What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-01 · 388 added, 222 removed, 965 unchanged (39% of the section changed)

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 1, 2023 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 29, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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As described in Note 5 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, was 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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In particular, the estimated selling price forecast is sensitive to changes in significant assumptions, including demand for the Company’s products, customer mix, and expected competition.

How We Addressed the

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's lower of cost or net realizable value estimate process.

This included controls over management's assessment of assumptions such as future demand, customer

Matter in Our Audit

mix and expected competition and data underlying the estimate, including but not limited to the completeness of the underlying inventory.

This included controls over management's assessment of assumptions such as future demand, customer mix and expected competition and data underlying the estimate, including but not limited to the completeness of the underlying inventory.

Our substantive audit procedures included, among others, evaluating the significant assumptions stated above and the accuracy and completeness of the underlying data management used to value enoxaparin inventory.

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We also evaluated adjustments to the estimated selling price for specific considerations, such as new significant customers, competitors, or planned price changes.

We evaluated the reasonableness of management’s forecasted selling price and whether expected changes in demand, competition, or customer mix were appropriate in comparison with the Company’s experience.

We evaluated the reasonableness of management’s forecasted selling price and whether expected changes in demand, competition, or customer mix were appropriate by comparing with the Company’s experience.

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 Company’s significant assumptions.

BAQSIMI ® Acquisition

Description of the Matter

On June 30, 2023, the Company completed its acquisition of BAQSIMI ® glucagon nasal powder, or BAQSIMI ® , pursuant to an asset purchase agreement, or the Purchase Agreement, dated April 21, 2023, and a manufacturing service agreement, or the MSA, and a transition services agreement, or the TSA, dated June 30, 2023, with Eli Lilly & Company, or Lilly, as disclosed in Note 4 to the consolidated financial statements.

The transaction was accounted for as an asset acquisition.

Auditing the Company's accounting for its acquisition of BAQSIMI ® was complex due to the judgement applied in identifying the elements of the transaction, including but not limited to the assets acquired, the MSA, and the TSA, and the effort in performing procedures and evaluating audit evidence related to the accounting for the transaction.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's accounting for the BAQSIMI ® acquisition.

This included testing the effectiveness of controls over management’s identification of the elements of the transaction.

To test the accounting for the BAQSIMI ® acquisition, we performed audit procedures that included, among others, reviewing the related Purchase Agreement, the MSA and the TSA, and evaluating management’s identification of the elements of the transaction.

We involved subject matter resources to assist in evaluating the identification of elements of the transaction and the related accounting.

/s/ Ernst & Young LLP

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Irvine, California

March 1, 2023

February 29, 2024

AMPHASTAR PHARMACEUTICALS, INC.

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Goodwill and intangible assets, net

Long-term investments

Deferred tax assets

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Accounts payable and accrued liabilities

Accrued payments for BAQSIMI ® (see Note 4)

Income taxes payable

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Year Ended December 31,

Net revenues:

Product revenues, net

Other revenues

Total net revenues

Cost of revenues

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Equity in losses of unconsolidated affiliate

Net income (loss) attributable to non-controlling interests

Net income attributable to non-controlling interests

Net income attributable to Amphastar Pharmaceuticals, Inc.

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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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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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Gain on deconsolidation of subsidiary

(Gain) loss on interest rate swaps and foreign currency transactions, net

Impairment of long-lived assets

Loss (gain) on interest rate swaps and foreign currency transactions, net

Depreciation of property, plant, and equipment

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Operating lease right-of-use asset amortization

Amortization of discounts, premiums, and debt issuance costs

Equity in losses of unconsolidated affiliate

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Cash Flows From Investing Activities:

BAQSIMI ® acquisition (See Note 4)

Purchases and construction of property, plant, and equipment

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Maturity of investments

Payment of deposits and other assets

Deposits and other assets

Net cash used in investing activities

Cash Flows From Financing Activities:

Acquisition of additional ownership interest in ANP

ANP restructuring (see Note 3)

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Debt issuance costs

Proceeds from borrowing under lines of credit

Repayments under lines of credit

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Principal payments on long-term debt

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net increase in cash, cash equivalents, and restricted cash

Net (decrease) increase in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

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Noncash Investing and Financing Activities:

Capital expenditure included in accounts payable

Deferred payment for BAQSIMI ® acquisition

Capital expenditures included in accounts payable

Operating lease right-of-use assets in exchange for operating lease liabilities

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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) Amphastar France Pharmaceuticals, S.A.S., or AFP, (5) Amphastar UK Ltd., or AUK, and (6) International Medication Systems (UK) Limited, or IMS UK.

Investments in Unconsolidated Affiliate

(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, (6) International Medication Systems (UK) Limited, or IMS UK, and (7) Amphastar Medication Co., LLC, or Amphastar Medication.

Investment 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.

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Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

The principal accounting estimates include:

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 value, impairment of investments, long-lived and intangible assets and goodwill, accrual for workers’ compensation liabilities, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

fair value of acquired assets, 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 value, impairment of investments, long-lived and intangible assets and goodwill, accrual for workers’ compensation liabilities, litigation reserves, stock price volatility for share-based compensation expense, valuation allowances for deferred tax assets, and liabilities for uncertain income tax positions.

Foreign Currency

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Equity is translated at the prevailing rate of exchange at the date of the equity transactions.

Translation adjustments are reflected in stockholders’ equity and are included as a component of other accumulated comprehensive income (loss).

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, 2022, 2021, and 2020 were a $ 1.8 million loss, a $ 2.6 million loss, and a $ 3.0 million gain, respectively.

Comprehensive Income

The Company’s comprehensive income includes its foreign currency translation gains and losses as well as its share of other comprehensive income from its equity method investments.

There was no material income tax provision allocated to other comprehensive loss for the years ended December 31, 2022 and 2021.

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

Translation adjustments are reflected in stockholders’ equity and are included as a component of other comprehensive income (loss).

The unrealized gains or losses of intercompany foreign currency transactions that are of a long-term investment nature are reported in other 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, 2023, 2022, and 2021 were a $ 1.1 million gain, a $ 1.8 million loss, and a $ 2.6 million loss, respectively.

Comprehensive Income (loss)

The Company’s comprehensive income (loss) includes its foreign currency translation gains and losses, changes in pension obligations as well as its share of other comprehensive income from its equity method investments.

The Company evaluates acquisitions and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and substantive processes that have the ability to create outputs, which would meet the definition of a business.

Acquisitions meeting the definition of business combinations are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values.

In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition.

Direct transaction costs are recognized as part of the cost of an asset acquisition.

The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis, with the exception of non-qualifying assets.

Goodwill is not recognized in an asset acquisition.

When a transaction accounted for as an asset acquisition includes an in-process research and development, or IPR&D, asset, the IPR&D asset is only capitalized if it has an alternative future use other than in a particular research and development project.

Asset acquisitions may include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets.

Contingent consideration, including assumed contingent considerations, is not recognized until all contingencies are resolved and the consideration is paid or becomes payable (unless contingent considerations meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired), at which point the consideration is allocated to the assets acquired based on their relative fair values at the acquisition date, with the exception of non-qualifying assets.

Judgments are used in determining estimates of useful lives of long-lived assets.

