What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-09 · 1032 added, 934 removed, 773 unchanged (72% of the section changed)

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

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.

and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income (loss), mezzanine equity and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, 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, 2023, 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 February 29, 2024 expressed an unqualified opinion.

Basis for Opinion

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(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.

The communication of critical audit matter 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 it relates.

Evaluation of Certain Assumptions impacting the Chargeback Accrual

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Amounts accrued for chargebacks as of December 31, 2023, are approximately $84.2 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.

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.

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 a significant judgment required by management with respect to measure 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.

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

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.

We recalculated the chargeback accrual for a selection of products, based on a combination of Company internal data, historical actual information, and executed third-party contract.

We performed a sensitivity analysis of the Company's accrual by recalculating the accrual using our independent assumptions.

We recalculated the chargeback accrual for a selection of products, based on a combination of Company internal data, historical accrual by recalculating the accrual using our independent assumptions.

We evaluated the Company’s ability to accurately estimate the accrual for chargebacks by comparing historically recorded accruals to the actual amount that was ultimately claimed by the wholesalers.

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Philadelphia, Pennsylvania

March 9, 2023

February 29, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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and Subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2023 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, 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.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as December 31, 2023, based on criteria established in the Internal Control - Integrated Framework ( 2013 ) issued by COSO.

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, 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.

and Subsidiaries as of December 31, 2023 and 2022, and the related consolidated statements of operations, comprehensive income (loss), mezzanine equity and stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023 and the related notes and our report dated February 29, 2024 expressed an unqualified opinion.

Basis for Opinion

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

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Philadelphia, Pennsylvania

March 9, 2023

February 29, 2024

ANI PHARMACEUTICALS, INC.

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(in thousands, except share and per share amounts)

2023 December 31,

Current Assets

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Accounts receivable, net of $ 97,262 and $ 161,052 of adjustments for chargebacks and other allowances at December 31, 2023 and 2022, respectively

Inventories, net

162,079 165,438

Inventories 111,196 105,355

Prepaid income taxes — 3,827

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Non-current Assets

Property and equipment

Accumulated depreciation

Property and equipment, net 44,593 43,246

Non-current restricted cash

Deferred tax assets, net of deferred tax liabilities and valuation allowance 90,711 81,363

Intangible assets, net 209,009 251,635

Goodwill 28,221 28,221

Derivatives and other non-current assets 12,072 11,361

Total Assets $ 904,422 $ 760,087

Liabilities, Mezzanine Equity, and Stockholders’ Equity

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Accrued government rebates 12,168 10,872

Income taxes payable 8,164 —

Returned goods reserve 29,678 33,399

Current contingent consideration 12,266 —

Accrued expenses and other 5,606 5,394

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Non-current debt, net of deferred financing costs and current component 284,819 285,669

Non-current contingent consideration

Derivatives and other non-current liabilities

Non-current contingent consideration, net of current 11,718 35,058

Other non-current liabilities 4,809 1,381

Total Liabilities $ 446,823 $ 421,547

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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, 2022 and December 31, 2021

25,000 shares issued and outstanding at December 31, 2023 and 2022

24,850 24,850

Stockholders’ Equity

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Class C Special Stock, $ 0.0001 par value, 781,281 shares authorized;

10,864 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

10,864 shares issued and outstanding at December 31, 2023 and 2022 respectively

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

0 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

0 shares issued and outstanding at December 31, 2023 and 2022, respectively

Treasury stock, 263,943 shares of common stock, at cost, at December 31, 2023 and 149,031 shares of common stock, at cost, at December 31, 2022

( 10,081 ) ( 5,094 )

Additional paid-in capital 514,103 403,901

Accumulated deficit ( 80,132 ) ( 97,286 )

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

Accumulated other comprehensive income, net of tax 8,857 12,168

Total Stockholders’ Equity 432,749 313,690

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Years Ended December 31,

2023 2022 2021

Net Revenues $ 486,816 $ 316,385 $ 216,136

Operating Expenses

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Total Operating Expenses 439,845 351,668 255,929

Operating Loss

Operating Income (Loss) 46,971 ( 35,283 ) ( 39,793 )

Other Expense, net

Interest expense, net ( 26,940 ) ( 28,052 ) ( 11,922 )

Other income/(expense), net

Loss Before Benefit for Income Taxes

Benefit for income taxes

Other (expense) income, net ( 159 ) 670 ( 4,343 )

Income (Loss) Before Expense (Benefit) for Income Taxes 19,872 ( 62,665 ) ( 56,058 )

Income tax expense (benefit) 1,093 ( 14,769 ) ( 13,455 )

Net Income (Loss) $ 18,779 $ ( 47,896 ) $ ( 42,603 )

Dividends on Series A Convertible Preferred Stock $ ( 1,625 ) $ ( 1,625 ) $ ( 190 )

Net Loss Available to Common Shareholders

Basic and Diluted Loss Per Share:

Basic Loss Per Share

Diluted Loss Per Share

Net Income (Loss) Available to Common Shareholders $ 17,154 $ ( 49,521 ) $ ( 42,793 )

Basic and Diluted Income (Loss) Per Share:

Basic Income (Loss) Per Share $ 0.86 $ ( 3.05 ) $ ( 3.40 )

Diluted Income (Loss) Per Share $ 0.85 $ ( 3.05 ) $ ( 3.40 )

Basic Weighted-Average Shares Outstanding 18,001 16,260 12,596

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AND SUBSIDIARIES

Consolidated Statements of Comprehensive (Loss)/Income

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Years Ended December 31,

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

2023 2022 2021

Net income (loss) $ 18,779 $ ( 47,896 ) $ ( 42,603 )

Other comprehensive (loss) income, net of tax:

Foreign currency translation adjustment 44 ( 112 ) 12

Gains/(losses) on interest rate swap

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

Total comprehensive loss, net of tax

(Loss) gain on interest rate swap ( 3,355 ) 15,335 8,370

Total other comprehensive (loss) income, net of tax ( 3,311 ) 15,223 8,382

Total comprehensive income (loss), net of tax $ 15,468 $ ( 32,673 ) $ ( 34,221 )

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

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Mezzanine Equity

Accumulated Other

Series A Convertible

Stock Mezzanine Equity

Series A Convertible

Preferred Stock

Shares Common

Par Value Common

Shares Class C

Stock Additional

Capital Treasury

Shares Treasury

Stock Accumulated Other

Comprehensive

Net of Tax Accumulated

Deficit Total

Mezzanine Equity

Preferred Stock

and Stockholders'

Balance, December 31, 2020 $ — — $ 1 12,430 $ — $ 214,354 76 $ ( 2,246 ) $ ( 11,437 ) $ ( 4,972 ) $ 195,700

Cumulative Effect of Change in Accounting Principle, Net of Tax

Stock-based Compensation Expense — — — — — 10,489 — — — — 10,489

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Issuance of Restricted Stock Awards — — — 541 — — — — — — —

Restricted Stock Awards Forfeitures — — — ( 81 ) — ( 1 ) ( 21 ) — — — ( 1 )

Issuance of Common Stock for Novitium Acquisition — — — 2,467 — 91,199 — — — 91,199

Issuance of Common Stock in Public Offering — — — 1,500 — 69,734 — — — — 69,734

Dividends on Convertible Preferred Stock — — — — — — — — — ( 190 ) ( 190 )

Issuance of Series A Convertible Preferred Stock from Mezzanine Equity 24,850 25 — — — — — — — — 24,850

Other comprehensive income — — — — — — — — 8,382 — 8,382

Net Loss — — — — — — — — — ( 42,603 ) ( 42,603 )

Balance, December 31, 2021 $ 24,850 25 $ 1 16,913 $ — $ 387,844 83 $ ( 3,135 ) $ ( 3,055 ) $ ( 47,765 ) $ 358,740

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Restricted Stock Awards Forfeitures — — — ( 69 ) — — — — — — —

Issuance of Common Stock for Novitium Acquisition

Issuance of Common Stock in Public Offering

Dividends on Convertible Preferred Stock — — — — — — — — — ( 1,625 ) ( 1,625 )

Issuance of Series A Convertible Preferred Stock from Mezzanine Equity

Other comprehensive income — — — — — — — — 15,223 — 15,223

Net Loss — — — — — — — — — ( 47,896 ) ( 47,896 )

Balance, December 31, 2022 $ 24,850 25 $ 1 17,644 $ — $ 403,901 149 $ ( 5,094 ) $ 12,168 $ ( 97,286 ) $ 338,540

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Issuance of Restricted Stock Awards — — — 674 — — — — — — —

Restricted Stock Awards Forfeitures

Issuance of Performance Stock Units — — — 85 — — — — — — —

Restricted Stock Awards and Performance Stock Units Forfeitures — — — ( 83 ) — ( 1 ) — — — — ( 1 )

Issuance of Common Stock in Public Offering, net of offering costs — — 1 2,184 — 80,555 — — — — 80,556

Dividends on Convertible Preferred Stock — — — — — — — — — ( 1,625 ) ( 1,625 )

Other comprehensive income

Other comprehensive loss — — — — — — — — ( 3,311 ) — ( 3,311 )

Net Income — — — — — — — — — 18,779 18,779

Balance, December 31, 2023 $ 24,850 25 $ 2 20,731 $ — $ 514,103 264 $ ( 10,081 ) $ 8,857 $ ( 80,132 ) $ 457,599

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Year Ended December 31,

2023 2022 2021

Cash Flows From Operating Activities

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

Net income (loss) $ 18,779 $ ( 47,896 ) $ ( 42,603 )

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

Stock-based compensation 20,652 14,599 10,489

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Depreciation and amortization 59,791 59,653 47,252

Acquired in-process research and development ("IPR&D")

Acquired in-process research and development ("IPR&D") — 1,151 —

Non-cash operating lease expense 1,269 — —

Non-cash interest 3,922 3,961 2,512

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Accounts receivable, net 3,359 ( 36,912 ) ( 5,548 )

Inventories, net

Inventories ( 5,841 ) ( 23,626 ) 3,224

Prepaid expenses and other current assets ( 9,015 ) ( 798 ) 127

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Accrued expenses, accrued compensation, and other 12,271 ( 905 ) ( 3,638 )

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

Net Cash and Cash Equivalents Provided by (Used in) Operating Activities 118,959 ( 31,203 ) 3,322

Cash Flows From Investing Activities

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Cash Flows From Financing Activities

Proceeds from public offering, net of transaction expenses 80,555 — 69,584

Payments on contingent consideration ( 12,500 ) — —

Payments on Term Loan and Delayed Draw Term Loan agreements — — ( 10,862 )

Payments on borrowings under credit agreements ( 3,000 ) ( 3,000 ) —

Payments on Revolver agreement

Borrowings under Prior Revolver agreement — — 24,000

Repayment of Prior Credit Facility — — ( 200,148 )

Borrowings under the Credit Facility

Borrowings under the Credit Facility, net of issuance costs — — 286,032

Proceeds from issuance of convertible preferred stock — — 25,000

Series A convertible preferred stock dividends paid ( 1,625 ) ( 1,625 ) ( 190 )

Proceeds from issuance of common stock in public offering

Cash paid for costs of share issuances

Proceeds from stock option exercises and ESPP purchases 8,996 1,458 2,069

Payments of debt issuance costs

Treasury stock purchases for restricted stock vests ( 4,987 ) ( 1,959 ) ( 890 )

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

Net Cash and Cash Equivalents Provided by (Used in) Financing Activities 67,439 ( 5,126 ) 194,595

Net Change in Cash and Cash Equivalents 167,887 ( 52,067 ) 92,434

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Reconciliation of cash, cash equivalents, and restricted cash, beginning of period

Cash and cash equivalents, beginning of year 53,234 105,301 12,867

Cash and cash equivalents, end of year $ 221,121 $ 53,234 $ 105,301

Year Ended December 31,

2023 2022 2021

Reconciliation of cash, cash equivalents, and restricted cash, beginning of year

Cash and cash equivalents 48,228 100,300 7,864

Restricted cash 5,006 5,001 5,003

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

Reconciliation of cash, cash equivalents, and restricted cash, end of period

Cash, cash equivalents, and restricted cash, beginning of year $ 53,234 $ 105,301 $ 12,867

Reconciliation of cash, cash equivalents, and restricted cash, end of year

Cash and cash equivalents 221,121 48,228 100,300

Restricted cash — 5,006 5,001

Cash, cash equivalents, and restricted cash, end of period

Cash, cash equivalents, and restricted cash, end of year $ 221,121 $ 53,234 $ 105,301

Supplemental disclosure for cash flow information:

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Cash paid for income taxes $ 1,228 $ 288 $ 10,371

Right-of-use assets obtained in exchange for lease obligations $ 4,715 $ — $ —

Supplemental non-cash investing and financing activities:

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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.

