 Expired— — — Forfeited(548,204)2.02-10.678.04 December 31, 2018 shares issuable under options4,352,391 $0.79-$10.67$4.61 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2018: Options OutstandingOptions ExercisableRange ofExercise PriceNumber ofOptionsWeightedAverageRemainingLife (Years )WeightedAverageExercisePriceNumber ofOptionsWeightedAverageExercisePrice$0.79 - $1.501,510,000 3.12$1.06 1,510,000 $1.06 $1.51 - $5.50992,457 8.273.23 199,826 2.76 $5.51 - $10.671,849,934 6.998.24 1,528,686 8.45 Total4,352,391 5.94$4.61 3,238,512 $4.65 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2017: Options OutstandingOptions ExercisableRange ofExercise PriceNumber ofOptionsWeightedAverageRemainingLife (Years )WeightedAverageExercisePriceNumber ofOptionsWeightedAverageExercisePrice$0.79 - $1.0025,000 2.01$0.79 25,000 $0.79 $1.01 - $1.501,721,000 4.141.06 1,721,000 1.06 $1.51 - $10.672,553,810 7.767.85 1,369,466 7.92 Total4,299,810 6.28$5.09 3,115,466 $4.07 The following table summarizes information concerning outstanding and exercisable options as of December 31, 2016: 33 Options OutstandingOptions ExercisableRange ofExercise PriceNumber ofOptionsWeightedAverageRemainingLife (Years )WeightedAverageExercisePriceNumber ofOptionsWeightedAverageExercisePrice$0.79 - $1.0050,000 3.01$0.79 50,000 $0.79 $1.01 - $1.501,808,400 5.111.07 1,808,400 1.07 $1.51 - $10.672,246,969 8.357.82 805,803 7.15 Total4,105,369 6.86$4.76 2,664,203 $2.90 The Company has recorded $1.5 million, $2.3 million and $2.3 million related to its stock option based expenses in cost of sales, product development andresearch expenses, and selling, general and administrative expenses on the accompanying Consolidated Statements of Operations for the years endedDecember 31, 2018, 2017 and 2016, respectively. The aggregate intrinsic value of options outstanding was $0.5 million at December 31, 2018, $4.7 million at December 31, 2017 and $11.5 million atDecember 31, 2016. The aggregate intrinsic value of the options exercisable was $0.5 million at December 31, 2018, $4.7 million at December 31, 2017 and$11.3 million at December 31, 2016. The total intrinsic value of the options exercised during 2018, 2017 and 2016 was $0.1 million, $0.4 million and $0.3million, respectively. A summary of non-vested options at December 31, 2018 and changes during the year ended December 31, 2018 is presented below: OptionsWeightedAverageGrant DateFair ValueNon-vested options at January 1, 20181,184,344 $3.48 Granted839,785 1.44 Vested(699,572)3.54 Forfeited(210,678)3.37 Non-vested options at December 31, 20181,113,879 $2.00 As of December 31, 2018, there was $1.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangementsunder the Plan. The costs will be recognized through December 2020. 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. The Company recognized $0.5 million, $1.0 million and $0.8 million, respectively, of compensation expense during the years endedDecember 31, 2018, 2017 and 2016 related to restricted stock awards and RSUs. Stock compensation expense is recognized over the vesting period of therestricted stock and RSUs. At December 31, 2018, the Company had approximately $0.5 million of total unrecognized compensation cost related to non-vested restricted stock and RSUs, all of which will be recognized through April 2021.There have been no restricted stock issuances in the years ended 2018, 2017 or 2016.A summary of non-vested RSUs and changes during each of the past three years is as follows:34Number ofRSUsWeighted AverageIssuance PriceNon-vested balance at January 1, 2016182,750 $10.23 Changes during the period:Shares granted58,068 7.50 Shares vested(60,918)10.13 Shares forfeited— — Non-vested balance at December 31, 2016179,900 $9.35 Changes during the period:Shares granted93,468 7.26 Shares vested(80,274)9.57 Shares forfeited(4,465)7.09 Non-vested balance at December 31, 2017188,629 $8.27 Changes during the period:Shares granted122,949 3.36 Shares vested(109,940)8.95 Shares forfeited(26,047)5.76 Non-vested balance at December 31, 2018175,591 $4.78 10. Accrued Expenses Accrued expenses represent various obligations of the Company including certain operating expenses and taxes payable.For the fiscal years ended December 31, 2018, and 2017 the largest components of accrued expenses were (in thousands):2018 2017 Professional fees$2,153 $546 Payroll1,908 1,580 Inventory and supplies1,809 58 Interest expense1,042 240 Rebates714 83 Medicaid and Medicare383 1,487 Clinical Studies334 596 Royalties222 856 Capital expenditures275 1,947 Wholesaler Fees203 — Income Tax45 58 Other754 650 $9,842 $8,101 11. Income Taxes The Company is subject to U.S. federal income tax and files a consolidated federal income tax return which includes all eligible U.S. subsidiary companies.The Company is also subject to tax in the states of Alabama, Illinois, Montana, New Jersey and35Tennessee. The Company conducts significant operations in certain foreign countries and is, accordingly, subject to tax in those foreign jurisdictionsconsisting of Canada (including the province of Ontario), Estonia, Luxembourg and Jersey.Loss before income tax for the years ended December 31, 2018, 2017 and 2016 consisted of the following (in thousands):2018 2017 2016 U.S. operations$(32,183)$(21,938)$(9,514)Foreign operations(4,135)6,662 (2,184)Global Total$(36,318)$(15,276)$(11,698)The Company’s current tax (benefit) expense was $(0.1) million, $(0.1) million and $0.3 million for the years ended December 31, 2018, 2017 and 2016,respectively. The (credit) provision for income taxes attributable to continuing operations before income taxes for the years ended December 31, 2018, 2017and 2016 is as follows (in thousands): 2018 2017 2016 Current tax expense (benefit): Federal$— $(86)$26 State and local30 20 35 Foreign(157)42 272 Total current tax (benefit) expense(127)(24)333 Deferred tax expense: Federal— — — State and local— — — Foreign65 (61)(46)Total deferred tax expense (benefit)65 (61)(46)Total income tax (benefit) expense$(62)$(85)$287 A comparison of income tax (benefit) expense at the U.S. statutory rate of 21% in 2018 and 35% in 2017 and 2016 to the Company's effective rate is asfollows (in thousands): 2018 2017 2016 Expected Statutory expense (benefit)$(7,627)$(5,195)$(3,977)U.S. TCJA recovery of alternative minimum tax credits— (73)— Change in the fair values of derivative and amortization of debt discount— 2,939 2,584 Other non-deductible expenses256 24 63 Change in valuation allowance including U.S. TCJA rate