Useful life estimates are based on, among other factors, estimates of expected future net cash flows, the assessment of each asset’s life cycle, and the impact of competitive trends on each asset’s life cycle and other factors.

These judgments can materially impact the estimates used to allocate purchase consideration to assets acquired and liabilities assumed, and the resulting timing and amounts charged to or recognized in current and future operating results.

For these and other reasons, actual results may vary significantly from estimated results.

Shipping and Handling Costs

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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 the commercial or campaign is first presented, and are reflected as a component of selling, distribution and marketing in the

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company’s consolidated statements of operations.

For the years ended December 31, 2023, 2022, and 2021, advertising expenses were $ 10.4 million, $ 8.7 million, and $ 8.1 million, respectively.

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

As of December 31, 2022, 2021, and 2020, the Company did not have material capitalized pre-launch inventory.

For the years ended December 31, 2023, 2022, and 2021, the Company did not have material capitalized pre-launch inventory.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments

The carrying amounts of cash and cash equivalents, short-term investments, restricted cash and short-term investments, accounts receivable, accounts payable, accrued expenses, and short-term borrowings approximate fair value due to the short maturity of these items.

The majority of the Company’s long-term obligations consist of variable rate debt, and their carrying value approximates fair value as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities.

The Company’s accompanying consolidated balance sheets include the following financial instruments:

cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses, short-term borrowings and long-term obligations.

The Company considers the carrying amounts of current assets and liabilities on the consolidated balance sheets to approximate the fair value of these financial instruments due to the short maturity of these items.

The carrying value of the Company’s long-term obligations, with the exception of the convertible debt (See Note 15) approximates their fair value, as the stated borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities.

Investments and short-term investments are recorded at fair value based on quoted prices from recognized security exchanges and other methods (See Note 9).

The Company at times enters into interest rate swap contracts to manage its exposure to interest rate changes and its overall cost of long-term debt.

The Company’s interest rate swap contracts exchange the variable interest rates for fixed interest rates.

The Company from time to time may enter into forward currency contracts to lock in currency exchange rates to manage its foreign currency exchange rate exposure.

From time to time, the Company may enter into forward currency contracts to lock in currency exchange rates to manage its foreign currency exchange rate exposure.

The Company’s interest rate swaps and forward currency contracts have not been designated as hedging instruments and, therefore are recorded at their fair values at the end of each reporting period with changes in fair value recorded in other income (expenses) on the consolidated statements of operations.

As of December 31, 2022, the Company had an unsettled forward currency contract to purchase foreign currency with a fair value of approximately $ 0.2 million based on Level 2 inputs, which was recorded as a liability in the accounts payable and accrued liabilities line in the accompanying consolidated balance sheets.

As of December 31, 2023, the Company did not have any unsettled forward currency contracts to purchase foreign currency.

As of December 31, 2022, the Company had an unsettled forward currency contract to purchase foreign currency with a fair value of approximately $ 0.2 million based on Level 2 inputs, which was recorded as a liability in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

Cash and Cash Equivalents

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

Investments as of December 31, 2022 and 2021 consisted of certificates of deposit and investment grade corporate and municipal bonds with original maturity dates between three and fifteen months.

Investments as of December 31, 2023 and 2022 consisted of certificates of deposit and investment grade corporate, agency, and municipal bonds with original maturity dates between three and fifteen months.

Restricted Cash

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As of December 31, 2023 and 2022, the restricted cash balance was $ 0.2 million.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Short-Term Investments

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When the Company is aware of circumstances that may impair a customer’s ability to pay subsequent to the original sale, the Company records a specific allowance to reduce the amounts receivable to the amount that the Company reasonably believes to be collectable.

For all other customers, the Company recognizes an allowance for credit losses based on factors that include the length of time the receivables are past due, industry and geographic concentrations, the current economic conditions and historical collection experience.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and historical collection experience.

As of December 31, 2023 and 2022, the Company's allowance for credit losses was $ 2.8 million and $ 2.7 million, respectively.

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If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset or an asset group, further impairment analysis is performed.

An impairment loss is measured as the amount by which the carrying amount

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the asset or asset groups exceeds the fair value (assets to be held and used) or fair value less cost to sell (assets to be disposed of).

An impairment loss is measured as the amount by which the carrying amount of the asset or asset groups exceeds the fair value (assets to be held and used) or fair value less cost to sell (assets to be disposed of).

The Company also assesses the useful lives of its assets periodically to determine whether events and circumstances warrant a revision to the remaining useful life.

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A valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Issuance Costs

Debt issuance costs related to non-revolving debt are recognized as a reduction to the related debt balance in the accompanying consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method.

Debt issuance costs associated with revolving debt are capitalized within other long-term assets on the consolidated balance sheets and are amortized to interest expense over the term of the related revolving debt.

Convertible Debt

The Company accounts for its convertible debt instruments as a single unit of accounting, a liability, because the Company concluded that the conversion features do not require bifurcation as a derivative under Accounting Standards Codification, or ASC, 815-15, Derivatives and Hedging and the Company did not issue its convertible debt instruments at a substantial premium.

The Company records debt issuance costs as contra-liabilities in our consolidated balance sheets at issuance and amortizes them over the contractual term of the convertible debt instrument using the effective interest rate.

In accordance with ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) :

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, the Company evaluates convertible debt instruments to determine if the conversion feature is freestanding or embedded.

If the conversion feature is embedded, the conversion feature is not bifurcated from the host instrument.

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20, Debt with Conversion and Other Options for consideration of any beneficial conversion features.

If no beneficial conversion features exist that require separate recognition, convertible debt instruments are accounted for as a single liability measured at its amortized cost as long as no other features require separation and recognition as derivatives.

Impairment of Indefinite-Lived Intangible Asset and Goodwill

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Self-Insured Claims

The Company is primarily self-insured, up to certain limits, for workers’ compensation claims.

The Company is self-insured, up to certain limits, for workers’ compensation claims.

The Company has purchased stop-loss insurance, which will reimburse the Company for individual claims in excess of $ 350,000 or aggregate minimum attachment of $ 4.8 million annually.

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Changes in estimates are recorded in the period identified.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Litigation, Commitments and Contingencies

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

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 for the year ended December 31, 2021.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In 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 other income (expense), net in the consolidated statements of operations for the year ended December 31, 2021.

Recent Accounting Pronouncements

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.

In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures which is intended to improve reportable segment disclosure requirements, primarily through additional disclosures about significant segment expenses.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the disclosure requirements related to the new standard.

In December 2023, the FASB issued Accounting Standard Update 2023-09, Income taxes (Topic 740):

Improvements to Income Tax Disclosures which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction.

The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively.

The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the disclosure requirements related to the new standard.

ANP Restructuring

As a result of the ANP restructuring that was completed during the third quarter of 2021, and subsequent investments by other equity holders of Hanxin, the Company has a 14 % noncontrolling investment in Hanxin as of December 31, 2022 that is accounted for as an equity method investment.

As a result of the ANP restructuring that was completed during the third quarter of 2021, and subsequent investments by other equity holders of Hanxin Pharmaceutical Technology Co., Ltd, or Hanxin, the Company has a 11.5 % noncontrolling investment in Hanxin as of December 31, 2023.

