What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-11 compared with 2021-03-15 · 426 added, 415 removed, 963 unchanged (47% of the section changed)

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Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders’ Equity

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We have audited the accompanying consolidated balance sheets of Amphastar Pharmaceuticals, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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As described in Note 4 to the consolidated financial statements, a provision for chargebacks is made at the time of sale and is analyzed and adjusted, if necessary, at each balance sheet date.

Auditing the provision for chargebacks estimate, the resulting impact of which is netted on the statement of operations against product sales, is complex, requires significant judgment, and the amounts involved are material to the financial statements taken as a whole.

Auditing the provision for chargebacks estimate, the resulting impact of which is netted on the statement of operations against product sales, was complex, requires significant judgment, and the amounts involved are material to the financial statements taken as a whole.

The significant judgment primarily relates to the estimation of the future wholesale customer mix and related contract pricing, which determine the rates at which future chargebacks on current sales will be paid.

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We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the provision for chargebacks estimation process.

This included testing controls over management’s review of significant assumptions and inputs used in the provision for chargebacks estimate, including actual sales, historical experience;

and wholesaler inventory levels, customer mix and contract pricing.

This included testing controls over management’s review of significant assumptions and inputs used in the provision for chargebacks estimate, including actual sales, historical experience and wholesaler inventory levels, customer mix and contract pricing.

To test the provision for chargebacks estimate, we obtained management’s calculations and performed the following procedures, among others.

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We also assessed the historical accuracy of management's estimates by performing retrospective reviews over prior periods' forecasted average selling prices and performed sensitivity analyses over the significant assumptions to evaluate the changes in the selling price forecast that would result from changes in the underlying assumptions.

Accounting for Amphastar Nanjing Pharmaceuticals, Inc.

restructuring transaction

Description of the Matter

In the third quarter of 2021, Amphastar Pharmaceuticals, Inc.

executed a Share Purchase Agreement (SPA) to acquire approximately 18% additional ownership interest in Amphastar Nanjing Pharmaceuticals, Inc.

(“ANP”) for approximately $29.4 million in cash and a Share Repurchase Agreement (SRA) to contribute 80% ownership interest in one of ANP’s wholly owned subsidiaries, Nanjing Hanxin Pharmaceutical Technology Co., Ltd.

("HX") (together with HX’s wholly owned subsidiaries), in exchange for approximately 10% additional ownership interest in ANP.

Upon completion of the restructuring, the Company owned approximately 85% of ANP and ANP owned approximately 20% of HX.

As described in Note 3 to the consolidated financial statements, the disposition of HX is accounted for under Accounting Standards Codification (ASC) 810 and the remaining interest in HX is recognized as an equity method investment.

The Company recorded a gain of $13.6 million for the year ended December 31, 2021 related to the ANP restructuring transaction.

In order to calculate the gain and equity method investment, management was required to estimate the fair value of both the shares received and equity method investment retained.

Auditing the restructuring transaction was complex due to the nature of it being a significant unusual transaction, the involvement of related parties, and significant estimation uncertainty in

assumptions used in the valuations of the shares received and equity method investment retained including the discount rate, revenue base and growth rate, gross margin, and earnings before interest and taxes (EBIT).

These significant assumptions are forward-looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over its accounting for the ANP restructuring transaction.

This included testing controls over management’s judgment and evaluation of underlying assumptions and estimates with regards to the fair values of the shares received and equity method investment retained.

Our substantive audit procedures included, among others, evaluating management’s conclusion that the SPA and SRA should be considered one transaction, and the appropriate accounting for the disposition of HX.

We also involved our valuation specialists to assist in testing the significant assumptions used.

For example, we compared the significant assumptions to current industry, market and economic trends, to the historical results of the entities and to other guidelines used by companies within the same industry.

Further, we assessed the Company’s disclosures related to the transaction pertaining to the related party transaction.

/s/ Ernst & Young LLP

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Operating lease right-of-use assets

Investment in unconsolidated affiliate

Goodwill and intangible assets, net

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Long-term reserve for income tax liabilities

Long-term debt, net of current portion

Long-term debt, net of current portion and unamortized debt issuance costs

Long-term operating lease liabilities, net of current portion

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Income (loss) from operations

Non-operating (expenses) income:

Non-operating income (expenses):

Interest income

Interest expense

Other (expenses) income, net

Total non-operating (expenses) income, net

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Net loss attributable to non-controlling interests

Net income (loss) attributable to Amphastar Pharmaceuticals, Inc.

Net income (loss) per share attributable to Amphastar Pharmaceuticals, Inc.

Other income (expenses), net

Total non-operating income (expenses), net

Income before income taxes

Income tax provision

Income before equity in losses of unconsolidated affiliate

Equity in losses of unconsolidated affiliate

Net income (loss) attributable to non-controlling interests

Net income attributable to Amphastar Pharmaceuticals, Inc.

Net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders:

Weighted-average shares used to compute net income (loss) per share attributable to Amphastar Pharmaceuticals, Inc.

Weighted-average shares used to compute net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders:

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AMPHASTAR PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Year Ended December 31,

Net income (loss) attributable to Amphastar Pharmaceuticals, Inc.

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc., net of income taxes

Reclassification of adjustment for amounts included in net income

Foreign currency translation adjustment

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Total other comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc.

Total comprehensive income (loss) attributable to Amphastar Pharmaceuticals, Inc.

Total comprehensive income attributable to Amphastar Pharmaceuticals, Inc.

See accompanying notes to consolidated financial statements.

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Beginning balance adjustment as a result of the adoption of new accounting standards

Net loss attributable to Amphastar Pharmaceuticals, Inc.

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc.

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( 5,918,515 )

Beginning balance adjustment as a result of the adoption of new accounting standards

Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc.

Proceeds from the private placement of ANP

Other comprehensive income attributable to Amphastar Pharmaceuticals, Inc.

Acquisition of additional ownership interest in ANP

Net loss attributable to non-controlling interest

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Net income attributable to Amphastar Pharmaceuticals, Inc.

Other comprehensive income attributable to Amphastar Pharmaceuticals, Inc.

Acquisition of additional ownership interest in ANP

Net loss attributable to non-controlling interest

Other comprehensive loss attributable to Amphastar Pharmaceuticals, Inc.

ANP restructuring (see Note 3)

Net income attributable to non-controlling interest

Purchase of treasury stock

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Cash Flows From Operating Activities:

Net income (loss)

Reconciliation to net cash provided by operating activities:

Loss on impairment and disposal of assets

Loss on disposal of assets

Gain on deconsolidation of subsidiary

Depreciation of property, plant, and equipment

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Operating lease right-of-use asset amortization

(Income) loss on equity method investment

Share-based compensation expense

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Purchases and construction of property, plant, and equipment

Proceeds from the sale of property, plant and equipment

Sale of intangible assets

Purchase of short-term investments

Maturity of short-term investments

Purchase of investments

Maturity of investments

Payment of deposits and other assets

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Acquisition of additional ownership interest in ANP

ANP restructuring (see Note 3)

Proceeds from equity plans, net of withholding tax payments

Purchase of treasury stock

Settlement of ANP equity awards

Debt issuance costs

Proceeds from borrowing under lines of credit

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Principal payments on long-term debt

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

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All intercompany activity has been eliminated in the preparation of the consolidated financial statements.

In the opinion of management, the accompanying consolidated financial statements include all adjustments necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company.

In the opinion of management, the accompanying consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company.

The Company’s subsidiaries include:

(1) International Medication Systems, Limited, or IMS, (2) Armstrong Pharmaceuticals, Inc., or Armstrong, (3) Amphastar Nanjing Pharmaceuticals Inc., or ANP, (4) Nanjing Letop Biological Technology Co., Ltd., or Letop, (5) Nanjing Hanxin Pharmaceutical Technology Co., Ltd., or Hanxin, (6) Nanjing Hanxin Biomedical Testing Service Co., Ltd., or Hanxin Biomedical, (7) Nanjing Baixin Trading Co., Ltd., or Baixin, (8) Amphastar France Pharmaceuticals, S.A.S., or AFP, (9) Amphastar UK Ltd., or AUK, and (10) International Medication Systems (UK) Limited, or IMS UK.

In July 2018, the Company’s Chinese subsidiary, ANP, completed a private placement of its common equity interest to accredited investors and received approximately $ 56.3 million of cash proceeds, a portion of which was received in 2019.

The Company has retained approximately 58 % of the equity interest in ANP following the private placement and continues to consolidate the financial results of ANP with the Company’s results of operations.

ANP’s net income after July 2, 2018, was attributed to the Company in accordance with the Company’s equity interest of approximately 58 % in ANP.

(1) International Medication Systems, Limited, or IMS, (2) Armstrong Pharmaceuticals, Inc., or Armstrong, (3) Amphastar Nanjing Pharmaceuticals Inc., or ANP, (4) Amphastar France Pharmaceuticals, S.A.S., or AFP, (5) Amphastar UK Ltd., or AUK, and (6) International Medication Systems (UK) Limited, or IMS UK.

COVID-19 Pandemic

The Company is subject to risks and uncertainties as a result of the novel coronavirus pandemic, or COVID-19.

The Company is subject to risks and uncertainties as a result of the ongoing novel coronavirus pandemic, or COVID-19.

The complete extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the information is constantly evolving.

The Company considered the impact of COVID-19 on the assumptions and estimates used to determine the results reported and asset valuations as of December 31, 2021.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the world, including locations where the Company operates, such as the United States, China and France.

The Company has been actively monitoring the COVID-19 pandemic and its impact globally.

In late January 2020, China implemented extensive curfews and travel restrictions to control the outbreak, and started easing these restrictions in March.

Our business operations in China experienced a temporary disruption but resumed full operation in February 2020.

In March 2020, France also implemented a stay-at-home order limiting movement and restricting travel, however, the Company was deemed to be an essential business and was not significantly impacted by the restrictions.

In March 2020, the Governors of the States of California and Massachusetts declared a health emergency and issued orders to close all nonessential business;

as a bio-pharmaceutical company, the

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company was deemed to be an essential businesses.

Subsequently, some but not all of the restrictions were lifted in China, France, and states where the Company operates, and most businesses were allowed to reopen.

All of the Company’s production facilities continued to operate during the remainder of the year as they had prior to the COVID-19 pandemic with very little change, other than for enhanced safety measures intended to prevent the spread of the virus.

All of the Company’s production facilities continued to operate during the year as they had prior to the COVID-19 pandemic with very little change, other than for enhanced safety measures intended to prevent the spread of the virus.

It is not possible at this time to estimate the complete impact that COVID-19 could have on the Company’s business, including its customers and suppliers, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

Infections may resurge or become more widespread and the limitation on the Company’s ability to travel and timely sell and distribute its products, as well as any closures or supply disruptions, may be extended for longer periods of time, all of which would have a negative impact on the Company’s business, financial condition and operating results.