reduction6,572 (2,012)590 Reduction in deferred tax assets related to U.S. TCJA rate reduction— 7,504 — Change to Accounting for Equity Compensation Windfalls— (1,112)— Tax rate differential - foreign vs. U.S.791 (2,276)822 State income taxes, net of federal benefit23 13 23 Shortfalls related to stock compensation expense— 129 154 Prior year true-up(93)(13)— Exchange gain16 (13)28 $(62)$(85)$287 36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, (3) a one-time transition tax on certain unrepatriated earnings of foreignsubsidiaries; (4) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system; (5) elimination of theAlternative Minimum Tax regulations; (6) recovery of Alternative Minimum Tax Credits over a five year period; and (7) modifying or repealing many otherbusiness deductions and credits.The Company has assessed the impacts of the changes resulting from the U.S. TCJA and during the fourth quarter of 2017 recognized an income tax benefitand a corresponding receivable of $73 thousand related to the recoverability of Alternative Minimum Tax Credits. Also, during the fourth quarter of 2017,deferred tax assets, liabilities and valuation allowances were remeasured at the new rate of 21%. There was no income impact from the remeasurement sinceall U.S. net deferred tax assets are fully reserved by the Company.In December 2017, the SEC provided regulatory guidance for accounting of the impacts of the TCJA, referred to as SAB 118. Under the guidance of SAB 118,the income tax effects, for which the accounting under ASC 740 is incomplete, are reported as a provisional amount based on a reasonable estimate. Thereasonable estimate is subject to adjustment during a “measurement period”, not to exceed one year, until the accounting is complete. The estimate is alsosubject to the finalization of management’s analysis related to certain matters, such as developing interpretations of the provisions of the TCJA, changes tocertain estimates and profits of certain subsidiaries and the filing of tax returns.During the fourth quarter of 2018, the Company completed its full assessment and finalized the accounting for the impact of TCJA and concluded that therewas no additional impact.Deferred tax balances included in the Consolidated Balance Sheets as of December 31, 2018 and 2017 consisted of the following (in thousands): 2018 2017 Deferred Tax Assets:Sales allowances and doubtful accounts$1,964 $506 Inventory reserve962 619 Deferred revenue590 — Accrued expenses23 664 Property, plant and equipment258 214 Tax operating loss carryforwards9,951 9,327 Tax credit and other carryforwards1,299 168 Stock compensation538 1,817 Total deferred tax assets15,585 13,315 Less valuation allowance(12,120)(13,309)Net deferred tax assets3,465 6 Deferred Tax Liabilities:Convertible debt conversion features(3,514)— Foreign exchange(28)— Intangible assets(138)(165)Total deferred tax liabilities(3,680)(165)Net deferred tax liability$(215)$(159) 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 $12.1 million and $13.3 million for the years ended December 31, 2018 and 2017,respectively, on its deferred tax assets. The valuation allowance decreased $1.2 million during 2018. This decrease was37due to a decrease of $2.0 million related to changes in deferred taxes offset by an increase of $0.8 million related to the 2018 net operating loss.Operating loss, tax credit and other carry forwards as of December 31, 2018 and 2017 were as follows (in thousands): 2018 2017 Federal:Net operating losses (see below)$45,081 $41,688 Disallowed interest expense (no expiration)5,018 — Contributions (expiring through 2023)524 210 Research tax credits (expiring through 2025)135 168 State:New Jersey (expiring in 2038)2,976 4,320 Other states (expiring through 2038)2,307 1072 ForeignNet operating losses (no expiration)$257 $255 At December 31, 2018, the Company’s U.S. federal net operating loss carryforwards will expire as follows (in thousands):YearNet Operating Loss2020 - 2023$8,227 2024 - 20299,063 2030 - 20329,926 2033 - 20366,296 2037 8,116 No expiration but subject to limitation3,453 Total$45,081 Federal net operating losses arising during and after 2018 are not subject to expiration; however, their usage is limited to 80% of taxable income during theyear of use.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 $26.5 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 2014 through 2017. The Company hasnot recorded any liability for uncertain tax positions at December 31, 2018 or December 31, 2017.12. Commitments38 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 2019 $573 2020 611 2021 633 2022 610 2023 607 2024 200 $3,234 Rent expense was $0.5 million, $0.5 million and $0.9 million for the years ended December 31, 2018, 2017 and 2016, 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, 2018, and will be paid over the next several years inaccordance with agreed upon milestones.13. Legal and U.S. Regulatory ProceedingsTo date, twelve putative class action antitrust lawsuits have been filed against the Company along with co-defendants, including Taro PharmaceuticalsU.S.A., Inc. and Perrigo New York Inc., regarding the pricing of generic econazole nitrate cream (“econazole”). The class plaintiffs seek to representnationwide or state classes consisting of persons who directly purchased, indirectly purchased, paid and/or reimbursed patients for the purchase of genericeconazole from July 1, 2014 until the time the defendants’ allegedly unlawful conduct ceased or will cease. The class plaintiffs seek treble damages foralleged overcharges for econazole during the alleged period of conspiracy, and certain of the class plaintiffs also seek injunctive relief against the defendants.All actions have been consolidated by the Judicial Panel on Multidistrict Litigation to the Eastern District of Pennsylvania for pre-trial proceedings as part ofthe In re Generic Pharmaceuticals Pricing Antitrust Litigation matter. On October 16, 2018 the court dismissed the class plaintiffs’ claims against theCompany with leave to replead. On December 21, 2018 the class plaintiffs filed amended complaints, which the Company moved to dismiss on February 21,2019. This motion remains pending.Three “opt-out” antitrust lawsuits have additionally been filed against the Company by Humana Inc.; The Kroger Co. et al.; and United HealthCare Services,Inc., and consolidated into the In re Generic Pharmaceuticals Pricing Antitrust Litigation matter by the Judicial Panel on Multidistrict Litigation. Each of theopt-out complaints names between thirty-six and forty-three defendants (including the Company) and involves allegations regarding the pricing ofeconazole along with between twenty-four and twenty-nine other drug products that were not manufactured or sold by the Company during the period atissue. The opt-out plaintiffs seek treble damages for alleged overcharges for the drug products identified in the complaint during the alleged period ofconspiracy, and two of the complaints also seek injunctive relief. A motion to dismiss the Humana Inc. and The Kroger Co., et al. opt-out complaints was filedon February 21, 2019. A motion to dismiss the United HealthCare Services, Inc. opt-out complaint has not yet been filed.