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.

Jack Zhang, the Company’s Chief Executive Officer and Dr.

Mary Luo, the Company’s Chief Operating Officer, 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.

Hanxin continues to be a related party after the deconsolidation.

BAQSIMI ® Acquisition

On June 30, 2023, the Company completed its acquisition of BAQSIMI ® glucagon nasal powder, or BAQSIMI ® pursuant to an asset purchase agreement, or the Purchase Agreement, with Eli Lilly & Company, or Lilly, dated April 21, 2023.

In connection with the closing of the transaction, or the Closing, the Company paid Lilly $ 500.0 million in cash.

In addition, the Company is required to pay Lilly a $ 125.0 million guaranteed payment on the first anniversary of the

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is also required to pay Lilly $ 4.0 million upon the assignment of certain contracts to the Company after the first anniversary of the Closing, but no later than 18 months after the Closing.

The Company may also be required to pay additional contingent consideration of up to $ 450.0 million to Lilly based on the achievement of certain milestones.

The Purchase Agreement provides that the contingent consideration that may become payable to Lilly would be achieved as follows:

(i) a one-time payment of $ 100.0 million if the Company achieves annual net sales of $ 175.0 million or more of BAQSIMI ® and certain related products, or the Milestone Products, in any one year during the first five years after the Closing;

(ii) up to two payments of $ 100.0 million each if the Company achieves annual net sales of $ 200.0 million or more of Milestone Products in any one year during the first five years after the Closing;

and (iii) a one-time payment of $ 150.0 million if the Company achieves total cumulative net sales of $ 950.0 million or more of the Milestone Products for the first five years after the Closing.

In addition, the Company assumed certain contingent consideration of Lilly, which would require the Company to pay up to an aggregate of $ 125.0 million based on the achievement of annual net sales milestones of $ 350.0 million, $ 400.0 million and $ 600.0 million.

The Company has accounted for the BAQSIMI ® acquisition as an asset acquisition in accordance with ASC 805, Business Combination s, as substantially all the fair value of the assets acquired is concentrated in a single identifiable asset, BAQSIMI ® product rights.

The BAQSIMI ® product rights include the license for the BAQSIMI ® intellectual property, regulatory documentation, marketing authorizations, and domain names, which are considered a single asset as they are inextricably linked.

As an asset acquisition, the cost to acquire the group of assets, including transaction costs, is allocated to the individual assets acquired based on their relative fair values, with the exception of non-qualifying assets.

The relative fair values of identifiable assets from the acquisition of BAQSIMI ® are based on estimates of fair value using assumptions that the Company believes are reasonable.

Manufacturing Services Agreement

In connection with the Closing, the Company entered into a Manufacturing Services Agreement, or the MSA, with Lilly, pursuant to which Lilly has agreed, for a period of time not to exceed 18 months , to provide certain manufacturing, packaging, labeling and supply services for BAQSIMI ® directly or through third-party contractors to the Company in connection with its operation of the development, manufacture, and commercialization of BAQSIMI ® .

Upon termination of the MSA, the Company will be obligated to purchase all API, components, and finished goods on hand at prices agreed upon in the MSA.

Transition Services Agreement

In connection with the Closing, the Company entered into a Transition Services Agreement, or the TSA, with Lilly pursuant to which Lilly has agreed, for a period of time not to exceed 18 months , to provide certain services to the Company to support the transition of BAQSIMI ® operations to the Company, including with respect to the conduct of certain clinical, regulatory, medical affairs, and commercial sales channel activities.

The following table summarizes the aggregate amount paid for the assets acquired by the Company in connection with the acquisition of BAQSIMI ® :

(in thousands)

Fair value of deferred cash payments

Transaction costs

Total purchase price

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The total purchase price was allocated to the acquired assets based on their relative fair values, as follow:

(in thousands)

Property, plant, and equipment

BAQSIMI ® product rights

Deferred tax assets

Total assets acquired

The Company is amortizing the acquired intangible asset on a straight line basis over its estimated useful life of 24 years (See Note 11 for additional information).

The fair value of the deferred cash payment is being accreted to the full $ 129.0 million amount over a one-year period through interest expense.

During the year ended December 31, 2023 $ 3.7 million of interest expense was recognized related to accretion of the deferred cash payments.

Credit Agreement

On June 30, 2023, in conjunction with the Company’s acquisition of BAQSIMI ® , the Company entered into a $ 700.0 million syndicated credit agreement, or the Credit Agreement, by and among the Company, certain subsidiaries of the Company, as guarantors, certain lenders, and Wells Fargo Bank, National Association, or Wells Fargo, as Administrative Agent (in such capacity, Agent), Swing line Lender and L/C Issuer.

The Credit Agreement provides for a senior secured term loan, or the Wells Fargo Term Loan in an aggregate principal amount of $ 500.0 million.

The Wells Fargo Term Loan matures on the June 30, 2028.

The Credit Agreement also provides a senior secured revolving credit facility, or the Revolving Credit Facility, in an aggregate principal amount of $ 200.0 million.

The Revolving Credit Facility matures on June 30, 2028.

As of December 31, 2023, the Company had no borrowings outstanding under the Revolving Credit Facility.

Proceeds from the Term Loan were used to finance the acquisition of BAQSIMI ® .

Revenue Recognition

In accordance with Accounting Standard Codification, or ASC, 606 Revenue from Contracts with Customers , revenue is recognized at the time that the Company’s customers obtain control of the promised goods.

Product revenues, net

In accordance with ASC 606 Revenue from Contracts with Customers , revenue is recognized at the time that the Company’s customers obtain control of the promised goods.

Generally, revenue is recognized at the time of product delivery to the Company’s customers.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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 completion 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

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of services or an output method of determining the progress of completion of performance obligation.

Revenue from research and development services at ANP was $ 4.3 million and $ 5.1 million for the years ended December 31, 2022 and 2021, respectively.

Service revenues derived from research and development contracts are recognized over time based on progress toward 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 $ 4.5 million, $ 4.3 million and $ 5.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Other revenues

Revenues related to sales of BAQSIMI ® , which was acquired on June 30, 2023 and was manufactured and sold by Lilly under the TSA during the year ended December 31, 2023, were recorded on a net basis, similar to a royalty arrangement.

Provision for Chargebacks and Rebates

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Changes in the chargeback provision from period to period are primarily dependent on the Company’s sales to its wholesalers, the level of inventory held by wholesalers, and the wholesalers’ customer mix.

Changes in the rebate provision from period to period are primarily dependent on retailer’s and other indirect customers’ purchases.

Changes in the rebate provision from period to period are primarily dependent on retailers’ and other indirect customers’ purchases.

The approach that the Company uses to estimate chargebacks has been consistently applied for all periods presented.

Variations in estimates have been historically small.

The Company continually monitors the provision for chargebacks and rebates and makes adjustments when it believes that the actual chargebacks and rebates may differ from the estimates.

The Company continually monitors the provision for chargebacks

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and rebates and makes adjustments when it believes that the actual chargebacks and rebates may differ from the estimates.

The settlement of chargebacks and rebates generally occurs within 20 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 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, 2022 and 2021, $ 20.5 million and $ 15.6 million were included as a reduction to accounts receivable, net, on the consolidated balance sheets, respectively.

