What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-09 compared with 2022-03-15 · 518 added, 348 removed, 1189 unchanged (42% of the section changed)

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ANI Pharmaceuticals, Inc.

and Subsidiaries

Opinion on the Financial Statements

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

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control - Integrated Framework ( 2013 ) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 15, 2022 expressed an unqualified opinion.

and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive (loss)/income, mezzanine equity and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 9, 2023 expressed an adverse opinion.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Evaluation of Certain Assumptions Impacting the Chargeback Accrual

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Amounts accrued for chargebacks as of December 31, 2022, are approximately $148.6 million and are evaluated on a quarterly basis.

Management’s estimate of chargebacks is based on the inventory levels in the distribution channel as provided by wholesalers, as well as the actual average selling price for each product which is impacted by changes in customer mix, changes in negotiated terms with customers, changes in the volume of off-contract purchases, and changes in the wholesaler acquisition cost, in order to estimate the expected provision.

The principal consideration for our determination that performing procedures relating to the chargeback reserve is a critical audit matter is that there was significant judgment required by management with respect to measurement uncertainty, as the calculation of the chargeback reserve includes assumptions such as average selling price, purchasing

trends of distributors and historical product sales used to predict future sales.

Management's estimate of chargebacks is based on the inventory levels in the distribution channel as provided by wholesalers, as well as the actual average selling price for each product which is impacted by changes in customer mix,

changes in negotiated terms with customers, changes in the volume of off-contract purchases, and changes in the wholesaler acquisition cost, in order to estimate the expected provision.

This in turn led to a high degree of auditor judgment, subjectivity and effort in applying the procedures related to those assumptions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with

forming our overall opinion on the consolidated financial statements.

These procedures included assessing the design and testing the effectiveness of controls relating to the chargeback reserve, including management's control over the assumptions used to estimate the corresponding accruals.

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We analyzed year over year trends in the reserve in comparison with revenue trends to further evaluate reasonableness of the estimate and consistency with expectations.

Accounting for Acquisition of Novitium - Valuation of Intangible Assets and Contingent Consideration

As described in Note 2 to the consolidated financial statements, the Company acquired Novitium Pharma, LLC (“Novitium”) and the transaction was accounted for using the acquisition method of accounting for business combinations.

Auditing the Company’s accounting for its acquisition of Novitium was complex due to the significant estimation uncertainty required by management to determine the fair value of identified intangible assets of $139.2 million and contingent consideration of $30.5 million.

The determination of the fair value of the intangible assets acquired and contingent consideration required management, with the help of a third-party valuation specialist, to make significant estimates and assumptions including the assumed net revenue growth rate, the achievement of regulatory milestones, gross profits, economic life and discount rate.

The fair value of the contingent consideration represent Level 3 inputs used in measuring fair value as they are unobservable inputs with little or no available market data.

The principal consideration for our determination that the valuation of intangible assets and contingent consideration associated with the acquisition is a critical audit matter is the subjective judgment required by management in selecting the inputs and assumptions used in determining fair value.

The valuation of the intangible assets and contingent consideration are subject to higher estimation uncertainty due to management’s judgment in determining key assumptions that include discount rates, probabilities of achievement of regulatory-based milestones and payments, and projected revenues and gross profits.

Changes in these significant assumptions could have a significant impact on the fair value of the intangible assets and contingent consideration.

This in turn led to a high degree of auditor judgment, subjectivity and effort in applying the procedures related to those assumptions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures include assessing the design and testing the effectiveness of controls relating to the valuation report and allocation of purchase price which included management’s review of the valuation report for the completeness and mathematical accuracy of the data, and evaluating the reasonableness of assumptions used in the calculation such as economic life and discount rate.

We utilized a valuation specialist to assist in evaluating the appropriateness of the Company’s valuation models developed for acquired assets and evaluating the reasonableness of significant assumptions used including the assumed net revenue growth rate, margin percentages, economic life and discount rate as compared to industry and market data.

We also examined the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation report, including historical and projected financial information.

/s/ EisnerAmper LLP

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

To the Board of Directors and Stockholders of

ANI Pharmaceuticals, Inc.

and Subsidiaries

Opinion on Internal Control over Financial Reporting

Opinion on the Internal Control over Financial Reporting

We have audited ANI Pharmaceuticals, Inc.

and Subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2022, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the Internal Control - Integrated Framework ( 2013 ) issued by COSO.

In our opinion, because of the effect of the material weaknesses described in the following paragraph on the achievement of the objectives of the control criteria, ANI Pharmaceuticals, Inc.

and Subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in the Internal Control - Integrated Framework (2013) issued by COSO.

A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management’s assessment.

The Company did not maintain an effective control environment in the Novitium subsidiary as a result of the following:

● Lack of adequate personnel resources in Novitium team to implement appropriate process controls addressing Novitium activity.

● Turnover in key finance personnel at Corporate that were tasked with driving / managing implementation of internal controls at Novitium, including the Corporate Controller.

While the Company hired seasoned temporary personnel in these corporate positions, the Company did not have adequate bandwidth to maintain focus on compliance with internal controls.

● Delays in execution of the extraction of the Procure to Pay cycle integration plan for the subsidiary, including creation of the Accounts Payable centers of excellence whereby processes at Novitium would be combined with legacy processes.

These factors contributed to the weaknesses in control activities, specifically, the following process areas related to activity at Novitium did not have effective controls in place and were not operating effectively for a sufficient amount of time:

● Purchase to Pay (Purchasing, Accounts Payable and Cash Disbursements)

● Manufacturing and Inventory

● Human Resources/Payroll

● Financial Statement Close (limited to those pertaining to the Novitium subsidiary level that were not incorporated into overall Company controls)

● Information technology general controls

The areas noted above had one or more of the following specific compliance exceptions:

● Certain controls were not implemented as designed.

● Documented controls not being performed consistently for all applicable transactions.

● Control performance not being adequately documented and evidenced.

● Materiality thresholds used in certain control performance were not consistent with documented control design.

● Controls not in place nor operating for a sufficient amount of time/number or instances.

● Changes to control performance upon employee turnover.

● Information technology general controls (“ITGC”) which could result in misstatements potentially impacting all financial statement accounts or disclosures.

Specifically, Novitium user access controls were not appropriately designed and maintained to adequately restrict user and privileged access to financial applications and data to the appropriate personnel.

The Company also identified a material weakness related to the control activities prescribed in ITGC.

Specifically, the evaluation of the ITGC’s identified that user access controls were not operating effectively to adequately restrict user access to the network and financial applications and data.

These material weaknesses were considered in determining the nature, timing, and extent of the audit tests applied in our audit of the December 31, 2022 financial statements, and this report does not affect our report dated March 9, 2023, on those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of ANI Pharmaceuticals, Inc.

and Subsidiaries as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and our report dated March 15, 2022 expressed an unqualified opinion.

and Subsidiaries as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive (loss)/income, mezzanine equity and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes, and our report dated March 9, 2023 expressed an unqualified opinion.

Basis for Opinion

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

As described in Note 2 to the consolidated financial statements, the Company acquired Novitium Pharma, LLC (“Novitium”) during the year ended December 31, 2021, and management excluded this entity from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 as the Company is currently in the process of integrating Novitium’s policies, processes, people, technology and operations into the consolidated company, and integrating Novitium’s operations into the consolidated internal control over financial reporting.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of this entity.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

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An entity’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and

directors of the entity;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity’s assets that could have a material effect on the financial statements.

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Cash and cash equivalents

Accounts receivable, net of $ 105,260 and $ 100,328 of adjustments for chargebacks and other allowances at December 31, 2021 and December 31, 2020, respectively

Current restricted cash

Accounts receivable, net of $ 161,052 and $ 105,260 of adjustments for chargebacks and other allowances at December 31, 2022 and 2021, respectively

Inventories, net

Prepaid income taxes

Assets held for sale

Prepaid expenses and other current assets

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Property and equipment, net

Restricted cash

Non-current restricted cash

Deferred tax assets, net of deferred tax liabilities and valuation allowance

Intangible assets, net

Other non-current assets

Derivatives and other non-current assets

Liabilities, Mezzanine Equity, and Stockholders’ Equity

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Accrued compensation and related expenses

Current income taxes payable, net

Accrued government rebates

Returned goods reserve

Deferred revenue

Accrued expenses and other

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Convertible Preferred Stock, Series A, $ 0.0001 par value, 1,666,667 shares authorized;

25,000 shares issued and outstanding at December 31, 2021;

0 shares issued and outstanding at December 31, 2020

25,000 shares issued and outstanding at December 31, 2022 and December 31, 2021

Stockholders’ Equity

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Accumulated deficit

Accumulated other comprehensive loss, net of tax

Accumulated other comprehensive income/(loss), net of tax

Total Stockholders’ Equity

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Purified Cortrophin Gel pre-launch charges

Restructuring activities

Intangible asset impairment charge

Total Operating Expenses

Operating (Loss)/Income

Operating Loss

Other Expense, net

Interest expense, net

Other expense, net

(Loss)/Income Before Benefit for Income Taxes

Other income/(expense), net

Loss Before Benefit for Income Taxes

Benefit for income taxes

Net (Loss)/Income

Dividends on Series A Convertible Preferred Stock

Net (Loss)/Income Allocated to Common Shares

Basic and Diluted (Loss)/Earnings Per Share:

Basic (Loss)/Earnings Per Share

Diluted (Loss)/Earnings Per Share

Net Loss Available to Common Shareholders

Basic and Diluted Loss Per Share:

Basic Loss Per Share

Diluted Loss Per Share

Basic Weighted-Average Shares Outstanding

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Years Ended December 31,

Net (loss)/income

Other comprehensive income/(loss), net of tax:

Foreign currency translation adjustment

Gains/(losses) on interest rate swap, net of tax

Gains/(losses) on interest rate swap

Total other comprehensive income/(loss), net of tax

Total comprehensive (loss)/income, net of tax

Total comprehensive loss, net of tax

The accompanying notes are an integral part of these consolidated financial statements.