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.

The team is focused on delivering growth by scaling up the Rare Disease business through the successful launch of its lead asset, Cortrophin Gel, strengthening our generics business with enhanced development capability, innovation in established brands and leveraging our North American manufacturing capabilities.

The Company owns and operates three pharmaceutical manufacturing facilities, of which two are located in Baudette, Minnesota, and one is located in East Windsor, New Jersey, 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.

The Company has ceased operations at the Oakville, Ontario, manufacturing facility as of March 31, 2023.

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

The Company has fully completed the transition of the products manufactured or packaged at Oakville to one of the three U.S.-based manufacturing sites.

On November 6, 2023, ANI Pharmaceuticals Canada Inc., a wholly owned subsidiary of the Company, entered into an agreement for the sale of the Oakville, Ontario manufacturing facility, however, the agreement was subsequently terminated in December 2023 by mutual agreement.

In February 2024, the Company entered into an agreement for the purchase and sale of the Oakville site, for a purchase price of 19.2 million Canadian Dollars, or approximately $ 14.2 million US Dollars, based on the current exchange rate.

The sale is expected to close in March 2024 (Note 19).

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Principles of Consolidation

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Foreign Currency

We have subsidiaries located in Canada and India.

The Canada-based subsidiary conducts its transactions in U.S.

dollars and Canadian dollars, but its functional currency is the U.S.

The Company has ceased operations at our subsidiary in Oakville, Ontario, Canada as of March 31, 2023.

The Company currently has a subsidiary located in India.

The Canada-based subsidiary conducted its transactions in U.S.

dollars and Canadian dollars, but its functional currency was the U.S.

The Indian-based subsidiary generally conducts its transactions in Indian rupees, which is also its functional currency.

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dollars at the applicable exchange rates during the period and resulting foreign currency transaction gains and losses are included in the determination of net income.

Our gain or loss on transactions denominated in foreign currencies and the translation impact of local currencies to U.S.

The gain or loss on transactions denominated in foreign currencies and the translation impact of local currencies to U.S.

dollars was immaterial for the years ended December 31, 2023, 2022, and 2021.

Unless otherwise noted, all references to “$” or “dollar” refer to the U.S.

Use of Estimates

The preparation of financial statements in conformity with U.S.

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, 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.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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.

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 others.

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

There was no material impact to these estimates or assumptions in our consolidated financial statements as of and for the years ended December 31, 2022 and 2021.

Actual results could differ from those estimates, which may change our estimates in future periods.

We continue to closely monitor the impact of the COVID-19 pandemic on our business.

At the inception of a contract we determine if the arrangement is, or contains, a lease.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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

Rent expense is recognized on a straight-line basis over the lease term.

We have made certain accounting policy elections whereby we (i) do not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months or less) and (ii) combine lease and non-lease elements of our operating leases.

Operating lease ROU assets are included in other non-current assets and operating lease liabilities are included in accrued expenses and other and derivatives and other non-current liabilities in our consolidated balance sheets.

As of December 31, 2022, we did not have any finance leases.

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, which consists of foreign currency translation.

Credit Concentration

Our customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and other pharmaceutical companies.

During the years ended December 31, 2022 and 2021 we had three customers that accounted for 10% or more of net revenues.

As of December 31, 2022, accounts receivable from these customers totaled 82 % of accounts receivable, net.

The three customers represent the total percentage of net revenues as follows:

Years Ended December 31,

Vendor Concentration

We source the raw materials for products, including active pharmaceutical ingredients (“API”), from both domestic and international suppliers.

Generally, only a single source of API is qualified for use in each product due to the costs and time required to validate a second source of supply.

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, 2022, we purchased approximately 19 % 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

The Company’s asset and liability accounts are translated using the current exchange rate as of the balance sheet date, except for shareholders’ equity accounts, intercompany, and fixed assets, which are translated using historical rates.

Net revenues and expense accounts are translated using an average exchange rate over the period ended on the balance sheet date.

Adjustments resulting from the translation of the financial statements of the Company’s foreign subsidiaries into U.S.

dollars are accumulated as a separate component of shareholders’ equity within accumulated other comprehensive income (loss), net of tax.

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2023, 2022, and 2021

represented at least 10% of inventory purchases.

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

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

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 potential adjustments, income tax expense or benefit, deferred taxes and valuation allowance, stock-based compensation, 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, and the depreciable lives of long-lived assets.

The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances.

Actual results could differ from such estimates.

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

Restructuring Activities

The Company defines 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 the consolidated statements of operations.

Revenue Recognition

We recognize revenue using the following steps:

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers .

Revenue is recognized using the following steps:

• Identification of the contract, or contracts, with a customer;

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• Recognition of revenue when we satisfy a performance obligation.

We derive our revenues primarily from sales of generic and branded pharmaceutical products.

Revenue is recognized when our obligations under the terms of our contracts with customers are satisfied, which generally occurs when control of the products we sell is transferred to the customer.

We estimate variable consideration after considering applicable information that is reasonably available.

We generally do not have incremental costs to obtain contracts that would otherwise not have been incurred.

We do not adjust revenue for the promised amount of consideration for the effects of a significant financing component because our customers generally pay us within 100 days.

All revenue recognized in our consolidated statements of operations is considered to be revenue from contracts with customers.

The following table depicts the disaggregation of revenue:

Products and Services

Years Ended December 31,

(in thousands)

Sales of generic pharmaceutical products

Sales of established brand pharmaceutical products

Sales of rare disease pharmaceutical products

Sales of contract manufactured products

Royalties from licensing agreements

Product development services

Total net revenues

Timing of Revenue Recognition

Years Ended December 31,

(in thousands)

Performance obligations transferred at a point in time

Performance obligations transferred over time

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

We had less than $ 0.1 million

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

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 branded pharmaceutical products, including rare disease pharmaceutical products.

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

Our products are sold at pre-determined standalone selling prices and our performance obligation is considered to be satisfied when control of the product is transferred to the customer.

Control is generally transferred to the customer upon delivery of the product to the customer, as our pharmaceutical products are generally sold on an FOB destination basis and because inventory risk and risk of ownership passes to the customer upon delivery.

Payment terms for these sales are generally less than 100 days.

Revenue from Distribution Agreements

From time to time, we enter into marketing and distribution agreements with third parties in which we sell products under Abbreviated New Drug Applications (“ANDAs”) or New Drug Applications (“NDAs”) owned or licensed by these third parties.

These products are sold under our own label.

We have assessed and determined that we control the products sold under these marketing and distribution agreements and therefore are the principal for sales under each of these marketing and distribution agreements.

As a result, we recognize revenue on a gross basis when control has passed to the customer and we have satisfied our performance obligation.

Under these agreements, we pay these third parties a specified percentage of the gross profit earned on sales of the products.

These profit-sharing percentages are recognized in cost of sales in our consolidated statements of operations and are accrued in accrued royalties in our consolidated balance sheets until payment has occurred.

Sales of our pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative and other rebates, and cash discounts.

The Company derives its revenues primarily from sales of generic, rare disease, and established brand pharmaceutical products, royalties, and other pharmaceutical services.

Revenue is recognized when obligations under the terms of contracts with customers are satisfied, which generally occurs when control of the products sold is transferred to the customer.

Generally, the Company does not incur incremental costs to obtain contracts that would otherwise not have been incurred.

The Company has not identified any agreements or arrangement that would qualify as a significant financing component.

Sales of pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative and other rebates, and cash discounts.

Estimates for these elements of variable consideration require significant judgment.

Chargebacks, primarily from wholesalers, result from arrangements we have with indirect customers establishing prices for products which the indirect customer purchases through a wholesaler.

Alternatively, we may pre-authorize wholesalers to offer specified contract pricing to other indirect customers.

Under either arrangement, we provide a chargeback credit to the wholesaler for any difference between the contracted price with the indirect customer and the wholesaler’s invoice price, typically Wholesale Acquisition Cost (“WAC”).

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.

This calculation is performed by product by wholesaler.

ASPs can be affected by several factors such as:

● A change in customer mix

● A change in negotiated terms with customers

● A change in the volume of off-contract purchases

● Changes in WAC

As necessary, we adjust ASPs based on anticipated changes in the factors above.

The difference between ASP and WAC is recorded as a reduction in both gross revenues in our consolidated statements of operations and accounts receivable in the consolidated balance sheets, at the time we recognize revenue from the product sale.

To evaluate the adequacy of our chargeback accruals, we obtain on-hand inventory counts from the wholesalers.

This inventory is multiplied by the chargeback amount, the difference between ASP and WAC, to arrive at total

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2023, 2022, and 2021

expected future chargebacks, which is then compared to the chargeback accruals.

We continually monitor chargeback activity and adjust ASPs when we believe that actual selling prices will differ from current ASPs.

Government Rebates

Our government rebates reserve consists of estimated payments due to governmental agencies for purchases made by third parties under various governmental programs.

The two largest government programs that impact our net revenue and our government rebates reserve are federal and state Medicaid rebate programs and Medicare.

We participate in certain qualifying federal and state Medicaid rebate programs whereby discounts and rebates are provided to participating programs after the final dispensing of the product by a pharmacy to a Medicaid plan participant.

Medicaid rebates are typically billed up to 120 days after the product is shipped.

Medicaid rebate amounts per product unit are established by law, based on the Average Manufacturer Price (“AMP”), which is reported on a monthly and quarterly basis, and, in the case of branded products, best price, which is reported on a quarterly basis.

Our Medicaid reserves are based on expected claims from state Medicaid programs.

Estimates for expected claims are driven by patient usage, sales mix, calculated AMP or best price, as well as inventory in the distribution channel that will be subject to a Medicaid rebate.

As a result of the delay between selling the products and rebate billing, our Medicaid rebate reserve includes both an estimate of outstanding claims for end-customer sales that have occurred but for which the related claim has not been billed, as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through to plan participants.

Many of our products are also covered under Medicare.

We, like all pharmaceutical companies, must provide a discount for any products sold under NDAs to Medicare Part D participants.

This applies to all products sold under NDAs, regardless of whether the products are marketed as branded or generic.

Our estimates for these discounts are based on historical experience with Medicare rebates for our products.

While such experience has allowed for reasonable estimations in the past, history may not always be an accurate indicator of future rebates.

Medicare rebates are typically billed up to 120 days after the product is shipped.

As a result of the delay between selling the products and rebate billing, our Medicare rebate reserve includes both an estimate of outstanding claims for end-customer sales that have occurred but for which the related claim has not been billed, as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through to Medicare Part D participants.

To evaluate the adequacy of our government rebate reserves, we review the reserves on a quarterly basis against actual claims data to ensure the liability is fairly stated.

We continually monitor our government rebate reserve and adjust our estimates if we believe that actual government rebates may differ from our established accruals.

Accruals for government rebates are recorded as a reduction to gross revenues in our consolidated statements of operations and as an increase to accrued government rebates in the consolidated balance sheets.

We maintain a return policy that allows customers to return product within a specified period prior to and subsequent to the expiration date.

Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration date.

Our product returns are settled through the issuance of a credit to the customer.

Our estimate for returns is based upon historical experience with actual returns.

While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns.

We continually monitor our estimates for returns and make adjustments when we believe that actual product returns may differ from the established accruals.

Accruals for returns are recorded as a reduction to gross revenues in our consolidated statements of operations and as an increase to the return goods reserve in the consolidated balance sheets.

Administrative Fees and Other Rebates

Administrative fees or rebates are offered to wholesalers, group purchasing organizations, and indirect customers.

We accrue for fees and rebates, by product by wholesaler, at the time of sale based on contracted rates and ASPs.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

To evaluate the adequacy of our administrative fee accruals, we obtain on-hand inventory counts from the wholesalers.