The Company will continue to monitor the impact of COVID-19 on all aspects of its business.

Investments in Unconsolidated Affiliate

The Company applies the equity method of accounting for investments when it has significant influence, but not controlling interest in the investee.

Judgment regarding the level of influence over each equity method investment includes key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.

The Company’s proportionate share of the earnings or losses resulting from these investments is reported as “Equity in earnings (losses) of unconsolidated affiliate” in the consolidated statements of operations.

Investments accounted for using the equity method may be reported on a lag of up to three months if financial statements of the investee are not available in sufficient time for the investor to apply the equity method as of the current reporting date.

The determination of whether an investee’s results are recorded on a lag is made on an investment-by-investment basis.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying value of equity method investments is reported as “Equity method investment” in the consolidated balance sheets.

The Company’s equity method investment are reported at cost and adjusted each period for the Company’s share of the investee’s earnings or losses and dividends paid, if any.

The Company assesses equity method investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable.

If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.

No such impairment was identified for any of the periods presented.

Use of Estimates

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The principal accounting estimates include:

determination of allowances for credit losses, allowance for discounts, provision for chargebacks and rebates, provision for product returns, adjustment of inventory to their net realizable values, impairment of long-lived and intangible assets and goodwill, workers’ compensation liabilities, litigation reserves, stock price volatilities for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

determination of allowances for credit losses, fair value of financial instruments, allowance for discounts, provision for chargebacks and rebates, provision for product returns, adjustment of inventory to its net realizable values, impairment of investment, long-lived and intangible assets and goodwill, accruals for workers’ compensation liabilities, litigation reserves, stock price volatilities for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

Foreign Currency

The functional currency of the Company, its domestic subsidiaries, its Chinese subsidiary ANP, and its U.K.

subsidiary, AUK, is the USD.

subsidiary, AUK, is the U.S.

Dollar, or USD.

ANP maintains its books of record in Chinese yuan.

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The Company’s French subsidiary, AFP, maintains its book of record in euros.

ANP’s other Chinese subsidiaries, maintain their books of record in Chinese yuan.

AUK’s subsidiary, IMS UK, maintains its book of record in British pounds.

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The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other accumulated comprehensive income (loss).

The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature for the years ended December 31, 2020, 2019, and 2018 were a $ 3.0 million gain, a $ 0.7 million loss, and a $ 1.5 million loss, respectively.

The unrealized gains and losses of intercompany foreign currency transactions that are of a long-term investment nature for the years ended December 31, 2021, 2020, and 2019 were a $ 2.6 million loss, a $ 3.0 million gain, and a $ 0.7 million loss, respectively.

Comprehensive Income (Loss)

For the years ended December 31, 2021, 2020 and 2019, the Company included its foreign currency translation gain (loss) and change in pension obligation of its defined benefit pension plan as part of its comprehensive income (loss) .

Income tax expense of $ 0.9 million was allocated to other comprehensive income for the year ended December 31, 2020.

There was no material income tax provision (benefit) allocated to other comprehensive loss for the years ended December 31, 2021 and 2019.

Income tax expense of $ 0.9 million was allocated to other comprehensive income for the year ended December 31, 2020.

AMPHASTAR PHARMACEUTICALS, INC.

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Shipping and Handling Costs

For the years ended December 31, 2020, 2019, and 2018, the Company included shipping and handling costs of approximately $ 4.3 million, $ 4.3 million, and $ 3.7 million, respectively, in selling, distribution and marketing expenses in the accompanying consolidated statements of operations.

For each of the years ended December 31, 2021, 2020, and 2019, the Company included shipping and handling costs of approximately $ 4.3 million in selling, distribution and marketing expenses in the accompanying consolidated statements of operations.

Advertising Expense

Advertising expenses, primarily associated with Primatene Mist ® are recorded as they are incurred, except for expenses related to the development of a major commercial or media campaign, which are expensed in the period in which commercial or campaign is first presented, and is reflected as a component of selling, distribution and marketing in the Company’s consolidated statement of operations.

For the years ended December 31, 2020, 2019, and 2018, advertising cost was $ 5.8 million, $ 4.3 million, and $ 0.4 million, respectively.

Advertising expenses, primarily associated with Primatene Mist ® are recorded as they are incurred, except for expenses related to the development of a major commercial or media campaign, which are expensed in the period in which the commercial or campaign is first presented, and are reflected as a component of selling, distribution and marketing in the Company’s consolidated statement of operations.

For the years ended December 31, 2021, 2020, and 2019, advertising expenses were $ 8.1 million, $ 5.8 million, and $ 4.3 million, respectively.

Research and Development Costs

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These include salaries and related employee benefits, costs associated with clinical trials, nonclinical research and development activities, regulatory activities, research-related overhead expenses and fees paid to external service providers.

The Company may produce or purchase inventories prior to or with the expectation of receiving marketing authorization in the near term, based on operational decisions about the most effective use of existing resources.

The Company may produce or purchase inventories prior to or with the expectation of receiving regulatory approval in the near term, based on operational decisions about the most effective use of existing resources.

This inventory is referred to as pre-launch inventory.

It is the Company’s accounting policy that the pre-launch inventory is capitalized if it has a probable future economic benefit.

If marketing authorization is received and previously expensed pre-launch inventory is sold, such sales may contribute up to a 100% margin to the Company’s operating results.

It is the Company’s accounting policy that the pre-launch inventory is capitalized if it has a probable future economic benefit at the time it is purchased or manufactured.

If regulatory approval is received and previously expensed pre-launch inventory is sold, such sales may contribute up to a 100% margin to the Company’s operating results.

Pre-launch inventory costs include cost of work in process, materials, and finished drug products.

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Cash and cash equivalents consist of cash, money market accounts, certificates of deposit and highly liquid investments purchased with original maturities of three months or less.

Short-Term Investments

Short-term investments as of December 31, 2020 and 2019 consisted of certificates of deposit and investment grade corporate bonds with original expiration dates within 12 months.

Investments as of December 31, 2021 and 2020 consisted of certificates of deposit and investment grade corporate bonds with original maturity dates between 3 and 15 months.

AMPHASTAR PHARMACEUTICALS, INC.

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Restricted cash is collateral required for the Company to guarantee certain vendor payments in France.

As of December 31, 2020 and 2019, the restricted cash balance was $ 1.9 million.

As of December 31, 2021 and 2020, the restricted cash balance was $ 0.2 million and $ 1.9 million, respectively.

Restricted Short-Term Investments

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The certificates of deposit have original maturities greater than three months, but less than one year.

As of December 31, 2020 and 2019, the balance of restricted short-term investments was $ 2.2 million and $ 2.3 million, respectively.

As of December 31, 2021 and 2020, the balance of restricted short-term investments was $ 2.2 million.

Allowance for Credit Losses

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Inventories are stated using the first-in, first-out method, on a consistent basis.

The Company states inventory at the lower of cost and net realizable value.

The Company states inventory at the lower of cost or net realizable value.

Provisions are made for slow-moving, unsellable, or obsolete items.

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The Company has purchased stop-loss insurance, which will reimburse the Company for individual claims in excess of $ 350,000 annually or aggregate claims exceeding $ 3.5 million annually.

Operations are charged with the cost of claims reported and an estimate of claims incurred but not reported.

The cost of claims reported and an estimate of claims incurred but not reported are charged to operating expenses.

A liability for unpaid claims and the associated claim expenses, including incurred but not reported losses, is actuarially determined and reflected in accrued liabilities in the accompanying consolidated balance sheets.

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Changes in estimates are recorded in the period identified.

Business Combinations

Business combinations are accounted for using the acquisition method of accounting, which requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date.

Fair value determinations are based on discounted cash flow analyses or other valuation techniques.

In determining the fair value of the assets acquired and liabilities assumed in a material acquisition, the Company may utilize appraisals from third party valuation firms to determine fair values of some or all of the assets acquired and liabilities assumed, or may complete some or all of the valuations internally.

In either case, the Company takes full responsibility for the

Litigation, Commitments and Contingencies

Litigation, commitments and contingencies are accrued when management, after considering the facts and circumstances of each matter as then known to management, has determined it is probable a liability will be found to have been incurred and the amount of the loss can be reasonably estimated.

When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded.

Legal fees are expensed as incurred.

Due to the inherent uncertainties surrounding gain contingencies, the Company generally does not recognize potential gains until realized.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

determination of the fair value of the assets acquired and liabilities assumed.

The value of goodwill reflects the excess of the fair value of the consideration conveyed to the seller over the fair value of the net assets received.

Acquisition-related costs that the Company incurs to effect a business combination are expensed in the periods in which the costs are incurred.

When the operations of the acquired businesses were not material to the Company’s consolidated financial statements, no pro forma presentations were disclosed.

In the fourth quarter of 2021, the Company settled a legal dispute with an unaffiliated third party and subsequently received a settlement payment, net of contingent legal fees, in the amount of $ 2.7 million.

The net amount of $ 2.7 million was recorded as other income in the other income (expense), net line in the consolidated statements of operations.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, No.

2016-13 Financial Instruments – Credit Losses , which is aimed at providing financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit.

The standard update changes the impairment model for financial assets measured at amortized cost, requiring presentation at the net amount expected to be collected.

The measurement of expected credit losses requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

Available-for-sale debt securities with unrealized losses will be recorded through an allowance for credit losses.

The ASU and the related clarifications subsequently issued by FASB are effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020.

This new guidance applies to the Company’s held-to-maturity investments and trade receivables.

The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No.

2017-04 Simplifying the Test for Goodwill Impairment , which eliminates the requirement to calculate the implied fair value of goodwill.

An entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

The update also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets.

The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020.

The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

2018-13 Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement , which removes, modifies, and adds certain disclosure requirements to Accounting Standard Codification, or ASC, 820, Fair Value Measurement.

The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020.

The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

2018-14 Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans , which removes, modifies, and adds certain disclosure requirements to ASC 715-20, Defined Benefit Plans.

The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020.

The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No.

2018-15 Customer’s Accounting for Implementation Cost Incurred in a Cloud Computing Arrangement that is a Service Contract , which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalized implementation cost incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).

The guidance also requires the entity to expense the capitalized implementation cost of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals.

This guidance is effective for the Company’s interim and annual reporting periods during the year ended December 31, 2020.

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

ANP Restructuring

In July 2018, the Company’s Chinese subsidiary, ANP, completed a private placement of its common equity interest to accredited investors and received approximately $ 56.3 million of cash proceeds.

The Company retained approximately 58 % of the equity interest in ANP following the private placement and continues to consolidate the financial results of ANP with the Company’s results of operations.

In May 2021, the Company’s Board of Directors approved a plan for the restructuring of the equity ownership of ANP, whereby the Company purchased an additional ownership interest in ANP from certain equity holders of ANP, or the Sellers, and split-off certain subsidiaries of ANP.