The remaining provision as of December 31, 2022 and 2021 was $ 6.1 million and $ 4.6 million, respectively, which were included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

The provision for chargebacks and rebates is included in the following balance sheet accounts:

(in thousands)

Reduction to accounts receivable, net

Accounts payable and accrued liabilities

Accrual for Product Returns

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Although these factors do not normally give the Company’s customers the right to return products outside of the regular return policy, the Company realizes that such factors could ultimately lead to increased returns.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company analyzes these situations on a case-by-case basis and makes adjustments to the product return reserve as appropriate.

The Company analyzes these situations on a case-by-case basis and makes adjustments to the product return reserve as appropriate.

The provision for product returns is reflected as a component of net revenues.

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Ending balance

Of the provision for product returns as of December 31, 2022 and 2021, $ 14.9 million and $ 16.0 million were included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets, respectively.

The remaining provision as of December 31, 2022 and 2021, of $ 4.6 million and $ 5.7 million were included in other long-term liabilities, respectively.

The provision for product returns is included in the following balance sheet accounts:

(in thousands)

Accounts payable and accrued liabilities

Other long-term liabilities

For the years ended December 31, 2023 and 2022, the Company’s aggregate product return rate was 1.1 % and 1.4 % of qualified sales, respectively.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income per Share Attributable to Amphastar Pharmaceuticals, Inc.

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Diluted net income 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.

stockholders gives effect to all potentially 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 potential common shares issued upon the conversion of Convertible Notes of the Company, due March 2029, or the 2029 Convertible Notes.

For the year ended December 31, 2023, the Company did not have any options that were excluded in the computation of diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders because the effect would be anti-dilutive.

The 2029 Convertible Notes had no impact on the computation of diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

stockholders, as the average stock price during the period was less than the conversion price.

For the year ended December 31, 2022, options to purchase 704,483 shares of stock with a weighted-average exercise price of $ 34.79 per share were excluded from the computation of diluted net income per share attributable to Amphastar Pharmaceuticals, Inc.

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stockholders because their 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 their effect would be anti-dilutive.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

stockholders for each of the periods presented:

Year Ended December 31,

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● Finished pharmaceutical products

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.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Other revenues from the sale of BAQSIMI ® are accounted for as a component of the finished pharmaceutical products segment.

Selected financial information by reporting segment is presented below:

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Income from operations

Non-operating income (expenses)

Non-operating (expenses) income

Income before income taxes

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(in thousands)

Finished pharmaceutical products net revenues:

Finished pharmaceutical products segment net revenues:

Primatene MIST ®

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Total finished pharmaceutical products net revenues

Total finished pharmaceutical products segment net revenues

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amount of depreciation and amortization expense included in cost of revenues by reporting segment is presented below:

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Total depreciation and amortization expense

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net revenues and carrying values of long-lived assets by geographic regions are as follows:

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United States (1)

Includes revenue from the sales of BAQSIMI ®

Customer and Supplier Concentration

Customer Concentrations

Three large wholesale drug distributors, AmerisourceBergen Corporation, or AmerisourceBergen, Cardinal Health, Inc., or Cardinal, and McKesson Corporation, or McKesson, are all distributors of the Company’s products, as well as suppliers of a broad range of health care products.

The Company considers these three customers to be its major customers, as each individually and these customers collectively, represented a significant percentage of the Company’s net revenue for the years ended December 31, 2022, 2021, and 2020, and accounts receivable as of December 31, 2022 and 2021, respectively.

Three large wholesale drug distributors, Cencora Inc., formally AmerisourceBergen, or Cencora, Cardinal Health, Inc., or Cardinal, and McKesson Corporation, or McKesson, are all distributors of the Company’s products, as well as suppliers of a broad range of health care products.

Lilly currently manufactures and sells BAQSIMI ® on the Company’s behalf pursuant to the terms of the TSA (See Note 4 for additional information).

The Company considers these four customers to be its major customers, as each individually and these customers collectively, represented a significant percentage of the Company’s net revenue for the years ended December 31, 2023, 2022, and 2021, and accounts receivable as of December 31, 2023 and 2022, respectively.

The following table provides accounts receivable and net revenue information for these major customers:

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Year Ended December 31,

AmerisourceBergen

Cardinal Health

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Furthermore, a significant portion of raw materials may only be available from foreign sources.

If the Company is unable to secure, on a timely basis, sufficient quantities of the materials it depends on to manufacture and market its products, it could have a materially adverse effect on the Company’s business, financial condition, and results of operations.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Company is unable to secure, on a timely basis, sufficient quantities of the materials it depends on to manufacture and market its products, it could have a materially adverse effect on the Company’s business, financial condition, and results of operations.

Fair Value Measurements

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● Level 1 – Inputs to measure fair value are based on quoted prices (unadjusted) in active markets on identical assets or liabilities;

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

● Level 2 – Inputs to measure fair value are based on the following:

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As of December 31, 2023, cash equivalents include money market accounts and corporate and municipal bonds with original maturities of less than three months.

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

Investments consist of certificates of deposit as well as investment-grade corporate, agency and municipal bonds with original maturity dates between three and fifteen months.

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

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 corporate, agency and municipal bonds are classified as held-to-maturity and are carried at amortized cost net of allowance for credit losses.

The fair value of such bonds is disclosed in Note 10 and was determined based on Level 2 inputs.

The restrictions on restricted cash and investments have an immaterial 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, 2022 and 2021, are as follows:

The fair values of the Company’s financial assets and liabilities measured on a recurring basis as of December 31, 2023 and 2022, are as follows:

(in thousands)

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Restricted short-term investments

Corporate, agency and municipal bonds

Interest rate swaps related to variable rate loans

Fair value measurement as of December 31, 2022

Total assets and liabilities measured at fair value as of December 31, 2023

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

Cash equivalents

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Restricted short-term investments

Corporate and municipal bonds

Interest rate swaps related to variable rate loans

Fair value measurement as of December 31, 2021

Total assets measured at fair value as of December 31, 2022

The Company does not hold any Level 3 instruments that are measured at fair value on a recurring basis.

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 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.

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 an impairment test.

As of December 31, 2023 and 2022, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the Company’s investments that are classified as held-to-maturity are as follows:

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

The following is a summary of the Company’s investments that are classified as held-to-maturity:

(in thousands)

Corporate and agency 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, 2023

Corporate bonds (due within 1 year)

Corporate bonds (due within 1 to 3 years)

Corporate and agency bonds (due within 1 year)

Municipal bonds (due within 1 year)

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

The Company evaluated the underlying credit quality and credit ratings of the issuers, noting neither a significant deterioration since purchase nor any other factors that would indicate a material credit loss.

The Company evaluated the underlying credit quality and credit ratings of the issuers, identifying neither a significant deterioration since purchase nor any other factors that would indicate a material credit loss.

The Company measures expected credit losses on held-to-maturity investments on a collective basis.

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The Company accounts for its share of the earnings or losses of its unconsolidated affiliate 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 years ended December 31, 2022 and 2021 was $ 1.2 million and $ 0.2 million, respectively, which was recorded in the “Equity in losses of unconsolidated affiliate” line on the accompanying consolidated statement of operations.