This inventory is multiplied by the ASPs to arrive at total expected future sales, which is then multiplied by contracted rates.

The result is then compared to the administrative fee accruals.

We continually monitor administrative fee activity and adjust our accruals when we believe that actual administrative fees will differ from the accruals.

Accruals for administrative fees and other rebates are recorded as a reduction in both gross revenues in our consolidated statements of operations and accounts receivable in the consolidated balance sheets.

Prompt Payment Discounts

We often grant sales discounts for prompt payment.

The reserve for prompt payment discounts is based on invoices outstanding.

We assume, based on past experience, that all available discounts will be taken.

Accruals for prompt payment discounts are recorded as a reduction in both gross revenues in our consolidated statements of operations and accounts receivable in the consolidated balance sheets.

The following table summarizes activity in the consolidated balance sheets for accruals and allowances for the years ended December 31, 2022, 2021, and 2020:

Accruals for Chargebacks, Returns, and Other Allowances

Administrative

Fees and Other

(in thousands)

Balance at December 31, 2020 (1)

Accruals/Adjustments

Credits Taken Against Reserve

Balance at December 31, 2021 (1)

Accruals/Adjustments

Credits Taken Against Reserve

Balance at December 31, 2022 (1)

(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.

Returns are included in returned goods reserve in the consolidated balance sheets.

Government Rebates are included in accrued government rebates in the consolidated balance sheets.

Revenue from Distribution Agreements

From time to time, the Company may enter into marketing and distribution agreements with third parties in which products are sold under Abbreviated New Drug Applications (“ANDAs”) or New Drug Applications (“NDAs”) owned or licensed by third parties.

These products are sold under the ANI label.

The Company controls the products sold under these marketing and distribution agreements and therefore are the principal for sales under each of these marketing and distribution agreements.

As a result, revenue is recognized on a gross basis when control has passed to the customer and the performance obligation has been satisfied.

Under these agreements, the Company pays third parties a specified percentage of the gross profit earned on sales of the products.

These profit-sharing percentages are recognized in cost of sales in the consolidated statements of operations and are accrued in accrued royalties in the consolidated balance sheets until payment has occurred.

Contract Manufacturing Product Sales Revenue

Contract manufacturing arrangements consist of agreements in which we manufacture a pharmaceutical product on behalf of a third party.

Our performance obligation is to manufacture and provide pharmaceutical products to customers, typically pharmaceutical companies.

The contract manufactured products are sold at pre-determined standalone selling prices and our performance obligations are considered to be satisfied when control of the product is transferred to the customer.

Control is transferred to the customer when the product leaves our dock to be shipped to the customer, as our contract manufactured pharmaceutical products are sold on an FOB shipping point basis and the inventory risk and risk of ownership passes to the customer at that time.

Contract manufacturing arrangements consist of agreements in which pharmaceutical products are manufactured by the Company on behalf of a third party.

The performance obligation is to manufacture and provide pharmaceutical products to customers, typically pharmaceutical companies.

The products are sold at predetermined standalone selling prices and the performance obligation is considered to be satisfied when control of the product is transferred to the customer.

Control is transferred to the customer when the product leaves the shipping dock to be shipped to the customer, as contract manufactured pharmaceutical products are sold on an FOB shipping point basis and the inventory risk and risk of ownership passes to the customer at that time.

Payment terms for these sales are generally fewer than two months.

We estimate returns based on historical experience.

Historically, we have not had material returns for contract manufactured products.

As of December 31, 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations for all open contract manufacturing customer contracts was $ 4.3 million, which consists of firm orders for contract manufactured products.

We will recognize revenue for these performance obligations as they are satisfied, which is anticipated within six months .

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

Typically, there are no material returns for contract manufactured products.

Royalties from Licensing Agreements

From time to time, we enter into transition agreements with the sellers of products we acquire, under which we license to the seller the right to sell the acquired products.

Therefore, we recognize the revenue associated with sales of the underlying products as royalties.

Because these royalties are sales-based, we recognize the revenue when the underlying sales occur, based on sales and gross profit information received from the sellers.

Upon full transition of the products and upon launching the products under our own labels, we recognize revenue for the products as sales of generic or branded pharmaceutical products, as described above.

From time to time, we enter into supply and distribution agreements with contract manufacturing customers, under which we license to the contract manufacturing customer the right to sell our products, and we are entitled to a royalty on sales made by the contract manufacturing customer under these arrangements.

Therefore, we recognize the revenue associated with sales of the underlying products as royalties.

Because these royalties are sales-based, we recognize the revenue when the underlying sales occur, based on sales and gross profit information received from the contract manufacturing customers.

Pursuant to a 2012 Tripartite Agreement (the “Tripartite Agreement”) between the Company, The Regents of the University of California (“The Regents”), and Cabaret Biotech Ltd., an Israeli corporation (“Cabaret”) (as assignee of Dr.

Zelig Eshhar’s rights under the Tripartite Agreement), and subsequent amendments thereto and assignments thereof, we were entitled to receive a percentage of the milestone and sales royalty payments paid to Cabaret by Kite Pharma, Inc.

(“Kite”), a subsidiary of Gilead Sciences, Inc., under a license agreement.

Under such license agreement, Kite licensed from Dr.

Eshhar and Cabaret the patent rights covered by the Tripartite Agreement and agreed to make certain payments to Cabaret based on, among other things, Kite’s sales of Yescarta®.

Under the Tripartite Agreement, portions of these payments were to be distributed to The Regents and to us.

Historically, we recorded royalty income related to Yescarta® on an accrual basis utilizing our best estimate of royalties earned based upon information available in the public domain, our understanding of the various agreements governing the royalty, and other information received from time to time from the relevant parties.

Generally, cash was received directly from Cabaret once a year.

The agreements governing this royalty were subject to multiple actions in multiple jurisdictions, including litigation between Cabaret and Kite, and separately, ANI and Cabaret.

In the first quarter of 2021, we became aware that the litigation between Cabaret and Kite was dismissed.

In April 2021, Cabaret and the Company settled all amounts due for amounts actually received by Cabaret or Eshhar for the licensing or use of the patent rights governed by the Kite license agreement.

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, 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, 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 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 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.

From time to time, the Company enters into licensing agreements, under which the Company licenses to the seller the right to sell the acquired products.

Because these royalties are sales-based, the Company recognizes the revenue when the underlying sales occur, based on sales and gross profit information received from the sellers.

The Company may enter into agreements which include profit-sharing percentages on gross profits.

The profit-sharing percentages are recorded in cost of sales in the consolidated statements of operations when the associated revenue is recognized and are recorded in accrued royalties in the consolidated balance sheets when the associated revenue is recognized and until payment has occurred.

Cash, Cash Equivalents, and Restricted Cash

All highly liquid investments with original maturities of three months or less from the date of purchase are classified as cash equivalents.

Cash and cash equivalents consist of cash deposited in checking accounts, time deposits with maturities of less than three months, and money market accounts with maturities of three months or less at the date of purchase.

Cash and cash equivalents include cash on-hand and money market funds which invest exclusively in high-quality, short-term securities that are issued or guaranteed by the U.S.

Due to the short-term maturity of the funds invested in the money market accounts, the carrying amounts are a reasonable estimate of fair value.

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

The majority of the Company's cash balances are in excess of FDIC coverage, which the Company considers to be a normal business risk.

Restricted cash at December 31, 2022, represented $ 5.0 million of funds held in a bank account owned by the Company to be used to pay for future milestones related to the purchase of the rights, title, and interest in the NDA for Inderal LA, as well as certain documentation, trademark rights, and finished goods from Cranford Pharmaceuticals, LLC in April 2016.

This amount was was released from restricted cash during the first quarter of the year ended December 31, 2023.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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.

We consider this to be a normal business risk.

In April 2016, we purchased the rights, title, and interest in the NDA for Inderal LA, as well as certain documentation, trademark rights, and finished goods from Cranford Pharmaceuticals, LLC for $ 60.0 million in cash and milestone payments based on future gross profits from sales of products under the NDA.

Additionally, we transferred $ 5.0 million to an escrow account as security for future milestone payments.

This escrow account balance is included in restricted cash in our consolidated balance sheet as of December 31, 2022.

Accounts Receivable

We extend credit to customers on an unsecured basis.

We measure expected credit losses on our financial assets at amortized cost, including trade and unbilled receivables, on a collective basis, based on their similar risk characteristics.

The Company extends credit to customers on an unsecured basis.

Expected credit losses are measured at amortized cost, including trade and unbilled receivables, on a collective basis, based on their similar risk characteristics.

Expected credits losses are based on historical credit loss experience, review of the current aging or status of accounts receivable and current and forward-looking views from an economic and industry perspective.

We determine trade receivables to be delinquent when greater than 30 days past due.

Receivables are written off when it is determined that amounts are uncollectible.

Our allowance for credit losses was immaterial as of December 31, 2022 and 2021.

The allowance for credit losses was immaterial as of December 31, 2023 and 2022.

Inventories consist of raw materials, packaging materials, work-in-progress, and finished goods.

Inventories are stated at the lower of standard cost or net realizable value.

We periodically review and adjust standard costs, which generally approximate weighted average cost.

The Company periodically reviews and adjusts standard costs, which generally approximate weighted average cost.

Property and Equipment

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Depreciation is recorded on a straight-line basis over estimated useful lives as follows:

Buildings and improvements

Machinery, furniture, and equipment

Construction in progress consists of multiple projects, primarily related to new equipment to expand our manufacturing capability as our product lines grow.

Classification Years

Buildings and improvements 20 - 40 years

Leasehold improvements Shorter of asset's useful life or remaining life of lease

Machinery, furniture, and equipment 3 - 10 years

Construction in progress consists of multiple projects, primarily related to new equipment and expansion of laboratory and manufacturing facilities to expand manufacturing capability as product lines grow.

Construction in progress includes the cost of construction and other direct costs attributable to the construction, along with capitalized interest.

Depreciation is not recorded on construction in progress until such time as the assets are placed in service.

We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset.

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No impairment loss related to property and equipment was recognized during the years ended December 31, 2023, 2022, and 2021.

Assets held for disposal are reportable at the lower of the carrying amount or fair value, less costs to sell.

No assets were held for disposal as of December 31, 2022 and 2021.

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

Assets Held-for-Sale

The Company classifies assets held-for-sale if all held-for-sale criteria is met pursuant to ASC 360-10, Property, Plant and Equipment .

Criteria include management commitment to sell the disposal group in its present condition and the sale being deemed probable of being completed within one year.

Assets classified as held-for-sale are not depreciated and are measured at the lower of their carrying amount or fair value less cost to sell.

The Company assesses the fair value of a disposal group, less any costs to sell, each reporting period it remains classified as held-for-sale and reports any subsequent changes as an adjustment to the carrying value of the disposal group, as long as the new carrying value does not exceed the initial carrying value of the disposal group.

The Company determined that the Oakville, Ontario, Canada property met the held-for-sale criteria.

As of December 31, 2023 and 2022, approximately $ 8.0 million of assets held for sale were recorded on the consolidated balance sheets.

See Note 4 to the consolidated financial statements for additional information.

ANI Pharmaceuticals, Inc.

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For the years ended December 31, 2023, 2022, and 2021

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.

In the case of certain NDA and product rights, we use an accelerated amortization method to better match the anticipated economic benefits expected to be provided.

Operating lease right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Rent expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheet, and the Company does not separate lease and non-lease components of contracts.

There are no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants included in the Company’s lease agreements.

Operating lease ROU assets are included in other non-current assets and operating lease liabilities are included in accrued expenses and other and other non-current liabilities in the consolidated balance sheets.

As of December 31, 2023 and 2022, the Company did not have any finance leases.

Intangible Assets

Intangible assets with definite lives are amortized based on their pattern of economic benefit over their estimated useful lives and reviewed periodically for impairment.

In the case of certain NDA and product rights, an accelerated amortization method is used to better match the anticipated economic benefits expected to be provided.

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.

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.

Our indefinite-lived intangible assets other than goodwill include in-process research and development (“IPR&D”) projects.

During the year ended December 31, 2023, no impairment charges were recognized on intangible assets..

During the year ended December 31, 2022, the Company 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, the Company recognized an impairment charge of $ 2.4 million related to a definite-lived ANDA intangible asset.