Under the terms of the restructuring plan, the Company entered into a Share Purchase Agreement, or SPA, with certain of the Sellers to acquire an approximately 18 % additional ownership interest in ANP for approximately $ 29.4 million in cash.

The Company also entered into a Share Repurchase Agreement, or SRA, with certain of the Sellers, whereby the Company contributed 80 % of its ownership interest in Hanxin and Hanxin’s existing subsidiaries, Baixin and Letop, to the Sellers in exchange for an approximately 10 % additional ownership interest in ANP.

In July 2021, after receiving regulatory approval, the Company completed these transactions, and the Company’s ownership in ANP increased to approximately 85 %.

In August 2021, the Company entered into a second Share Purchase Agreement, or Second SPA, with the other sole remaining equity holder of ANP to acquire the remaining approximately 15 % of ownership interest in ANP.

The total cash payment by the Company for this transaction was approximately $ 22.5 million.

Following completion of the transaction, the Company’s ownership of ANP increased to 100 %.

Certain of the Sellers were the Company’s executive officers, directors and other related parties.

The Sellers who participated in the SPA included executives of the Company William J.

Peters, Rong Zhou, and Jacob Liawatidewi;

directors of the Company Howard Lee and Richard Koo;

relatives of Dr.

Jack Zhang and Dr.

Mary Luo, Henry Zhang, Qingqing Chen, Chongqing Zhang, Lu Zhang, and James Luo, or entities related to such persons.

The Sellers who participated in the SRA included Dr.

Mary Luo and Dr.

Jack Zhang through an affiliated party, and their family members Henry Zhang, Qingqing Chen, Chongqing Zhang, Bill Zhang, and Lu Zhang.

Sellers who participated in the Second SPA include Dr.

Mary Luo, Dr.

Jack Zhang, through an affiliated party, and their family members Chongqing Zhang and Bill Zhang.

The restructuring of ANP was completed in the third quarter of 2021.

As a result of the restructuring activities, the Company’s ownership interest in ANP was increased to 100 %, and ANP’s ownership interest in Hanxin and its subsidiaries was reduced to approximately 20 %.

The reduction of the Company’s ownership in Hanxin to 20 %, resulted in ANP experiencing a “loss of control” of a subsidiary as defined by GAAP.

Loss of control is deemed to have occurred when, among other things, a parent company owns less than a majority of the outstanding common stock in the subsidiary, lacks a controlling financial interest in the subsidiary and, is unable to unilaterally control the subsidiary through other means such as having, or

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The adoption of the guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU No.

2018-17 Targeted Improvements to Related Party Guidance for Variable Interest Entities , which requires indirect interests held through related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.

The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020.

The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In November 2018, the FASB issued ASU No.

2018-18 Clarifying the Interaction between Topic 808 and Topic 606 , which requires transactions in collaborative arrangements to be accounted for under ASC 606, Revenue from Contracts with Customers, or ASC 606, if the counterparty is a customer for a good or service that is a distinct unit of account.

The amendments also preclude entities from presenting consideration from transactions with a collaborator that is not a customer together with revenue recognized from contracts with customers.

The guidance is effective for the Company’s interim and annual reporting periods during the year ending December 31, 2020.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No.

2019-12 Simplifying the Accounting for Income Taxes (Topic 740) , which simplifies various aspects related to accounting for income taxes.

The amendment also improves consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

The guidance is effective for the Company’s interim and annual reporting periods during the year ended December 31, 2021, with early adoption permitted.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

In April 2020, the FASB issued ASU No.

2020-04 Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Business Acquisitions

Acquisition of fourteen injectable products from Hikma Pharmaceuticals PLC

In March 2016, the Company acquired 14 abbreviated new drug applications, or ANDAs, representing 11 different injectable chemical entities from Hikma Pharmaceuticals PLC, or Hikma, for $ 4.0 million.

This transaction was accounted for as a business combination in accordance with ASC 805.

The ANDAs were estimated to have a fair value of $ 4.0 million, and were subject to a straight-line amortization over a useful life of approximately 15 years .

In February 2017, the Company sold these products to an unrelated party.

(See note 10)

being able to obtain, the power to elect a majority of the subsidiary's board of directors based solely on contractual rights or ownership of shares holding a majority of the voting power of the subsidiary's voting securities.

These loss-of-control factors were met with respect to ANP’s ownership interest in Hanxin after the restructuring.

Accordingly, upon completion of the SRA in the third quarter, the Company deconsolidated Hanxin and recorded a $ 13.6 million gain on deconsolidation, which is recognized in other income (expenses), net, in the consolidated statement of operations for the year ended December 31, 2021.

Of the $ 13.6 million gain recorded, approximately $ 2.7 million related to the remeasurement to fair value of the retained noncontrolling investment in Hanxin.

The remainder of the gain relates to the excess of the fair value the consideration received, over the book value of Hanxin’s net assets.

Hanxin continues to be a related party after the deconsolidation.

In addition to the retained noncontrolling investment in Hanxin, the Company maintains a seat on Hanxin’s board of directors, and Henry Zhang, a relative of Dr.

Jack Zhang and Dr.

Mary Luo, is an equity holder, general manager, and chairman of the board of directors of Hanxin.

As a result, it was determined that the Company has significant influence over Hanxin and as such the retained noncontrolling investment in Hanxin is accounted for as an equity method investment.

As an equity method investment, the retained noncontrolling 20 % investment in Hanxin was recorded at fair value in the amount of $ 4.2 million at the date of the transaction, which exceeds the amount of underlying equity in Hanxin’s net assets by $ 2.7 million.

This basis difference was deemed to be a premium in excess of fair value, which is referred to as equity method goodwill, and is recorded within the “Investment in unconsolidated affiliate” line on the Company’s consolidated balance sheets.

The fair value of the noncontrolling investment in Hanxin was determined using a discounted cash flow model using Level 3 inputs, including discount rates between 25 % and 27 %, revenue base and growth rate, gross margins, and earnings before interest and taxes (EBIT).

Subsequent to the restructuring, during the third quarter of 2021, Hanxin received additional capital contributions resulting in further reduction of ANP’s ownership to approximately 14 %.

Revenue Recognition

2 unchanged sentences

In some cases, revenue is recognized at the time of shipment when stipulated by the terms of the sale agreements.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The consideration the Company receives in exchange for its goods or services is only recognized when it is probable that a significant reversal will not occur.

2 unchanged sentences

The Company’s payment terms vary by types and locations of customers and the products or services offered.

Payment terms differ by jurisdiction and customer, but payment is generally required in a term ranging from 30 to 75 days from date of shipment or satisfaction of the performance obligation.

Payment terms differ by jurisdiction and customers, but payment is generally required in a term ranging from 30 to 75 days from date of shipment or satisfaction of the performance obligation.

For certain products or services and certain customer types, we may require payment before products are delivered or services are rendered to customers.

Provisions for estimated chargebacks, rebates, discounts, product returns and credit losses are made at the time of sale and are analyzed and adjusted, if necessary, at each balance sheet date.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues derived from contract manufacturing services are recognized when third-party products are shipped to customers, and after the customer has accepted test samples of the products to be shipped.

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The Company does not have any revenue arrangements with multiple performance obligations.

Service revenues derived from research and development contracts is recognized over time based on progress toward complete satisfaction of the performance obligation.

For each performance obligation satisfied over time, the Company assesses the proper method to be used for revenue recognition, either an input method to measure progress toward the satisfaction of services or an output method of determining the progress of completion of performance obligation.

Revenue from research and development services at ANP was $ 5.1 million.

Provision for Chargebacks and Rebates

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The settlement of chargebacks and rebates generally occurs within 30 days to 60 days after the sale to wholesalers.

Accounts receivable and/or accounts payable and accrued liabilities are reduced and/or increased by the

Accounts receivable and/or accounts payable and accrued liabilities are reduced and/or increased by the chargebacks and rebate amounts depending on whether the Company has the right to offset with the customer.

Of the provision for chargebacks and rebates as of December 31, 2021 and 2020, $ 15.6 million and $ 16.4 million were included as a reduction to accounts receivable, net, on the consolidated balance sheets, respectively.

The remaining provision as of December 31, 2021 and 2020 was $ 4.6 million and $ 4.0 million, respectively, which were included in accounts payable and accrued liabilities, respectively.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

chargebacks and rebate amounts depending on whether the Company has the right to offset with the customer.

Of the provision for chargebacks and rebates as of December 31, 2020 and 2019, $ 16.4 million and $ 15.4 million were included in accounts receivable, net, on the consolidated balance sheets, respectively.

The remaining provision as of December 31, 2020 and 2019 was $ 4.0 million and $ 6.2 million, respectively, which were included in accounts payable and accrued liabilities, respectively.

Accrual for Product Returns

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For the years ended December 31, 2021 and 2020, the Company’s aggregate product return rate was 1.7 % and 1.4 % of qualified sales, respectively.

Income (Loss) per Share Attributable to Amphastar Pharmaceuticals, Inc.

Basic net income (loss) per share attributable to Amphastar Pharmaceuticals Inc.

Income per Share Attributable to Amphastar Pharmaceuticals, Inc.

Basic net income per share attributable to Amphastar Pharmaceuticals Inc.

stockholders is calculated based upon the weighted-average number of shares outstanding during the period.

Diluted net income (loss) per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders gives effect to all potential dilutive shares outstanding during the period, such as stock options, non-vested restricted stock units, and shares issuable under the Company’s Employee Stock Purchase Plan, or ESPP, and the reallocation of net income attributable to non-controlling interest from the assumed dilutive effect of stock options issued under the 2018 ANP Equity Incentive Plan, or the 2018 Plan.

For the year ended December 31, 2020, options to purchase 1,917,437 shares of stock with a weighted-average exercise price of $ 20.85 per share, and the reallocation of net income attributable to non-controlling interest were excluded in the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc.

Diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

For the year ended December 31, 2021, options to purchase 1,906,029 shares of stock with a weighted-average exercise price of $ 20.82 per share, and the reallocation of net income attributable to non-controlling interest were excluded from the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc.

stockholders because the effect would be anti-dilutive.

For the year ended December 31, 2020, options to purchase 1,917,437 shares of stock with a weighted-average exercise price of $ 20.85 per share, and the reallocation of net income attributable to non-controlling interest were excluded from the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc.

stockholders because the effect would be anti-dilutive.

For the year ended December 31, 2019, options to purchase 803,257 shares of stock with a weighted-average exercise price of $ 21.99 per share, and the reallocation of net income attributable to non-controlling interest were excluded from

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the computation of diluted net income per common share attributable to Amphastar Pharmaceuticals, Inc.

stockholders because the effect would be anti-dilutive.

As the Company reported a net loss for the year ended December 31, 2018, the diluted net loss per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders, as reported, equals the basic net loss per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders since the effect of the assumed exercise of stock options, vesting of non-vested RSUs, and issuance of common shares under the Company’s ESPP are anti-dilutive.