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Mezzanine Equity

Accumulated Other

Series A Convertible

Mezzanine Equity

Series A Convertible

Comprehensive

Mezzanine Equity

Preferred Stock

Other Comprehensive

Retained Earnings/

and Stockholders'

Preferred Stock

(Loss)/Gain, Net of Tax

(Accumulated Deficit)

Balance, December 31, 2019

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Issuance of Restricted Stock Awards

(Losses)/Gains on Interest Rate Swap

Other comprehensive income

Balance, December 31, 2020

Cumulative Effect of Change in Accounting Principle, Net of Tax

Stock-based Compensation Expense

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Issuance of Restricted Stock Awards

Losses on Interest Rate Swap

Restricted Stock Awards Forfeitures

Issuance of Common Stock for Novitium Acquisition

Issuance of Common Stock in Public Offering

Dividends on Convertible Preferred Stock

Issuance of Series A Convertible Preferred Stock from Mezzanine Equity

Other comprehensive income

Balance, December 31, 2021

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Restricted Stock Awards Forfeitures

Issuance of Common Stock for Novitium Acquisition

Issuance of Common Stock in Public Offering

Dividends on Convertible Preferred Stock

Issuance of Series A Convertible Preferred Stock from Mezzanine Equity

Other comprehensive income

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Cash Flows From Operating Activities

Net (loss)/income

Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:

Adjustments to reconcile net loss to net cash and cash equivalents (used in)/provided by operating activities:

Stock-based compensation

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Loss on extinguishment of debt

Asset impairment charge

Asset impairment charges

Gain on sale of ANDAs

Changes in operating assets and liabilities, net of acquisitions:

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable, net

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Accrued expenses, accrued compensation, and other

Net Cash and Cash Equivalents Provided by Operating Activities

Net Cash and Cash Equivalents (Used in)/Provided by Operating Activities

Cash Flows From Investing Activities

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Payments on Term Loan and Delayed Draw Term Loan agreements

Borrowings under Delayed Draw Term Loan agreement

Payments on borrowings under credit agreements

Payments on Revolver agreement

Borrowings under Revolver agreement

Borrowings under Prior Revolver agreement

Repayment of Prior Credit Facility

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Proceeds from issuance of convertible preferred stock

Convertible preferred stock dividends paid

Series A convertible preferred stock dividends paid

Proceeds from issuance of common stock in public offering

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Proceeds from stock option exercises and ESPP purchases

Repayment of Convertible Notes

Payments of debt issuance costs

Treasury stock purchases for restricted stock vests

Net Cash and Cash Equivalents Provided by/(Used in) by Financing Activities

Net Cash and Cash Equivalents (Used in)/Provided by Financing Activities

Net Change in Cash and Cash Equivalents

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Fair value of equity issued as consideration in a business combination

Acquisition of product rights, IPR&D, and other related assets included in returned goods reserve and derivatives and other non-current liabilities

Acquisition of product rights included in accounts payable

Property and equipment purchased and included in accounts payable

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and its consolidated subsidiaries (together, “ANI,” the “Company,” “we,” “us,” or “our”) is a diversified bio-pharmaceutical company serving patients in need by developing, manufacturing, and marketing high quality branded and generic prescription pharmaceuticals, including for diseases with high unmet medical need.

We are focused on delivering sustainable growth by building a successful Purified Cortrophin Gel franchise, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our North American manufacturing capabilities.

Our team is focused on delivering growth by building a successful Purified Cortrophin Gel franchise, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our manufacturing capabilities.

Our four pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, one is located in East Windsor, New Jersey, and one is located in Oakville, Ontario, are together capable of producing oral solid dose products, as well as semi-solids, liquids and topicals, controlled substances, and potent products that must be manufactured in a fully-contained environment.

On June 2, 2022, we announced that we intend to cease operations at our Oakville, Ontario, Canada manufacturing plant by first quarter 2023.

This action is part of ongoing initiatives to capture operational synergies following our acquisition of Novitium Pharma LLC (“Novitium”) in November 2021.

We have transitioned the majority of products manufactured or packaged in Oakville to one of our three U.S.-based manufacturing sites and are on track to cease operations by the end of the first quarter 2023.

We are seeking to find potential buyers for the Oakville site.

Basis of Presentation

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GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period.

In the consolidated financial statements, estimates are used for, but not limited to, stock-based compensation, revenue recognition, allowance for credit losses, variable consideration determined based on accruals for chargebacks, administrative fees and rebates, government rebates, returns and other allowances, allowance for inventory obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, including contingent consideration in acquisitions, fair value of long-lived assets, income tax provision or benefit, deferred taxes and valuation allowance, determination of right-of-use assets and lease liabilities, purchase price allocations, and the depreciable lives of long-lived assets.

In the consolidated financial statements, estimates are used for, but not limited to, variable consideration determined based on accruals for chargebacks, administrative fees and rebates, government rebates, returns and other allowances, income tax provision or benefit, deferred taxes and valuation allowance, stock-based compensation, revenue recognition, allowance for inventory obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, including contingent consideration in acquisitions, fair value of long-lived assets, determination of right-of-use assets and lease liabilities, allowance for credit losses, purchase price allocations, and the depreciable lives of long-lived assets.

Because of the uncertainties inherent in such estimates, actual results may differ from those estimates.

Management periodically evaluates estimates used in the preparation of the financial statements for reasonableness.

We are subject to risks and uncertainties as a result of the novel coronavirus (“COVID-19”) pandemic.

We are unable to predict the impact that the COVID-19 pandemic will continue to have on our future business, financial condition, and results of operations due to numerous uncertainties.

These uncertainties include the occurrence of recurring outbreaks and their severity and the duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

We are subject to risks and uncertainties as a result of the novel coronavirus (“COVID-19”) pandemic.

We are unable to predict the impact that the COVID-19 pandemic will continue to have on our future business, financial condition, and results of operations due to numerous uncertainties.

We remain unable to predict the future impact on our estimates and assumptions.

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Comprehensive Income/(Loss)

Comprehensive (loss)/income, which is reported in the statement of comprehensive (loss)/income, consists of net (loss)/income, changes in fair value of our interest rate swap, and other comprehensive (loss)/income, net of tax.

Credit Concentration

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As a result, we are dependent upon our current vendors to supply reliably the API required for on-going product manufacturing.

During the year ended December 31, 2021, no single vendor represented at least 10% of inventory purchases.

During the year ended December 31, 2022, we purchased approximately 19 % of our inventory from one supplier.

During the year ended December 31, 2019, we purchased approximately 13 % of our inventory from one supplier.

As of December 31, 2022, our amount payable to this supplier was $ 10.9 million.

During the year ended December 31, 2021, no single vendor

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

represented at least 10% of inventory purchases.

During the year ended December 31, 2020, we purchased approximately 10 % of our inventory from one supplier.

Revenue Recognition

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Sales of generic pharmaceutical products

Sales of branded pharmaceutical products

Sales of established brand pharmaceutical products

Sales of rare disease pharmaceutical products

Sales of contract manufactured products

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During the year ended December 31, 2022, we did not incur, and therefore did not defer, any material incremental costs to fulfill contracts.

We recognized an increase of $ 9.9 million of net revenue from performance obligations satisfied in prior periods during the year ended December 31, 2021, consisting primarily of an increase of $ 11.2 million related to the final royalty revenue from the Kite license agreement pursuant to the Tripartite Agreement as defined and described herein in Royalties from Licensing Agreements, which was partially offset by a decrease related to revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales.

We provide technical transfer services to customers, for which services are transferred over time.

We recognized a decrease of $ 2.2 million of net revenue from performance obligations satisfied in prior periods during the year ended December 31, 2022, consisting primarily of revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales.

As of December 31, 2022, we did not have any contract assets related to revenue recognized based on percentage of completion but not yet billed.

We had $ 0.1 million of deferred revenue at December 31, 2021 and December 31, 2020.

For the year ended December 31, 2021, we recognized less than $ 0.1 million of revenue that was included in deferred

We did no t have deferred revenue at December 31, 2022.

We had less than $ 0.1 million

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

revenue as of December 31, 2020.

For the year ended December 31, 2020, we recognized $ 0.3 million of revenue that was included in deferred revenue as of December 31, 2019.

of deferred revenue at December 31, 2021.

For the years ended December 31, 2022 and 2021, we recognized less than $ 0.1 million of revenue that was included in deferred revenue as of December 31, 2021 and 2020.

Revenue from Sales of Generic and Branded Pharmaceutical Products

Product sales consists of sales of our generic and brand pharmaceutical products.

Product sales consists of sales of our generic and branded pharmaceutical products, including rare disease pharmaceutical products.

Our sole performance obligation in our contracts is to provide pharmaceutical products to customers.

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Chargeback credits are calculated as follows:

Prior period chargebacks claimed by wholesalers are analyzed to determine the actual average selling price ("ASP") for each product.

Prior period chargebacks claimed by wholesalers are analyzed to determine the actual average selling price (“ASP”) for each product.

This calculation is performed by product by wholesaler.

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Balance at December 31, 2022 (1)

(1) Chargebacks are included as a reduction to accounts receivable, net of chargebacks and other allowances in the consolidated balance sheets.

(1) Chargebacks are included as an offset to accounts receivable, net of chargebacks and other allowances in the consolidated balance sheets.

Administrative Fees and Other Rebates and Prompt Payment Discounts are included as a reduction to accounts receivable, net of chargebacks and other allowances or accrued expenses and other in the consolidated balance sheets.

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As a result, we recognized $ 11.2 million as royalties from licensing agreements in our net revenues during the three month period ended March 31, 2021.

In addition, we agreed to reimburse Cabaret $ 0.4 million, which has been recorded as other expense, net in our consolidated statement of operations, related to certain legal expenditures incurred.

In addition, during the three month period ended March 31, 2021, we agreed to reimburse Cabaret $ 0.4 million, which has been recorded as other expense, net related to certain legal expenditures incurred.

We received final payment from Cabaret in May 2021.

Based upon the events that led to the dismissal of the litigation between Cabaret and Kite, the Company does not expect to receive any future royalty income related to the Kite license agreement.

In conjunction with payment of amounts due to us, all outstanding litigation between the Company and Cabaret were dismissed.

Based upon the events that led to the dismissal of the litigation between Cabaret and Kite, we do not expect to receive any future royalty income related to the Kite license agreement.

In conjunction with payment of amounts due to us, all outstanding litigation between the Company and Cabaret was dismissed.

Product Development Services Revenue

We provide product development services to customers, which are performed over time.

These services primarily relate to the technical transfer of product development to our facility in Oakville, Ontario.

The duration of these technical transfer projects can be up to three years.

These are services primarily performed at our facility in East Windsor, New Jersey.

As of December 31, 2022, we have ceased all manufacturing and packaging and clinical operations at our Oakville, Ontario facility.

We have transitioned the product development services at the facility to one of our three U.S.-based manufacturing sites.

The duration of these development projects can be up to three years.

Deposits received from these customers are recorded as deferred revenue until revenue is recognized.

For contracts with no deposits and for the remainder of contracts with deposits, we invoice customers as our performance obligations are satisfied.

We recognize revenue on a percentage of completion basis, which results in contract assets on our balance sheet.

As of December 31, 2021, the aggregate amount of the transaction price allocated to the remaining performance obligations for all product development services contracts was less than $ 0.1 million.

We expect to satisfy these performance obligations within the next 15 months .

Cash, Cash Equivalents, and Restricted Cash

We consider all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents.

All interest bearing and non-interest bearing accounts are guaranteed by the Federal Deposit Insurance

We recognize revenue on a percentage of completion basis, which results in contract assets on our balance sheet and that revenue is recognized over time.

As of December 31, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations for all open product development services contracts was immaterial.

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

Corporation (“FDIC”) up to $ 250 thousand.

Cash, Cash Equivalents, and Restricted Cash

We consider all highly liquid instruments with maturities of three months or less when purchased to be cash equivalents.

All interest bearing and non-interest bearing accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250 thousand.

The majority of our cash balances are in excess of FDIC coverage.

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Intangible Assets

Definite-lived intangible assets consist of acquired ANDAs for previously commercialized and marketed drug products, acquired approved ANDAs for generic products yet to be commercialized, an acquired development package for a generic drug product, a license, supply and distribution agreement for a generic drug product, acquired product rights for generic products, acquired NDAs and product rights for branded products, acquired marketing and distribution rights, acquired customer relationships, and a non-compete agreement.

They are stated at cost, net of amortization, generally using the straight-line method over the expected useful lives of the intangible assets.

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

product rights for generic products, acquired NDAs and product rights for branded products, acquired marketing and distribution rights, acquired customer relationships, and a non-compete agreement.