No events or circumstances arose in 2023, 2022, or 2021 that indicated that the carrying value of any of the other definite-lived intangible assets may not be recoverable.

Indefinite-lived intangible assets other than goodwill include in-process research and development (“IPR&D”) projects.

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.

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.

Indefinite-lived intangibles are tested for impairment 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.

Judgment is used in determining when these events and circumstances arise.

If we determine that the carrying value of the assets may not be recoverable, judgment and estimates are used to assess the fair value of the assets and to determine the amount of any impairment loss.

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

Goodwill relates to the 2013 merger with BioSante Pharmaceuticals, Inc.

and the acquisitions of WellSpring and Novitium, and represents the excess of the total purchase consideration over the fair value of acquired assets and assumed liabilities, using the purchase method of accounting.

No events or circumstances arose in 2023 that indicated that the carrying value of any of the indefinite-lived intangible assets may not be recoverable.

Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost, using the purchase method of accounting, and is related to past business combinations with BioSante Pharmaceuticals, Inc., WellSpring, and Novitium.

Goodwill is not amortized, but is subject to periodic review for impairment.

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 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.

When performing the qualitative assessment, we evaluate events and circumstances that would affect the significant inputs used to determine the fair value of the goodwill.

Events and circumstances evaluated include macroeconomic conditions that could affect us, industry and market considerations for the generic pharmaceutical industry that could affect us, cost factors that could affect our performance, our financial performance (including share price), and consideration of any company-specific events that could negatively affect us, our business, or the fair value of our business.

If we determine that it is more likely than not that goodwill is impaired, we will then apply detailed testing methodologies.

Otherwise, we will conclude that no impairment has occurred.

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.

If the fair value exceeds carrying value, then it is concluded that no goodwill impairment has occurred.

If the carrying value of the reporting unit were to exceed its fair value, we would recognize an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.

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

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

The Company is organized in two operating segments, and two reporting units, and has determined that goodwill resides in one reporting unit, Generics, Established Brands, and Other.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

therefore no quantitative testing for impairment was required.

The Company reviews goodwill for impairment on a reporting unit basis annually, on October 31, and whenever events or changes in circumstances indicate the carrying value of goodwill might not be recoverable.

Under the authoritative guidance issued by the FASB, the Company has the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the goodwill impairment test is performed.

The goodwill impairment test requires the Company to estimate the fair value of the reporting unit and to compare the fair value of the reporting unit with its carrying amount.

If the fair value exceeds the carrying amount, then no impairment is recognized.

If the carrying amount recorded exceeds the fair value calculated, then an impairment charge is recognized for the difference.

The judgments made in determining the projected cash flows used to estimate the fair value can materially impact the Company’s financial condition and results of operations.

The Company assessed the assets qualitatively, and concluded it was more likely than not that the fair value of the Generics, Established Brands, and Other reporting unit is greater than its carrying value as of October 31, 2023 and 2022, and therefore no quantitative testing for impairment was required.

No impairment loss related to goodwill was recognized in the years ended December 31, 2023, 2022, and 2021.

Collaborative Arrangements

At times, we have entered into arrangements with various commercial partners to further business opportunities.

In collaborative arrangements such as these, when we are actively involved and exposed to the risks and rewards of the activities and are determined to be the principal participant in the collaboration, we classify third party costs incurred and revenues in our consolidated statements of operations on a gross basis.

Otherwise, third party revenues and costs generated by collaborative arrangements are presented on a net basis.

Payments between us and the other participants are recorded and classified based on the nature of the payments.

We have entered profit-sharing arrangements with third parties in which we sell products under ANDAs or NDAs owned or licensed by these third parties.

Under these agreements, we pay these third parties a specified percentage of the gross profit earned on sales of the products.

These profit-sharing percentages are recorded in cost of sales in our consolidated statements of operations when the associated revenue is recognized and are recorded in accrued royalties in our consolidated balance sheets when the associated revenue is recognized and until payment has occurred.

The Company may enter into collaborative arrangements with various commercial partners to further business opportunities.

In collaborative arrangements revenues and costs generated by collaborative arrangements may be presented on a gross or net basis depending on the specific facts of the collaborative arrangement.

Research and Development Expenses

Research and development costs are expensed as incurred and primarily consist of expenses relating to product development.

Research and development costs totaled $ 22.3 million, $ 11.4 million, and $ 16.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Research and development ("R&D") activities are expensed as incurred.

R&D expenses primarily consist of direct and allocated expenses incurred with the process of formulation, clinical research, and validation associated with new product development.

Stock-Based Compensation

We have a stock-based compensation plan that includes stock options and restricted stock, which are awarded in exchange for employee and non-employee director services.

From time to time, we may make awards through an inducement grant outside of our plan to induce prospective employees to accept employment with us.

These grants are made pursuant to inducement grants outside of our shareholder approved equity plan as permitted under the Nasdaq Stock Market listing rules.

Stock-based compensation cost for stock options is determined at the grant date using an option pricing model and stock-based compensation cost for restricted stock is based on the closing market price of the stock at the grant date.

The Company issues stock options and restricted stock awards, which are awarded in exchange for employee and non-employee director services.

From time to time, the Company may grant awards through an inducement grant outside of the incentive plan to induce prospective employees to accept employment with the Company.

These grants are made pursuant to inducement grants outside of the shareholder approved equity plan as permitted under the Nasdaq Stock Market listing rules.

Stock-based compensation cost for stock options is determined at the grant date using an option pricing model and stock-based compensation cost for restricted stock awards is based on the closing market price of the stock at the grant date.

The value of the award is recognized as expense on a straight-line basis over the employee’s requisite service period and classified where the underlying salaries are classified.

We also account for forfeitures as they occur.

We recognize excess tax benefits or tax deficiencies as a component of our current period provision for income taxes.

In addition, in July 2016, we commenced administration of our Employee Stock Purchase Plan (“ESPP”).

We recognize the estimated fair value of stock-based compensation awards and classify the expense where the underlying salaries are classified.

We incurred $ 14.3 million, $ 10.4 million, and $ 12.8 million of non-cash, stock-based compensation cost for the years ended December 31, 2022, 2021, and 2020, respectively, and $ 313 thousand, $ 123 thousand, and $ 180 thousand of the 2022, 2021, and 2020 expense related to the ESPP, respectively.

In 2020, we recognized $ 3.4 million of stock compensation expense related to the modification of awards of our former President and Chief Executive Officer, pursuant to his termination without good cause.

Valuation of stock awards requires us to make assumptions and to apply judgment to determine the fair value of the awards.

These assumptions and judgments include estimating the future volatility of our stock price and dividend yields.

Changes in these assumptions can affect the fair value estimate.

Forfeitures are accounted for as they occur.

Excess tax benefits or tax deficiencies are recognized as a component of the current period provision for income taxes.

Awards may also be issued in the form of Performance Stock Units (“PSUs”) to certain employees of the Company.

PSUs represent the right to receive a number of shares of Company common stock, contingent upon the achievement of specified performance objectives during a specified performance period.

PSUs granted vest over a three-year performance period.

Currently, the PSU’s vesting is contingent upon the Company meeting certain total shareholder return (“TSR”) levels as compared to a select peer group over the over three years , and contingent upon the Company meeting certain adjusted non-GAAP year-on-year earnings before interest, income taxes, depreciation, and amortization (“EBITDA”) growth rates over the vesting term.

The related share-based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized straight-line over the vesting term.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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

The Company also administers an Employee Stock Purchase Plan (“ESPP”).

The estimated fair value of stock-based compensation awards are recognized and classified in the expense where the underlying salaries are classified.

Valuation of stock awards requires us to make assumptions and to apply judgment to determine the fair value of the awards.

These assumptions and judgments include estimating the future volatility of the Company's stock price and dividend yields.

Changes in these assumptions can affect the fair value estimate.

The Company uses 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 reverse.

1 unchanged sentence

The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

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

The Company is subject to taxation in various U.S.

jurisdictions, Canada, and India, and all of our income tax returns remain subject to examination by tax authorities due to the availability of net operating loss carryforwards.

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.

1 unchanged sentence

We have not identified any uncertain income tax positions that could have a material impact on the consolidated financial statements.

We recognize interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense;

we did not have any material amounts accrued as of December 31, 2022, 2021, and 2020.

We are subject to taxation in various U.S.

jurisdictions, Canada, and India, and all of our income tax returns remain subject to examination by tax authorities due to the availability of NOL carryforwards.

We consider potential tax effects resulting from discontinued operations and for gains and losses in other comprehensive income and record intra-period tax allocations, when those effects are deemed material.

We previously entered into an interest rate swap agreement (Note 5) that we have designated as a cash flow hedge designed to manage exposure to changes in LIBOR-based interest rate underlying our variable rate debt.

Due to the effective nature of the hedge, the initial fair value of the hedge and subsequent changes in the fair value of the hedge are recognized in accumulated other comprehensive loss, net of tax in the consolidated balance sheets.

Income taxes are allocated to the hedge component of accumulated other comprehensive income based on appropriate intra-period tax allocations when those effects are deemed material.

Earnings (Loss) per Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period.

For periods of net income, and when the effects are not anti-dilutive, we calculate diluted earnings (loss) per share by dividing net income available to common shareholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options, shares to be purchased under our ESPP, unvested restricted stock awards under the treasury stock method, and convertible preferred stock using the if-converted method.

For periods of net loss, diluted loss per share is calculated similarly to basic loss per share.

Our unvested restricted shares and convertible preferred stock shares contain non-forfeitable rights to dividends, and therefore are considered to be participating securities;

in periods of net income, the calculation of basic and diluted earnings (loss) per share excludes from the numerator net income (but not net loss) attributable to the unvested restricted shares and the common shares assumed converted from the preferred shares and excludes the impact of those shares from the denominator.

The Company has previously entered into an interest rate swap agreement (Note 6) designated as a cash flow hedge designed to manage exposure to changes in SOFR-interest rate underlying our variable rate debt.

Due to the effective nature of the hedge, the initial fair value of the hedge and subsequent changes in the fair value of the hedge are recognized in other comprehensive income (loss) in the consolidated balance sheets.

Income taxes are allocated to the hedge component of other comprehensive income (loss) based on appropriate intra-period tax allocations when those effects are deemed material.

Derivative Instruments and Hedge Accounting

The Company uses interest rate swaps to hedge exposure to interest rate risk, as well as benefit from favorable conditions.

The Company recognizes all derivative instruments as either assets or liabilities at fair value.

For all of the Company’s derivative positions that are designated and qualify as part of a cash flow hedging relationship, the effective portion of the gain or loss on the derivatives is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

Gains and losses on derivatives representing any ineffective component of the hedge are recognized in current earnings.

All of the Company’s cash flow hedges have been deemed effective as of December 31, 2023 for both accounting and tax purposes.

The Company has elected hedge accounting for both U.S.

GAAP and tax purposes.

The Company maintains formal documentation through a periodic memo and accounting analysis that cover what is being hedged, how it is being hedged, hedge effectiveness, the nature of the risk being hedged, among other required analyses.

Company policy further includes a quarterly probability analysis covering hedge effectiveness.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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:

(in thousands, except per share amounts)

Years Ended December 31,

Net income allocated to participating securities

Dividends on Series A convertible preferred stock

Net loss available to common shareholders

Basic Weighted-Average Shares Outstanding

Dilutive effect of stock options and ESPP

Diluted Weighted-Average Shares Outstanding

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 .

Hedge Accounting

At times we use derivative financial instruments to hedge our exposure to interest rate risks.

All derivative financial instruments are recognized as either assets or liabilities at fair value on the consolidated balance sheet and are classified as current or non-current based on the scheduled maturity of the instrument.

When we enter into a hedge arrangement and intend to apply hedge accounting, we formally document the hedge relationship and designate the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge.

When we determine that a derivative financial instrument qualifies as a cash flow hedge and is effective, the changes in fair value of the instrument are recorded in accumulated other comprehensive (loss)/income, net of tax in our consolidated balance sheets and will be reclassified to earnings when the hedged item affects earnings.

Contingent Consideration

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.

At acquisition date, we recorded this contingent consideration at fair value based on the additional consideration expected to be transferred, which is based on the estimate of probability-weighted future cash flows as discounted to present value.