Total stock options, non-vested RSUs, and shares issuable under the Company’s ESPP excluded from the year ended December 31, 2018, net loss per share were 10,105,565 stock options, 1,206,661 non-vested RSUs, and 51,792 shares issuable under the ESPP.

The following table provides the calculation of basic and diluted net income (loss) per share attributable to Amphastar Pharmaceuticals, Inc.

The following table provides the calculation of basic and diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

shareholders for each of the periods presented:

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Basic and dilutive numerator:

Net income (loss) attributable to Amphastar Pharmaceuticals, Inc.

Net income attributable to Amphastar Pharmaceuticals, Inc.

Weighted-average shares outstanding — basic

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Weighted-average shares outstanding — diluted

Net income (loss) per share attributable to Amphastar Pharmaceuticals, Inc.

Net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders — basic

Net income (loss) per share attributable to Amphastar Pharmaceuticals, Inc.

Net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders — diluted

4 unchanged sentences

● Finished pharmaceutical products

The finished pharmaceutical products segment manufactures, markets and distributes Primatene Mist ® , enoxaparin, naloxone, phytonadione, lidocaine, epinephrine, as well as various other critical and non-critical care drugs.

The finished pharmaceutical products segment manufactures, markets and distributes Primatene Mist ® , glucagon, enoxaparin, naloxone, phytonadione, lidocaine, epinephrine, various critical and non-critical care drugs, as well as certain contract manufacturing and contract research revenues.

The API segment manufactures and distributes recombinant human insulin API and porcine insulin API for external customers and internal product development.

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Operating expenses

Income from operations

Non-operating (expense) income

Income (loss) before income taxes

Income (loss) from operations

Non-operating income (expenses)

Income before income taxes

The Company manages its business segments to the gross profit level and manages its operating and other costs on a company-wide basis.

46 unchanged sentences

As of December 31, 2021, cash equivalents include money market accounts.

Short-term investments consist of certificates of deposit as well as investment-grade corporate bonds with original expiration dates within 12 months.

Investments consist of certificates of deposit as well as investment-grade municipal bonds with original maturity dates between 3 and 15 months.

The certificates of deposit are carried at amortized cost in the Company’s consolidated balance sheet, which approximates their fair value determined based on Level 2 inputs.

The corporate bonds are classified as held-to-maturity and are carried at amortized cost net of allowance for credit losses, which approximates their fair value determined based on Level 2 inputs.

The restrictions on restricted cash and short-term investments have a negligible effect on the fair value of these financial assets.

The corporate and municipal bonds are classified as held-to-maturity and are carried at amortized cost net of allowance for credit losses, which approximates their fair value determined based on Level 2 inputs.

The restrictions on restricted cash and investments have a negligible effect on the fair value of these financial assets.

The fair value of the Company’s financial assets and liabilities measured on a recurring basis as of December 31, 2021 and 2020, are as follows:

4 unchanged sentences

Restricted short-term investments - certificates of deposit

Corporate bonds

Interest rate swaps related to variable rate loans

Corporate and municipal bonds

Interest rate swap related to variable rate loans

Fair value measurement as of December 31, 2021

3 unchanged sentences

Restricted short-term investments - certificates of deposit

Corporate bonds

Interest rate swaps related to variable rate loans

Corporate and municipal bonds

Interest rate swap related to variable rate loans

Fair value measurement as of December 31, 2020

1 unchanged sentence

Nonfinancial assets and liabilities are not measured at fair value on a recurring basis but are subject to fair value adjustments in certain circumstances.

These items primarily include long-lived assets, goodwill, and intangible assets for which the fair value of assets is determined as part of the related impairment test.

These items primarily include investments in unconsolidated affiliates, long-lived assets, goodwill, and intangible assets for which the fair value is determined as part of the related impairment test.

As of December 31, 2021 and 2020, there were no significant adjustments to fair value for nonfinancial assets or liabilities.

The deferred compensation plan assets are valued using the cash surrender value of the life insurance policies and are not included in the table above.

AMPHASTAR PHARMACEUTICALS, INC.

2 unchanged sentences

(in thousands)

Corporate bonds

Corporate bonds (due within 1 year)

Corporate bonds (due within 1 to 3 years)

Municipal bonds (due within 1 year)

Total investments as of December 31, 2021

Corporate bonds

Corporate bonds (due within 1 year)

Municipal bonds (due within 1 year)

Total investments as of December 31, 2020

The Company believes that the unrealized gains and losses disclosed above were primarily driven by interest rate change rather than by unfavorable changes in the credit ratings associated with these securities and as a result, the Company continues to expect to collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value.

At each reporting period, the Company evaluates securities for impairment when the fair value of the investment is less than its amortized cost.

4 unchanged sentences

Expected credit losses on held-to-maturity investments were not material to the consolidated financial statements.

Investment in Hanxin

As a result of the ANP restructuring that was completed during the third quarter of 2021 (see Note 3), and subsequent investments by other equity holders of Hanxin, the Company has a 14 % noncontrolling investment in Hanxin that is accounted for as an equity method investment.

The Company accounts for its share of the earnings or losses of Hanxin with a reporting lag of three months, as the financial statements of Hanxin are not completed on a basis that is sufficient for the Company to apply the equity method on a current basis.

The Company’s share of Hanxin’s losses for the year ended December 31, 2021 was $ 0.2 million, which was recorded in the “Equity in losses of unconsolidated affiliate” line on the consolidated statement of operations.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Intangible Assets

10 unchanged sentences

As of December 31, 2021

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Weighted-Average

5 unchanged sentences

Land-use rights

Other intangible assets

Indefinite-lived intangible assets

2 unchanged sentences

Intangible assets with indefinite lives have an indeterminable average life.

Sale of Fourteen Injectable ANDAs

In February 2017, the Company sold the 14 ANDAs it acquired in March 2016 from Hikma to an unrelated party.

The consideration included a purchase price of $ 6.4 million of which $ 1.0 million was received upon closing, $ 1.0 million was received in the second quarter of 2017 and the remaining $ 4.4 million was received in January 2018.

In addition to the purchase price, the purchaser agreed to pay the Company a royalty fee equal to 2 % of net sales derived from purchaser’s sales of the products for the period from February 2017 through February 2027.

The Company has not recognized any royalty fee revenue.

The changes in the carrying amounts of goodwill were as follows:

1 unchanged sentence

Beginning balance

ANP restructuring

Currency translation

2 unchanged sentences

In January 2009, the Company acquired the exclusive rights to the trademark, domain name, website and domestic marketing, distribution and selling rights related to Primatene Mist ® , an over-the-counter bronchodilator product, recorded at the allocated fair value of $ 29.2 million, which is its carrying value as of December 31, 2021.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The trademark was determined to have an indefinite life.

8 unchanged sentences

and considerations for obsolescence, demand, competition and other economic factors.

As a result of environmental concerns about chlorofluorocarbons, or CFCs, the FDA required the CFC formulation of Primatene Mist ® to be phased out on December 31, 2011.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 2013, the Company filed a new drug application, or NDA, for Primatene Mist ® , which utilizes a non-CFC propellant.

In November 2018, the FDA granted over-the-counter approval of the NDA for Primatene Mist ® , and the Company re-launched this product in December 2018.

Included in cost of revenues for the years ended December 31, 2021, 2020 and 2019 is product rights amortization expense of $ 1.0 million, $ 1.2 million, and $ 1.0 million, respectively.

11 unchanged sentences

Charges of $ 24.6 million, $ 13.9 million, and $ 9.4 million were included in the cost of revenues in the Company’s consolidated statements of operations for the years ended December 31, 2021, 2020, and 2019, respectively, to adjust the Company’s inventory and related purchase commitments to their net realizable value.

For the year ended December 31, 2020, the charge included $ 9.4 million as a result of an increase in the price of heparin as well as a decrease in the forecasted average selling price.

For the year ended December 31, 2021, the charge included $ 20.7 million as a result of an increase in the price of heparin as well as a decrease in the forecasted average selling price of enoxaparin.

For the year ended December 31, 2020, the charge included $ 9.4 million as a result of an increase in the price of heparin as well as a decrease in the forecasted average selling price of enoxaparin.

For the year ended December 31, 2019, the charge included $ 5.8 million as a result of an increase in purchases of higher price heparin.

For the year ended December 31, 2018, the charge included $ 9.1 million related to enoxaparin inventory due to a decrease in the forecasted average selling price.

Losses on firm purchase commitments related to raw materials on order were $ 7.1 million, $ 1.2 million and $ 1.3 million as of December 31, 2021, 2020 and 2019, respectively.

20 unchanged sentences

Accrued loss on firm purchase commitments

Accrued litigation settlements

Accrued litigation and settlements

Other accrued liabilities

7 unchanged sentences

Line of Credit Facilities

Line of credit facility with China Everbright Bank due June 2021

Line of credit facility with China Merchant Bank due August 2021

Line of credit facility with Bank of Nanjing due October 2021

Line of credit facility with Cathay Bank due May 2022

Line of credit facility with East West Bank due December 2022

Equipment line of credit facility with East West Bank due September 2025

Line of credit facility with China Everbright Bank - closed June 2021

Line of credit facility with China Merchant Bank

Line of credit facility with Bank of Nanjing - deconsolidated (see Note 3)

Line of credit facility with Cathay Bank - closed in August 2021

Line of credit facility with East West Bank - closed in August 2021

Equipment line of credit facility with East West Bank - closed in August 2021

Revolving line of credit facility with Capital One N.A.

due August 2026

Term loan with Capital One N.A.

due August 2026

Mortgage Loans

Mortgage payable with East West Bank due May 2021

Mortgage payable with East West Bank due October 2026

Mortgage payable with East West Bank paid off May 2021

Mortgage payable with East West Bank paid off August 2021

Mortgage payable with Cathay Bank paid off August 2021

Mortgage payable with East West Bank due June 2027

Mortgage payable with Cathay Bank due August 2027

Equipment Loans

Equipment loan with East West Bank due June 2021

Equipment loan due with East West Bank December 2022

Equipment loan with East West Bank due February 2024

Equipment loan with East West Bank paid off June 2021

Equipment loan with East West Bank paid off August 2021

Other Loans and Payment Obligations

Acquisition loan with Cathay Bank due June 2024

French government loan paid off June 2020

French government loan due July 2021

Acquisition loan with Cathay Bank paid off August 2021

French government loan paid off July 2021

French government loans due December 2026

Payment Obligation to Merck

Equipment under Finance Leases

Less current portion of long-term debt

Long-term debt, net of current portion

Line of Credit Facilities

Line of Credit Facility with China Everbright Bank – Due June 2021

In June 2020, the Company entered into a line of credit facility with China Everbright bank for $ 0.7 million.

The loan bears interest at a fixed rate of 4.05 %.

Interest payments are due quarterly and repayment of the principle amount is due in June 2021.

As of December 31, 2020, the Company had $ 0.8 million outstanding under this loan.