The Company’s share of Hanxin’s losses for the years ended December 31, 2023, 2022 and 2021 was $ 2.0 million, $ 1.2 million and $ 0.2 million, respectively, which was recorded in “equity in

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

losses of unconsolidated affiliate” on the accompanying consolidated statement of operations.

Goodwill and Intangible Assets

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Definite-lived intangible assets

BAQSIMI ® product rights (1)

IMS (UK) international product rights (2)

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Intangible assets with indefinite lives have an indeterminable average life.

In June 2023, the Company recorded an impairment related to its IMS (UK) international product rights in the amount of $ 2.7 million.

The Company recorded the impairment in the cost of revenue in its consolidated statement of operations for the year ended December 31, 2023

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

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Beginning balance

ANP restructuring

Currency translation

1 unchanged sentence

Primatene ® Trademark

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, 2022.

In January 2009, the Company acquired the exclusive rights to the trademark, domain name, website and domestic

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2023.

The trademark was determined to have an indefinite life.

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

BAQSIMI ® Product Rights

As discussed in Note 4, in June 2023, the Company acquired the BAQSIMI ® product rights.

BAQSIMI ® is an emergency nasal spray used to treat severe hypoglycemia.

The BAQSIMI ® product rights intangible asset is amortized over its estimated useful life of 24 years .

In determining the BAQSIMI ® product rights’ useful life, the Company considered the following:

the expected use of the intangible asset;

the longevity of the brand;

the legal, regulatory and contractual provisions that affect their maximum useful life;

the Company’s ability to renew or extend the asset’s legal or contractual life without substantial costs;

effects of the regulatory environment;

expected changes in distribution channels;

maintenance expenditures required to obtain the expected future cash flows from the asset;

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

Included in cost of revenues for the years ended December 31, 2023, 2022 and 2021 is product rights amortization expense of $ 15.5 million, $ 0.9 million, and $ 1.0 million, respectively.

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Total inventories

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Charges of $ 18.8 million, $ 17.2 million, and $ 24.6 million were included in the cost of revenues in the Company’s consolidated statements of operations for the years ended December 31, 2023, 2022, and 2021, respectively, to adjust the Company’s inventory and related firm purchase commitments to their net realizable value.

For the year ended December 31, 2023, these charges included $ 9.1 million in the cost of revenues to adjust the Company’s enoxaparin inventory and related firm purchase commitments to their net realizable value.

Additionally, as a result of amending the MannKind RHI Supply Agreement in December 2023, the Company booked a $ 3.6 million adjustment to reduce RHI inventory to its net realizable value.

For the year ended December 31, 2022, the charge included $ 14.9 million in the cost of revenues to adjust the Company’s enoxaparin inventory and related firm purchase commitments to their net realizable value.

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.

Losses on firm purchase commitments related to raw materials on order as of December 31, 2023 and 2022 were $ 1.0 million and $ 2.7 million, respectively, which are recorded in cost of revenues in the Company’s consolidated statement of operations.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant, and Equipment

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Interest expense capitalized was approximately $ 2.0 million, $ 1.4 million, and $ 1.4 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Payable and Accrued Liabilities

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Total accounts payable and accrued liabilities

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt consists of the following:

(in thousands)

Term loan with Capital One N.A.

due August 2026

Convertible Debt

2029 Convertible Notes

Wells Fargo Term Loan due June 2028

Capital One N.A.

Term Loan paid off June 2023

Mortgage Loans

3 unchanged sentences

Line of Credit Facilities

Line of credit facility with China Merchant Bank

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

due August 2026

Line of credit facility with China Merchant Bank due October 2026

Wells Fargo Revolving line of credit facility due June 2028

Capital One N.A.

Revolving line of credit facility closed in June 2023

Equipment under Finance Leases

2 unchanged sentences

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

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Agreement

Credit Agreement with Capital One N.A.

- Due August 2026

2029 Convertible Notes

In September 2023, the Company issued the 2029 Convertible Notes, in the aggregate principal amount of $ 345.0 million in a private offering pursuant to Section 4(a)(2) and Rule 144A under the Securities Act of 1933, as amended.

The Company used portions of the net proceeds from the 2029 Convertible Notes to (i) repay approximately $ 200.0 million of the Company’s borrowings under the Wells Fargo Term Loan and (ii) repurchase $ 50.0 million of the Company’s common stock.

In connection with the issuance of the 2029 Convertible Notes, the Company incurred approximately $ 10.8 million of debt issuance costs, which primarily consisted of underwriting, legal and other professional fees.

Unamortized debt issuance costs related to the 2029 Convertible Notes were $ 10.3 million as of December 31, 2023.

The fair value of the 2029 convertible notes was approximately $ 418.8 million as of December 31, 2023 based on level 2 inputs.

The 2029 Convertible Notes are general senior, unsecured obligations and bear an interest rate of 2.0 % per year.

The 2029 Convertible Notes were issued pursuant to an indenture, dated September 15, 2023, or the Indenture, between the Company and U.S.

Bank Trust Company, National Association, as trustee.

The 2029 Convertible Notes will rank senior in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the 2029 Convertible Notes;

equal in right of payment to all of the Company’s unsecured indebtedness that is not so subordinated;

effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness, including any amount outstanding under the Company’s credit facilities;

and structurally junior to all indebtedness and other liabilities of the Company’s current or future subsidiaries, including trade payables.

Interest will be payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2024.

The 2029 Convertible Notes may bear additional interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the Indenture or if the 2029 Convertible Notes are not freely tradeable as required by the Indenture.

The 2029 Convertible Notes will mature on March 15, 2029, unless earlier converted, repurchased or redeemed.

Conversions of the 2029 Convertible Notes will be settled in cash up to the aggregate principal amount of the 2029 Convertible Notes to be converted, and cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, with respect to the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount.

Holders may convert their 2029 Convertible Notes at their option prior to the close of business on the business day immediately preceding December 15, 2028, in multiples of $ 1,000 principal amount, only under the following circumstances;

(i) during any calendar quarter commencing after the calendar quarter ending on December 31, 2023 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price for the 2029 Convertible Notes on each applicable trading day, (ii) during the five business day period after any five consecutive trading day period in which the trading price, as defined in the Indenture, per $ 1,000 principal amount of the 2029 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day, (iii) if the Company calls the 2029 Convertible Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date, and (iv) upon the occurrence of specified corporate events defined in the Indenture.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On or after December 15, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2029 Convertible Notes, in multiples of $ 1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.

The Company may redeem the 2029 Convertible Notes, at its option, in whole or in part (subject to certain limitations), on or after September 20, 2026 and prior to the 41 st scheduled trading day preceding the maturity date, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on and including the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2029 Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The initial conversion rate is 15.8821 shares of the Company’s common stock per $ 1,000 principal amount of the 2029 Convertible Notes, which represents an initial conversion price of approximately $ 62.96 per share of common stock.

The initial conversion price of $ 62.96 represents a premium of approximately 35.0 % over the last reported sale price of the Company’s common stock on Nasdaq Global Select Market on September 12, 2023.

The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture.