They are stated at cost, net of amortization, generally using the straight-line method over the expected useful lives of the intangible assets.

The definite-lived ANDAs, NDAs and product rights, marketing and distribution rights, customer relationships, and non-compete agreement are stated at cost, net of amortization, and generally amortized over their remaining estimated useful lives, ranging from seven to 10 years , based on the straight-line method.

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Management reviews definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, in a manner similar to that for property and equipment.

During the year ended December 31, 2022, we recognized a full impairment of a definite-lived ANDA asset with a remaining carrying value of $ 0.1 million.

During the year ended December 31, 2021, we recognized an impairment charge of $ 2.4 million related to a definite-lived ANDA intangible asset.

During the year ended December 31, 2020, we recognized an impairment charge of $ 0.4 million relating to a marketing and distribution right asset.

During the year ended December 31, 2019, we recognized an impairment charge of $ 75 thousand relating to our Ranitidine product right asset.

No events or circumstances arose in 2022, 2021, or 2020 that indicated that the carrying value of any of our other definite-lived intangible assets may not be recoverable.

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IPR&D intangible assets represent the fair value of technology acquired in a business combination for which the technology projects are incomplete but have substance.

IPR&D acquired in a business combination is initially capitalized as an indefinite-lived intangible asset until the project is complete, which is generally when we receive regulatory approval for a product.

Upon approval, we determine the useful life of the asset and begin amortizing the value over that life.

IPR&D acquired in a purchase of assets rather than a business is expensed as incurred.

When an IPR&D project is completed (generally upon receipt of regulatory approval), the asset is then accounted for as a definite-lived intangible asset.

We test for impairment of indefinite-lived intangible assets at least annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying amount of the asset might not be recoverable.

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Goodwill is reviewed for impairment annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying amount of the goodwill might not be recoverable.

We perform our review of goodwill on our one reporting unit.

We have determined that goodwill resides in one reporting unit, Generics, Established Brands, and Other.

Before employing detailed impairment testing methodologies, we first evaluate the likelihood of impairment by considering qualitative factors relevant to our reporting unit.

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Otherwise, we will conclude that no impairment has occurred.

Detailed impairment testing involves comparing the fair value of our one reporting unit to its carrying value, including goodwill.

Detailed impairment testing involves comparing the fair value of our Generics, Established Brands, and Other reporting unit to its carrying value, including goodwill.

Fair value reflects the price a market participant would be willing to pay in a potential sale of ANI.

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The loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

No impairment loss related to goodwill was recognized in the years ended December 31, 2021, 2020, and 2019.

Based on our evaluations, described in the preceding paragraph, it was more likely than not that the fair value of our Generics, Established Brands, and Other reporting unit is greater than its carrying value as of October 31, 2022 and 2021, and

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2022, 2021, and 2020

therefore no quantitative testing for impairment was required.

No impairment loss related to goodwill was recognized in the years ended December 31, 2022, 2021, and 2020.

Collaborative Arrangements

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Changes in these assumptions can affect the fair value estimate.

We use the asset and liability method of accounting for income taxes.

Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2022, 2021, and 2020

We use the asset and liability method of accounting for income taxes.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.

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We have provided a valuation allowance against certain of our state net operating loss (“NOL”) carryforwards that are not expected to be used during the carryforward periods.

As of December 31, 2018, we had also provided a valuation allowance against ANI Canada’s net deferred tax assets of $ 1.9 million and against certain of our state NOL carryforwards that were not expected to be used during the carryforward periods.

As a result of a newly adopted transfer pricing policy in 2019, our assessment of the amount of ANI Canada’s deferred tax assets that were more likely than not to be realized changed.

During 2019, we released ANI Canada’s valuation allowance.

As of December 31, 2022, our valuation allowance is $ 0.4 million and relates to state NOL carryforwards.

We have not provided for deferred taxes related to any difference between the tax basis in the shares of ANI Canada and the financial reporting basis in those shares since it has the intent and ability to indefinitely reinvest ANI Canada’s earnings and not repatriate those earnings.

We use a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return.

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For the years ended December 31, 2022, 2021, and 2020

For purposes of determining diluted earnings (loss) per share in 2019, we elected a policy to settle the principal portion of our 3 % Convertible Senior Notes (the “Notes”), which matured and were settled in December 2019, in cash.

As such, the principal portion of the Notes had no effect on either the numerator or denominator when determining diluted earnings (loss) per share.

Any conversion gain was assumed to be settled in shares and was incorporated in diluted earnings per share using the treasury method.

The warrants issued in conjunction with the issuance of the Notes were considered to be dilutive if they were in-the-money relative to our average stock price during the period;

the bond hedge purchased in conjunction with the issuance of the Notes was always considered to be anti-dilutive.

Earnings per share for the years ended December 31, 2022, 2021, and 2020 are calculated for basic and diluted earnings (loss) per share as follows:

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Years Ended December 31,

Net (loss)/income

Net income allocated to participating securities

Dividends on Series A convertible preferred stock

Net (loss)/income allocated to common shares

Net loss available to common shareholders

Basic Weighted-Average Shares Outstanding

Dilutive effect of stock options and ESPP

Dilutive effect of Notes

Diluted Weighted-Average Shares Outstanding

(Loss)/Income per share

Loss per share

The number of anti-dilutive shares, which have been excluded from the computation of diluted earnings (loss) per share, were 2.6 million, 1.7 million, and 1.3 million for the years ended December 31, 2022, 2021, and 2020, respectively.

For the years ended December 31, 2022, 2021 and 2020, all potentially dilutive shares were anti-dilutive and excluded from the calculation of diluted loss per share because we recognized a net loss .

For the year ended December 31, 2019, anti-dilutive shares consist of out-of-the-money Class C Special stock, out-of-the-money common stock options, unvested restricted stock awards and common stock options that are anti-dilutive when calculating the impact of the potential dilutive common shares using the two-class or treasury stock method, and underlying shares related to out-of-the-money bonds issued as convertible debt.

Hedge Accounting

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Contingent Consideration

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

The terms of the acquisition agreement between ANI and Novitium Pharma LLC include the potential payment of future consideration that is contingent upon the achievement of certain regulatory and financial performance milestones.

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As payments are not expected to be made shortly after the acquisition, any future payment of contingent consideration will be reported as a financing cash flow for amounts paid up to the acquisition-date fair value of the consideration, and as an operating cash outflow for any amounts in excess of the acquisition-date fair value in our consolidated statement of cash flows.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

Fair Value of Financial Instruments

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See Note 9 for additional information regarding fair value.

Geographic Information

Based on the distinct nature of our operations, our internal management structure, and the financial information that is evaluated regularly by our Chief Operating Decision Maker, we determined that we operate in one reportable segment.

Our operations are located in the United States, Canada, and India.

The majority of the assets of the Company are located in the United States.

The following table depicts our revenue by geographic operations during the following periods:

(in thousands)

Years Ended December 31,

Location of Operations

United States

Total Revenue

The following table depicts our property and equipment, net according to geographic location as of:

(in thousands)

December 31, 2021

December 31, 2020

United States

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

Total property and equipment, net

Restructuring Activities

We define restructuring activities to include costs directly associated with exit or disposal activities.

Such costs include cash employee contractual severance and other termination benefits, one-time employee termination severance and benefits, contract termination charges, impairment and acceleration of depreciation associated with long-lived assets, and other exit or disposal costs.

In general, we record involuntary employee- related exit and disposal costs when there is a substantive plan for employee severance and related payments are probable and estimable.

For one-time termination benefits, including those with a service requirement, expense is recorded when the employees are entitled to receive such benefits and the amount can be reasonably estimated.

Expense related to one-time termination benefits with a service requirement is recorded over time, as the service is completed.

Contract termination fees and penalties, and other exit and disposal costs are generally recorded as incurred.

Restructuring activities are recognized as an operating expense in our consolidated statement of operations.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In December 2022, the Financial Accounting Standards Board issued ASU 2022-06, which extended the sunset date of the reference rate reform in ASU 848 from December 31, 2022, to December 31, 2024.

We have not adopted the guidance and are currently evaluating the impact, if any, that the adoption of this guidance will have on our consolidated financial statements.

We have evaluated all other issued and unadopted Accounting Standards Updates and believe the adoption of these standards will not have a material impact on our consolidated statements of operations, comprehensive income, balance sheets, or cash flows.

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued guidance simplifying the accounting for certain financial instruments with characteristics of liabilities and equity, including certain convertible instruments and contracts on an entity’s own equity.

The new standard removes the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial conversion features.

It also removes certain settlement conditions that are currently required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation for convertible instruments.

We early adopted this guidance as of January 1, 2021.

The adoption of this guidance removed the requirement for an evaluation of a beneficial conversion feature related to our issuance of convertible preferred stock in November 2021 and will impact the calculation of diluted earnings per share in periods of net earnings.

In November 2019, the FASB issued guidance simplifying the accounting for income taxes by removing the following exceptions:

1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, 2) exception requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, 3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and 4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

The amendments also simplify accounting for income taxes by doing the following:

1) requiring that an entity recognize a franchise tax or similar tax that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, 2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, 3) specifying that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, 4) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date, and 5) making minor Codification improvements for income taxes related to employee stock ownership plans and investments in qualified affordable housing projects accounted for using the equity method.

Most of the provisions of this guidance were to be adopted on a prospective basis.

Items 2) and 3) of the “removal” provisions were to be adopted on either a full or modified retrospective basis and item 4) of the “simplifying” provisions was to be adopted on a full retrospective basis.

The guidance was effective for reporting periods beginning after December 15, 2020, including interim periods within that fiscal year.

We adopted this guidance as of January 1, 2021.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

BUSINESS COMBINATION

On November 19, 2021, we completed our previously announced acquisition of all of the interests of Novitium pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021, for cash consideration, 2,466,654 restricted shares of our common stock valued at $ 91.2 million based on our closing stock price of $ 43.54 on the date of closing and discounted for lack of marketability due to restrictions on shares, and up to $ 46.5 million in additional contingent consideration.

Additionally, we agreed to pay certain debts of Novitium in the amount of

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2022, 2021, and 2020

on the date of closing and discounted for lack of marketability due to restrictions on shares, and up to $ 46.5 million in additional contingent consideration.

Additionally, we agreed to pay certain debts of Novitium in the amount of $ 8.5 million, which we deemed to be paid in consummation of the transaction closing, and not assumed liabilities, and thus were included as additional cash consideration.

$ 8.5 million, which we deemed to be paid in consummation of the transaction closing, and not assumed liabilities, and thus were included as additional cash consideration.

This acquisition was accounted for as a business combination.

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As of the acquisition date, the contingent consideration had a fair value of $ 30.8 million.

As of December 31, 2021, the fair value of the contingent consideration was $ 31.0 million.

The fair value of the contingent consideration was $ 35.1 million and $ 31.0 million as of December 31, 2022 and 2021, respectively.

Refer to Note 9 for changes in contingent consideration and changes in fair value.

Total consideration including cash, restricted shares and contingent consideration was valued at $ 206.5 million.

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based manufacturing capacity, and to diversify our revenue base.

The preliminary allocation of the fair value of the Novitium acquisition is shown in the table below.

The allocation of the fair value will be finalized when the valuation is completed and the differences will be trued up for the final allocated amounts.