Loan issuance costs

Long-term debt, net of current portion and unamortized debt issuance costs

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Line of Credit Facility with China Merchant Bank – Due August 2021

Credit Agreement

Credit Agreement with Capital One N.A.

- Due August 2026

In August 2021, the Company entered into a $ 140.0 million credit agreement with Capital One N.A.

acting as a lender and as agent for other lenders.

Under the terms of the credit agreement, the Company borrowed $ 70.0 million in the form of a term loan.

Proceeds from the loan were used to pay down certain of the Company’s outstanding loans and revolving lines of credit with Cathay Bank and East West Bank.

The interest rate on the term loan is based on a variable interest rate, plus an applicable margin rate ranging between 0.5 % and 2.5 %, determined based on the Company’s net leverage ratio as defined by the terms of the agreement.

The loan matures in August 2026.

At December 31, 2021, the interest rate on this loan was 1.84 %.

The loan requires principal payments of $ 1.8 million per year for the first two years, which increases to $ 3.5 million during the third and fourth year and to $ 3.9 million in the fifth year, with the remaining balance due at maturity.

The loan is secured by substantially all of the Company’s assets, excluding the assets of ANP.

The credit agreement provides for a $ 70.0 million revolving credit facility, which bears a variable interest rate, plus a fixed margin.

In conjunction with the new credit agreement, the Company entered into an interest rate swap agreement with Capital One N.A., with a notional amount of $ 55.0 million to exchange the variable interest rate on the new term loan for a fixed rate of 0.93 %.

The Company incurred approximately $ 1.7 million in issuance costs in connection with this credit agreement, which are being amortized over the term of the loan.

Line of Credit Facilities

Line of Credit Facility with China Everbright Bank – Closed June 2021

In June 2020, the Company entered into a line of credit facility with China Everbright bank for $ 0.7 million.

The loan bore interest at a fixed rate of 4.05 %.

Interest payments were due quarterly and repayment of the principal amount was due in June 2021.

In June 2021, the Company repaid all outstanding amounts due under this line of credit.

Line of Credit Facility with China Merchant Bank – Due March 2023

In March 2020, the Company entered into a credit agreement with China Merchant Bank.

3 unchanged sentences

In August 2020, the Company borrowed $ 0.4 million under the credit agreement.

The loan bears interest at a fixed rate of 4.35 %.

Interest payments are due quarterly and repayment of the principle amount is due in August 2021.

As of December 31, 2020, the Company had $ 0.4 million outstanding under this loan.

Line of Credit Facility with Bank of Nanjing – Due October 2021

In October 2020, the Company entered into a line of credit facility with Bank of Nanjing for $ 0.2 million.

The loan bears interest at a fixed rate of 4.6 %.

Interest payments are due monthly and repayment of the principle amount is due in October 2021.

As of December 31, 2020, the Company had $ 0.2 million outstanding under this loan.

Line of Credit Facility with Cathay Bank — Due May 2022

The loan bore interest at a fixed rate of 4.35 %.

Interest payments were due quarterly and repayment of the principal amount was due in August 2021.

In August 2021, the Company repaid all outstanding amounts due under this loan.

As of December 31, 2021, the Company did not have any amounts outstanding under this line of credit.

Line of Credit Facility with Bank of Nanjing – Deconsolidated

In October 2020, Hanxin entered into a line of credit facility with Bank of Nanjing for $ 0.2 million.

The loan bore interest at a fixed rate of 4.6 %.

Interest payments were due monthly and repayment of the principal amount was due in

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 2021.

As a result of the deconsolidation of Hanxin during the third quarter of 2021, the line of credit was no longer on the Company’s consolidated balance sheets.

Line of Credit Facility with Cathay Bank — Closed August 2021

In April 2012, the Company entered into a $ 20.0 million revolving line of credit facility with Cathay Bank.

Borrowings under the facility are secured by inventory, accounts receivable, and intangibles held by the Company.

The facility bears a variable interest rate at the prime rate as published by The Wall Street Journal with a minimum interest rate of 4.00 % .

In June 2020, the Company amended the facility to extend the maturity date from May 2020 to May 2022.

As of December 31, 2020, the Company did not have any amounts outstanding under this facility.

Line of Credit Facility with East West Bank — Due December 2022

In March 2012, the Company entered into a $ 10.0 million line of credit facility with East West Bank, which bears a variable interest rate at the prime rate as published by The Wall Street Journal .

Borrowings under the facility are secured by inventory and accounts receivable.

Borrowings under the facility were secured by inventory, accounts receivable, and intangibles held by the Company.

The facility had a variable interest rate at the prime rate as published by The Wall Street Journal with a minimum interest rate of 4.00 %.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company closed this line of credit.

Line of Credit Facility with East West Bank — Closed August 2021

In March 2012, the Company entered into a $ 10.0 million line of credit facility with East West Bank, which had a variable interest rate at the prime rate as published by The Wall Street Journal .

Borrowings under the facility were secured by inventory and accounts receivable.

In March 2016, the facility was amended to increase the line of credit to $ 15.0 million.

This facility matured in December 2020.

In December 2020, the Company amended the facility to extend the maturity date to December 2022.

As of December 31, 2020, the Company did not have any amounts outstanding under this facility.

Equipment Line of Credit with East West Bank — Due September 2025

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company closed this line of credit.

Equipment Line of Credit with East West Bank — Closed August 2021

In September 2020, the Company entered into a $ 10.0 million equipment credit line with a 12-month draw down period with East West Bank.

Interest payments are due monthly through September 2021 at the prime rate as published by The Wall Street Journal minus 0.5 %.

After the draw down period, the outstanding principal balance converts into a 48-month term loan that bears a variable interest rate at the prime rate as published by The Wall Street Journal minus 0.5 %.

The loan matures in September 2025, and the principal and interest payments are due monthly.

Borrowings under the facility are secured by equipment.

As of December 31, 2020, the Company had $ 3.2 million outstanding under the equipment line of credit.

Interest payments were due monthly through September 2021 at the prime rate as published by The Wall Street Journal minus 0.5 %.

After the draw down period, the outstanding principal balance converted into a 48-month term loan that had a variable interest rate at the prime rate as published by The Wall Street Journal minus 0.5 %.

The loan would have matured in September 2025, and the principal and interest payments were due monthly.

Borrowings under the facility were secured by equipment.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company repaid all outstanding amounts and closed this line of credit.

Mortgage Loans

Mortgage Payable with East West Bank — Due May 2021

The Company refinanced the mortgage term loan with East West Bank in January 2016, which had an outstanding principal balance of $ 3.7 million at December 31, 2015, and had a maturity date of February 2021.

The refinanced loan is payable in monthly installments with a final balloon payment of $ 3.3 million.

The refinanced loan is secured by one of

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the buildings at the Company’s Rancho Cucamonga, California, headquarters complex.

The refinanced loan has a variable interest rate at the prime rate as published by The Wall Street Journal .

As of December 31, 2020, the fair value of the loan approximates its book value.

The interest rate used in the fair value estimation was determined to be a Level 2 input.

The Company has entered into a fixed interest rate swap contract on this loan to exchange the variable interest rate for a fixed interest rate of 4.39 % over the life of the loan without the exchange of the underlying notional debt amount.

In December 2020, the Company extended the maturity date to May 2021, with no changes to the monthly principle payments during the extension.

The Company treated the extension as a modification for accounting purposes.

Mortgage Payable with East West Bank — Due October 2026

Mortgage Payable with East West Bank — Paid off May 2021

The refinanced loan was payable in monthly installments with a final balloon payment of $ 3.3 million.

The refinanced loan was secured by one of the buildings at the Company’s Rancho Cucamonga, California, headquarters complex.

The refinanced loan had a variable interest rate at the prime rate as published by The Wall Street Journal .

In May 2021, the Company repaid all outstanding amounts due under this loan.

Mortgage Payable with East West Bank — Paid off August 2021

In September 2006, the Company entered into a mortgage term loan with East West Bank in the principal amount of $ 2.8 million, which matured in September 2016.

The Company refinanced the mortgage term loan in September 2016, which increased the principal amount to $ 3.6 million and extended the maturity date to October 2026.

The refinanced loan is payable in monthly installments with a final balloon payment of $ 2.9 million.

The refinanced loan was payable in monthly installments with a final balloon payment of $ 2.9 million.

The refinanced loan was secured by one of the buildings at the Company’s Rancho Cucamonga, California, headquarters complex.

The refinanced loan bears a variable interest rate at the one-month LIBOR rate plus 2.75 %.

As of December 31, 2020, the fair value of the loan approximates its book value.

The interest rate used in the fair value estimation was determined to be a Level 2 input.

Subsequently, the Company entered into a fixed interest rate swap contract on this loan to exchange the variable interest rate for a fixed interest rate of 4.15 % until October 2021 without the exchange of the underlying notional debt amount.

The refinanced loan had a variable interest rate at the one-month LIBOR rate plus 2.75 %.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company repaid all outstanding amounts under this loan.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mortgage Payable with Cathay Bank — Paid off August 2021

In August 2017, the Company refinanced the mortgage term loan with Cathay Bank that had been entered into on April 2014, with a principal balance outstanding of $ 7.9 million.

The loan was payable in monthly installments and was secured by the building at the Company’s Canton, Massachusetts location.

The loan bore interest at a fixed rate of 4.70 % for the first five years of the loan;

thereafter, the loan had a variable interest rate at the prime rate as published by The Wall Street Journal and would have matured in June 2027.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company repaid all outstanding amounts under this loan.

Mortgage Payable with East West Bank — Due June 2027

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The interest rate used in the fair value estimation was determined to be a Level 2 input.

The Company entered into a fixed interest rate swap contract on this loan to exchange the variable interest rate for a fixed interest rate of 4.79 % until June 2024 without the exchange of the underlying notional debt amount.

Mortgage Payable with Cathay Bank — Due August 2027

In August 2017, the Company refinanced the mortgage term loan with Cathay Bank that had been entered into on April 2014, with a principal balance outstanding of $ 7.9 million.

The loan is payable in monthly installments and is secured by the building at the Company’s Canton, Massachusetts location.

The loan bears interest at a fixed rate of 4.70 % for the first five years of the loan;

thereafter, the loan bears a variable interest rate at the prime rate as published by The Wall Street Journal and matures in June 2027.

As of December 31, 2020, the fair value of the loan approximates its book value.

The interest rate used in the fair value estimation was determined to be a Level 2 input.

The Company entered into a fixed interest rate swap contract on this loan to exchange the variable interest rate for a fixed interest rate of 4.79 % until June 2024.

Equipment Loans

Equipment Loan with East West Bank – Due June 2021

Equipment Loan with East West Bank – Paid off June 2021

In March 2016, the Company entered into a $ 5.0 million equipment credit facility with East West Bank.

In May 2017, the Company converted the outstanding balance of $ 5.0 million into a term equipment loan that matures in June 2021.

Borrowings under the loan are secured by equipment.