If a fundamental change, as defined in the Indenture, occurs at any time prior to the maturity date, then, subject to certain conditions, holders of the 2029 Convertible Notes may require the Company to repurchase for cash all or any portion of their 2029 Convertible Notes at a repurchase price equal to 100 % of the principal amount of the 2029 Convertible Notes to be repurchased, plus any accrued and unpaid interest.

In addition, following certain specified corporate events or if the Company issues a notice of redemption, the Company will, under certain circumstances, increase the conversion rate for holders who convert their 2029 Convertible Notes in connection with such corporate event or during a redemption period.

Syndicated Credit Agreement with Wells Fargo Bank, National Association - Due June 2028

In June 2023, in connection with the BAQSIMI ® acquisition, the Company entered into a syndicated credit agreement with Wells Fargo, or the Credit Agreement.

Under the terms of the Credit Agreement, the Company borrowed $ 500.0 million in the form of a term loan, or the Wells Fargo Term Loan.

Proceeds from the Wells Fargo Term Loan were used to finance the acquisition of BAQSIMI ® , repay certain of the Company’s and its subsidiaries’ existing third-party indebtedness, and pay fees and expenses incurred in connection with each of the foregoing.

Outstanding borrowings with respect to the Wells Fargo Term Loan initially accrue interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50 %, (y) the prime rate then in effect and (z) an adjusted daily one-month Secured Overnight Financing Rate, or SOFR, rate determined on the basis of a one-month interest period plus 1.00 %, in each case, plus an applicable margin of 1.25 %, or (ii) an adjusted Term SOFR rate, subject to a floor of 0.00 %, plus an applicable margin of 2.25 %.

Following delivery of financial statements for the Company’s first fiscal quarter following payment in full of a $ 125.0 million guaranteed payment owed to Lilly on June 30, 2024, the applicable margin for outstanding borrowings with respect to the Wells Fargo Term Loan will range from 0.50 % to 1.50 % in the case of base rate loans and 1.50 % to 2.50 % in the case of Term SOFR rate loans, in each case, depending on the Company’s consolidated net leverage ratio as of the most recently ended fiscal quarter.

The Wells Fargo Term Loan matures in June 2028.

The Wells Fargo Term Loan requires principal payments of $ 12.5 million for the first year, which increases to $ 25.0 million during the second year, and $ 37.5 million during the third, fourth and fifth years, with the remaining balance due at maturity.

The loan is secured by substantially all of the Company’s and certain of its subsidiaries’ assets, subject to certain exceptions and limitations.

In the third quarter of 2023, the Company repaid approximately $ 200.0 million of the borrowings under the Wells Fargo term Loan with the proceeds from the 2029 Convertible Notes, thereby satisfying all of the current and future loan amortization payments required by the Wells Fargo Term Loan until maturity.

In the fourth quarter of 2023, the Company made a principal payment of $ 50.0 million, reducing the balance to $ 250.0 million.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Credit Agreement also provides for a $ 200.0 million Revolving Credit Facility and bears the same interest rate as the Wells Fargo Term Loan.

In conjunction with the Credit Agreement, the Company entered into an interest rate swap agreement with Wells Fargo, with a notional amount of $ 250.0 million to exchange the variable rate on the Wells Fargo Term Loan for a fixed rate of 4.04 %.

The interest swap agreement had a fair value of $ 5.4 million liability as of December 31, 2023.

For lenders that were part of the previous credit agreement with Capital One N.A.

as well as the new Credit Agreement, the transaction was accounted for as a modification under ASC 470-50, Debt Modifications and Extinguishments , based on a comparison of the present value of the cash flows for each lender under the terms of the debt immediately before and after the transaction, which resulted in a change of less than 10%.

The Company incurred approximately $ 14.3 million in issuance costs in connection with the Credit Agreement, of which $ 3.0 million represented debt modification costs and were charged to interest expense in the Company’s consolidated statement of operations for year ended December 31, 2023.

Debt issuance costs associated with the Credit Agreement (other than its Revolving Credit Facility component) are presented as a reduction to the carrying value of the related debt, while debt issuance costs associated with the Revolving Credit Facility are capitalized within other long-term assets on the consolidated balance sheets.

Unamortized debt issuance costs related to the Credit Agreement as of December 31, 2023 were $ 7.8 million which are being amortized over the term of the Credit Agreement using the effective interest rate method.

As a result of the $ 250.0 million repayment of the principal balance of the Wells Fargo Term Loan, approximately $ 3.8 million of unamortized debt issuance costs were written off during the year ended December 31, 2023.

Syndicated Credit Agreement with Capital One N.A.

– Paid off June 2023

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.

Under the terms of the credit agreement, the Company borrowed $ 70.0 million in the form of a term loan, or the Capital One N.A.

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.

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 %.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, the Company has incurred approximately $ 2.1 million in issuance costs in connection with this credit agreement, which are being amortized over the term of the loan.

The interest rate on the Capital One N.A.

Term Loan was 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.

In June 2023, the Company repaid all amounts outstanding under the Capital One N.A.

Mortgage Loans

3 unchanged sentences

The loan is secured by one of the buildings at the Company’s Rancho Cucamonga, California, headquarters complex and two buildings at the Company’s Chino, California, facility.

The loan bears a variable interest rate at the one-month LIBOR rate plus 2.5 %.

As of December 31, 2022, 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 loan bears a variable interest rate at the one-month SOFR rate plus 2.6 %.

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.

Line of Credit Facilities

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

Line of Credit Facility with China Merchant Bank – Due October 2026

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

The interest rate and other terms will be determined at the time of the borrowing, depending on the type of loan requested.

The credit period is for 36 months and expires in March 2023.

Other Loans and Payment Obligations

Loans with Seine-Normandie Water Agency

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 maturities, and include annual equal payments and bear no interest.

As of December 31, 2022, the payment obligation had an aggregate book value of $ 0.2 million, which approximates fair value.

The credit period is for 36 months and expired in March 2023.

In October 2023, the Company renewed the credit agreement with China Merchant Bank, and allows the Company to borrow up to $ 4.1 million.

The credit period is for 36 months and expires in October 2026.

Interest Rate Swap Contracts

As of December 31, 2022, the fair value of the loans listed above approximated their carrying amount.

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

For the mortgage loan with East West Bank, as well as the term loan with Capital One N.A., the Company has entered into fixed interest rate swap contracts to exchange the variable interest rates for fixed interest rates.

The interest rate swap contracts are recorded at fair value in the other assets line in the condensed consolidated balance sheets.

Gains from changes in the fair values of interest rate swaps were $ 5.5 million and $ 1.5 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2023, the fair value of the loans listed above approximated their carrying amount based on Level 2 inputs.

For the mortgage loan with East West Bank, as well as the Wells Fargo Term Loan, the Company has entered into fixed interest rate swap contracts to exchange the variable interest rates for fixed interest rates.

The interest rate swap contracts are recorded at fair value in the other assets line in the consolidated balance sheets.

Changes in the fair values of interest rate swaps were $ 5.9 million and $ 5.5 million for the years ended December 31, 2023 and 2022, respectively.