The following presents the final allocation of the purchase price to the assets acquired and liabilities assumed on November 19, 2021:

(in thousands)

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The net assets were recorded at their estimated fair value.

In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations,

In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates.

In connection with the acquisition, we recognized $ 46.9 million of indefinite-lived

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2022, 2021, and 2020

and appropriate discount rates.

In connection with the acquisition, we recognized $ 46.9 million of indefinite-lived in-process research and development intangible assets, $ 67.4 million of acquired ANDA intangible assets, and $ 24.9 million of customer relationship intangible assets.

in-process research and development intangible assets, $ 67.4 million of acquired ANDA intangible assets, and $ 24.9 million of customer relationship intangible assets.

Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition, such as the assembled workforce and synergies between the entities.

Goodwill established as a result of the acquisition is tax deductible in the U.S.

Novitium operations generated $ 7.7 million of revenue and recorded a net loss of $ 1.4 million from the date of acquisition through December 31, 2021.

Novitium operations generated $ 90.3 million and $ 7.7 million of revenue during the years ended December 31, 2022 and 2021, respectively.

Pro Forma Consolidated Financial Information (unaudited)

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It includes inputs of not readily observable market data, which are Level 3 inputs.

These unobservable inputs include ANI stock volatility with a range of 65 % - 71 %, and the discounted lack of marketability with a range of 7.5 % - 21.5 % depending on the length of restriction.

These unobservable inputs include ANI stock volatility with a range of 65 % to 71 %, and the discounted lack of marketability with a range of 7.5 % to 21.5 % depending on the length of restriction.

RESTRUCTURING

On June 2, 2022, we announced that we intend to cease operations at our Oakville, Ontario, Canada manufacturing plant by the first quarter of 2023.

This action is part of ongoing initiatives to capture operational synergies following our acquisition of Novitium in November 2021.

We are seeking to find potential buyers for the Oakville site, though there can be no assurance as to when or if that will occur or the amount of any net proceeds that may be received.

For the year ended December 31, 2022, restructuring activities resulted in expenses of $ 5.7 million.

This included $ 2.1 million of severance and other employee benefit costs and $ 3.1 million of asset-related impairment and accelerated depreciation costs, for the year ended December 31, 2022, respectively.

There were also $ 0.4 million of other costs year to date.

As of December 31, 2022, $ 1.4 million of the severance and other employee benefits are unpaid and accrued.

These costs are recorded as restructuring activities, an operating item, in the accompanying consolidated statements of operations.

Certain of the severance and other employee benefit costs contain a service requirement, and as such, are being accrued over time as they are earned.

We expect to incur additional charges of approximately $ 0.3 million in severance costs, $ 1.2 million in asset-related accelerated depreciation and $ 0.2 million to $ 0.4 million in other charges over the next three months.

These costs are part of the Generics, Established Brands, and Other segment.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

In conjunction with the planned exit of our Canadian facility, we have determined that the land and building at our Oakville, Ontario, Canada plant will be sold together over the transition period and meet the criteria to be classified as held for sale as of December 31, 2022.

The land and building have a net carrying value of $ 8.0 million, which is presented as assets held for sale on the accompanying consolidated balance sheets.

These assets are part of the Generics, Established Brands, and Other segment.

Credit Facility

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The Term Facility matures in November 2027 and the Revolving Facility in November 2026.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

defined in the Credit Agreement) in the case of LIBOR loans under the Term Facility and (b) 3.75 % above the base rate in the case of ABR Loans under the Revolving Facility and 4.75 % above the LIBOR Rate (as defined in the Credit Facility) in the case of loans under the Revolving Facility.

Each permits both base rate borrowings (“ABR Loans”) and Eurodollar rate borrowings (“Eurodollar Loans”), plus a spread of (a) 5.00 % above the base rate in the case of ABR Loans under the Term Facility and 6.00 % above the LIBOR Rate (or alternate benchmark rate as defined in the Credit Agreement) in the case of LIBOR loans under the Term Facility and (b) 3.75 % above the base rate in the case of ABR Loans under the Revolving Facility and 4.75 % above the LIBOR Rate (as defined in the Credit Facility) in the case of loans under the Revolving Facility.

The interest rate under the Term Facility was 10.39 % at December 31, 2022.

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We incur a commitment fee of 0.5 % per annum on any unused portion of the Revolving Facility.

The Credit Facility carried a customary ticking fee that commenced after a period post-syndication and ended upon the closing of the Credit Facility.

During the year ended December 31, 2021, we incurred $ 4.2 million in expense related to the ticking fee, all of which was recognized as other expense, net, on the consolidated statement of operations.

In connection with entry into the Credit Facility, on November 19, 2021, we terminated our existing Amended and Restated Credit Agreement, dated as of December 27, 2018 (the “Prior Credit Agreement”), among the Company, as borrower, and Citizens Bank with other lenders.

In connection with the termination of the Prior Credit Agreement, on November 19, 2021, we used borrowings under the Credit Facility to prepay the full amount of indebtedness under the Prior Credit Agreement, and to pay related accrued and unpaid interest, fees, and expenses.

The repayment and termination of the Prior Credit Agreement was recognized as an extinguishment.

As of November 19, 2021, the carrying amount of the debt related to the Prior Credit Agreement consisted of principal of $ 200.1 million, net of $ 1.4 million in deferred financing fees, or $ 198.7 million.

We made a reacquisition payment of $ 200.1 million, representing the remaining principal balance under this facility of $ 200.1 million plus certain legal fees, resulting in a loss on extinguishment of $ 1.5 million.

The loss is recognized as other expense, net, on our consolidated statement of operations.

The Credit Facility is secured by a lien on substantially all of ANI Pharmaceuticals, Inc.’s and its principal domestic subsidiary’s assets and any future domestic subsidiary guarantors’ assets.

The Credit Facility is subject to customary financial and nonfinancial covenants.

The carrying value of the current and non-current components of the Term Facility as of December 31, 2021 and Term Loan and Delayed Draw Term Loan under the Prior Credit Agreement as of December 31, 2020 are:

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

The carrying value of the current and non-current components of the Term Facility as of December 31, 2022 and 2021 are:

(in thousands)

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As of December 31, 2022, we had a $ 297.0 million balance on the Term Facility.

Of the $ 1.0 million of deferred debt issuance costs allocated to the Revolving Facility, $ 0.8 million is included in other non-current assets

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

in the consolidated balance sheets and $ 0.2 million is included in prepaid expenses and other current assets in the consolidated balance sheets.

Of the $ 0.9 million of unamortized deferred debt issuance costs allocated to the Revolving Facility, $ 0.6 million is included in other non-current assets in the consolidated balance sheets, and $ 0.3 million is included in prepaid expenses and other current assets in the consolidated balance sheets.

The contractual maturity of our Term Facility is as follows for the years ending December 31:

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Contractual coupon

Amortization of debt discount

Amortization of finance fees

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In April 2020, we entered into an interest rate swap with Citizens Bank, N.A.

to manage our exposure to changes in LIBOR-based interest rates underlying total borrowings under term facilities related to our Prior Credit Agreement.

to manage our exposure to changes in LIBOR-based interest rates (or alternate benchmark rate as defined in the Credit Agreement) underlying total borrowings under term facilities related to our Prior Credit Agreement.

The interest rate swap matures in December 2026.

Concurrent with the termination of the Prior Credit Agreement and entry into the Credit Agreement with Truist Bank, the interest rate swap with a notional value of $ 168.6 million was novated and Truist Bank is the new counterparty.

Concurrent with the termination of the Prior Credit Agreement and entry into the Credit Agreement with Truist Bank, the interest rate swap with a notional value of $ 168.6 million at origin on November 19, 2021 was novated and Truist Bank is the new counterparty.

The swap is used to manage changes in LIBOR-based interest rates underlying a portion of the borrowing under the Term Facility.

The interest rate swap provides an effective fixed interest rate of 2.26 % and has been designated as an effective cash flow hedge and therefore qualifies for hedge accounting.

As of December 31, 2021, the notional amount of the interest rate swap was $ 165.8 million and decreases quarterly by approximately $ 4.0 million until December 2023, after which it remains static until maturity in December 2026.

As of December 31, 2021, the fair value of the interest rate swap liability recorded in derivatives and other non-current liabilities in the consolidated balance sheets was $ 6.8 million.

The interest rate swap provides an effective

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

fixed interest rate of 2.26 % and has been designated as an effective cash flow hedge and therefore qualifies for hedge accounting.

The notional amount of the interest rate swap was $ 151.5 million and $ 165.8 million as of December 31, 2022 and 2021, respectively, and decreases quarterly by approximately $ 4.0 million until December 2023, after which it remains static until maturity in December 2026.

As of December 31, 2022, the fair value of the interest rate swap asset was recorded in other non-current assets in the consolidated balance sheets was $ 8.8 million.

As of December 31, 2022, $ 12.2 million was recorded in accumulated other comprehensive loss, net of tax in the consolidated balance sheets.

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Included in these amounts for the years ended December 31, 2022 and 2021 are reclassifications out of accumulated other comprehensive income/loss of $ 2.8 million and $ 3.5 million in expense, respectively, related to terminated and de-designated cash flow hedges.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

Inventories consist of the following as of December 31:

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Inventories, net

(1) Includes inventory acquired in the acquisition of Novitium (Note 2).

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following as of December 31:

PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of December 31:

(in thousands)

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Property and equipment, net

(1) Includes property and equipment acquired in the acquisition of Novitium (Note 2).

(1) Amounts as of December 31, 2022 exclude the land and building at our Canada facility, which are classified as held for sale as of December 31, 2022.

These assets have a carrying value of $ 8.0 million.

Depreciation expense for the years ended December 31, 2022, 2021, and 2020 totaled $ 7.4 million, $ 5.5 million, and $ 4.8 million, respectively.

During the years ended December 31, 2021, 2020, and 2019 there was $ 0.1 million, $ 0.1 million, and $ 0.2 million of interest capitalized into construction in progress, respectively.

INTANGIBLE ASSETS

As a result of our 2013 merger with BioSante Pharmaceuticals, Inc., we recorded goodwill of $ 1.8 million.

From our acquisition of WellSpring, we recorded additional goodwill of $ 1.7 million in 2018.

During the years ended December 31, 2022, 2021, and 2020 there was $ 0.1 million of interest capitalized into construction in progress.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

GOODWILL AND INTANGIBLE ASSETS

As a result of our 2013 merger with BioSante Pharmaceuticals, Inc.

(“BioSante”), we recorded goodwill of $ 1.8 million.

As a result of our acquisition of WellSpring Pharma Services Inc., we recorded additional goodwill of $ 1.7 million in 2018.

From our acquisition of Novitium in 2021, we recorded goodwill of $ 24.6 million.

We have two operating segments, which are the same as our two reporting units, Generics, Established Brands, and Other reporting unit and the Rare Disease reporting unit.

All of the goodwill is recorded in our Generics, Established Brands, and Other reporting unit.

For the goodwill impairment analyses performed at October 31, 2022 and 2021, we performed qualitative assessments to determine whether it was more likely than not that our goodwill asset was impaired in order to determine the necessity of performing a quantitative impairment test, under which management would calculate the asset’s fair value.

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In addition to the qualitative impairment analysis performed at October 31, 2022, there were no events or changes in circumstances that would have reduced the fair value of our reporting unit below its carrying value from October 31, 2022 to December 31, 2022.