The loan bears a variable interest rate at the prime rate as published by The Wall Street Journal .

As of December 31, 2020, the fair value of the loan approximates its book value.

The interest rate used in the fair value estimation was determined to be a Level 2 input.

The Company has entered into a fixed interest rate swap contract on this facility to exchange the variable interest rate for a fixed interest rate of 4.86 %

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

over the life of the facility without the exchange of the underlying notional debt amount.

Equipment Loan with East West Bank — Due December 2022

In May 2017, the Company converted the outstanding balance of $ 5.0 million into a term equipment loan that matured in June 2021.

Borrowings under the loan were secured by equipment.

The loan had a variable interest rate at the prime rate as published by The Wall Street Journal .

In June 2021, the Company repaid all outstanding amounts under this loan.

Equipment Loan with East West Bank — Paid off August 2021

In June 2017, the Company entered into an $ 8.0 million equipment credit line with an 18 -month draw down period with East West Bank.

Interest payments are due monthly through December 2018 at the prime rate as published by The Wall Street Journal .

After the draw down period, the outstanding principal balance converts into a 48 -month term loan which bears a variable interest rate at the prime rate as published by The Wall Street Journal .

The loan matures in December 2022, and the principal and interest payments are due monthly.

Borrowings under the facility are secured by equipment.

Interest payments were due monthly through December 2018 at the prime rate as published by The Wall Street Journal .

After the draw down period, the outstanding principal balance converted into a 48 -month term loan which had a variable interest rate at the prime rate as published by The Wall Street Journal .

The loan would have matured in December 2022, and the principal and interest payments were due monthly.

Borrowings under the facility were secured by equipment.

In June 2018, the Company drew down $ 8.0 million on the equipment credit line and in December 2018, the credit line converted into an equipment loan.

As of December 31, 2020, the fair value of the loan approximates its book value.

The interest rate used in the fair value estimation was determined to be a Level 2 input.

The Company entered into a fixed interest rate swap contract on this facility to exchange the variable interest rate for a fixed interest rate of 5.87 % over the life of the facility without the exchange of the underlying notional debt amount.

Equipment loan with East West Bank — Due February 2024

In January 2019, the Company entered into a $ 10.0 million equipment credit line with East West Bank which has a 12 -month draw down period.

Interest payments are due monthly through February 2020 at the prime rate as published by The Wall Street Journal minus 1 % .

After the draw down period, the outstanding principal balance converts into a 48 -month term loan which bears a variable interest rate at the prime rate as published by The Wall Street Journal minus 1 % .

The loan matures in February 2024, and the principal and interest payments are due monthly.

Borrowings under the facility are secured by equipment.

As of December 31, 2019, the Company has drawn $ 3.6 million from the equipment line of credit.

Subsequently, in January 2020, the Company drew an additional $ 3.0 million on the equipment credit line and in February 2020, the credit line converted into a $ 6.6 million equipment loan.

As of December 31, 2020, the fair value of the loan approximates its book value.

The Company entered into a fixed interest rate swap contract on this facility to exchange the variable interest rate for a fixed interest rate of 3.85 % over the life of the facility without the exchange of the underlying notional debt amount.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company repaid all outstanding amounts under this loan.

Equipment loan with East West Bank — Paid off August 2021

In January 2019, the Company entered into a $ 10.0 million equipment credit line with East West Bank which had a 12 -month draw down period.

Interest payments were due monthly through February 2020 at the prime rate as published by The Wall Street Journal minus 1 % .

After the draw down period, the outstanding principal balance converted into a 48 -month term loan which had a variable interest rate at the prime rate as published by The Wall Street Journal minus 1 % .

The loan would have matured in February 2024, and the principal and interest payments were due monthly.

Borrowings under the facility were secured by equipment.

In January 2020, the Company drew an additional $ 3.0 million on the equipment credit line and in February 2020, the credit line converted into a $ 6.6 million equipment loan.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company repaid all outstanding amounts under this loan.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Loans and Payment Obligations

Acquisition Loan with Cathay Bank — Due June 2024

Acquisition Loan with Cathay Bank — Paid off August 2021

On April 22, 2014, in conjunction with the Merck API Transaction, the Company entered into a secured term loan with Cathay Bank as lender.

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Under the amended loan agreement, the maturity date was extended to June 2024.

The acquisition loan bears a variable interest rate at the prime rate as published by The Wall Street Journal , with a minimum interest rate of 5.00 %.

Beginning in August 2019, and through the maturity date, the Company must make monthly payments of principal and interest based on the then outstanding amount of the loan amortized over a 60-month period.

As of December 31, 2020, the fair value of the loan approximates its book value.

The interest rate used in the fair value estimation was determined to be a Level 2 input.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The loan includes customary restrictions on, among other things, the Company’s ability to incur additional indebtedness, pay dividends in cash or make other distributions in cash, make certain investments, create liens, sell assets, and make loans.

The loan also includes customary events of defaults, the occurrence and continuation of any of which provide Cathay Bank the right to exercise remedies against the Company and the collateral securing the loan.

These events of default include, among other things, the Company’s failure to pay any amounts due under the loan, the Company’s insolvency, the occurrence of any default under certain other indebtedness or material agreements, and a final judgment against the Company that is not discharged in 30 days.

The acquisition loan had a variable interest rate at the prime rate as published by The Wall Street Journal , with a minimum interest rate of 5.00 %.

Beginning in August 2019, and through the maturity date, the Company made monthly payments of principal and interest based on the then outstanding amount of the loan amortized over a 60-month period.

As a result of the credit agreement that the Company entered into with Capital One N.A.

in August 2021, the Company repaid all outstanding amounts under this loan.

Loans with Seine-Normandie Water Agency

In January 2015, the Company entered into three French government loans with the Seine-Normandie water agency in the aggregate amount of $ 0.7 million.

The loans have maturities that range between three to six years , include annual equal payments and bears no interest.

In December 2018, the Company entered into two additional French government loans with the Seine-Normandie water agency in the aggregate amount $ 0.5 million.

The loans have 8 year lives, and include annual equal payments and bear no interest.

The loans have 8 year maturities, and include annual equal payments and bear no interest.

As of December 31, 2021, the payment obligation had an aggregate book value of $ 0.3 million, which approximates fair value.

The fair value of the payment obligation was determined by using the interest rate associated with the Company’s acquisition loan with Cathay Bank that bears a variable interest rate at the prime rate as published by The Wall Street Journal , with a minimum interest rate of 4.00 %.

Such interest rate is deemed to be a Level 2 input for measuring fair value.

Payment Obligation to Merck

On April 30, 2014, in conjunction with the Company’s acquisition of Merck Sharpe & Dohme’s, API manufacturing business in Éragny-sur-Epte, France, or the Merck API Transaction, the Company entered into a commitment obligation with Merck, in the principal amount of $ 16.0 million.

The terms of the purchase price include annual payments over four years and beard a fixed interest rate of 3.00 %.

In February 2020, the Company repaid all outstanding amounts due under this obligation.

At December 31, 2020 and 2019, the Company was in compliance with its debt covenants.

At December 31, 2021 and 2020, the Company was in compliance with all of its debt covenants.

Long-Term Debt Maturities

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Total income (loss) before taxes

The Company’s provision (benefit) for income taxes consisted of the following:

The Company’s provision for income taxes consisted of the following:

Year Ended December 31,

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Deferred provision (benefit):

Total deferred provision (benefit)

Total provision (benefit) for income taxes

Total deferred provision

Total provision for income taxes

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

Year Ended December 31,

Statutory federal income tax (benefit)

Statutory federal income tax

State tax expense, net of federal tax benefit

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Executive compensation

Deferred tax remeasurement

Employee-related expenses

Effective tax rate (benefit)

The Company’s effective tax rate for 2020 increased in comparison to 2019 primarily due to differences in pre-tax income positions and the recording of a valuation allowance on Hanxin deferred tax assets.

Effective tax rate

The Company’s effective tax rate for 2021 decreased in comparison to 2020 primarily due to differences in pre-tax income positions.

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, tax credit carryforwards, and the tax effects of net operating loss carryforwards.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

liabilities for financial reporting purposes and the amounts used for income tax purposes, tax credit carryforwards, and the tax effects of net operating loss carryforwards.

The significant components of the Company’s deferred tax assets and liabilities are as follows:

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The California NOL carryforwards begin to expire in 2032 .

The Company had France, United Kingdom, and China foreign NOL carryforwards of approximately $ 55.6 million, $ 1.4 million, and $ 12.4 million, respectively.

The France and United Kingdom NOL carryforward can be used annually with certain limitations and have an indefinite carryforward period while the China NOL carryforward begins to expire in 2024 .

At December 31, 2020, the Company had federal and California research and development tax credit carryforwards of approximately $ 2.1 million and $ 21.9 million, respectively.

The federal research and development tax credit begins to expire in 2041 .

The Company had France and United Kingdom foreign NOL carryforwards of approximately $ 68.1 million and $ 2.0 million, respectively.

The France and United Kingdom NOL carryforward can be used annually with certain limitations and have an indefinite carryforward.

At December 31, 2021, the Company had California research and development tax credit carryforwards of approximately $ 22.8 million.

The California research and development tax credit has an indefinite carryforward period.

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Ultimately, the realization of deferred tax assets depends on the existence of future taxable income.

Management considers sources of taxable income such as income in prior carryback

Management considers sources of taxable income such as income in prior carryback periods, future reversal of existing deferred taxable temporary differences, tax-planning strategies, and projected future taxable income.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

periods, future reversal of existing deferred taxable temporary differences, tax-planning strategies, and projected future taxable income.

The Company continues to record a full valuation allowance on AFP’s net deferred income tax assets and will continue to do so until AFP generates sufficient taxable income to realize its deferred income tax assets.

However, a tax benefit is included in the annual effective tax rate computation due to AFP reporting a year-to-date foreign exchange gain in other comprehensive income.

However, a tax benefit is included in the annual effective tax rate computation for 2020 due to AFP reporting a year-to-date foreign exchange gain in other comprehensive income.

As of December 31, 2021 and 2020, the Company had a full valuation allowance against the net deferred tax assets of AFP, which totaled $ 16.9 million and $ 13.7 million, respectively.

For the year ended December 31, 2020, the Company also determined that Hanxin more likely than not would not realize the benefit of its deferred tax assets due to recent operating losses.

Therefore, the Company recorded a full valuation allowance of $ 2.1 million against Hanxin’s deferred tax assets.

The Company continued to record a full valuation allowance on Hanxin’s net deferred tax assets until the July 2021 Hanxin split-off transaction caused Hanxin to be deconsolidated.

As such, the Company had no valuation allowance on Hanxin’s deferred tax assets as of December 31, 2021, and a valuation allowance of $ 2.1 million as of December 31, 2020.