At the acquisition date, contingent consideration is recorded at fair value based on the additional consideration expected to be transferred, which is based on the estimate of probability-weighted future cash flows as discounted to present value.

Significant inputs used in the measurement of the fair value include discount rates, probabilities of achievement of regulatory-based milestones and payments, and projected revenues and gross profits.

1 unchanged sentence

The probability of achievement of regulatory milestones is based on historical and projected success rates.

The projected revenues and gross profits are based on our internal forecasts and long-term plans.

We remeasure the fair value of the contingent consideration each reporting period using Level 3 inputs, as discussed further below.

Changes in fair value, which incorporate changes in assumptions and the passage of time, are recognized as an operating expense in our consolidated statement of operations.

The projected revenues and gross profits are based on internal forecasts and long-term plans.

The contingent consideration is remeasured each reporting period using Level 3 inputs.

Changes in fair value, which incorporate changes in assumptions and the passage of time, are recognized as an operating expense in the consolidated statements of operations.

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

Our consolidated balance sheets include various financial instruments (primarily cash and cash equivalents, prepaid expenses, accounts receivable, accounts payable, accrued expenses, and other current liabilities) that are carried at cost and that approximate fair value.

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date.

Fair Value Measurements

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date.

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.

5 unchanged sentences

The fair value hierarchy gives the lowest priority to Level 3 inputs.

The consolidated balance sheets include certain financial instruments (primarily cash and cash equivalents, prepaid expenses, accounts receivable, accounts payable, accrued expenses, and other current liabilities) that are carried at cost and that approximate fair values as of December 31, 2023, 2022 due to their short term nature.

See Note 10 for additional information regarding fair value.

Restructuring Activities

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

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.

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

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company as of the specified effective date.

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which improves reportable segment disclosure requirements, primarily through enhanced disclosures related to significant segment expenses.

The guidance in this ASU is effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable.

The Company is currently evaluating the effect the adoption of this ASU may have on its disclosures in the notes to the consolidated financial statements.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

$ 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.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which includes guidance to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

These amendments are effective for all public entities for fiscal periods beginning after December 15, 2024, with early adoption permitted.

These amendments apply on a prospective basis, but entities have an option to apply it retrospectively for all periods presented.

The Company does not expect that the adoption of this guidance will have a material impact on the consolidated financial statements.

Recent Accounting Pronouncements Adopted

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This ASU provides optional expedients and exceptions, that may be elected over time as reference rate reform activities occur, for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform.

The guidance in this ASU was extended in December 2022 when the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 , extending the sunset date under Topic 848 to December 31, 2024 to align the temporary accounting relief guidance with the expected LIBOR cessation.

In August 2023, the Company completed the transition of its debt and derivative instruments from LIBOR to Adjusted Term Secured Overnight Financing Rate ("SOFR") and applied the optional expedients in ASC 848 related to contract modifications and changing critical terms of the Company’s hedging relationships.

Application of these expedients allowed the Company to preserve presentation of derivatives as qualifying cash flow hedges and to account for the debt modification as a continuation of the existing contract.

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

REVENUE RECOGNITION AND RELATED ALLOWANCES

Revenue Recognition

Revenues are primarily derived from sales of generic, rare disease, and established brand pharmaceutical products, royalties, and other pharmaceutical services.

Revenue is recognized when obligations under the terms of contracts with customers are satisfied, which generally occurs when control of the products we sell is transferred to the customer.

Variable consideration is estimated after the consideration of applicable information that is reasonably available.

The Company generally does not have incremental costs to obtain contracts that would otherwise not have been incurred.

The Company does not adjust revenue for the promised amount of consideration for the effects of a significant financing component because our customers generally pay us within 100 days.

All revenue recognized in the accompanying consolidated statements of operations is considered to be revenue from contracts with customers.

The following table depicts the disaggregation of revenue:

Products and Services Years Ended December 31,

(in thousands) 2023 2022 2021

Sales of generic pharmaceutical products $ 269,449 $ 210,121 $ 143,571

Sales of established brand pharmaceutical products, royalties, and other pharmaceutical services 105,250 64,578 72,565

Sales of rare disease pharmaceutical products 112,117 41,686 —

Total net revenues $ 486,816 $ 316,385 $ 216,136

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

Timing of Revenue Recognition Years Ended December 31,

(in thousands) 2023 2022 2021

Performance obligations transferred at a point in time $ 486,441 $ 313,436 $ 214,826

Performance obligations transferred over time 375 2,949 1,310

Total $ 486,816 $ 316,385 $ 216,136

In the years ended December 31, 2023 or 2022, the Company did not incur, and therefore did not defer, any material incremental costs to obtain or fulfill contracts.

As of December 31, 2023, there were no contract assets recorded which were related to revenue recognized based on percentage of completion but not yet billed.

The Company recognized an increase of $ 4.1 million of net revenue from performance obligations satisfied in prior periods during the year ended December 31, 2023, consisting primarily of revised estimates for variable consideration, including chargebacks, rebates, returns, and other allowances, related to prior period sales.

For the years ended December 31, 2023 and 2022, the Company recognized less than $ 0.1 million of revenue that was included in deferred revenue as of December 31, 2022 and 2021.

As of December 31, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations for all open contract manufacturing customer contracts was $ 6.3 million, which consists of firm orders for contract manufactured products.

We will recognize revenue for these performance obligations as they are satisfied, which is anticipated within six months .

Variable Consideration

Sales of pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative and other rebates, and cash discounts.

Estimates for these elements of variable consideration require significant judgment.

Chargebacks, primarily from wholesalers, result from arrangements with indirect customers establishing prices for products which the indirect customer purchases through a wholesaler.

Alternatively, the Company may pre-authorize wholesalers to offer specified contract pricing to other indirect customers.

Under either arrangement, the Company provides a chargeback credit to the wholesaler for any difference between the contracted price with the indirect customer and the wholesaler’s invoice price, typically Wholesale Acquisition Cost (“WAC”).

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.

ASPs can be affected by several factors such as:

• A change in customer mix

• A change in negotiated terms with customers

• A change in the volume of off-contract purchases

• Changes in WAC

As necessary, ASPs are adjusted based on anticipated changes in the factors above.

The difference between ASP and WAC is recorded as a reduction in both gross revenues in the consolidated statements of operations and accounts receivable in the consolidated balance sheets, at the time revenue is recognized from the product sale.

The Company continually monitors chargeback activity and adjusts ASPs when the Company believes that actual selling prices will differ from current ASPs.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

Government Rebates

Government rebates reserve consists of estimated payments due to governmental agencies for utilization of our products by beneficiaries under such governmental programs.

The two largest government programs are Medicaid and Medicare.

The Company participates in the Medicaid Drug Rebate Program and pays rebates to the states related on Medicaid beneficiary utilization of the Company's products.

Medicaid rebates are billed 60-90 days of the end of the quarter in which the product was dispensed to a Medicaid beneficiary.

Medicaid reserves are based on expected claims from state Medicaid programs.

Estimates for expected claims are driven by patient usage, sales mix, calculated AMP or best price, as well as inventory in the distribution channel that will be subject to a Medicaid rebate.

As a result of the delay between selling the products, dispensing the products and rebate billing, the Medicaid rebate reserve includes both an estimate of outstanding claims for end-customer sales that have occurred but for which the related claim has not been billed, as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through to plan participants.

Many of the products are also covered under Medicare.

ANI participates in the Coverage Gap Discount Program in order for its branded drugs to be covered by Medicare Part D and must provide a rebate for any products sold under NDAs dispensed to Medicare Part D beneficiaries while the beneficiaries are in the Coverage Gap phase of the benefit.

This applies to all products sold under NDAs, regardless of whether the products are marketed as branded or generic.

Estimates for these discounts are based on historical experience with Medicare rebates for products.

Medicare rebates are billed quarterly for drugs dispensed to Medicare beneficiaries in the prior quarter, which is typically 120 days after the product is shipped.

As a result of the delay between selling the products, dispensing the products and rebate billing, Medicare rebate reserve includes both an estimate of outstanding claims for end-customer sales that have occurred but for which the related claim has not been billed, as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through to Medicare Part D participants.

To evaluate the adequacy of the government rebate reserves, reserves are reviewed on a quarterly basis against actual claims data to ensure the liability is fairly stated.

The Company continually monitors the government rebate reserve and adjusts estimates if it is expected that actual government rebates may differ from established accruals.

Accruals for government rebates are recorded as a reduction to gross revenues in the consolidated statements of operations and as an increase to accrued government rebates in the consolidated balance sheets.

A returns policy is in place that allows customers to return product within a specified period prior to and subsequent to the expiration date.

Generally, product may be returned for a period beginning six months prior to its expiration date to up to one year after its expiration date.

Product returns are settled through the issuance of a credit to the customer.

The estimate for returns is based upon historical experience with actual returns.

While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of future returns.

We continually monitor estimates for returns and make adjustments when it is expected that actual product returns may differ from the established accruals.

Accruals for returns are recorded as a reduction to gross revenues in the consolidated statements of operations and as an increase to the return goods reserve in the consolidated balance sheets.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

Administrative Fees and Other Rebates

Administrative fees or rebates are offered to wholesalers, group purchasing organizations, and indirect customers.

Fees and rebates are accrued, by product by wholesaler, at the time of sale based on contracted rates and ASPs.

To evaluate the adequacy of the administrative fee accruals, on-hand inventory counts are obtained from the wholesalers.

The Company continually monitors administrative fee activity and adjust accruals when it is expected that actual administrative fees may differ from the accruals.

Accruals for administrative fees and other rebates are recorded as a reduction in both gross revenues in the consolidated statements of operations and accounts receivable in the consolidated balance sheets.

Prompt Payment Discounts

Sales discounts may be granted to customers for prompt payment.

The reserve for prompt payment discounts is based on invoices outstanding.

Based on past experience, it is assumed that all available discounts will be taken.

Accruals for prompt payment discounts are recorded as a reduction in both gross revenues in the consolidated statements of operations and accounts receivable in the consolidated balance sheets.

The following table summarizes activity in the consolidated balance sheets for accruals and allowances for the years ended December 31, 2023, 2022, and 2021:

Accruals for Chargebacks, Returns, and Other Allowances

(in thousands) Chargebacks Government

Rebates Returns Administrative

Fees and Other

Rebates Prompt

Balance at December 31, 2021 (1) $ 94,066 $ 5,492 $ 35,831 $ 13,100 $ 4,642

Accruals/Adjustments 642,409 20,657 23,252 42,044 21,302

Credits Taken Against Reserve ( 587,913 ) ( 15,277 ) ( 25,684 ) ( 45,702 ) ( 19,456 )

Balance at December 31, 2022 (1) $ 148,562 $ 10,872 $ 33,399 $ 9,442 $ 6,488

Accruals/Adjustments 586,511 23,915 18,360 55,798 22,932

Credits Taken Against Reserve ( 650,865 ) ( 22,619 ) ( 22,081 ) ( 53,828 ) ( 24,555 )

Balance at December 31, 2023 (1) $ 84,208 $ 12,168 $ 29,678 $ 11,412 $ 4,865

____________________

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

Returns are included in returned goods reserve in the consolidated balance sheets.

Government Rebates are included in accrued government rebates in the consolidated balance sheets.

Credit Concentration

Customers are primarily wholesale distributors, chain drug stores, group purchasing organizations, and other pharmaceutical companies.

During the year ended December 31, 2023 four customers accounted for 10% or more of net revenues.

During the years ended December 31, 2022 and 2021 , three customers accounted for 10% or more of net revenues.

As of December 31, 2023, accounts receivable from these customers totaled 81 % of accounts receivable, net.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

The four customers represent the total percentage of net revenues as follows:

Years Ended December 31,

2023 2022 2021

Customer 1 31 % 26 % 29 %

Customer 2 13 % 18 % 23 %

Customer 3 13 % 15 % 16 %

Customer 4 12 % 6 % — %

BUSINESS COMBINATION

On November 19, 2021, the Company acquired all of the interests of Novitium pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021.

This acquisition was accounted for as a business combination.

The total consideration consisted of cash of approximately $ 88.1 million, 2,466,654 restricted shares of common stock valued at $ 91.2 million, and up to $ 46.5 million in additional contingent consideration.