No impairment loss was recognized during the years ended December 31,

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

2021, 2020, and 2019, and the balance of goodwill was $ 27.9 million and $ 3.6 million as of December 31, 2021 and 2020, respectively.

No impairment loss was recognized during the years ended December 31, 2022, 2021, and 2020, and the balance of goodwill was $ 28.2 million and $ 27.9 million as of December 31, 2022 and 2021, respectively.

Intangible Assets

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Total Intangible Assets, net

During 2022, $ 20.3 million was reclassified from IPR&D to ANDA intangible assets upon completion of projects and launch of related products.

We also added $ 7.2 million in ANDA intangible assets related to the July 21, 2022 transaction with Oakrum Pharma, LLC (Note 9).

These assets will be amortized over a seven-year useful life.

Indefinite-Lived Intangible Assets impairment analysis was performed as of October 31, 2022.

We performed qualitative assessments to determine whether it was more likely than not that the assets were impaired in order to determine the necessity of performing a quantitative impairment test, under which management would calculate the asset’s fair value.

When performing the qualitative assessments, we evaluated events and circumstances that would affect the significant inputs used to determine the fair value of the assets.

Based on our assessments of the aforementioned factors, it was determined that it was more likely than not that the fair value of assets are greater than their carrying amount as of October 31, 2022, and therefore no quantitative testing for impairment was

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

In addition to the qualitative impairment analysis performed, there were no events or changes in circumstances that would have reduced the fair value of assets below their carrying value from October 31, 2022 to December 31, 2022.

During the year ended December 31, 2022, we recognized a full impairment of a definite-lived ANDA asset with a remaining carrying value of $ 0.1 million.

Amortization expense was $ 49.5 million, $ 41.8 million, and $ 39.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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The Term Facility bears an interest rate that fluctuates with the changes in LIBOR and, because the variable interest rates approximate market borrowing rates available to us, we believe the carrying values of these borrowings approximated their fair values at December 31, 2022 and 2021.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

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We also determined that the changes in such fair value were immaterial for the years ended December 31, 2022, 2021, and 2020.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

Interest Rate Swap

The fair value of our interest rate swap is estimated based on the present value of projected future cash flows using the LIBOR forward rate curve.

In 2023, we expect that this will be replaced by a forward rate curve for an alternate benchmark rate as defined in the Credit Agreement.

The model used to value the interest rate swap includes inputs of readily observable market data, a Level 2 input.

As described in detail in Note 4, the fair value of the interest rate swap was a $ 6.8 million liability at December 31, 2021.

As described in detail in Note 5, the fair value of the interest rate swap was a $ 8.8 million asset at December 31, 2022.

Contingent Consideration

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As of the November 19, 2021 acquisition date, the contingent consideration had a fair value of $ 30.8 million.

The fair value of the contingent consideration was $ 31.0 million as of December 31, 2021 and is reflected as a non-current accrued contingent consideration liability in the consolidated balance sheet.

The fair value of the contingent consideration was $ 35.1 million and $ 31.0 million as of December 31, 2022 and 2021, respectively, and is reflected as a non-current accrued contingent consideration liability in the consolidated balance sheet.

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:

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Projected fiscal year of payment

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

The following table presents the changes in contingent consideration balances classified as Level 3 balances for the year ended December 31, 2022 and 2021:

Years Ended December 31,

(in thousands)

Beginning balance

Initial valuation

Measurement period adjustment

Change in fair value

Ending balance

The following table presents our financial assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2022 and December 31, 2021, by level within the fair value hierarchy:

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December 31, 2022

Interest rate swap

Contingent consideration

Interest rate swaps

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

Fair Value at

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Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We measure our long-lived assets, including property, plant, and equipment, ROU assets, intangible assets, and goodwill, at fair value on a non-recurring basis.

We measure our long-lived assets, including property and equipment, ROU assets, intangible assets, and goodwill, at fair value on a non-recurring basis.

These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired.

During the year ended December 31, 2022, we recognized an impairment charge of $ 0.1 million related to a definite-lived ANDA intangible asset.

During the year ended December 31, 2020, we recognized a $ 0.4 million impairment charge related to marketing and distribution right asset.

During the year ended December 31, 2021, we recognized an impairment charge of $ 2.4 million related to a definite-lived ANDA intangible asset.

There were no other fair value impairments recognized in the years ended December 31, 2022 and 2021.

Acquired Non-Financial Assets Measured at Fair Value

On July 21, 2022, we acquired four ANDAs from Oakrum Pharma, LLC for total consideration of $ 8.0 million plus an immaterial amount for the purchase of finished goods inventory.

The transaction was funded from cash on hand.

We accounted for this transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition.

The product portfolio included one commercial product, one approved product with a launch completed in September and two filed products, with approval pending.

We recognized $ 7.2 million as acquired ANDA intangible assets and $ 1.2 million as research and development expense because certain of the generic products have significant remaining work required in order to be commercialized and the products do not have an alternative future use.

The payment was allocated to the acquired intangible assets and in-process research and development based on relative fair value, which was determined using Level 3 unobservable inputs.

We used the present value of the estimated cash flows related to the products, using a discount rate of 13 % to determine the fair value of the acquired intangible assets and in-process research and development.

The inventory acquired was immaterial.

Contingent liabilities are accrued when they are both estimable and probable.

We accrued $ 0.2 million in contingent payments due to a third party upon the launch of a product completed in September.

This was accrued and recorded in the fair value of acquired intangible assets as it was probable at the acquisition date and has been paid in December 2022.

The ANDA’s will be amortized in full over its useful life of seven years and will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable.

No such triggering events were identified during the period from the date of acquisition to December 31, 2022, and therefore no impairment loss was recognized for the year ended December 31, 2022.

In April 2021, we acquired three NDAs and an ANDA and certain related inventories from Sandoz, Inc.

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The fair value of the inventory was determined based on the estimated selling price to be generated from the finished goods, less costs to sell, including a reasonable margin, which are level 3 unobservable inputs.

The intangible assets are being amortized in full over a useful life of seven years and are tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable.

No such triggering events were identified during the period from the date of acquisition to December 31, 2021 and therefore no impairment loss was recognized for the year ended December 31, 2021.

In July 2020, we acquired an ANDA and certain related inventories from a private company for total consideration of $ 4.3 million.

We also incurred and paid $ 0.1 million in transaction costs directly related to the acquisition.

We accounted for this transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition.

We recognized $ 3.0 million as an acquired ANDA intangible asset and $ 1.4 million in inventory at fair value.

The intangible assets are being amortized in full over a useful life of seven years and are tested for impairment when events or circumstances indicate that the carrying value of the asset may

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

not be recoverable.

No such triggering events were identified during the period from the date of acquisition to December 31, 2022 and therefore no impairment loss was recognized for the years ended December 31, 2021 and 2022.

In July 2020, we acquired an ANDA and certain related inventories from a private company for total consideration of $ 4.3 million.

We also incurred and paid $ 0.1 million in transaction costs directly related to the acquisition.

We accounted for this transaction as an asset acquisition and capitalized the transaction costs directly related to the acquisition.

We recognized $ 3.0 million as an acquired ANDA intangible asset and $ 1.4 million in inventory at fair value.

The ANDA was being amortized in full over its useful life of seven years .

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Authorized shares

We are authorized to issue up to 33.3 million shares of common stock with a par value of $ 0.0001 per share, 0.8 million shares of class C special stock with a par value of $ 0.0001 per share, and 1.7 million shares of undesignated preferred stock with a par value of $ 0.0001 per share at December 31, 2021.

There were 16.9 million shares of common stock issued and outstanding as of December 31, 2021, and 12.4 million and 12.3 million shares of common stock issued and outstanding as of December 31, 2020, respectively.

There were 17.6 million and 17.5 million shares of common stock issued and outstanding as of December 31, 2022, respectively, and 16.9 million and 16.8 million shares of common stock issued and outstanding as of December 31, 2021, respectively.

During 2021, we issued 1.5 million shares related to a public offering of our common stock and 2.5 million shares as consideration for our acquisition of Novitium.

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Each share of class C special stock entitles its holder to one vote per share.

Each share of class C special stock is exchangeable, at the option of the holder, for one share of our common stock, at an exchange price of $ 90.00 per share, subject to adjustment upon certain capitalization events.

Holders of class C special stock are not entitled to receive dividends or to participate in the distribution of our assets if we were to liquidate, dissolve, or wind-up the company.

The holders of class C special stock have no cumulative voting, preemptive, subscription, redemption, or sinking fund rights.

Each share of class C special stock

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

is exchangeable, at the option of the holder, for one share of our common stock, at an exchange price of $ 90.00 per share, subject to adjustment upon certain capitalization events.

Holders of class C special stock are not entitled to receive dividends or to participate in the distribution of our assets if we were to liquidate, dissolve, or wind-up the company.

The holders of class C special stock have no cumulative voting, preemptive, subscription, redemption, or sinking fund rights.

Mezzanine Equity

Concurrently with the execution of the Agreement and Plan of Merger, and as financing for a portion of the acquisition, on March 8, 2021, we entered into an Equity Commitment and Investment Agreement with Ampersand (the “PIPE Investor”), pursuant to which we agreed to issue and sell to the PIPE Investor, and the PIPE Investor agreed to purchase, 25,000 shares of our Series A Convertible Preferred Stock (the “PIPE Shares”), for a purchase price of $ 1,000 per share and an aggregate purchase price of $ 25.0 million PIPE Investment.

Concurrently with the execution of the Merger Agreement, and as financing for a portion of the acquisition, on March 8, 2021, we entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership (the “PIPE Investor”), pursuant to which we agreed to issue and sell to the PIPE Investor, and the PIPE Investor agreed to purchase, 25,000 shares of our Series A Convertible Preferred Stock (the “PIPE Shares”), for a purchase price of $ 1,000 per share and an aggregate purchase price of $ 25.0 million.

This agreement closed and the 25,000 PIPE Shares were sold and issued for $ 25.0 million on November 19, 2021.

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In case of a change of control of ANI, the PIPE Shares will be redeemed at the greater of (i) the PIPE Shares’ purchase price plus any accrued and unpaid dividends thereon and (ii) the change of control transaction consideration that the holder of the PIPE Shares would have received if it had converted into our common stock.

There were no shares of Series A convertible preferred stock outstanding as of December 31, 2020.

There were 25,000 shares of Series A convertible preferred stock outstanding as of December 31, 2022 and 2021.

STOCK-BASED COMPENSATION

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Under the ESPP, participants can purchase shares of our stock at a 15 % discount.

We issued 14 thousand, 13 thousand, and six thousand shares in the years ended December 31, 2021, 2020, and 2019, respectively.

We issued 29 thousand, 14 thousand, and 13 thousand shares in the years ended December 31, 2022, 2021, and 2020, respectively.

ANI Pharmaceuticals, Inc.

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Equity-based service awards are granted under the ANI Pharmaceuticals, Inc.

Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”).

As of December 31, 2021, 0.5 million shares of our common stock remained available for issuance under the 2008 Plan.

Amended and Restated 2022 Stock Incentive Plan (the “2022 Plan”), which was approved by our stockholders at the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) held on April 27, 2022.

Prior to this approval, we had been granting equity-based incentive awards under our Sixth Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”), which was renamed and was amended and restated to become the 2022 Plan.

This amendment and restatement, among other things, increased the number of shares reserved for issuance thereunder by 1,150,000 shares.