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 toprovide an estimate of the amount or range of potential loss. We believe these cases are without merit, and we intend to vigorously defend against theseclaims.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 alleges that the Company breached agreements between the parties by developing an additional and different generic drug product,an ointment, containing flurandrenolide, and failing to meet certain contractual requirements. Stayma seeks monetary damages. Because discovery in thismatter is ongoing, the Company is unable to form a judgment at this time as to whether an unfavorable outcome is either probable or remote or to provide anestimate of the amount or range of potential loss. The39Company believes this case is without merit, and the Company intends to vigorously defend against these claims. The Company filed three counter-claimsagainst Stayma for its failure to pay several past due invoices of approximately $1.7 million relating to the development and commercial supply of the twosubject products and for breaching the confidentiality provisions and exclusivity provisions of the parties’ agreements.On December 13, 2018, Valdepharm SA filed a lawsuit alleging that the Company breached contracts regarding two drug products that the Company hadsought to have Valdepharm manufacture. On February 12, 2019 the Company answered the complaint and counterclaimed, alleging that Valdepharmbreached the contracts by failing to perform its work in compliance with FDA regulations and current Good Manufacturing Practices. Each party seeksdamages associated with the alleged breach and related claims. Due to the early stage of the case we are unable to form a judgment at this time as to whetheran unfavorable outcome is either probable or remote or to provide an estimate of the amount or range of potential loss. We believe the claims against Teligentare without merit, and we intend to vigorously defend against them. 14. 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$18,500 for 2018, $18,000 for 2017 and $18,000 for 2016, plus a catch-up contribution of up to $6,000 for 2018, $6,000 for 2017 and $6,000 for 2016, 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 $358,167, $311,467 and $228,619 in 2018, 2017 and 2016, respectively. 4015. Quarterly Results (Unaudited) As disclosed in Note 1, Correction of Prior Year Consolidated Financial Statements, the Company’s consolidated financial statements for the years endedDecember 31, 2017 and 2016 have been revised to correct certain immaterial accounting errors described therein. Accordingly, the effect of the correction ofthese immaterial accounting errors resulted in a reduction in the Company’s previously reported revenue and cost of revenue of $2.2 million, $2.0 million,$1.5 million, and $1.3 million for the quarters ended March 31, 2017, June 30, 2017, September 30, 2017 and December 31, 2017, respectively. Thefollowing is a summary of certain quarterly financial information for the fiscal years 2018 and 2017: FirstQuarterSecondQuarterThirdQuarterFourthQuarterTotal(in thousands, except per share data)Year Ended December 31, 2018 Total revenues, net$14,545 $16,249 $18,294 $16,777 $65,865 Gross profit5,220 4,784 6,719 5,662 22,385 Operating loss(3,531)(4,910)(1,213)(5,445)(15,099)Net loss(4,802)(13,119)(3,945)(14,390)(36,256)Net loss attributable to commonstockholders(4,802)(13,119)(3,945)(14,390)(36,256)Basic loss per share$(0.09)$(0.25)$(0.07)$(0.27)$(0.68)Diluted loss per share$(0.09)$(0.25)$(0.07)$(0.27)$(0.68)Year Ended December 31, 2017 Total revenues, net$17,663 $16,432 $11,340 $14,767 $60,202 Gross profit10,934 8,037 2,538 5,863 27,372 Operating 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 to commonstockholders831 (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)41TELIGENT, INC.SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS(in thousands) Additions Balance atBeginningof YearCharged toCosts andExpensesChargedotherAccountsDeductionsBalance atEnd of YearYear Ended December 31, 2016 Change in Tax Valuation Allowance$14,309 — 941 — $15,250 Allowance for Doubtful Accounts$90 347 — 20 $417 Reserve for Inventory Obsolescence$121 872 — 583 $410 Year Ended December 31, 2017 Change in Tax Valuation Allowance$15,250 (61)(1,880)— $13,309 Allowance for Doubtful Accounts$417 1,768 — — $2,185 Reserve for Inventory Obsolescence$410 2,000 9 1,115 $1,304 Year Ended December 31, 2018 Change in Tax Valuation Allowance$13,309 67 (1,256)— $12,120 Allowance for Doubtful Accounts$2,185 451 — — $2,636 Reserve for Inventory Obsolescence$1,304 3,343 — 1,980 $2,667 42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 S3 (Nos.333-224188, 333-27173, 333-47006, 333-61716, 333-163524, 333-171446, 333-173615, 333-173148, 333-187221 and 333-196543) and Form S8(Nos. 33-58479, 333-28183, 33-65249, 333-52312, 333-65553, 333-67565, 333-79333, 333-79341, 333-160341, 333-160342, 333-160865, 333-167387 and 333-197811) of our report dated March 19, 2018, on our audits of the consolidated financial statements and financial statementschedule as of December 31, 2017 and for the years ended December 31, 2017 and 2016, which report is included in this Annual Report on Form10-K./s/ EisnerAmper LLPEISNERAMPER LLPIselin, New JerseyApril 1, 2019Exhibit 23.2CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-224188, 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, 333-167387and 333-197811) of our reports dated April 1, 2019, relating to (1) the consolidated financial statements of Teligent, Inc. andsubsidiaries (the “Company”), and (2) the effectiveness of the Company’s internal control over financial reporting (which reportexpresses an adverse opinion on the effectiveness of the Company's internal control over financial reporting