Additionally, the Company agreed to pay certain debts of Novitium in the amount of $ 8.5 million.

The contingent consideration is based on the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24 -month period, regulatory filings completed during this 24 -month period, and a percentage of net profits on certain products that are launched in the future.

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

Total consideration including cash, restricted shares and contingent consideration, net of cash acquired of $ 12.1 million was $ 206.5 million at the date of purchase.

The fair value of the contingent consideration was $ 24.0 million and $ 35.1 million as of December 31, 2023 and 2022, respectively.

Refer to Note 10 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.

Purchase consideration consisted of the following:

(in thousands)

Cash consideration

Repayment of Novitium debts

Fair value of restricted shares

Fair value of contingent consideration

Gross consideration

Cash acquired

Net consideration

The cash consideration was funded in part by borrowings under our new credit facility (Note 4) and through issuance of PIPE convertible preferred stock shares (Note 10).

We acquired Novitium due to its proven track record of being a research and development growth engine capable of fueling sustainable growth, to expand our research and development pipeline via niche opportunities, to enhance our contract development and manufacturing organization (“CDMO”) business and U.S.

based manufacturing capacity, and to diversify our revenue base.

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

(in thousands)

Total Purchase Consideration

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other current assets

Property and equipment

Intangible assets

Other non-current assets

Total assets acquired

Accounts payable

Accrued expense and other current liabilities

Accrued compensation and other related expenses

Accrued government rebates

Returned goods reserve

Other non-current liabilities

Total liabilities assumed

Net assets acquired

The cash consideration was funded in part by borrowings under the cr edit facility (Note 5) and through issuance of convertible preferred stock sha res.

Concurrently with the execution of the Merger Agreement, the Company entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership (the “PIPE Investor”), pursuant to which the PIPE Investor agreed to purchase, 25,000 shares of the Company's 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 on November 19, 2021 (Note 11) .

T he acquisition of Novitium was completed due to its proven track record of being a research and development growth engine capable of fueling sustainable growth, to expand the research and development pipeline via niche opportunities, to enhance the contract development and manufacturing organization (“CDMO”) business and U.S.

based manufacturing capacity, and to diversify the Company's revenue base.

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, and appropriate discount rates.

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

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 connection with the acquisition, $ 46.9 million of indefinite-lived in-process research and development intangible assets, $ 67.4 million of acquired ANDA intangible assets, $ 24.9 million of customer relationship intangible assets, and goodwill of $ 24.6 million was recognized.

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.

1 unchanged sentence

Novitium operations generated $ 149.9 million and $ 90.3 million of revenue during the years ended December 31, 2023 and 2022, respectively.

Pro Forma Consolidated Financial Information (unaudited)

The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the Novitium acquisition had been completed as of January 1, 2020.

Years Ended December 31,

(in thousands)

Transaction Costs

In conjunction with the acquisition, we incurred approximately $ 9.4 million in transaction costs, all of which were expensed in 2021 as selling, general, and administrative expense in the consolidated statement of operations.

In conjunction with the acquisition, approximately $ 9.4 million in transaction costs were expensed during the year ended 2022 as selling, general, and administrative expense in the consolidated statement of operations.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

Restricted Shares

The Novitium acquisition consideration included 2,466,654 restricted shares, which were valued at $ 91.2 million.

These shares contain restrictions on their transfer for periods from three to 24 months following the completion of the acquisition.

These shares contained restrictions on their transfer for periods from three to twenty-four months following the completion of the acquisition.

A Finnerty model was used to value the restricted shares.

1 unchanged sentence

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.

Pro Forma Consolidated Financial Information (unaudited)

Year Ended December 31,

(in thousands) 2021

Net revenues $ 272,888

Net loss $ ( 31,740 )

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.

On March 31, 2023 the Compan y ceased operations at the Oakville, Ontario, Canada manufacturing plant.

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

ANI has fully completed the transition of the products manufactured or packaged in Oakville to one of the Company's three U.S.-based manufacturing sites.

For the year ended December 31, 2023, restructuring activities resulted in expenses of $ 1.1 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.

This included $ 0.2 million of severance and other employee benefit costs and $ 0.7 million of asset-related impairment and accelerated depreciation costs, and $ 0.2 million for other miscellaneous other costs.

As of December 31, 2023, $ 0.1 million of the severance and other employee benefits are unpaid and accrued.

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, and $ 0.4 million for other miscellaneous other costs.

There were no restructuring expenses incurred for the year ended December 31, 2021.

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.

In conjunction with the exit of the Canadian facility, the Company has determined that the land and building at the Oakville, Ontario, Canada plant will be sold together and met the criteria to be classified as held for sale as of March 31, 2023.

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 as of December 31, 2023.

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

On November 6, 2023, ANI Pharmaceuticals Canada Inc., a wholly owned subsidiary of the Company, entered into an agreement with a potential buyer for the sale of the Oakville, Ontario manufacturing facility, however, the agreement was subsequently terminated in December 2023 by mutual agreement.

The sale is expected to close in March 2024 (Note 19).

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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

On November 19, 2021, the Company, as borrower, entered into a credit agreement (the “Credit Agreement”) with Truist Bank and other lenders, which provides for credit facilities consisting of (i) a senior secured term loan facility in an aggregate principal amount of $ 300.0 million (the “Term Facility”) and (ii) a senior secured revolving credit facility in an aggregate commitment amount of $ 40.0 million, which may be used for revolving credit loans, swingline loans and letters of credit (the “Revolving Facility,” and together with the Term Facility, the “Credit Facility”).

The Term Facility proceeds were used to finance the cash portion of the consideration under the merger agreement between ANI and Novitium, repay our existing credit facility, and pay fees, costs and expenses incurred in connection with the merger.

Proceeds of the Revolving Facility are expected to be used, subject to certain limitations, for working capital and other general corporate purposes.

The Term Facility proceeds were used to finance the cash portion of the consideration under the Merger Agreement, repay the existing credit facility, and pay fees, costs and expenses incurred in connection with the merger.

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

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.

The Credit Facility has a subjective acceleration clause in case of a material adverse effect.

The Term Facility includes a repayment schedule, pursuant to which $ 750 thousand of the loan will be paid in quarterly installments during the twelve months ended December 31, 2023.

As of December 31, 2022, $ 3.0 million of the loan is recorded as current borrowings in the consolidated balance sheets.

As of December 31, 2022, we have not drawn on the Revolving Facility and $ 40.0 million remained available for borrowing.

We incurred $ 14.0 million in deferred debt issuance costs associated with the Credit Facility.

In July 2023, the Company amended its Credit Agreement to transition from LIBOR to SOFR due to the cessation of LIBOR pursuant to the terms of Amendment No.1 to the Credit Agreement (“Amendment No.

SOFR will be applied to the Credit Facility for the interest period (as defined in the Credit Agreement) beginning on August 1, 2023 and replaced all LIBOR terms.

The Credit Facility 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 SOFR Rate (or alternate benchmark rate as defined in the Credit Agreement) in the case of SOFR 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 SOFR Rate (as defined in the Credit Facility) in the case of loans under the Revolving Facility.

Amendment No.

1 also includes the addition of a credit spread adjustment of 0.11448 % for an interest period of one-month duration, 0.26161 % for a three-month duration, and 0.42826 % for a six-month duration, in addition to SOFR and the applicable margin, as noted above.

There were no other changes or modifications to the Credit Agreement.

The Company has applied the optional expedients in ASC 848, Reference Rate Reform , and elected to treat the change in the benchmark interest rate to SOFR as a continuation of the existing Credit Agreement and account for the change prospectively.

The interest rate under the Term Facility was 11.46 % at December 31, 2023.

As of December 31, 2023, there was $ 0 drawn on the Revolving Facility and $ 40.0 million remained available for borrowing subject to certain conditions.

The Company incurred $ 14.0 million in deferred debt issuance costs associated with the Credit Facility.

Costs allocated to the Term Facility are classified as a direct reduction to the current and non-current portion of the borrowings, depending on their nature.

Costs allocated to the Revolving Facility are classified as other current and other non-current assets, depending on their nature.

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

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.

A commitment fee of 0.5 % per annum on any unused portion of the Revolving Facility.

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.

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:

The carrying value of the current and non-current components of the Term Facility as of the years ended December 31:

(in thousands) 2023 2022

2 unchanged sentences

Current debt, net of deferred financing costs $ 850 $ 850

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

(in thousands) 2023 2022

2 unchanged sentences

Non-current debt, net of deferred financing costs and current component $ 284,819 $ 285,669

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

As of December 31, 2023, outstanding principal was $ 294.0 million on the Term Facility.

Of the $ 0.6 million of unamortized deferred debt issuance costs allocated to the Revolving Facility, $ 0.4 million is included in other non-current assets in the consolidated balance sheets, and $ 0.2 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:

(in thousands)

Term Facility

2028 and thereafter

The following table sets forth the components of total interest expense related to the Term Facility and the Term Loan, DDTL, and Revolver under our Prior Credit Agreement recognized in our consolidated statements of operations for the year ended December 31:

Years Ended December 31,

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

(in thousands) Term Facility

Total $ 294,000

The following table sets forth the components of total interest expense related to the Term Facility recognized in the accompanying consolidated statements of operations for the years ended December 31:

(in thousands) 2023 2022 2021

2 unchanged sentences

Capitalized interest ( 587 ) ( 95 ) ( 98 )

$ 32,469 $ 28,418 $ 11,945

DERIVATIVE FINANCIAL INSTRUMENT AND HEDGING ACTIVITY

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 (or alternate benchmark rate as defined in the Credit Agreement) underlying total borrowings under term facilities related to our Prior Credit Agreement.

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

to manage 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 the 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 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

As described further below, the Company amended its Credit Agreement to transition from LIBOR to SOFR due to the cessation of LIBOR, and accordingly, the interest rate swap transitioned from LIBOR to SOFR.

The swap is used to manage changes in SOFR-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.

The notional amount of the interest rate swap was $ 139.4 million and $ 151.5 million as of December 31, 2023 and 2022, respectively, and decreased quarterly by approximately $ 4.0 million until December 2023, after which it remains static until maturity in December 2026.

As of December 31, 2023, the fair value of the interest rate swap asset was recorded in other non-current assets in the consolidated balance sheets was $ 6.2 million.

As of December 31, 2023, $ 8.9 million was recorded in accumulated other comprehensive income (loss) in the consolidated balance sheets.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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.

During the year ended December 31, 2022, the change in fair value of the interest rate swaps was a gain of $ 14.3 million.

During the year ended December 31, 2022, gains on the interest rate swap of $ 15.2 million were recorded in accumulated other comprehensive loss, net of tax in our consolidated statements of comprehensive (loss)/income.

Differences between the hedged LIBOR rate and the fixed rate are recorded as interest expense in the same period that the related interest is recorded for the Term Facility based on the LIBOR rate.

In the year ended December 31, 2022 and 2021, $ 2.3 million and $ 4.8 million, respectively, of interest expense was recognized in relation to the interest rate swaps.

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.

Inventories consist of the following as of December 31:

During the year ended December 31, 2023, the change in fair value of the interest rate swaps was a loss of $ 3.7 million.

During the year ended December 31, 2023, losses on the interest rate swap of $ 3.4 million were recorded in other comprehensive income (loss) , net of tax.

Di fferences between the hedged SOFR rate and the fixed rate are recorded as interest expense in the same period that the related interest is recorded for the Term Facility based on the SOFR rate.

In the years ended December 31, 2023 and 2022, $ 2.6 million and $ 2.3 million, respectively, of interest expense was recognized in relation to the interest rate swaps.

Included in these amounts for the years ended December 31, 2023 and 2022 are reclassifications out of accumulated other comprehensive income (loss) of $ 2.8 million in expense, related to terminated and de-designated cash flow hedges.

In conjunction with the amendment of the Credit Agreement (Note 5), the Company’s derivative positions automatically transitioned to SOFR, the designated fallback terms, as determined by the International Swaps and Derivatives Association on August 1, 2023.

Concurrently, the Company updated its hedge documentation to reflect the change of the benchmark index, which changed solely as a result of reference rate reform.

Under ASC 848, Reference Rate Reform, hedge accounting may continue without de-designation if certain criteria are met.