As of December 31, 2022, 1.1 million shares of our common stock were available for issuance under the 2022 Plan.

From time to time, we may grant stock options to employees through an inducement grant outside of our 2022 Plan to induce prospective employees to accept employment with us (the “Inducement Grants”).

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We recognize stock-based compensation expense ratably over the vesting periods of the awards.

The following table summarizes stock-based compensation expense incurred under the 2008 Plan and Inducement Grant and included in our consolidated statements of operations:

Years Ended December 31,

The following table summarizes stock-based compensation expense incurred under the Stock Incentive Plans and Inducement Grant and included in our consolidated statements of operations:

(in thousands)

Years Ended December 31,

Cost of sales

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Selling, general, and administrative

We recognized income tax benefits of $ 1.0 million, $ 1.6 million, and $ 1.4 million for stock-based compensation-related tax deductions in our 2021, 2020, and 2019 consolidated statements of operations, respectively.

We recognized income tax benefits of $ 1.7 million, $ 1.0 million, and $ 1.6 million for stock-based compensation-related tax deductions in our 2022, 2021, and 2020 consolidated statements of operations,

Stock Options

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The cost is expected to be recognized over a weighted-average period of 2.0 years.

During the year ended December 31, 2022, we received $ 0.7 million in cash from the exercise of stock options and recorded less than $ 0.1 million tax provision related to these exercises.

During the year ended December 31, 2021, we received $ 1.7 million in cash from the exercise of stock options and recorded a $ 0.1 million tax provision related to these exercises.

During the year ended December 31, 2020, we received $ 0.3 million in cash from the exercise of stock options and recorded a $ 43 thousand tax provision related to these exercises.

During the year ended December 31, 2019, we received $ 5.5 million in cash from the exercise of stock options and recorded a $ 0.7 million tax benefit related to these exercises.

ANI Pharmaceuticals, Inc.

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We consider the projected future taxable income and tax planning strategies in making this assessment.

As part of purchase accounting in 2018, we established net deferred tax assets relating to differences in the book bases (determined based on fair value purchase accounting) and tax bases (determined based on the carryover nature of the nontaxable transaction) of ANI Canada’s assets and liabilities of approximately $ 1.9 million, offset by a full valuation allowance due to our determination that it was more likely than not that all of the deferred tax assets would

As of December 31, 2022 and 2021, our consolidated valuation allowance was $ 0.4 million, related solely to deferred tax assets for net operating loss carryforwards in certain U.S.

state jurisdictions.

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

not be realized.

During 2019, we adopted an intercompany transfer pricing policy that uses the “comparable profits method” for pricing intercompany services between ANI Pharmaceuticals, Inc.

and ANI Canada.

and Canadian tax purposes, the policy was adopted in conjunction with the acquisition date of August 6, 2018.

As a result of the newly adopted transfer pricing policy, our assessment of the amount of ANI Canada’s deferred tax assets that are more likely than not to be realized changed and, as a result, during 2019, we released the remaining net valuation allowance related to ANI Canada’s deferred tax assets.

As of December 31, 2021 and 2020, our consolidated valuation allowance was $ 0.4 million, related solely to deferred tax assets for net operating loss carryforwards in certain U.S.

state jurisdictions.

Our total provision for income taxes consists of the following for the years ended December 31, 2022, 2021, and 2020:

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federal net operating loss carryforwards of approximately $ 22.6 million, all of which arose as a result of the 2013 merger with BioSante Pharmaceuticals, Inc.

and from our taxable loss in 2021.

and from our taxable loss in 2021 and 2022.

Our net operating loss carryforwards related to our 2013 merger, if not used, expire in annual increments through 2033 and are limited on an annual basis as prescribed by Section 382 of the U.S.

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our current annual limitation is approximately $ 0.8 million per year.

Our net operating losses that arose in 2021 do not expire and are not limited by Section 382.

Additionally, as of December 31, 2021 we have total net operating losses in Canada of $ 4.7 million that begin expiring in 2038.

Our net operating losses that arose in 2021 and 2022 do not expire and are not limited by Section 382.

Additionally, as of December 31, 2022, we have total net operating losses in Canada of $ 1.7 million that expire through 2038.

We are subject to income taxes in numerous jurisdictions in the U.S., Canada, and India.

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All our existing leases as of December 31, 2022 are classified as operating leases.

As of December 31, 2021, we have twelve material operating leases for facilities and office equipment with remaining terms expiring from 2022 through 2026 and a weighted average remaining lease term of 3.2 years.

As of December 31, 2022, we have 13 material operating leases for facilities and office equipment with remaining terms expiring from 2025 through 2027 and a weighted average remaining lease term of 2.6 years.

Many of our existing leases have fair value renewal options, none of which are considered certain of being exercised or included in the minimum lease term.

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Future payments:

2026 and thereafter

Lease liability

Current lease liability

Non-current lease liability

Current lease liability, included in accrued expenses and other in the consolidated balance sheets

Non-current lease liability, included in derivatives and other non-current liabilities in the consolidated balance sheets

Vendor Purchase Minimums

We have supply agreements with three vendors that include purchase minimums.

Pursuant to these agreements, we will be required to purchase a total of $ 12.6 million of API from these three vendors during the year ended December 31, 2022.

We have a supply agreement with one vendor that includes purchase minimums.

Pursuant to this agreement, we will be required to purchase a total of $ 0.1 million of API from this vendor during the year ended December 31, 2023.

Government Regulation

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The FDA evaluates whether to initiate enforcement action on a case-by-case basis, but gives higher priority to enforcement action against products in certain categories, such as those with potential safety risks or that lack evidence of effectiveness.

We continue to believe that, so long as we comply with applicable manufacturing standards, the FDA will continue to operate on a risk-based approach and will not take action against us.

However, we can offer no assurance

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

that the FDA will continue to follow this approach or that it will not take a contrary position with any individual product or group of products.

We continue to believe that, so long as we comply with applicable manufacturing standards, the FDA will continue to operate on a risk-based approach and will not take action against us.

However, we can offer no assurance that the FDA will continue to follow this approach or that it will not take a contrary position with any individual product or group of products.

If the FDA were to move away from the risk-based approach to enforcement against marketing of unapproved products, we may be required to seek FDA approval for these products or withdraw such products from the market.

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These matters are complex and subject to significant uncertainties.

As such, we cannot accurately predict the outcome, or the effects of the legal proceedings described below.

Due to the inherent unpredictability of legal matters, including litigation, governmental and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings, investigations or inquiries are in the early stages, we cannot accurately predict the outcome, or the effects of the legal proceedings described below.

While we believe that we have valid claims and/or defenses in the litigation and other matters described below, litigation is inherently unpredictable, and the outcome of the proceedings could result in losses, including substantial damages, fines, civil or criminal penalties and injunctive or administrative remedies.

We intend to vigorously prosecute and/or defend these matters, as appropriate, however, from time to time, we may settle or otherwise resolve these matters on terms and conditions that we believe are in our best interests.

We intend to vigorously prosecute and/or defend these matters, as appropriate;

however, from time to time, we may settle or otherwise resolve these matters on terms and conditions that we believe are in our best interests.

Resolution of any or all claims, investigations, and legal proceedings, individually or in the aggregate, could have a material adverse effect on our results of operations and/or cash flows in any given accounting period or on our overall financial condition.

Some of these matters with which we are involved are described below, and unless otherwise disclosed, we are unable to predict the outcome of the matter or to provide an estimate of the range of reasonably possible material losses.

Some of these matters with which we are involved are described below and in our 2021 Form 10-K, and unless otherwise disclosed, we are unable to predict the outcome of the matter or to provide an estimate of the range of reasonably possible material losses.

We record accruals for loss contingencies to the extent we conclude it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

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If and when any reasonably possible losses associated with the resolution of such other pending proceedings, in our opinion, become material, we will disclose such matters.

Furthermore, like all pharmaceutical manufacturers, we are periodically exposed to product liability claims.

Furthermore, like many pharmaceutical manufacturers, we are periodically exposed to product liability claims.

The prevalence of these claims could limit our coverage under future insurance policies or cause those policies to become more expensive, which could harm our business, financial condition, and operating results.

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Our policies have been subject to such exclusions which place further potential risk of financial loss on us.

Legal fees for litigation-related matters are expensed as incurred and included in the consolidated statements of operations under the selling, general, and administrative expense line item.

Commercial Litigation

In November of 2017, we were served with a complaint filed by Arbor Pharmaceuticals, LLC, in the United States District Court for the District of Minnesota.

The complaint alleged false advertising and unfair competition in violation of Section 43(a) of the Lanham Act, Section 1125(a) of Title 15 of the United States Code, and Minnesota State law, under the premise that we sold an unapproved Erythromycin Ethylsuccinate (“EES”) product during the period between September 27, 2016 and November 2, 2018.

The complaint sought a trial by jury and monetary

Legal fees for litigation-related matters are expensed as incurred and included in the condensed consolidated statements of operations under the selling, general, and administrative expense line item.

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

damages (inclusive of actual and consequential damages, treble damages, disgorgement of ANI profits, and legal fees) of an unspecified amount.

Commercial Litigation

In November of 2017, we were served with a complaint filed by Arbor Pharmaceuticals, LLC, in the United States District Court for the District of Minnesota.

The complaint sought a trial by jury and monetary damages (inclusive of actual and consequential damages, treble damages, disgorgement of ANI profits, and legal fees) of an unspecified amount.

Discovery in this action closed on March 31, 2019 and trial was scheduled to commence on August 25, 2021.

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On January 24, 2022, the court dismissed all claims brought by the plaintiffs without prejudice.

The court granted the plaintiffs until February 22, 2022 to file amended complaints, which were filed on that date.

The court granted the plaintiffs until February 22, 2022 to file amended complaints, which were filed in federal court in the Southern District of New York, on that date.

The newly amended complaints contain substantially similar claims.

The Company disputes any liability in these matters.

On April 19, 2022, the Company and other defendants filed motions to dismiss the newly amended complaints.

On May 23, 2022, the plaintiffs filed oppositions to the motions to dismiss and, on June 24, 2022, the Company and other defendants filed replies to those oppositions.

On February 21, 2023, the Company and the defendants’ motions to dismiss all actions were granted with prejudice.

Plaintiffs have thirty days to file an appeal.

On March 24, 2021, Azurity Pharmaceuticals, Inc.

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We paid the settlement from cash on hand and the $ 1.9 million charge was recorded as cost of sales (excluding depreciation and amortization) on the consolidated statement of operations for the year ended December 31, 2021.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

On April 1, 2021, United Therapeutics Corp.

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ANI filed its answer and counterclaims on May 28, 2021, denying UTC/Supernus’ allegations and seeking declaratory judgment that ANI has not infringed any valid and enforceable claim of the Asserted Patents, that the Asserted Patents are invalid, and an award of attorneys’ fees and costs.

Trial is set for May 8, 2023.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

Industry Related Litigation

In July 2020, ANI and Novitium were served with a complaint brought by the Office of the Attorney General of the State of New Mexico against manufacturers and sellers of ranitidine products.

On May 26, 2022, the parties’ respective claims and counterclaims were dismissed pursuant to a confidential settlement agreement.