because of materialweaknesses), appearing in the Annual Report on Form 10-K of the Company for the year ended December 31, 2018./s/ DELOITTE & TOUCHE LLPParsippany, NJApril 1, 2019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: April 1, 2019 /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: April 1, 2019 /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, 2018 (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: April 1, 2019/s/ Jason Grenfell-Gardner Principal Executive Officer Dated: April 1, 2019/s/ Damian Finio Principal Financial OfficerMay 7, 2018Jenniffer Collins12 Cherry PlaceManasquan, New Jersey 08736 Dear Jenniffer:The purpose of this letter agreement (“Agreement and Release”) is to confirm the decision to terminate your employment withTeligent, Inc. (“Teligent” or the “Company”) and to set forth the terms of your separation from employment pursuant to your July 14,2011, “Employment Agreement” with IGI Laboratories, Inc. (subsequently renamed Teligent, Inc.), and the special separationprovisions being offered to you in this letter.1.STANDARD SEPARATION PROVISIONS FOLLOWING TERMINATION OF EMPLOYMENTa.You will receive a lump-sum payment, less applicable withholdings and deductions, for the value of the unusedvacation time you have accrued and to which you are entitled under the Company’s vacation policy.b.You will be given the opportunity to purchase the Medical and Dental Plan coverage for which you are eligible throughthe Consolidated Omnibus Reconciliation Act (COBRA) for a period of up to 18 months at your own expense. Youwill receive the appropriate COBRA application form and information regarding rates and period of coverage in thenear future. Please note that at the end of the month within which your last day of employment occurs, your currentcoverage will be terminated. However, upon the completion and processing of your COBRA application, coverage willbe retroactively reinstated.c.Your Group Life/Accidental Death and Dismemberment, Short Term and Long-Term Disability coverages willterminate your last day of employment. Your Life Insurance coverage may be converted to an individual policy within31 days from your coverage termination date by making written application to Guardian. You have 31 days from yourtermination date to exercise the conversion feature. A copy of the form and life conversation rates are attached to thisform for your convenience.d.You will be provided with information describing your options under the Teligent 401K Savings Plan under separatecover.Page 1 of 1e.You will receive compensation associated with a “Termination of Employment Without Cause” in the manner outlinedin your Employment Agreement in the first paragraph of Section 8.1 and Section 8.4 (which requires you to execute arelease of liability to receive such compensation). Signing this letter, thereby agreeing to the Release in paragraph 3below, will fulfill your obligations under Employment Agreement Section 8.4.f.Other than as set forth in Paragraphs a-d above, the Company shall have no other financial obligations to you under anycompensation or benefit plan, program or policy and your participation in the Company compensation and benefitplans, programs and policies shall cease as of the date of your termination.g.If the Company receives requests for references from prospective employers, it will provide only dates of employmentand positions held.h.Upon your termination, you must return to the Company all Company property, including all notes, reports, plans, keys,security cards and/or identification cards, customer lists, product information and other documents and propertyincluding computer equipment, and cellular phones that were created, developed, generated or received by you duringyour employment or that are the property of the Company, whether or not such items are confidential to the Company.You will also be responsible for discharging your obligations under Section 8.3 of the Employment Agreement).i.You are reminded of your continuing legal and contractual obligations, including without limitation those set forth inyour Employment Agreement previously executed by you (copy attached), not to use or disclose any secret,confidential, or proprietary information or documents of the Company for any purpose following the termination ofyour employment with the Company. Specifically, you are not to disclose, nor use for your benefit or the benefit of anyother person or entity, any information received from Teligent or its parent, subsidiaries or affiliated companies(individually or collectively a “Teligent Company”), which is confidential or proprietary and: (i) which has not beendisclosed publicly by a Teligent Company; (ii) which is otherwise not a matter of public knowledge; or (iii) which is amatter of public knowledge but you knows or have reason to know that such information became a matter of publicknowledge through an unauthorized disclosure. Proprietary or confidential information includes information theunauthorized disclosure or use of which would reduce the value of such information to the Company. Such informationincludes, without limitation, any Company customer and supplier lists, trade secrets, intellectual property, confidentialinformation about (or provided by) any customer or prospective or former customer or business partner of theCompany, information concerning the Company’s business or financial affairs (including its books and records,commitments, procedures, plans, strategies, inventions, and prospects), products developed or in development by theCompany, securities positions, or current or prospective transactions or business of the Company.1.SPECIAL SEPARATION PROVISIONSPage 2 of 2If you agree to the terms set forth in Paragraph 3 below, and in consideration of the obligations you assume in Paragraph 3 andthe other agreements made by you under this Agreement and Release, the Company agrees that in addition to the above:a.Your last day of employment will be extended to May 25, 2018 (the “Termination Date”), so that you can transitionyour position to your replacement, and complete pending projects. The transition and completion of work will occurfrom May 7, 2018 to May 25, 2018 (the “Transition Period”). During this period, you agree to use your best efforts toassist with the transition, and you will continue to be employed as an at-will employee.b.You will receive your current salary, less applicable withholdings and deductions, through the Termination Date(provided your employment is