Undistributed Earnings from Foreign Operations

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Balance at the beginning of the year

Deductions based on tax positions related to prior years

Additions based on tax positions related to the current year

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Included in the balance of unrecognized tax benefits as of December 31, 2021 and 2020, was $ 11.4 million and $ 9.9 million, respectively that represents the portion that would impact the effective income tax rate if recognized.

During the year ended December 31, 2018, the Company reduced unrecognized tax benefits for tax positions related to prior years by $ 1.6 million and for tax audit settlement by $ 0.1 million as the result of a state tax audit resolution.

The Company recognizes interest and penalties related to unrecognized tax benefits in its income tax provision.

For the years ended December 31, 2021, 2020 and 2019, the Company accrued interest of approximately $ 0.5 million, $ 0.2 million and $ 0.3 million, respectively, related to its uncertain tax positions.

The Company and/or one or more of its subsidiaries filed income tax returns in the U.S.

federal jurisdiction and various

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company and/or one or more of its subsidiaries files income tax returns in the U.S.

federal jurisdiction and various U.S.

states and foreign jurisdictions.

In February 2018, the IRS completed an examination of the Company’s 2015 income tax return resulting in no changes to reported tax.

In June 2018, the Franchise Tax Board completed an examination of the Company’s 2007, 2008, and 2009 tax return resulting in no material tax liability.

As of December 31, 2021, the Company does not have a tax examination in progress for federal, state, or foreign jurisdictions.

The Company is subject to income tax audit by tax authorities for tax years 2018 to 2020 for federal, 2017 to 2020 for states and 2011 to 2020 for foreign.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stockholders' Equity

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As of the effective date, there were 5,300,296 shares available for grant under the 2015 Plan.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, the Company reserved an aggregate of 6,059,138 shares of common stock for future issuance under the 2015 Plan.

1 unchanged sentence

Amended and Restated 2005 Equity Incentive Award Plan

The Amended and Restated 2005 Equity Incentive Award Plan, or 2005 Plan, provided for the grant of incentive stock options, or ISOs, nonqualified stock options, or NQSOs, restricted stock awards, restricted stock unit awards, stock appreciation rights, or SARs, dividend equivalents and stock payments to the Company’s employees, members of the Board of Directors and consultants.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

appreciation rights, or SARs, dividend equivalents and stock payments to the Company’s employees, members of the Board of Directors and consultants.

Stock options under the 2005 Plan were granted with a term of up to ten years and at prices no less than the fair market value of the Company’s common stock on the date of grant.

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Share Buyback Program

As of December 31, 2020, the Company’s Board of Directors have authorized a total of $ 140.0 million.

As of December 31, 2021, the Company’s Board of Directors have authorized a total of $ 160.0 million in the share buyback program.

The primary goal of the program is to offset dilution created by the Company’s equity compensation programs.

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Pursuant to the Company’s share buyback program, the Company purchased 1,477,305 shares, 1,366,384 shares, and 1,122,781 , shares of its common stock during the years ended December 31, 2021, 2020 and 2019, totaling $ 28.9 million, $ 24.4 million, and $ 22.3 million, respectively.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-Based Award Activity and Balances (excluding the ANP Equity Plan)

2 unchanged sentences

The fair value of RSUs is estimated at the grant date using the Company’s common share price.

Prior to the adoption of ASU No.

2018-07, Improvements to Non-employees Share-Based Payment Accounting , non-vested stock options held by non-employees are revalued at each balance sheet date.

As a result of the Company’s early adoption of the guidance on July 1, 2018, stock options held by non-employees are no longer revalued after grant.

The portion that is expected to vest is amortized and recognized in compensation expense on a straight-line basis over the requisite service period, generally from the grant date to the vesting date.

Compensation cost for all share-based payments granted with service-based graded vesting schedules is recognized using the straight-line method over the requisite service period.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Options issued under the Company’s 2015 Plan and 2005 Plan, are granted at exercise prices equal to or greater than the fair value of the underlying common shares on the date of grant and vest based on continuous service.

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● Expected Volatility.

Starting in 2020, the Company estimates its volatility based on the weighted-average historical volatility of its stock price since IPO.

Starting in 2020, the Company estimates its volatility based on the historical volatility of its stock price since IPO.

Prior to that, the Company had limited data regarding company-specific historical or implied volatility of its share price.

Consequently, the Company estimated its volatility based on the weighted average historical volatility of its stock price since IPO and the stock price from a set of peer companies, since our shares did not have sufficient trading history.

Consequently, the Company estimated its volatility based on the weighted average historical volatility of its stock price since its IPO and the stock price volatility from a set of peer companies, since our shares did not have sufficient trading history.

Management considered factors such as stage of life cycle, competitors, size, market capitalization and financial leverage in the selection of similar entities.

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The expected term of “plain vanilla” options is estimated based on the midpoint between the vesting date and the end of the contractual term under the simplified method permitted by the SEC implementation guidance.

The weighted-average expected term of the Company’s options is approximately five years.

● Risk- Free Rate.

1 unchanged sentence

Treasury zero-coupon issues with a term approximately equal to the expected life of the option being valued.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company does not anticipate paying cash dividends in the foreseeable future.

1 unchanged sentence

The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual experience differs from those estimates.

For the years ended December 31, 2020, 2019 and 2018, the Company estimated an average overall forfeiture rate of approximately 5 %, based on historical experience.

For the years ended December 31, 2021, 2020 and 2019, the Company estimated an average overall forfeiture rate of approximately 6 %, 5 %, and 5 %, respectively, based on historical experience.

Forfeiture rates are separately estimated for its (1) directors and officers, (2) management personnel and (3) other employees.

3 unchanged sentences

Tax benefits resulting from tax deductions in excess of the share-based compensation cost recognized (excess tax benefits) are recorded in the statements of cash flows as financing activities.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted-averages for key assumptions used in determining the fair value of options granted during the years ended December 31, 2021, 2020, and 2019 are as follows:

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Options expired

( 1,112,774 )

Outstanding as of December 31, 2021

Exercisable as of December 31, 2021

Vested and expected to vest as of December 31, 2021

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company’s common stock for those awards that have an exercise price below the estimated fair value at December 31, 2021.

During the years ended December 31, 2021, 2020, and 2019, the Company recorded expense of $ 8.0 million, $ 9.1 million, and $ 8.1 million, respectively, related to stock options granted under all plans.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information relating to option grants and exercises is as follows:

4 unchanged sentences

Cash received from options exercised

Total fair value of the options vested during the year

Total fair value of the options vested during the period

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the status of the Company’s non-vested options as of December 31, 2021, and changes during the year ended December 31, 2021, are presented below:

23 unchanged sentences

As a result of this modification, the Company incurred share-based compensation expense of $ 1.6 million, which is included within general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2020.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021, there was $ 13.1 million of total unrecognized compensation cost, net of forfeitures, related to non-vested RSU-based compensation arrangements granted under all plans.

The cost is expected to be recognized over a weighted-average period of 2.5 years and will be adjusted for future changes in estimated forfeitures.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information relating to RSU grants and deliveries is as follows:

1 unchanged sentence

Value of RSUs

Compensation (1)

(in thousands)

6 unchanged sentences

The 2018 ANP Equity Incentive Plan

In December 2018, ANP’s board of directors approved the 2018 Plan, which is set to expire in December 2023.

The 2018 Plan permits the grant of stock options and other equity awards in ANP shares to ANP employees.

During the year ended December 31, 2020, ANP has granted 2,433,445 stock options to its employees under the 2018 Plan.

In 2019, 3,648,932 stock options were granted to its employees under the 2018 Plan.

As of December 31, 2020, the number of stock options outstanding was 5,709,977 .

The options vest over a period of approximately four years and have up to a 10 year contractual term.

For the years ended December 31, 2020 and 2019, the Company recorded expense of $ 0.7 million and $ 0.3 million related to stock options issued by ANP under the 2018 Plan, respectively.

In December 2018, ANP’s board of directors approved the 2018 ANP Equity Incentive Plan, or the 2018 Plan, which was set to expire in December 2023.

The 2018 Plan permitted the grant of stock options and other equity awards in ANP shares to ANP employees.

During the second quarter of 2021, in connection with the ANP restructuring, the 2018 Plan was terminated.

At the time of the 2018 Plan termination, the number of stock options outstanding was 5,018,880 .

As part of the termination, ANP cash settled 4,091,080 stock options, of which 1,944,771 stock options were vested and 2,146,309 stock options were unvested, for $ 0.8 million which approximated the fair value of these awards at the time of the settlement.

The cash settlement of these awards was recorded as a reduction in equity.

For the remaining 927,800 stock option awards that were outstanding under the 2018 Plan, of which 56,925 stock options were vested and 870,875 were unvested, the Company cancelled these awards and issued replacement awards under the 2015 Plan.

The modified awards vest over periods ranging from 1 to 2 years and have a 10-year contractual term.

The cancellation and replacement of the awards was accounted for as a modification in accordance with ASC 718.

As a result of the modification, the Company incurred $ 2.3 million of share-based compensation expense, of which $ 1.8 million was recorded within general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2021, and the remaining $ 0.5 million which will be recognized over the vesting period of the modified awards.

Prior to the termination of the 2018 Plan, for the years ended December 31, 2021, 2020 and 2019, the Company recorded expense of $ 0.5 million, $ 0.7 million and $ 0.3 million related to stock options issued by ANP under the 2018 Plan, respectively.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation Expense

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The Company has a defined contribution 401(k) plan, or the Plan, whereby eligible employees voluntarily contribute up to a defined percentage of their annual compensation.

The Company matches contributions at a rate of 50 % on the first

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 % of employee contributions, and pays the administrative costs of the Plan.

The Company matches contributions at a rate of 50 % on the first 6 % of employee contributions, and pays the administrative costs of the Plan.

Total employer contributions for the years ended December 31, 2021, 2020, and 2019 were approximately $ 2.0 million, $ 1.9 million, and $ 1.5 million, respectively.

6 unchanged sentences

The plan is currently unfunded, and the benefit obligation under the plan was $ 2.7 million and $ 3.0 million at December 31, 2021 and 2020, respectively.

Expense under the plan was $ 0.2 million, $ 0.2 million, and $ 0.3 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Expense under the plan was $ 0.2 million for each of the years ended December 31, 2021, 2020, and 2019.

Gain or loss due to change in actuarial valuation of the Company’s defined benefit pension plan is recorded in other comprehensive income (loss).

6 unchanged sentences

Eligible participants began contributing to the plan in January 2020.

As of December 31, 2020, the plan assets and liabilities were valued at approximately $ 1.6 million and $ 1.7 million, respectively.

The plan assets were valued at approximately $ 3.4 million as of December 31, 2021.

The plan liabilities were valued at approximately $ 3.5 million as of December 31, 2021.

As of December 31, 2020, the plan assets and liabilities were valued at approximately $ 1.6 million

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and $ 1.7 million, respectively.

The plan assets and liabilities are included in other long-term assets and other long-term liabilities, respectively, on the Company’s consolidated balance sheets.