On October 3, 2022, Azurity Pharmaceuticals, Inc.

filed a complaint in the United States District Court for the District of New Jersey against ANI’s wholly owned subsidiary, Novitium Pharma, LLC, asserting that Novitium’s manufacture, use, sale, importation and/or offer to sell Bionpharma Inc.’s (“Bionpharma”) enalapril maleate oral solution drug product (the “Product”) infringes U.S.

11,040,023 and 11,141,405.

The complaint seeks injunctive relief, and an award of Azurity’s costs and expenses.

On October 12, 2022, Bionpharma filed a motion in United States District Court for the District of New Jersey to intervene on Novitium’s behalf in the litigation and on October 14, 2022, Novitium and Bionpharma filed a joint motion to transfer venue to the District of Delaware, which motion to transfer was granted on January 23, 2023.

Bionpharma has agreed to indemnify Novitium under the terms of its manufacturing and supply agreement for any damages, costs and expenses relating to actual or alleged infringement of intellectual property rights or sale of the Product by Bionpharma.

ANI and Novitium dispute any liability in this matter.

Ranitidine Related Litigation

State of New Mexico Litigation .

In July 2020, ANI and Novitium were served with a complaint brought in the First Judicial Court, County of Santa Fe, State of New Mexico by the Office of the Attorney General of the State of New Mexico against manufacturers and sellers of ranitidine products.

The complaint asserts a public nuisance claim and a negligence claim against the generic ranitidine manufacturer defendants, including ANI and Novitium.

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Novitium is named as a Defendant in the amended complaint.

According to Novitium’s records, Novitium sold approximately 42 bottles of ranitidine indirectly into New Mexico, and received no funds from any state funded health care plan or Medicaid.

According to Novitium’s records, Novitium did not ship any ranitidine product to New Mexico, and received no funds from any state funded health care plan or Medicaid.

The Defendants filed a motion to dismiss the claims asserted in the New Mexico litigation based primarily on preemption.

The motion was denied in August 2021.

In December 2020, the City of Baltimore served ANI and Novitium with a complaint against manufacturers and sellers of ranitidine products.

The City of Baltimore complaint tracks the allegations of the New Mexico complaint.

The Baltimore action was removed to federal court and transferred to the In re Zantac MDL on February 1, 2021.

The City of Baltimore moved for remand, which was granted on April 1, 2021.

The parties stipulated to allow the City of Baltimore to file an amended complaint in the Circuit Court of Maryland for Baltimore City in “due course,” without a specific filing deadline.

On June 23, 2021, the City of Baltimore filed an amended complaint.

The City of Baltimore did not name ANI in its amended complaint, effectively voluntarily dismissing ANI from the action.

Novitium was named as a defendant in the amended complaint.

Defendants in the Baltimore action filed a motion to dismiss on based primarily on preemption to which Novitium joined.

The motion was granted as to all generic manufacturer defendants on January 28, 2022, and all claims against Novitium were dismissed with prejudice.

The deadline for the City to file an appeal was February 28, 2022.

ANI and Novitium dispute any liability in these matters.

Product Liability Related Litigation

All manufacturers of the drug Reglan and its generic equivalent metoclopramide, including ANI, have faced allegations from plaintiffs in various states claiming bodily injuries as a result of ingestion of metoclopramide or its brand name, Reglan, prior to the FDA’s February 2009 Black Box warning requirement (“legacy claims”).

All these original legacy claims were settled or closed out, including a series of claims in California that were resolved by coordinated proceeding and settlement.

Our insurance company assumed the defense of the legacy claims and paid all losses in settlement of the California legacy claims.

In March 2019, we were served with a lawsuit in the Superior Court of California, County of Riverside, adding us as a defendant in a complaint filed in July 2017 that is alleged not to have been part of the original settled legacy claims.

This new claim was dismissed with prejudice in July 2021 and the matter is now closed.

A motion for reconsideration was denied on September 22, 2022.

The case is currently in discovery.

Federal Court Personal Injury Litigation .

In June 2020, ANI was served with a personal injury complaint in the case of Koepsel v.

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9:20-cv-80882-RLR, filed in the United States District Court for Southern District of Florida, in which the plaintiff alleges that he developed kidney cancer in 2018 as a result of taking over the counter medication containing ranitidine.

The Koepsel action was filed within an existing multidistrict litigation concerning ranitidine-containing drugs pending in the Southern District of Florida before Judge Robin L.

The Koepsel action was filed within the existing MDL concerning ranitidine-containing drugs pending in the Southern District of Florida before Judge Robin L.

Rosenberg, In re Zantac MDL , 20 MDL 2924.

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ANI was dismissed from the Koepsel case on August 21, 2020 and was dismissed from the MPIC on September 8, 2020.

On December 31, 2020,

On December 31, 2020, after ANI was dismissed, the district court dismissed the MPIC claims against generic

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2022, 2021, and 2020

after ANI was dismissed, the district court dismissed the MPIC claims against generic manufacturer defendants partially with prejudice and partially with leave to replead.

manufacturer defendants partially with prejudice and partially with leave to replead.

The failure to warn and design defect claims were dismissed with prejudice on preemption grounds.

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That decision is on appeal to the Eleventh Circuit Court of Appeals.

In addition, by opinion and order dated December 6, 2022, the district court granted the brand manufacturer defendants’ Daubert motion to exclude the plaintiffs’ expert testimony on general causation for the “designated cancers” that the plaintiffs’ leadership team claimed to be caused by ranitidine.

The district court also granted the brand manufacturer defendants’ motion for summary judgment because the plaintiffs had failed to produce admissible primary evidence of general causation.

ANI and Novitium were named in other individual personal injury complaints filed in MDL 20 MD 2924 in which plaintiffs allege that they developed cancer after taking prescription and over the counter medication containing ranitidine.

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9-20-cv-80837-RLR (served December 30, 2020).

We have informed counsel for the plaintiffs that ANI did not sell an over the counter ranitidine product and sold a generic prescription ranitidine product for a limited two-month period of time, from July 2019 to September 2019.

ANI informed counsel for the plaintiffs that ANI did not sell an over the counter ranitidine product and sold a generic prescription ranitidine product for a limited two-month period of time, from July 2019 to September 2019.

ANI’s product was voluntarily recalled in January 2020.

Each of the plaintiffs in the five pending cases alleges a cancer diagnosis prior to the time that ANI sold ranitidine, and we have informally sought dismissal from these cases on that basis.

ANI was voluntarily dismissed from the Cooper , Lineberry and Lovette actions on November 20, 2020.

ANI was voluntarily dismissed from the Bird action on March 15, 2021 and from the Hightower action on March 29, 2021.

Novitium has been named in 150 short form complaints filed by claimants in the MDL.

ANI was voluntarily dismissed from the Cooper , Lineberry and Lovette actions on November 20, 2020, from the Bird action on March 15, 2021, and from the Hightower action on March 29, 2021.

Prior to the district court’s July 8, 2021 preemption decision, Novitium had been named in 158 short form complaints filed by claimants in the MDL.

Those complaints were effectively dismissed with prejudice with the MPIC on July 8, 2021.

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Novitium’s product was voluntarily recalled in October 2019.

Out of the 150 claimants, approximately 109 claimants either were diagnosed with cancer before Novitium began manufacturing the product, only took over the counter ranitidine, or took ranitidine before Novitium began manufacturing it.

Out of the 158 short form complaints, approximately 114 plaintiffs either were diagnosed with cancer before Novitium began manufacturing the product, only took over the counter ranitidine, or took ranitidine before Novitium began manufacturing it.

Two of those 114 plaintiffs dismissed Novitium from their short form complaints.

In light of the Court’s dismissal of all claims with prejudice, Novitium has not pursued dismissal of the short form complaints against it at this time.

Following the district court’s Daubert decision, plaintiffs began filing additional short form complaints in the MDL.

Novitium currently is named as a defendant in more than 200 short form complaints.

State Court Personal Injury Litigation

On February 3, 2022, a complaint was filed in Cook County, Illinois, naming Novitium as a defendant.

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Boehringer Ingelheim Pharmaceuticals, Inc., et.

The complaint has not yet been served on Novitium.

The complaint asserts claims of strict liability/failure to warn, strict liability/design defect, negligent failure to warn, negligent product design, general negligence, negligent misrepresentation, breach of express and implied warranties, and unjust enrichment.

At this point, there is no indication that the Plaintiff used a Novitium product.

ANI and Novitium dispute any liability in these MDL matters.

The plaintiff alleges that he was diagnosed with prostate cancer in 2017, before Novitium began selling generic ranitidine products, and that he took over the counter ranitidine that he purchased at Walgreens from 2008 to 2019.

At this point, the allegations show that the plaintiff’s alleged cancer injury could not have come from a Novitium product.

The generic manufacturer defendants filed a motion to dismiss on preemption grounds.

That motion is pending.

In August 2022, the Keller Postman law firm commenced six multi-plaintiff actions in Illinois state court naming generic ranitidine manufacturers, including ANI and/or Novitium, as defendants.

Those cases are:

(1) Jodee Gillespie v.

Walgreen Co., et.

, Circuit Court of the Third Judicial Circuit, Madison County, Illinois, Case No.

2022LA001007 (naming both Novitium and ANI);

(2) John Jackson v.

Walgreen Co., et.

, Circuit Court of the

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

Third Judicial Circuit, Madison County, Illinois, Case No.

2022LA001012 (naming Novitium);

(3) Ayesha Salahuddin v.

Walgreen Co., et.

al., Circuit Court of the Twentieth Judicial Circuit, St.

Clair County, Illinois, Case No.

22LA0709 (naming Novitium);

(4) Lashanda McGruder v.

Walgreen Co., et.

al., Circuit Court of the Third Judicial Circuit, Madison County, Illinois, Case No.

22LA0710 (naming both Novitium and ANI);

(5) Richard Devriendt v.

Walgreen Co., et.

al., Circuit Court of Cook County, Illinois, Case No.

2022L007429 (naming Novitium);

(6) Anthony Stigger v.

Walgreen Co., et.

al., Circuit Court of Cook County, Illinois, Case No.

2022L007396 (naming both Novitium and ANI).

The complaints allege causes of action for failure to warn, design defect, general negligence, loss of consortium and wrongful death.

Pursuant to an Order of the Illinois Supreme Court dated October 25, 2022, the pending ranitidine personal injury actions in Illinois have been consolidated in Cook County for coordinated pre-trial proceedings.

Those pre-trial proceedings are pending in the Circuit Court of Cook County before Judge Daniel A.

On January 12, 2023, Judge Trevino directed the plaintiffs to dismiss the multi-plaintiff actions and refile each individual plaintiff action under a separate case number.

The Keller Postman firm has communicated that it is complying with that directive.

At a status conference held on February 16, 2023, the court required that the plaintiffs re-file within 60 days.

The court also authorized use of a master complaint, which is due within 21 days.

The Keller Postman attorneys requested authority to bypass formal service of process for the refiled single-plaintiff actions, and serve the new complaints by email on outside counsel.

Judge Trevino authorized email service.

As of February 21, 2023, ANI and Novitium had not yet been served with any of the single-plaintiff complaints.

In August and September 2022, the Keller Postman law firm commenced seven multi-plaintiff actions in California state court, Alameda County, naming generic ranitidine manufacturers, including ANI and/or Novitium, as defendants.

Those cases are:

(1) Carlos Ascencio v.

ANI Pharmaceuticals, et.

al., Superior Court of California, County of Alameda, Case.

22CV016230 (naming both Novitium and ANI);

(2) Andre Lebeau v.