not separated prior to the Termination Date).c.On the condition that you (i) work through the entire Transition Period; and (ii) sign the Supplemental SeveranceAgreement and Full and Final Release of Claims (hereinafter “Supplemental Agreement”) attached hereto as Exhibit A,no earlier than May 28, 2018; you will receive a retention bonus of $30,000. Such amount, which shall be paid out ofpayroll and is subject to applicable payroll deductions, including federal tax withholding at the “supplemental rate,” willbe paid in the form of a lump sum paid within 21 days following the Company’s receipt of the signed SupplementalAgreement from you. The Supplemental Agreement will release any and all claims for anything that occurs, or mayoccur, between the date of your execution of this Agreement and the date you sign the Supplemental Agreement.Teligent shall have no obligation to make any payment to you pursuant to this Paragraph 2(c) unless and until youexecute the Supplemental Agreement. If you execute the Supplemental Agreement before May 28, 2018, Teligent shallhave no obligation to pay you any of the amounts described in this Paragraph 2(c).d.Also, on the condition that you (i) work through the entire Transition Period; and (ii) sign the Supplemental Agreement(in the manner discussed in paragraph 2c above); Teligent will pay your share of COBRA coverage premium expensesthrough December 31, 2018. This does not extend the 18-month period, described in paragraph 1b, during which youwill be eligible for COBRA continuation.1.WAIVER OF RIGHTSIn exchange for the consideration described in Paragraph 2 above, including all subparts (and specifically including theCompany’s agreement to extend your employment into the Transition Period), you agree as follows:Page 3 of 3a.to release and forever discharge the Company, its subsidiaries and affiliates and their parent organizations, predecessors,successors, officers, directors, employees, agents, attorneys, associates and employee benefit plans from all claims,demands or causes of action arising out of facts or occurrences prior to the date of this Agreement and Release, whetherknown or unknown to you. You agree that this release of claims is intended to be broadly construed so as to resolveany pending and potential disputes between you and the Company that you have up to the date of this Release, whethersuch disputes are known or unknown to you, including, but not limited to, claims based on express or implied contract;any action arising in tort, including, but not limited to libel, slander, defamation, intentional infliction of emotionaldistress, or negligence; any or all claims for wrongful discharge; Title VII of the Civil Rights Act of 1964 as amended;the Civil Rights Acts of 1866 and 1871; the Employee Retirement Income Security Act; the Family and Medical LeaveAct, the Americans With Disabilities Act; the Occupational Safety and Health Act; the Immigration Reform andControl Act; the Fair Labor Standards Act of 1938 as amended; the Occupational Safety and Health Act; Section 806of the Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination – N.J. Rev. Stat. §10:5-1 et seq.; NewJersey Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers’ Compensation Claim – N.J. Rev.Stat. §34:15-39.1 et seq.; New Jersey Family Leave Act – N.J. Rev. Stat. §34:11B-1 et seq.; New Jersey Smokers’Rights Law – N.J. Rev. Stat. §34:6B-1 et seq.; New Jersey Equal Pay Act – N.J. Rev. Stat. §34:11-56.1 et seq.; NewJersey Genetic Privacy Act – N.J. Rev. Stat. Title 10, Ch. 5, §10:5-43 et seq.; New Jersey Conscientious EmployeeProtection Act (Whistleblower Protection) – N.J. Stat. Ann. §34:19-3 et seq.; New Jersey Wage Payment and WorkHour Laws; New Jersey Public Employees’ Occupational Safety and Health Act – N.J. Stat. Ann. §34:6A-25 et seq.;New Jersey Fair Credit Reporting Act; the Millville Dallas Automotive Plant Job Loss Notification (mini-WARN) Act;New Jersey Fair Credit Reporting Act; New Jersey False Claims Act; New Jersey Civil Rights Act; New Jersey mini-COBRA; New Jersey laws regarding Political Activities of Employees, Lie Detector Tests, Jury Duty, EmploymentProtection, and Discrimination; and other applicable federal, state or local law, regulation, ordinance or order, andincluding all claims for, or entitlement to, attorneys’ fees. However, the foregoing release is not intended to cover anyclaim for vested benefits to which you are entitled, if any, under the Company’s Pension and Investment Savings Plan.b.In further consideration for the compensation and benefits described in Paragraph 2 above (and specifically includingthe Company’s agreement to extend your employment into the Transition Period), you agree strictly to maintain theconfidentiality of this Agreement and Release and not to disclose its existence or its terms to anyone other than yourspouse, your attorney and any tax advisors.Page 4 of 4c.You expressly agree that you shall be responsible for remitting to federal, state and/or local tax authorities your share ofany applicable taxes due from the payments set forth in this Agreement and Release, to the extent that such taxes havenot been withheld from said payments and remitted on your behalf, and shall hold the Company harmless andindemnify it for any liability, costs and expenses (including attorney’s fees arising from your failure to remit your shareof any applicable taxes), caused by any tax authority relating in any way to the tax treatment of the payment madepursuant to this Agreement and Release.d.In further consideration of this Agreement and Release, you agree to refrain from any publication or any type ofcommunication, oral or written, of a defamatory or disparaging statement pertaining to the Company, its corporateparent(s) and affiliates, or their respective past, present and future officers, agents, directors, supervisors, employees orrepresentatives, except as otherwise required by law. The Company shall not make any disparaging remarks orotherwise take any action that could reasonably be anticipated to cause damage to your reputation, or otherwise makeremarks that may reflect negatively upon you. Notwithstanding the foregoing provision, you and the Company maytestify truthfully pursuant to compulsory process. The breach of this paragraph shall not affect the continuing validity orenforceability of this Agreement and Release. Inquiries about your employment at Teligent should be directed toShannon Johnston, Vice President, Human Resources, and the Company will respond to inquiries