For cash flow hedges in which the designated hedged risk is LIBOR (or another rate that is expected to be discontinued), the guidance allows an entity to assert that it remains probable that the hedged forecasted transaction will occur.

The Company applied the optional expedient within ASC 848 to conclude the updates to the hedge relationship due to reference rate reform did not have a material impact on the Company's consolidated financial statements.

The following table shows the Company's inventory by asset class as of the years ended December 31:

(in thousands) 2023 2022

3 unchanged sentences

Finished goods 36,198 28,020

Reserve for excess/obsolete inventories

Inventories, net

PROPERTY AND EQUIPMENT

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

Inventories $ 111,196 $ 105,355

Vendor Concentration

Raw materials are sourced for products, including API, from both domestic and international suppliers.

Generally, only a single source of API is qualified for use in each product due to the costs and time required to validate a second source of supply.

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

During the year ended December 31, 2023, no single vendor represented at least 10% of invent ory purchases.

During th e year ended December 31, 2022, the Company purchased approximately 19 % of inventory from one supplier.

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

PROPERTY AND EQUIPMENT, NET

The following tables show the Company’s gross property and equipment by major asset class and accumulated depreciation as of the years ended December 31:

(in thousands) 2023 2022

Land $ 1,549 $ 1,549

Buildings 17,875 16,659

Machinery, furniture, and equipment 50,412 53,146

Construction in progress 7,692 4,604

77,528 75,958

accumulated depreciation ( 32,935 ) ( 32,712 )

Property and equipment, net $ 44,593 $ 43,246

(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, 2023, 2022, and 2021 totaled $ 7.5 million, $ 7.4 million, and $ 5.5 million, respectively.

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

During the years ended December 31, 2023, 2022, and 2021 there was $ 0.6 million, $ 0.1 million, and $ 0.1 million, respectively, of interest capitalized into construction in progress, respectively.

GOODWILL AND INTANGIBLE ASSETS

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

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

As a result of the acquisition of WellSpring Pharma Services Inc., the Company recorded goodwill of $ 1.7 million in 2018.

From the acquisition of Novitium in 2021, the Company recorded goodwill of $ 24.6 million.

As of December 31, 2023, the Company had two operating segments, which were also deemed the Company's two reporting units, Generics, Established Brands, and Other reporting unit and the Rare Disease reporting unit.

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

Goodwill is reviewed for impairment at least annually, at October 31st, or more frequently if a triggering event occurs between impairment testing dates.

The Company’s impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value.

Qualitative factors may include, macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events.

If, based on the qualitative test, the Company determines that it is “more likely than not” that the fair value of a reporting unit is less than its carrying value, then we evaluate goodwill for impairment by comparing the fair value of the reporting unit to its respective carrying value, including its goodwill.

If it is determined that it is “not likely” that the fair value of the reporting unit is less than its carrying value, then no further testing is required.

Based on the qualitative assessments performed by the Company, it was determined that it was more likely than not that the fair value of the Generics, Established Brands, and Other reporting unit was greater than its carrying value as of October 31, 2023, and therefore no impairment charges have been recognized, and no quantitative testing was required.

In addition to the qualitative impairment analysis performed at October 31, 2023, there were no events or changes in circumstances that would have reduced the fair value of the reporting unit below its carrying value from October 31, 2023 to December 31, 2023.

No impairment loss was recognized during the years ended December 31, 2023, 2022, and 2021, and the balance of goodwill was $ 28.2 million as of December 31, 2023 and 2022.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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.

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

Based on our assessments of the aforementioned factors, it was determined that it was more likely than not that the fair value of our one reporting unit is greater than its carrying amount as of October 31, 2022 and 2021, and therefore no quantitative testing for impairment was required.

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, 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

The components of net definite-lived intangible assets and net indefinite-lived intangible assets other than goodwill are as follows:

December 31, 2022

December 31, 2021

Weighted Average

Gross Carrying

(in thousands)

December 31, 2023 December 31, 2022 Weighted Average

(in thousands) Gross Carrying Amount

Amortization Net Carrying Amount Gross Carrying

Amount Accumulated

Amortization Net Carrying Amount

Definite-Lived Intangible Assets:

Acquired ANDA intangible assets

NDAs and product rights

Marketing and distribution rights

Non-compete agreement

Customer relationships

Acquired ANDA intangible assets $ 209,780 $ ( 100,660 ) $ 109,120 $ 195,862 $ ( 75,606 ) $ 120,256 5.2 years

NDAs and product rights 244,871 ( 184,861 ) 60,010 242,372 ( 162,188 ) 80,184 3.1 years

Marketing and distribution rights 17,157 ( 14,271 ) 2,886 17,157 ( 13,309 ) 3,848 3.0 years

Non-compete agreement 624 ( 624 ) — 624 ( 602 ) 22 - years

Customer relationships 24,900 ( 7,707 ) 17,193 24,900 ( 4,150 ) 20,750 4.8 years

Total Definite-Lived Intangible Assets 497,332 ( 308,123 ) 189,209 480,915 ( 255,855 ) 225,060 4.5 years

Indefinite-Lived Intangible Assets:

In process research and development

In process research and development 19,800 — 19,800 26,575 — 26,575 Indefinite

Total Intangible Assets, net $ 517,132 $ ( 308,123 ) $ 209,009 $ 507,490 $ ( 255,855 ) $ 251,635

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).

(1) Weighted average amortization period as of December 31, 2023.

Definite-lived intangible assets arising from business combinations and other asset acquisitions include intangibles such as Abbreviated New Drug Applications (“ANDAs”), New Drug Applications (“NDAs”) and product rights, marketing and distribution rights, customer relationships, and non-compete agreements.

Definite-lived intangible assets are amortized over the estimated period during which the asset is expected to contribute directly or indirectly to future cash flows.

Definite-lived intangible assets are stated at cost, net of amortization, and generally amortized over their remaining estimated useful lives, ranging from seven to ten years years, based on the straight-line amortization method.

In the case of certain NDAs and product rights assets, an accelerated amortization method is used to better match the anticipated economic benefits expected to be provided.

Definite-lived intangible assets are tested for impairment annually, or when events or changes in circumstances indicate that these asset might be impaired.

Indefinite-lived intangible assets other than goodwill include primarily IPR&D projects.

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

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

During 2023, definite-lived intangibles increased approximately $ 16.4 million, which includes $ 6.8 million which was reclassified from indefinite-lived IPR&D to acquired ANDA intangible assets upon completion of projects and launch of related products, and the Company added approximately $ 9.6 million of intangible assets, comprised of $ 7.1 million of ANDA intangible assets related to asset acquisitions with Slayback Pharma Limited Liability Company and Akorn Holding Company, $ 2.0 million in product rights related to the transaction with Alvogen, Inc., and other asset acquisitions.

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

The Company added $ 7.2 million in ANDA intangible assets related to the July 21, 2022 transaction with Oakrum Pharma, LLC (Note 10).

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.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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.

Amortization expense for definite-lived intangible assets was $ 52.3 million, $ 49.5 million, and $ 41.8 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Refer to Note 10 for more details on acquired definite-lived and indefinite-lived intangible assets.

1 unchanged sentence

(in thousands)

2024 $ 50,364

2029 and thereafter 15,502

Total $ 189,209

Expected amortization expense is an estimate.

Actual amounts of amortization expense may differ due to timing of regulatory approvals related to IPR&D assets, additional intangible assets acquired, impairment of intangible assets, and other events.

FAIR VALUE DISCLOSURES

Indefinite-lived intangible assets are not amortized, and the Company tests for impairment of indefinite-lived intangible assets and definite-lived intangibles when events or circumstances indicate that the carrying value of the assets may not be recoverable, and the Company performs an asset impairment analysis annually, as of October 31, 2023.

The Company 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, the Company evaluated events and circumstances that would affect the significant inputs used to determine the fair value of the assets.

Based on the 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, 2023, and therefore no quantitative testing for impairment was required.

In addition to the qualitative impairment analysis performed at October 31, 2023, there were no events or changes in circumstances that would have reduced the fair value of the indefinite or definite-lived intangible assets below their carrying values from October 31, 2023 to December 31, 2023.

No impairment loss was recognized during the year ended December 31, 2023.

During the years ended December 31, 2022 and 2021, impairment losses of approximately $ 0.1 million and $ 2.4 million, respectively, were recognized in relation to ANDA assets.

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date.

1 unchanged sentence

The inputs used in measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance with the three-tier fair value hierarchy.

The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of our funds.

The fair value of short-term financial instruments (primarily accounts receivable, prepaid expenses, accounts payable, accrued expenses, and other current liabilities) approximate their carrying values because of their short-term nature.

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.

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

Contingent Value Rights

Our contingent value rights (“CVRs”), which were granted coincident with our merger with BioSante Pharmaceuticals, Inc.

and expire in June 2023, are considered to be contingent consideration and are classified as liabilities.

As such, the CVRs were recorded as purchase consideration at their estimated fair value, using Level 3 inputs, and are marked to market each reporting period until settlement.

The fair value of CVRs is estimated using the present value of management’s projection of the expected payments pursuant to the terms of the CVR agreement, which is the primary unobservable input.

If our projection or expected payments were to increase substantially, the value of the CVRs could increase as a result.

The present value of the liability was calculated using a discount rate of 15 %.

We determined that the fair value of the CVRs was immaterial as of December 31, 2022 and 2021.

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

The fair market values are based on period-end statements supplied by the various banks and brokers that held the majority of the funds.

The Term Facility bears an interest rate that fluctuates with the changes in SOFR and, because the variable interest rates approximate market borrowing rates available to the Company, the carrying values of these borrowings approximated their fair values at December 31, 2023 and 2022.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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

Money Market Funds

Money market funds are readily convertible into cash and the net asset value of each fund on the last day of the reporting period is used to determine its fair value.

Money market funds are included in Cash and cash equivalents within the Consolidated Balance Sheet, and is classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices.

The Company does not adjust the quoted market price for such financial instruments.

The fair value of the money market funds as of December 31, 2023 was approximately $ 191.8 million.

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

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

As described in detail in Note 5, the fair value of the interest rate swap was a $ 6.2 million and $ 8.8 million at December 31, 2023 and 2022, respectively, and was classified as a non-current asset.

Contingent Consideration

In connection with the acquisition of Novitium, we may pay up to $ 46.5 million in additional consideration related to the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24-month period, regulatory filings completed during this 24-month period, and a percentage of net profits on certain products that are launched in the future.

In connection with the acquisition of Novitium, the Company may pay up to $ 46.5 million in additional consideration related to the achievement of certain milestones, including milestones on gross profit of Novitium portfolio products over a 24-month period, regulatory filings completed during this 24-month period, and a percentage of net profits on certain products that are launched in the future.

The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs.

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 $ 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.

Pursuant to the terms of the Agreement and Plan of Merger, dated as of March 8, 2021, on December 12, 2023, the Company paid $ 12.5 million of cash consideration to the Company Members, defined as the holders of Novitium ownership interests in the Agreement and Plan of Merger, as the holders of Novitium ownership interests, for the achievement of the "ANDA Filing Earn-Out," as defined in the Agreement (Note 17).

Furthermore, on February 22, 2024, the Company paid $ 12.5 million to Company Members of Novitium upon the achievement of the "Gross Profit Earn-Out," as defined in the Agreement (Note 19).

The fair value of the contingent consideration was approximately $ 24.0 million and $ 35.1 million as of December 31, 2023 and 2022, respectively, and is reflected as a current and non-current accrued contingent consideration liability in the consolidated balance sheets.

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

Valuation Technique

Unobservable Input

Profit-based milestone payments

Probability-weighted discounted cash flow

Discount rate

Payment Type Valuation Technique Unobservable Input Assumptions

Profit-based milestone payments Probability-weighted discounted cash flow Discount rate 12 %

Projected fiscal year of payment 2025-2035

Product development-based milestone payments

Probability-weighted discounted cash flow

Discount rate

Product development-based milestone payments Probability-weighted discounted cash flow Discount rate 12.0 %

Probability of payment 100 %

Projected fiscal year of payment 2024

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

The following table presents the changes in contingent consideration balances classified as Level 3 balances for the years ended December 31, 2023 and 2022:

Years Ended December 31,

1 unchanged sentence

Beginning balance $ 35,058 $ 31,000

Initial valuation

Measurement period adjustment — 300

Payment of ANDA filing earn-out ( 12,500 ) —

Change in fair value 1,426 3,758

Ending balance $ 23,984 $ 35,058

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:

Contingent Value Rights

The contingent value rights (“CVRs”), which were granted coincident with the merger with BioSante expired during June 2023, were considered contingent consideration and were classified as liabilities, and there were no payments made pursuant to the terms of the CVR agreement.