At December 31, 2023 and 2022, the Company was in compliance with all of its debt covenants.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Term Debt Maturities

1 unchanged sentence

(in thousands)

The Company’s income (loss) before income taxes generated from its operations were:

The Company’s income before income taxes generated from its operations were:

Year Ended December 31,

(in thousands)

Income (loss) before income taxes:

Income before income taxes:

United States

Total income (loss) before taxes

Total income before income taxes

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

9 unchanged sentences

federal and state tax expense and cash taxes to be paid for the tax year ending December 31, 2023.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

8 unchanged sentences

Employee-related expenses

Intercompany transfer of assets other than inventory

Effective tax rate

The Company’s effective tax rate for 2022 decreased in comparison to 2021 primarily due to differences in pre-tax income positions and excess tax benefit from share-based compensation.

The Company’s effective tax rate for 2023 decreased in comparison to 2022 primarily due to differences in pre-tax income positions, including jurisdictions where the Company maintains valuation allowance reserves against its deferred tax assets, and additional research and development credit benefit.

Deferred Tax Assets and Liabilities

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

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

18 unchanged sentences

Net deferred tax assets

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net Operating Loss Carryforwards and Tax Credits

5 unchanged sentences

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

The utilization of NOL and credit carryforwards and other tax attributes could be subject to an annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, or the Code, whereby they could be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period as defined in the Code.

Valuation Allowance

1 unchanged sentence

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

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

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.

During the year ended December 31, 2023, the Company determined its U.K.

subsidiaries, AUK and IMS UK, more likely than not would not realize the benefits of their deferred tax assets.

Therefore, the Company recorded a valuation allowance expense of an immaterial amount and will discontinue recognizing income tax benefits until sufficient taxable income is generated to realize their deferred tax assets.

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.

As of December 31, 2022 and 2021, the Company had a full valuation allowance against the net deferred tax assets of AFP, which totaled $ 18.9 million and $ 16.9 million, respectively.

As of December 31, 2023

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and 2022, the Company had a full valuation allowance against the net deferred tax assets of AFP, which totaled $ 19.0 million and $ 18.9 million, respectively.

The Company records a valuation allowance on net deferred income tax assets in states where it files separately and will continue to do so until sufficient taxable income is generated to realize these state deferred income tax assets.

13 unchanged sentences

Included in the balance of unrecognized tax benefits as of December 31, 2023 and 2022, was $ 11.7 million and $ 12.2 million, respectively that represents the portion that would impact the effective income tax rate if recognized.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

states and foreign jurisdictions.

As of December 31, 2022, the Company does not have a tax examination in progress for federal, state, or foreign jurisdictions.

As of December 31, 2023, the Company is under examination in California for the 2019 - 2021 tax years, but does not have a tax examination in progress for federal, Massachusetts, other states, or foreign jurisdictions.

The Company is subject to income tax audit by tax authorities for tax years 2020 to 2022 for federal, 2019 to 2022 for states, and 2013 to 2022 for foreign.

5 unchanged sentences

The Company issues new shares of common stock upon exercise of stock options, vesting of restricted stock units, or RSU, and settlement of ESPP, with the exception of the awards granted to employees at AFP, which are settled through re-issuance of the Company’s treasury shares.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amended and Restated 2015 Equity Incentive Plan

9 unchanged sentences

As of December 31, 2023, the Company reserved an aggregate of 6,777,943 shares of common stock for future issuance under the Amended and Restated 2015 Equity Incentive Plan, or the 2015 Plan, including 1,201,722 shares, which were reserved in January 2024 pursuant to the evergreen provision in the 2015 Plan.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amended and Restated 2005 Equity Incentive Award Plan

3 unchanged sentences

Stock options granted to Board of Directors and consultants generally vested over one year .

As of March 2015, consequent to the 2015 Plan becoming effective, awards were no longer granted under the 2005 Plan.

2014 Employee Stock Purchase Plan

7 unchanged sentences

As of December 31, 2023, the Company has issued 1,192,134 shares of common stock under the ESPP and 807,866 shares of its common stock remains available for issuance under the ESPP.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2023, 2022, and 2021, the Company recorded ESPP expense of $ 1.1 million, $ 0.9 million, and $ 0.7 million, respectively.

9 unchanged sentences

The Company accounts for share-based compensation payments in accordance with ASC 718, which requires measurement and recognition of compensation expense at fair value for all share-based payment awards made to employees and directors.

Under these standards, the fair value of option awards and the option components of the ESPP

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

awards are estimated at the grant date using the Black-Scholes option-pricing model.

Under these standards, the fair value of option awards and the option components of the ESPP awards are estimated at the grant date using the Black-Scholes option-pricing model.

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

12 unchanged sentences

● Expected Term.

The expected term represents the period of time in which the options granted are expected to be outstanding.

The expected term represents the period of time in which the options granted are

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expected to be outstanding.

The Company estimates the expected term of options with consideration of vesting date, contractual term, and historical experience for exercise and post-vesting employment or contractual termination behavior after its common stock has been publicly traded.

12 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.

The weighted-averages for key assumptions used in determining the fair value of options granted during the years ended

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022, 2021, and 2020 are as follows:

The weighted-averages for key assumptions used in determining the fair value of options granted are as follows:

Year Ended December 31,

11 unchanged sentences

Options exercised

( 1,222,147 )

Options cancelled

Options forfeited

Options expired

3 unchanged sentences

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the estimated fair value of the Company’s stock for those awards that have an exercise price below the estimated fair value at December 31, 2023.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2023, 2022, and 2021, the Company recorded expense of $ 9.6 million, $ 8.5 million, and $ 8.0 million, respectively, related to stock options granted under all plans.

2 unchanged sentences

(in thousands, except per share data)

Weighted-average grant date fair value per option share

Weighted-average grant date fair value per share

Intrinsic value of options exercised

1 unchanged sentence

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, 2023, and changes during the year ended December 31, 2023, are presented below:

8 unchanged sentences

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.

In April 2020, Jason Shandell resigned from his position as the Company’s President and General Counsel and as a member of the Company’s board of directors.

In connection with his resignation, the Company and Mr.

Shandell entered into a separation agreement.

As part of the separation agreement, the Company agreed to accelerate 80 % of his unvested stock options and extended the expiration date of certain vested stock option awards.

As a result of this modification, the Company incurred share-based compensation expense of $ 0.7 million, which is included within general and administration expenses in the consolidated statement of operations for the year ended December 31, 2020.

Restricted Stock Units

2 unchanged sentences

The RSUs may not be sold or otherwise transferred until vested.

The RSUs do not have any voting or dividend rights prior to the issuance of certificates of the underlying common stock.

The RSUs do not have any voting or dividend rights prior to the issuance of underlying common stock.

The share-based expense associated with these grants was based on the Company’s common stock fair value at the time of grant and is amortized over the requisite service period, which generally is the vesting period, using the straight-line method.

During the years ended December 31, 2023, 2022, and 2021, the Company recorded expenses of $ 9.5 million, $ 8.4 million, and $ 8.1 million, respectively, related to RSU awards granted under all plans.

As part of the separation agreement with Mr.

Shandell, the Company agreed to accelerate the vesting of 80 % of his RSU awards.

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.

As of December 31, 2023, there was $ 18.1 million of total unrecognized compensation cost, net of forfeitures, related to non-vested RSU-based compensation arrangements granted under all plans.