by only providingyour dates of service, title, and final compensation.e.If you challenge the enforceability of this Agreement and Release in a court of law or before any administrative agency,or you breach your obligations under the Agreement and Release, except as provided in Paragraph 7, you acknowledgethat (i) you will reimburse the Company for any monetary consideration previously received by you under thisAgreement and Release, and (ii) you agree to pay reasonable attorneys’ fees and costs incurred by the Company to theextent the Company successfully enforces the Agreement and Release or proves a breach of the Agreement andRelease.f.You shall cooperate fully with the Company in its defense of, or other participation in, any administrative, judicial orother proceeding arising from any charge, complaint or other action that has been or may be filed.1.This Agreement and Release shall not be construed as an admission by the Company of any wrongdoing or any violation offederal, state or local law, and the Company specifically disclaims any wrongdoing against, or liability to you.Page 5 of 52.You affirm that you have not filed or caused to be filed, and currently are not a party to any claim, complaint, or action againstthe Company in any forum or form. You further affirm that you have been paid and/or have received all leave (paid or unpaid),compensation, wages, bonuses, commissions, and/or benefits to which you may be entitled and that no other leave (paid orunpaid), compensation, wages, bonuses, commissions and/or benefits are due to you, except as described in this Agreementand Release. You further affirm that you have no known workplace injuries or occupational diseases and have been providedand/or have not been denied any leave requested under any applicable family and medical leave laws.3.You acknowledge and agree as follows:a.the payments and other benefits provided to you under Paragraph 2 of this Agreement and Release exceed the natureand scope of that to which you would otherwise have been entitled to receive from the Company and constituteadequate consideration for your promises herein;b.you acknowledge that, before signing this Agreement and Release, you were given a period of at least 21 calendar daysto consider this Agreement and Release;c.you waive any right you might have to additional time beyond this 21 day consideration period within which toconsider this Agreement and Release;d.you have read and understand this Agreement and Release in its entirety;e.you have been advised by the Company to consult with an attorney (at your own expense) before signing thisAgreement and Release and this paragraph constitutes such advice in writing;f.you are waiving, among other things, any age discrimination claims under the Age Discrimination in Employment Act(“ADEA”), provided, however, you are not waiving any claims under the ADEA that may arise out of acts oromissions done or occurring after the date this Agreement is executed;g.You may revoke this Agreement and Release within seven days after your execution of it, and it shall not becomeeffective until the expiration of such seven-day revocation period. Any revocation within this period must be submitted,in writing, to Teligent Human Resources and state, “I hereby revoke my acceptance of our Agreement and Release.”The revocation must be delivered to Human Resources, Attn: Shannon Johnston, 33 Wood Avenue South, Iselin, NJ08830. and postmarked within seven (7) calendar days of your execution of this Agreement and Release. If the last dayof the revocation period is a Saturday, Sunday, or legal holiday in the state in which you reside, then the revocationperiod shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday. In the event of atimely revocation by you, this Agreement and Release will be deemed null and void and the Company will have noobligations hereunder.Page 6 of 6h.You enter into this Agreement and Release knowingly and voluntarily, without duress or reservation of any kind, andafter having given the matter full and careful consideration; andi.Nothing in this Agreement and Release changes in any way your status as an at-will employee of the Company and thisAgreement does not restrict in any way the Company’s right to terminate your employment in accordance withapplicable law. j.Nothing in this Agreement and Release shall prevent any Party from asserting any claim to enforce the terms of thisAgreement or to seek a judicial determination of the validity of the waiver of ADEA claims.1.Nothing in this Agreement and Release shall be construed to prohibit you from filing any charge or complaint with, orparticipating in any investigation or proceeding conducted by, the EEOC (or any analogous state agency), any self-regulatoryorganization, or any state or federal regulatory authority, nor shall any provision of this Agreement and Release adversely affectyour right to engage in such conduct. Notwithstanding the foregoing, pursuant to Paragraph 3 above, you waive the right toobtain any relief or recover any monies or compensation as a result of filing any such charge or complaint. Additionally, theparties intend that the Company shall have the right, to the full extent permitted by law, to enforce this Agreement and Releaseand to pursue any and all legal or equitable remedies against you in the event you violate this Agreement and Release.2.This Agreement and Release contains the entire agreement between you and the Company concerning your separation fromemployment. Your post-separation obligations to the Company contained in your Employment Agreement will remain in fullforce and effect.3.This Agreement and Release shall be construed and enforced in accordance with New Jersey law, to the extent not governedby federal law.4.In the event any portion of this Agreement and Release is deemed to be invalid or unenforceable, that portion will be deemedomitted and the remainder of this Agreement and Release will remain in full force and effect.If you agree to the terms set forth above, please sign the next page and return the original of the entire document in theenvelope provided.Page 7 of 7 Teligent, Inc.By: __________________________ Dated:PLEASE READ THE FOREGOING AGREEMENT CAREFULLY BEFORE SIGNING. THIS AGREEMENTINCLUDES A RELEASE OF ALL CLAIMS, WHETHER KNOWN OR UNKNOWN, YOU MAY HAVE INCONNECTION WITH YOUR EMPLOYMENT WITH THE COMPANY INCLUDING, BUT NOT LIMITED TO, THETERMINATION THEREOF. Jenniffer Collins Dated:Page 8 of 8EXHIBIT ASUPPLEMENTAL SEVERANCE AGREEMENT ANDFULL