Actavis Mid Atlantic, LLC et.

al., Superior Court of California, County of Alameda, Case No.

22CV016448 (naming Novitium);

(3) Roque Torres v.

ANI Pharmaceuticals, Inc., et.

al., Superior Court of California, County of Alameda, Case No.

22CV016338 (naming both Novitium and ANI);

(4) Deborah Hinds v.

ANI Pharmaceuticals, Inc., et.

al., Superior Court of California, County of Alameda, Case No.

22CV016123 (naming both Novitium and ANI);

(5) Mark Cruz v.

ANI Pharmaceuticals, Inc., et.

al., Superior Court of California, County of Alameda, Case No.

22CV016338 (naming both Novitium and ANI);

(6) Bent Olsen v.

ANI Pharmaceuticals, Inc., et.

al., Superior Court of California, County of Alameda, Case No.

22CV016402 (naming both Novitium and ANI);

(7) John Norman v.

Actavis Mid Atlantic, LLC, et.

al., Superior Court of California, County of Alameda, Case No.

22CV018334 (naming Novitium).

The complaints allege causes of action for failure to warn, design defect, general negligence, loss of consortium and wrongful death.

By stipulation and order dated December 28, 2022, the cases were transferred to an existing civil case coordination docket for pretrial proceedings (JCCP) pending before Judge Evelio Grillo in Alameda County.

By order dated January 19, 2023, Judge Grillo ordered that counsel for the plaintiffs must dismiss the individual plaintiffs (other than the first-named plaintiff) from each of the multi-plaintiff complaints and that each of the dismissed plaintiffs must re-file their claims in a single plaintiff complaint.

As of February 21, 2023, ANI and Novitium had not yet been served with any of these single-plaintiff complaints.

As of February 21, 2023, the Company is aware of three single-plaintiff cases in which Novitium is named as a defendant:

David Duncan v.

GSK Holdings , No.

Charmaine Sili v.

GSK Holdings , No.

and Charles Crippen v.

Boehringer, No.

Pennsylvania .

In September 2022, two single-plaintiff complaints were filed in Pennsylvania state court, Philadelphia County, naming Novitium as a defendant:

(1) William Titus v.

Glaxo SmithKline LLC, et.

, Court of Common Pleas, Philadelphia County, Pennsylvania, Case No.

and (2) Jodi Woodard v.

Ajanta Pharma USA, Inc., et.

, Court of Common Pleas, Philadelphia County, Pennsylvania, Case No.

These complaints allege causes of action for negligence, failure to warn, negligent storage and transportation, breach of express and implied warranties, negligent misrepresentation, and fraud.

On February 16, 2023, the Pennsylvania plaintiffs filed a consolidated long-form complaint against the generic defendants, Plaintiffs v.

Civil Action No.

The long-form complaint names Novitium as a defendant.

The long form complaint asserts causes of action for negligence, failure to warn, negligent storage and transportation, breach of express warranties, breach of implied warranties, negligent misrepresentation, fraud, strict products liability, wrongful death and survivor

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

actions, and loss of consortium.

The complaint includes a prayer for punitive damages.

The court has not yet set a deadline for responsive pleadings.

ANI and Novitium dispute any liability in these matters.

Other Industry Related Matters

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However, no assurance can be given as to the timing or outcome of the investigation.

PURIFIED CORTROPHIN PRE-LAUNCH CHARGES

PURIFIED CORTROPHIN GEL PRE-LAUNCH CHARGES

In January 2016, we acquired the right, title and interest in the NDAs for Cortrophin Gel and Cortrophin-Zinc.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2021, 2020, and 2019

API via manufacture of commercial-scale batches, and executed a long-term commercial supply agreement with a current good manufacturing practice (“cGMP”) aseptic fill contract manufacturer.

Subsequently, we assembled a Cortrophin Gel re-commercialization team of scientists, executed a long-term supply agreement with a supplier of pig pituitary glands, our primary raw material for corticotrophin API, executed a long-term supply agreement with an API manufacturer, with whom we have advanced the manufacture of corticotropin API via manufacture of commercial-scale batches, and executed a long-term commercial supply agreement with a current good manufacturing practice (“cGMP”) aseptic fill contract manufacturer.

Prior to the third quarter 2019, all purchases of material, including pig pituitary glands and API, related to the re-commercialization efforts were consumed in research and development activities and recognized as research and development expense in the period in which they were incurred.

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Subsequent to approval, these purchases are recorded as inventory at net realizable value.

During the years ended December 31, 2021, 2020, and 2019, we incurred $ 0.8 million, $ 11.3 , million, and $ 6.7 million, respectively, of charges for the purchase of materials that were not capitalizable.

During the years ended December 31, 2021 and 2020, we recognized $ 0.8 million and $ 11.3 , million, respectively, of charges for the purchase of materials.

We also incurred other charges directly related to the Cortrophin pre-launch commercialization efforts, including, but not limited to, sales and marketing and consulting expenses.

During the year ended December 31, 2021, we incurred $ 14.0 million of these charges, which are included on the consolidated statements of operations as a selling, general, and administrative expense.

There were no comparable expenses in 2020 and 2019.

There were no comparable expenses in 2020.

RELATED PARTY TRANSACTIONS

On March 8, 2021, we entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership, pursuant to which we agreed to issue and sell 25,000 shares of our Series A Convertible Preferred Stock for a purchase price of $ 1,000 per share and an aggregate purchase price of $ 25.0 million.

On March 8, 2021, we entered into an Equity Commitment and Investment Agreement with the PIPE Investor, pursuant to which we agreed to issue and sell 25,000 shares of our PIPE Shares for a purchase price of $ 1,000 per share and an aggregate purchase price of $ 25.0 million.

This agreement closed and the shares were sold and issued for $ 25.0 million on November 19, 2021.

Our Chairman of the Board of Directors is an operating partner of Ampersand Capital Partners, an affiliate of Ampersand 2020 Limited Partnership.

The Chairman of our board of directors is an operating partner of Ampersand Capital Partners, an affiliate of the PIPE Investor.

In August 2020, we appointed Jeanne Thoma as a director of the Company.

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SPI supplies ingredients to the Company.

We made payments totaling approximately $ 352,000 and $ 208,000 in the years ended 2020, and 2019, respectively, to SPI, related to the purchase of ingredients.

We made payments totaling approximately $ 352,000 in the year ended 2020, to SPI, related to the purchase of ingredients.

In connection with our acquisition of Novitium, we entered into employment agreements with the two executives and founders of Novitium, Muthusamy Shanmugam and Chad Gassert.

Both will serve as executive officers of the Company and Mr.

Both serve as executive officers of the Company and Mr.

Shanmugam was also appointed to the board of directors.

Shanmugam holds a minority interest in Scitus Pharma Services (“Scitus”), which provides clinical research services to Novitium, majority interest in SS Pharma LLC (“SS Pharma”), which acquires and supplies API to Novitium, majority interest in Esjay Pharma LLC (“Esjay”), which provides research and development and facilities consulting services, and a minority interest in Nuray Chemical Private Limited (“Nuray”), which manufactures and supplies API to Novitium.

Shanmugam holds a minority interest in Scitus Pharma Services (“Scitus”), which provides clinical research services to Novitium, majority

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

interest in SS Pharma LLC (“SS Pharma”), which acquires and supplies API to Novitium, a minority interest in Nuray Chemical Private Limited (“Nuray”), which manufactures and supplies API to Novitium, and a majority interest in Esjay Pharma LLC (“Esjay”), which provided research and development and facilities consulting services through September 30, 2022.

Gassert holds a minority interest in Scitus.

During the period from November 19, 2021 and December 31, 2021, subsequent to our acquisition of Novitium, we paid Esjay an immaterial amount and paid Nuray $ 0.4 million.

As of December 31, 2021, the outstanding balances due to Scitus, SS Pharma, Esjay, and Nuray were $ 0.2 million, $ 0.1 million, $ 22 thousand, and $ 0.9 million, respectively.

SUBSEQUENT EVENT

On February 15, 2022, we settled an outstanding litigation with Azurity Pharmaceuticals, Inc.

Refer to Note 12 for more information.

A summary of our payments to related parties is presented below:

Years Ended December 31,

Scitus Pharma Services

SS Pharma LLC

Esjay Pharma LLC

Nuray Chemical Private Limited

(1) Includes payments during the period from November 19, 2021 to December 31, 2021, subsequent to our acquisition of Novitium.

As of December 31, 2022, the outstanding balances due to Scitus and SS Pharma were $ 45 thousand and $ 170 thousand, respectively.

There was no outstanding balance due to Nuray at December 31, 2022.

SEGMENT REPORTING

An operating segment is defined as a component of an entity that engages in business activities from which it may recognize revenues and incur expense, its operating results are regularly reviewed by the entity’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and its discrete financial information is available.

Prior to 2022, based on this definition, we had concluded that we had one operating segment.

Prior period segment disclosures have been recast for the new segment presentation.

Effective in the first quarter of 2022 and prospectively, in conjunction with the principal completion of our buildout of infrastructure in the areas of commercialization of rare disease therapies and the launch of Cortrophin Gel, we determined that we have two operating segments as follows:

● Generics, Established Brands, and Other – Consists of operations related to the development, manufacturing, and marketing of generic and established brand pharmaceuticals, including those sold through traditional channels, contract manufactured products, product development services, royalties, and other.

● Rare Disease – Consists of operations related to the development, manufacturing and marketing of pharmaceuticals used in the treatment of patients with rare conditions.

The rare disease segment currently consists of operations related to Cortrophin Gel.

Our CODM evaluates our two operating segments based on revenues and earnings before interest, income taxes, depreciation, and amortization (“EBITDA”), exclusive of corporate expenses and other expenses not directly allocated or attributable to an operating segment.

These expenses include, but are not limited to, certain management, legal, accounting, human resources, insurance, and information technology expenses.

We do not manage assets of the Company by operating segment and our CODM does not review asset information by operating segment.

Accordingly, we do not present total assets by operating segment.

Financial information by reportable segment, including historical information that has been retroactively re-cast to reflect our two operating segments, is as follows:

Year Ended December 31,

(in thousands)

Generics, Established Brands, and Other

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2022, 2021, and 2020

Total net revenues

Segment earnings/(loss) before interest, taxes, depreciation and amortization (“EBITDA”) and reconciliation to (loss)/income before income taxes

Generics, Established Brands, and Other

Depreciation and amortization

Corporate and other unallocated expenses (1)

Total operating loss

Interest expense, net

Other income/(expense), net

Loss before benefit for income taxes

(1) Includes expenses not directly allocated or attributable to a reporting segment, including certain management, legal, accounting, human resources, insurance, and information technology expenses, and are included in selling, general, and administrative expenses in our consolidated statement of operations.

Geographic Information

Our operations are located in the United States, Canada, and India.

The majority of the assets of the Company are located in the United States.

The following table depicts the Company’s revenue by geographic operations during the following periods:

(in thousands)

Years Ended December 31,

Location of Operations

United States

Total Revenue

The following table depicts the Company’s property and equipment, net according to geographic location as of:

(in thousands)

December 31, 2022

December 31, 2021

United States

Total property and equipment, net

(1) Amounts as of December 31, 2022 exclude the land and building at our Canada facility, which are classified as held for sale as of December 31, 2022.

These assets have a carrying value of $ 8.0 million.

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