Commitments and Contingencies

Lease Liabilities

On January 1, 2019, the Company adopted ASC 842, which resulted in the recognition of right-of-use, or ROU, assets of approximately $ 13.9 million and related lease liabilities of approximately $ 14.1 million in the consolidated balance sheet as of December 31, 2019, related to its operating lease commitments.

ROU assets represent the Company’s right to control an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Right-of-Use, or ROU assets, represent the Company’s right to control an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

1 unchanged sentence

Various factors, including economic incentives, intent, past history and business needs are considered to determine if a renewal option is reasonably certain to be exercised.

As most of its leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the commencement date in determining the discount rate used to present value the lease payments.

As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the discount rate used to present value the lease payments.

The Company has lease agreements with both lease and non-lease components, which are accounted for as a single component for all asset classes.

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The Company, at its option, can renew a substantial portion of its leases, at the market rate, for various renewal periods ranging from one to six years .

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of lease costs for the years ended December 31, 2021, 2020 and 2019 were as follows:

Year Ended December 31,

(in thousands)

6 unchanged sentences

Total lease costs

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other information pertaining to leases is as follows:

Year Ended December 31,

(in thousands, except lease term and discount rate)

12 unchanged sentences

Finance leases

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Future minimum rental payments under leases that have initial or remaining non-cancelable lease terms in excess of 12 months as of December 31, 2021, are as follows:

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The Company anticipates that most of these commitments with a remaining term in excess of one year will be fulfilled by 2023.

In accordance with certain agreements between ANP and the Chinese government, in January 2010 and November 2012, the Company acquired certain land-use rights for $ 1.2 million and $ 1.3 million, respectively.

As required by these agreements, the Company was committed to spend approximately $ 15.0 million in the related land development, which primarily includes the construction of fixed assets according to a specific timetable.

As of December 31, 2020, the Company has spent $ 19.5 million on such construction, fulfilling its commitment.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related-Party Transactions

ANP Private Placement

As discussed in footnote 2, in July 2018, ANP completed a private placement of its common equity interest and received approximately $ 56.3 million of cash proceeds.

In connection with the private placement, all of the executive officers of the Company, Stephen Shohet, Howard Lee, and Richard Koo, directors of the Company, certain relatives of Dr.

Jack Zhang and Dr.

Mary Luo, and certain employees of ANP entered into subscription agreements (each, a “Subscription Agreement”) for the indirect investment in ANP.

These Subscription Agreements were transacted either through an investment in Amphastar Cayman, a Cayman Islands limited liability company, or Qianqia or Zhongpan, Chinese partnerships.

The aggregate gross proceeds received as of December 31, 2020, from such executive officers, directors and related parties were approximately $ 36.4 million.

ANP Restructuring

Subsequent to the ANP restructuring discussed in Note 3, which involved various related parties, Hanxin is no longer a wholly-owned subsidiary of the Company and was deconsolidated in the third quarter of 2021.

The Company determined that it has significant influence over Hanxin as a result of its 14 % ownership interest, its seat on Hanxin’s board of directors, and Henry Zhang’s position as an equity holder, general manager, and chairman of the board of directors of Hanxin, given he is the son of Dr.

Additionally, Dr.

Mary Luo and Dr.

Jack Zhang, through an affiliated entity, have an ownership interest in Hanxin and as such Hanxin continues to be a related party after the restructuring.

Retirement of James Luo

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As a result, the Company recorded a total of $ 1.1 million in general and administrative expense in the fourth quarter of 2020 related to this agreement.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Momenta/Sandoz Enoxaparin Patent and Antitrust Litigation

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District Court for the Central District of California, alleging that Aventis Pharma S.A., or Aventis, through its acquisition of a patent through false and misleading statements to the U.S.

Patent and Trademark Office, as well as through false and misleading statements to the FDA, overcharged the federal and state governments for its Lovenox ® product.

Patent and Trademark Office, as well as through false and misleading statements to the FDA, overcharged the federal and state governments for its Lovenox ® product (the “Aventis FCA Action”).

On May 11, 2017, the Company’s lawsuit against Aventis was dismissed for lack of jurisdiction.

On July 14, 2017, Aventis filed an application with the District Court for entitlement to attorneys’ fees and expenses.

On November 20, 2017, the District Court issued its order granting Aventis’ application for fees.

On November 13, 2020, the Court issued an Opinion and Order (“Fee Order”) awarding Aventis $ 12.1 million in attorneys’ fees and $ 0.7 million in costs and expenses, and ordered Aventis to submit updated calculations on accrued interest.

On December 14, 2020, Aventis submitted a supplemental application to the Court seeking interest for the time between the case’s inception and April 30, 2018, and fees, expenses, and interest for the period between May 1, 2018 and November 13, 2020.

The Supplemental Application also identified a mathematical error in the Court’s Fee Order and requested that the Court revise the Fee Order to $ 12.2 million to correct the error.

On December 14, 2020, the Company filed an appeal of the Fee Order to the United States Court of Appeals for the Ninth Circuit.

On January 12, 2021, the Company submitted an opposition to the Supplemental Application identifying several issues with the Supplemental Application including Aventis’ incorrect calculation of fees based on the Fee Order, incorrect calculation of interest, among other procedural and factual arguments.

The Court has not yet ruled on the Supplemental Application and has not provided a timeline by which the parties should expect a ruling.

The Company has accrued $ 12.8 million relating to this litigation as of December 31, 2020 in other income (expenses) in the consolidated statement of operations.

This amount represents management’s best estimate of the probable loss at this time.

The final fee award could be higher and the final amount cannot be reasonably estimated at this time.

The Company intends to continue to vigorously defend against any imposition of attorneys’ fees and expenses in this case.

Regadenoson (0.4 mg/5 mL, 0.08 mg/mL) Patent Litigation

On February 25, 2020, Astellas US LLC, Astellas Pharma US, Inc., and Gilead Sciences, Inc.

(collectively, “Astellas-Gilead”) filed a Complaint in the United States District Court for the District of Delaware against IMS for infringement

On November 20, 2017, the District Court issued its order granting Aventis’ application for fees, and on November 13, 2020, the Court issued an Order (“November Order”) awarding Aventis $ 12.1 million in attorneys’ fees and $ 0.7 million in costs and

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded $ 12.8 million in other income (expenses) in the consolidated statement of operations for the year ended December 31, 2020.

On May 3, 2021, the Court issued a further Order based upon supplemental application to the Court seeking fees, expenses, and interest for the period after, and not covered by, the November Order.

The Court awarded Aventis an additional $ 4.4 million bringing the total amount awarded to Aventis to $ 17.2 million.

On June 30, 2021, the Company and Aventis entered into a settlement agreement to settle the attorney fees’ and expenses claim for $ 14.5 million.

The additional $ 1.7 million was recorded in other income (expenses), in the consolidated statement of operations.

The settlement was paid in full in the third quarter of 2021.

Hatch-Waxman Litigations

Regadenoson (0.4 mg/5 mL, 0.08 mg/mL) Patent Litigation

On February 25, 2020, Astellas US LLC, Astellas Pharma US, Inc., and Gilead Sciences, Inc.

(collectively, “Astellas-Gilead”) filed a Complaint in the United States District Court for the District of Delaware against IMS for infringement of U.S.

8,106,183 (the “‘183 patent”), RE47,301 (the “‘301 patent”), and 8,524,883 (the “‘883 patent”) (collectively, “Astellas-Gilead Patents”) with regard to IMS’s ANDA No.

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On March 30, 2020, the Court issued an Order allowing the Company to join pending consolidated litigation with five other generic Regadenoson ANDA filers involving similar claims.

Trial is currently scheduled for June 14, 2021.

The Company’s 30-month FDA stay expires August 10, 2022.

The Company intends to vigorously defend this patent lawsuit.

On January 26, 2022, the Company and Astellas-Gilead reached an agreement to resolve the lawsuit.

The parties submitted, and the Court granted, a motion to dismiss without prejudice Astellas-Gilead’s complaint of infringement against IMS on January 27, 2022.

Teriparatide (0.25 mg/mL) Patent Litigation

On June 29, 2021, the Company filed a Complaint in the United States District Court for the Southern District of Indiana against Eli Lilly and Company (“Lilly”) seeking a declaratory judgment of non-infringement of U.S.

7,517,334 with regard to Amphastar’s ANDA No.

213,641 for approval to manufacture and sell 0.25 mg/mL prefilled pens.

On September 30, 2021, the Company and Lilly submitted a motion for entry of a consent judgment of non-infringement of Amphastar’s ANDA No.

213,641 in favor of Amphastar and against Lilly.

The Court endorsed the consent judgment and issued a final determination in favor of Amphastar and against Lilly on October 1, 2021.

Employee Litigations

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On February 9, 2021, the Company was able to successfully resolve these claims, as well as Brenes’ personal employment claims at mediation for $ 1.0 million.

The agreement is still subject to approval by the court.

The settlement was approved by the Court on April 7, 2021.

The Company accrued the amount of $ 1.0 million as of December 31, 2020.

Amphastar Pharmaceuticals, Inc.

On May 29, 2020, Priscilla Ramirez, (“Ramirez”), a former employee filed a PAGA lawsuit for alleged violations of various California labor laws pertaining to wage and hour against the Company.

The Company accrued the amount of

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ 1.0 million for this litigation as of March 31, 2021.

On April 5, 2021, the parties reached a settlement for $ 1.0 million.

On June 9, 2021, Ramirez submitted a motion to the Court seeking approval of the settlement.

On August 16, 2021, the Court approved the settlement.

On September 13, 2021, consistent with the terms of the settlement agreement, the Company remitted payment for this case, thus resolving the matter.

Navarrette v.

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As to IMS, the Brenes settlement subsumes the claims of Navarrette.

Amphastar Pharmaceuticals, Inc.

On May 29, 2020, Priscilla Ramirez, (“Ramirez”), a former employee filed a PAGA lawsuit for alleged violations of various California labor laws pertaining to wage and hour against the Company.

The parties have agreed to a mediation scheduled in April 2021.

At this time, neither potential liability nor a reasonable and calculable estimate of exposure can be determined as initial evaluation is ongoing.

The Company intends to vigorously defend this lawsuit.

As to the Company, the Ramirez settlement subsumes the claims of Navarette covering overlapping periods.

Other Litigation

The Company is also subject to various other claims, arbitrations, and lawsuits from time to time arising in the ordinary course of business, including contractual employment matters.

The Company is also subject to various other claims, arbitrations, and lawsuits from time to time arising in the ordinary course of business.

The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

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Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.

Subsequent Events

On January 26, 2022, the Company reached an agreement with Astellas US, LLC, Astellas Pharma US, Inc.

(together with Astellas US, LLC, “Astellas”), and Gilead Sciences, Inc.

to settle the Regadenoson patent litigation (See Note 20).

Under the terms of the agreement, the Company received $ 5.4 million from Astellas constituting saved litigation expenses.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data