AND FINAL RELEASE OF CLAIMSThis Supplemental Severance Agreement and Full and Final Release of Claims (“Supplemental Agreement”) is entered into betweenJennifer Collins (“Employee” or “you”) and Teligent, Inc. (the “Employer”, the “Company” or “Teligent”).1.RECITALSOn ______, Employer notified Employee that Employee’s employment was being terminated. Employee’s last day of workwas May 25, 2018. On ________, 2018, Employee executed an Agreement and General Release of Claims (the “Agreement andRelease”) and received continued employment as part of a Transition Period.In exchange for Employer’s agreement to continue Employee’s employment into the Transition Period (and other valuableconsideration), Employee agreed to release and forever discharge Employer, its subsidiaries and affiliates and their parentorganizations, predecessors, successors, officers, directors, employees, agents, attorneys, associates and employee benefit plans from allclaims, demands, or causes of action arising out of facts or occurrences prior to the date of the Supplemental Agreement.Accordingly, in consideration of the terms, conditions and agreements set forth below, Employer and Employee hereby furtheragree as follows:2.AGREEMENTSIf Employee agrees to the terms set forth in Section 3 below, and in consideration of the obligations Employee assumes inSection 3 and the other agreements made by Employee under this Supplemental Agreement, Employer agrees:Employee will receive $30,000 as a severance payment and continued COBRA continuation payments as described inparagraphs 2c and 2 d of the Agreement and Release. 3.WAIVER OF RIGHTSIn exchange for the consideration described in above, Employee agrees as follows:Page 9 of 9a.To release and forever discharge the Company, its subsidiaries and affiliates and their parent organizations,predecessors, successors, officers, directors, employees, agents, attorneys, associates and employee benefit plans fromall claims, demands or causes of action arising out of facts or occurrences prior to the date of this SupplementalAgreement, whether known or unknown to you. You agree that this release of claims is intended to be broadlyconstrued so as to resolve any pending and potential disputes between you and the Company that you have up to thedate of this Release, whether such disputes are known or unknown to you, including, but not limited to, claims basedon express or implied contract; any action arising in tort, including, but not limited to libel, slander, defamation,intentional infliction of emotional distress, or negligence; any or all claims for wrongful discharge; Title VII of the CivilRights Act of 1964 as amended; the Civil Rights Acts of 1866 and 1871; the Employee Retirement Income SecurityAct; the Family and Medical Leave Act, the Americans With Disabilities Act; the Occupational Safety and Health Act;the Immigration Reform and Control Act; the Fair Labor Standards Act of 1938 as amended; the Occupational Safetyand Health Act; Section 806 of the Sarbanes-Oxley Act of 2002, the New Jersey Law Against Discrimination – N.J.Rev. Stat. §10:5-1 et seq.; New Jersey Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers’Compensation Claim – N.J. Rev. Stat. §34:15-39.1 et seq.; New Jersey Family Leave Act – N.J. Rev. Stat. §34:11B-1et seq.; New Jersey Smokers’ Rights Law – N.J. Rev. Stat. §34:6B-1 et seq.; New Jersey Equal Pay Act – N.J. Rev.Stat. §34:11-56.1 et seq.; New Jersey Genetic Privacy Act – N.J. Rev. Stat. Title 10, Ch. 5, §10:5-43 et seq.; NewJersey Conscientious Employee Protection Act (Whistleblower Protection) – N.J. Stat. Ann. §34:19-3 et seq.; NewJersey Wage Payment and Work Hour Laws; New Jersey Public Employees’ Occupational Safety and Health Act –N.J. Stat. Ann. §34:6A-25 et seq.; New Jersey Fair Credit Reporting Act; the Millville Dallas Automotive Plant JobLoss Notification (mini-WARN) Act; New Jersey Fair Credit Reporting Act; New Jersey False Claims Act; NewJersey Civil Rights Act; New Jersey mini-COBRA; New Jersey laws regarding Political Activities of Employees, LieDetector Tests, Jury Duty, Employment Protection, and Discrimination; and other applicable federal, state or local law,regulation, ordinance or order, and including all claims for, or entitlement to, attorneys’ fees. However, the foregoingrelease is not intended to cover any claim for vested benefits to which you are entitled, if any, under the Company’sPension and Investment Savings Plan.b.In further consideration for the compensation and benefits described above (and specifically including the Company’sagreement to extend your employment into the Transition Period), you agree strictly to maintain the confidentiality ofthis Supplemental Agreement and not to disclose its existence or its terms to anyone other than your spouse, yourattorney and any tax advisors.Page 10 of 10c.You expressly agree that you shall be responsible for remitting to federal, state and/or local tax authorities your share ofany applicable taxes due from the payments set forth in this Supplemental Agreement, to the extent that such taxes havenot been withheld from said payments and remitted on your behalf, and shall hold the Company harmless andindemnify it for any liability, costs and expenses (including attorney’s fees arising from your failure to remit your shareof any applicable taxes), caused by any tax authority relating in any way to the tax treatment of the payment madepursuant to this Supplemental Agreement.d.In further consideration of this Supplemental Agreement, you agree to refrain from any publication or any type ofcommunication, oral or written, of a defamatory or disparaging statement pertaining to the Company, its corporateparent(s) and affiliates, or their respective past, present and future officers, agents, directors, supervisors, employees orrepresentatives, except as otherwise required by law. The Company shall not make any disparaging remarks orotherwise take any action that could reasonably be anticipated to cause damage to your reputation, or otherwise makeremarks that may reflect negatively upon you. Notwithstanding the foregoing provision, you and the Company maytestify truthfully pursuant to compulsory process. The breach of this paragraph shall not affect the continuing validity orenforceability of this Supplemental Agreement. Inquiries about your employment at Teligent should be directed toShannon Johnston, Vice President, Human Resources, and the Company will respond to inquiries by only providingyour dates of service, title, and final