23 unchanged sentences

As a result of the modification, the cost to the Company was $ 2.3 million, of which $ 1.8 million was recorded as share-based compensation 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 and 2020, the Company recorded expense of $ 0.5 million and $ 0.7 million related to stock options issued by ANP under the 2018 Plan, respectively.

Prior to the termination of the 2018 Plan, for the year ended December 31, 2021, the Company recorded expense of $ 0.5 million related to stock options issued by ANP under the 2018 Plan.

AMPHASTAR PHARMACEUTICALS, INC.

30 unchanged sentences

Eligible participants began contributing to the plan in January 2020.

The plan assets were valued at approximately $ 4.5 million and $ 3.4 million as of December 31, 2022 and December 31, 2021, respectively.

The plan liabilities were valued at approximately $ 4.6 million and $ 3.5 million as of December 31, 2022 and December 31, 2021, respectively.

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

The plan assets were valued at approximately $ 6.8 million and $ 4.5 million as of December 31, 2023 and 2022, respectively.

The plan liabilities were valued at approximately $ 7.1 million and $ 4.6 million as of December 31, 2023 and 2022, 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.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

consolidated balance sheets.

Commitments and Contingencies

8 unchanged sentences

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 .

The components of lease costs for the years ended December 31, 2022, 2021 and 2020 were as follows:

The components of lease costs were as follows:

Year Ended December 31,

13 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Operating cash flows paid for operating leases

Operating cash flows paid for finance leases

Financing cash flows paid for finance leases

Right-of use assets obtained in exchange for lease liabilities

15 unchanged sentences

Related-Party Transactions

ANP Restructuring

ANP Restructuring and Investment in Hanxin

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.

4 unchanged sentences

Contract manufacturing agreement with Hanxin

In April 2022, the Company’s Chinese subsidiary, ANP, entered into a contract manufacturing agreement with Hanxin, a related party, whereby Hanxin will develop several active pharmaceutical ingredients and finished products for the Chinese market and will engage ANP to manufacture the products on a cost-plus basis.

In April 2022, ANP, entered into a contract manufacturing agreement with Hanxin, whereby Hanxin will develop several active pharmaceutical ingredients and finished products for the Chinese market and will engage ANP to manufacture the products on a cost-plus basis.

Hanxin will commit to purchase certain quantities from ANP subject to the terms and conditions set forth in the agreement, including Hanxin filing for and obtaining any required marketing authorizations.

During the year ended December 31, 2022, the Company recognized $ 0.4 million of revenue from manufacturing services provided to Hanxin.

During the years ended December 31, 2023 and 2022, the Company recognized $ 0.1 million and $ 0.4 million of revenue from manufacturing services provided to Hanxin, respectively.

As of December 31, 2023, the Company did not have any receivables from Hanxin.

6 unchanged sentences

Any additional work or changes to the scope of work requested by the Company will be charged by Hanxin to the Company on a cost-plus basis, plus any applicable taxes.

During the year ended December 31, 2022, the Company paid $ 0.6 million under this agreement and has accrued an additional $ 0.4 million payable to Hanxin as of December 31, 2022.

Supply Agreement with Letop

In November 2022, the Company’s Chinese subsidiary, ANP, entered in to a supply agreement with Nanjing Letop Biotechnology Co., Ltd., or Letop, a related party, whereby Letop would manufacture and deliver chemical intermediates for ANP on a cost-plus basis.

The agreement is effective for three years and the total cost of the agreement shall not exceed approximately $ 1.5 million, with payments adjusted based on the then current exchange rates.

In March 2023, the Company amended the agreement with Hanxin, whereby Hanxin will perform scale-up manufacturing process development using the RCBs for the Company.

Per the terms of the amended agreement the Company will own any confidential and proprietary information and technology produced during the scale-up manufacturing, which shall include engineering, scientific and practical information and formula, research data design and procedures and others to develop and manufacture the RCBs.

The amendment agreement will remain in full force and effect until July 5, 2025.

The total cost of the amended agreement to the Company shall not exceed approximately $ 0.5 million in additional payments beyond the $ 2.2 million in payments under the contract research agreement, with payments adjusted based on actual currency exchange rates.

Any additional work or changes to the scope of work requested by the Company will be charged by Hanxin to the Company on a cost-plus basis, plus any applicable taxes.

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2022, ANP paid $ 0.2 million under this agreement.

During the years ended December 31, 2023 and 2022, the Company paid $ 1.6 million and $ 0.6 million, respectively, under this agreement.

Supply Agreement with Letop

In November 2022, ANP entered in to a supply agreement with Nanjing Letop Biotechnology Co., Ltd., or Letop, which is considered a related-party due to an ownership stake by Henry Zhang.

Under the terms of the supply agreement Letop will manufacture and deliver chemical intermediates for ANP on a cost-plus basis.

The agreement is effective for three years and the total cost of the agreement shall not exceed approximately $ 1.5 million, with payments adjusted based on the then current exchange rates.

During the years ended December 31, 2023 and 2022, ANP paid $ 0.7 million and $ 0.2 million, respectively, under this agreement.

As of December 31, 2023, the Company did not have any additional accruals payable to Letop.

Retirement of James Luo

In December 2020, James Luo retired from his position as the Company’s Senior Vice President of Engineering and President of AFP.

Luo is a relative of the Company’s Chief Operating Officer, Dr.

In connection with his retirement, the Company and Mr.

Luo entered into a retirement agreement where the Company agreed to pay Mr.

Luo approximately $ 1.0 million in cash compensation over a period of three years as well as provide health insurance coverage for a six year period beginning in 2021.

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.

16 unchanged sentences

214,252 for approval to manufacture and sell 0.4 mg/5 mL (0.08 mg/mL) intravenous solution of Regadenoson.

On March 4, 2020, IMS filed its Answer and Counterclaims.

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.

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

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

The parties submitted, and the Court granted on January 27, 2022, a Motion to Dismiss Without Prejudice for Astellas-Gilead’s complaint of infringement against IMS.

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

The Company recorded the settlement amount in the other income (expenses) line in its consolidated statement of operations for the year ended December 31, 2022.

The Company recorded the settlement amount in other income (expenses) in its consolidated statement of operations for the year ended December 31, 2022.

Employee Litigations

In 2021 the Company settled employee litigations relating to alleged violations of various California labor laws pertaining to wage and hour against the Company.

For the year ended December 31, 2021, the Company recorded $ 1.0

AMPHASTAR PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Litigations

In 2021 and 2020, the Company settled employee litigations relating to alleged violations of various California labor laws pertaining to wage and hour against the Company.

For each of the years ended December 31, 2021 and 2020, the Company recorded $ 1.0 million, related to the settlement of employment litigation, in general and administrative expense in the Company’s consolidated statements of operations.

million, related to the settlement of employment litigation, in general and administrative expense in the Company’s consolidated statements of operations.

Other Litigation

5 unchanged sentences

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

Syndicated Line of Credit Facility with ICBC Bank – Due June 2033

In January 2024, the Company entered into a credit agreement with ICBC Bank acting as a lender and as agent for other lenders.

The credit agreement allows the Company to borrow up to $ 40.0 million secured by equipment and buildings at ANP.

The interest rate and other terms will be determined at the time of the borrowing, depending on the type of loan requested.

The credit agreement expires in November 2033.

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