compensation.e.If you challenge the enforceability of this Supplemental Agreement in a court of law or before any administrativeagency, or you breach your obligations under the Supplemental Agreement, except as provided in Paragraph 1, youacknowledge that (i) you will reimburse the Company for any monetary consideration previously received by youunder this Supplemental Agreement, and (ii) you agree to pay reasonable attorneys’ fees and costs incurred by theCompany to the extent the Company successfully enforces the Supplemental Agreement or proves a breach of theSupplemental Agreement.f.Employee shall cooperate fully with Employer in its defense of, or other participation in, any administrative, judicial orother proceeding arising from any charge, complaint or other action that has been or may be filed.1.This Supplemental Agreement shall not be construed as an admission by the Company of any wrongdoing or any violation offederal, state or local law, and the Company specifically disclaims any wrongdoing against, or liability to you.2.Employee affirms that she has not filed or caused to be filed, and currently is not a party to any claim, complaint, or actionagainst Employer in any forum or form. Employee further affirms that she has been paid and/or have received all leave (paid orunpaid), compensation, wages, bonuses, commissions, and/or benefits to which she may be entitled and that no other leave(paid or unpaid), compensation, wages, bonuses, commissions and/or benefits are due to her, except as provided in thisSupplemental Agreement. Employee furthermore affirms that she has no known workplace injuries or occupational diseasesand have been provided and/or have not been denied any leave requested under any applicable family and medical leave laws.Page 11 of 113.Employee acknowledges and agrees as follows:a.The payments and other benefits provided to Employee under this Supplemental Agreement exceed the nature andscope of that to which you would otherwise have been entitled to receive from the Company and constitute adequateconsideration for your promises herein;b.You acknowledge that, before signing this Supplemental Agreement, you were given a period of at least 21 calendardays to consider this Supplemental Agreement;c.You waive any right you might have to additional time beyond this 21 day consideration period within which toconsider this Supplemental Agreement;d.You have read and understand this Supplemental Agreement in its entirety;e.You have been advised by the Company to consult with an attorney (at your own expense) before signing thisSupplemental Agreement and this paragraph constitutes such advice in writing;f.you are waiving, among other things, any age discrimination claims under the Age Discrimination in Employment Act(“ADEA”), provided, however, you are not waiving any claims under the ADEA that may arise out of acts oromissions done or occurring after the date this Agreement is executed;g.You may revoke this Supplemental Agreement within seven days after your execution of it, and it shall not becomeeffective until the expiration of such seven day revocation period. Any revocation within this period must be submitted,in writing, to Teligent Human Resources and state, “I hereby revoke my acceptance of our Supplemental Agreement.”The revocation must be delivered to Human Resources, Attn: Shannon Johnston, 33 Wood Avenue South, Iselin, NJ08830. and postmarked within seven (7) calendar days of your execution of this Supplemental Agreement. If the lastday of the revocation period is a Saturday, Sunday, or legal holiday in the state in which you reside, then the revocationperiod shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday. In the event of atimely revocation by you, this Supplemental Agreement will be deemed null and void and the Company will have noobligations hereunder.h.you enter into this Supplemental Agreement knowingly and voluntarily, without duress or reservation of any kind, andafter having given the matter full and careful consideration; andPage 12 of 12i.Nothing in this Supplemental Agreement changes in any way your status as an at-will employee of the Company andthis Agreement does not restrict in any way the Company’s right to terminate your employment in accordance withapplicable law. j.Nothing in this Supplemental Agreement shall prevent any Party from asserting any claim to enforce the terms of thisAgreement or to seek a judicial determination of the validity of the waiver of ADEA claims.1.Nothing in this Supplemental Agreement shall be construed to prohibit you from filing any charge or complaint with, orparticipating in any investigation or proceeding conducted by, the EEOC (or any analogous state agency), any self-regulatoryorganization, or any state or federal regulatory authority, nor shall any provision of this Supplemental Agreement adverselyaffect your right to engage in such conduct. Notwithstanding the foregoing, pursuant to Paragraph 3 above, you waive the rightto obtain any relief or recover any monies or compensation as a result of filing any such charge or complaint. Additionally, theparties intend that the Company shall have the right, to the full extent permitted by law, to enforce this SupplementalAgreement and to pursue any and all legal or equitable remedies against you in the event you violate this SupplementalAgreement.2.This Supplemental Agreement along with the Agreement and Release contain the entire agreement between Employee andEmployer concerning Employee’s separation from employment. Employee’s post-separation obligations to the Companycontained in Employee’s Employment Agreement will remain in full force and effect.3.This Supplemental Agreement shall be construed and enforced in accordance with New Jersey law, to the extent not governedby federal law.4.In the event any portion of this Supplemental Agreement is deemed to be invalid or unenforceable, that portion will be deemedomitted and the remainder of this Supplemental Agreement will remain in full force and effect.If Employee agrees to the terms set forth above, please sign below and return the original of the entire document in theenvelope provided.PLEASE READ THE FOREGOING AGREEMENT CAREFULLY BEFORE SIGNING. THIS AGREEMENTINCLUDES A RELEASE OF ALL CLAIMS, WHETHER KNOWN OR UNKNOWN, YOU MAY HAVE INCONNECTION WITH YOUR EMPLOYMENT WITH THE COMPANY INCLUDING, BUT NOT LIMITED TO, THETERMINATION THEREOF.Page 13 of 13Jenniffer CollinsDated: May 8, 2018 Page 14 of 14

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