The Company determined that the fair value of the CVRs was immaterial as of December 31, 2022, and also determined that the changes in such fair value were immaterial for the years ended December 31, 2022, and 2021.

The following table presents financial assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2023 and December 31, 2022, by level within the fair value hierarchy:

(in thousands)

Fair Value at

December 31, 2022

Description Fair Value at

December 31, 2023 Level 1 Level 2 Level 3

Money Market Fund $ 191,841 $ 191,841 $ — $ —

Interest rate swap $ 6,236 $ — $ 6,236 $ —

Contingent consideration $ 23,984 $ — $ — $ 23,984

Description Fair Value at

December 31, 2022 Level 1 Level 2 Level 3

Interest rate swaps $ 8,759 $ — $ 8,759 $ —

Contingent consideration $ 35,058 $ — $ — $ 35,058

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

There are no financial assets and liabilities that are measured at fair value on a non-recurring basis.

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

There are no non-financial assets and liabilities that are measured at fair value on a recurring basis.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

Fair Value at

December 31, 2021

Contingent consideration

Interest rate swaps

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

We have no financial assets and liabilities that are measured at fair value on a non-recurring basis.

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

We have no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured 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, 2021, we recognized an impairment charge of $ 2.4 million related to a definite-lived ANDA intangible asset.

Long-lived assets, including property and equipment, ROU assets, intangible assets, and goodwill, are measured at fair value on a non-recurring basis.

During the year ended December 31, 2023, there were no impairment charges recognized related to non-financial assets and liabilities measured at fair value on a non-recurring basis.

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

There were no other fair value impairments recognized in the years ended December 31, 2023 and 2022.

Acquired Non-Financial Assets Measured at Fair Value

On December 27, 2023, the Company acquired from Alvogen, Inc.

the rights to certain pharmaceutical products for total cash consideration of $ 2.0 million (Note 8), which we plan to launch commercially in early 2024.

The transaction was accounted for as an asset acquisition and there were no transaction costs directly related to the acquisition.

Intangible assets amounted to $ 2.0 million as NDAs and product rights.

The payment was allocated to the acquired intangible assets based on relative fair value, which was determined using Level 3 unobservable inputs.

The intangible asset 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, 2023.

August 14, 2023, the Company acquired one ANDA and registered patents and pending patent applications from Slayback Pharma Limited Liability Company for total consideration of $ 3.0 million (Note 9).

The Company also acquired an NDA which has yet to be filed.

The transaction was funded from cash on hand.

The transaction was accounted for as an asset acquisition and the transaction costs directly related to the acquisition were capitalized.

Intangible assets amounted to $ 2.8 million as acquired ANDA intangible assets.

The payment was allocated to the acquired intangible assets based on relative fair value, which was determined using Level 3 unobservable inputs.

The ANDA 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, 2023 , and therefore no impairment loss was recognized for the year ended December 31, 2023 .

During the second quarter of fiscal 2023, the Company acquired two ANDAs and one pipeline product from the Chapter 7 Trustee for the estates of Akorn Holding Company and certain of its affiliates for total consideration of $ 4.8 million.

The transaction was funded from cash on hand.

This transaction was accounted for as an asset acquisition and the transaction costs directly related to the acquisition were capitalized.

The product portfolio included two commercial products and one pipeline product.

The Company recognized $ 4.3 million as acquired ANDA intangible assets.

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.

The ANDAs 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, 2023, and therefore no impairment loss was recognized for the year ended December 31, 2023.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

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.

8 unchanged sentences

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.

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 2022.

No such triggering events were identified during the period from the date of acquisition to December 31, 2023, and therefore no impairment loss was recognized for the year ended December 31, 2023.

7 unchanged sentences

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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 .

During the fourth quarter 2021, we recognized a full impairment of the remaining $ 2.4 million carrying value of the asset, as it was determined that the asset would not generate future cash flows.

In January 2020, we completed the acquisition of the U.S.

portfolio of 23 generic products and API and finished goods related to certain of those products from Amerigen Pharmaceuticals, Ltd.

(“Amerigen”) for a purchase consideration of $ 56.8 million and up to $ 25.0 million in contingent payments over the subsequent four years from the acquisition.

The product portfolio at the time of the acquisition included ten commercial products, three approved products with launches pending, four filed products and four in-development products as well as a license to commercialize two approved products.

Payments were made using cash on hand and through borrowings of $ 15.0 million under our Revolver.

We also incurred and paid $ 0.7 million in transaction costs directly related to the acquisition.

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

We recognized $ 38.5 million as acquired ANDA intangible assets and $ 6.7 million as acquired marketing and distribution rights related to the licensed products, which are being amortized over their useful lives of seven years .

We also recognized $ 3.8 million of the purchase price 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 two asset categories and in-process research and development based on relative fair value, which was determined using Level 3 unobservable inputs.

To determine the fair value of the acquired intangible assets and in-process research and development, we used the present value of the estimated cash flows related to the products, using a discount rate of 8 %.

We also recognized $ 8.4 million in inventory at fair value, including $ 1.7 million of API and $ 6.7 million of finished goods.

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

The intangible assets will be tested for impairment when events or circumstances indicate that the carrying value of the asset may not be recoverable.

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, 2023 and therefore no impairment loss was recognized for the years ended December 31, 2022 and 2023.

2 unchanged sentences

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, 2022 and 2021.

The Company is 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, 2023 and 2022.

There were 20.7 million and 20.5 million shares of common stock issued and outstanding as of December 31, 2023, respectively, and 17.6 million and 17.5 million shares of common stock issued and outstanding as of December 31, 2022, 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.

There were 11 thousand shares of class C special stock issued and outstanding as of December 31, 2022 and 2021.

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

Each share of class C special stock

Public Offering

In May 2023, through a public offering, the Company completed the issuance and sale of 2,183,545 shares of ANI common stock, resulting in net proceeds after issuance costs of $ 80.6 million.

During 2021, the Company issued 1.5 million shares related to a public offering of the Company's common stock and 2.5 million shares as consideration for the acquisition of Novitium.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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.

Class C Special Stock

There were 11 thousand shares of class C special stock issued and outstanding as of December 31, 2023 and 2022.

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 the Company's 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 the Company's assets upon liquidation, dissolution, or winding-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 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.

The PIPE Shares are classified as mezzanine equity because the shares are mandatorily redeemable for cash upon a change in control, an event that is not solely in our control.

We incurred $ 0.2 million in issuance costs associated with the transaction.

The PIPE Shares accrue dividends at 6.50 % per year on a cumulative basis, payable in cash or in-kind, and will also participate, on a pro-rata basis, in any dividends that may be declared with respect to our common stock.

The PIPE Shares are convertible into our common shares at the conversion price of $ 41.47 (i) beginning two years after their issuance date, at the election of ANI (in which case the PIPE Investor must convert all of the PIPE Shares), if the volume-weighted average price of our common stock for any 20 trading days out of 30 consecutive trading days exceeds 170 % of the conversion price, and (ii) at any time after issuance, at the election of the PIPE Investor.

As of December 31, 2022, the PIPE shares are currently convertible into a maximum of 602,901 shares of our common stock.

In case of a liquidation event, the holder of the PIPE Shares will be entitled to receive, in preference to holders of our common stock, the greater of (i) the PIPE Shares’ purchase price plus any accrued and unpaid dividends thereon and (ii) the amount the holder of the PIPE Shares would have received in the liquidation event if it had converted its PIPE Shares into our common stock.

The PIPE Shares will have voting rights, voting as one series with our common stock, on as-converted basis, and will have separate voting rights on any (i) amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate”) that adversely amends and relates solely to the terms of the PIPE Shares and (ii) issuance of additional Series A convertible preferred stock.

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.

Concurrently with the execution of the Merger Agreement, and as financing for a portion of the acquisition, on March 8, 2021, the Company entered into an Equity Commitment and Investment Agreement with Ampersand 2020 Limited Partnership (the “PIPE Investor”), pursuant to which the PIPE Investor agreed to purchase, 25,000 shares of the Company's 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 on November 19, 2021.

The PIPE Shares are classified as mezzanine equity because the shares are mandatorily redeemable for cash upon a change in control, an event that is not solely in the Company's control.

The Company incurred $ 0.2 million in issuance costs associated with the transaction.

The PIPE Shares are convertible into the Company's common shares at the conversion price of $ 41.47 (i) beginning two years years after their issuance date, at the election of ANI (in which case the PIPE Investor must convert all of the PIPE Shares), if the volume-weighted average price of the Company's common stock for any 20 trading days out of 30 consecutive trading days exceeds 170 % of the conversion price, and (ii) at any time after issuance, at the election of the PIPE Investor.

As of December 31, 2023, the PIPE shares are currently convertible into a maximum of 602,901 shares of the Company's common stock.

In case of a liquidation event, the holder of the PIPE Shares will be entitled to receive, in preference to holders of the Company's common stock, the greater of (i) the PIPE Shares’ purchase price plus any accrued and unpaid dividends thereon and (ii) the amount the holder of the PIPE Shares would have received in the liquidation event if it had converted its PIPE Shares into the Company's common stock.

The PIPE Shares will have voting rights, voting as one series with the Company's common stock, on as-converted basis, and will have separate voting rights on any (i) amendment to the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (the “Certificate”) that adversely amends and relates solely to the terms of the PIPE Shares and (ii) issuance of additional Series A convertible preferred stock.

In case of a change of control of the Company , 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 the Company's common stock.

There were 25,000 shares of Series A convertible preferred stock outstanding as of December 31, 2023 and 2022.

STOCK-BASED COMPENSATION

Employee Stock Purchase Plan

In July 2016, we commenced administration of the ANI Pharmaceuticals, Inc.

2016 Employee Stock Purchase Plan.

The Board of Directors and shareholders approved a maximum of 0.2 million shares of common stock, which were reserved and made available for issuance under the ESPP.

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

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

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

The following table summarizes ESPP expense incurred under the 2016 Employee Stock Purchase Plan and included in our consolidated statements of operations:

(in thousands)

Years Ended December 31,

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

For periods of net income, and when the effects are not anti-dilutive, we calculate diluted earnings (loss) per share by dividing net income available to common stockholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options, shares to be purchased under our ESPP, and performance stock units, using the more dilutive of the treasury stock or the two-class method.

For periods of net loss, diluted loss per share is calculated similarly to basic loss per share.

Unvested restricted shares and Series A convertible preferred stock shares contain non-forfeitable rights to dividends, and therefore are considered to be participating securities;

Earnings (loss) per share for the years ended December 31, 2023, 2022, and 2021 are calculated for basic and diluted earnings (loss) per share as follows:

Basic Diluted

(in thousands, except per share amounts) Years Ended December 31, Years Ended December 31,

2023 2022 2021 2023 2022 2021

Net income (loss) available to common shareholders $ 17,154 $ ( 49,521 ) $ ( 42,793 ) $ 17,154 $ ( 49,521 ) $ ( 42,793 )

Earnings allocated to participating securities ( 1,679 ) — — ( 1,663 ) — —

Net income (loss) available to common shareholders $ 15,475 $ ( 49,521 ) $ ( 42,793 ) $ 15,491 $ ( 49,521 ) $ ( 42,793 )

Basic Weighted-Average Shares Outstanding 18,001 16,260 12,596 18,001 16,260 12,596

Dilutive effect of stock options, ESPP, and performance stock units 193 — —

Diluted Weighted-Average Shares Outstanding 18,194 16,260 12,596

Earnings (loss) per share $ 0.86 $ ( 3.05 ) $ ( 3.40 ) $ 0.85 $ ( 3.05 ) $ ( 3.40 )

The number of anti-dilutive shares, which have been excluded from the computation of diluted earnings (loss) per share, were 2.4 million, 2.6 million, and 1.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

STOCK-BASED COMPENSATION

Employee Stock Purchase Plan

In July 2016, the Company commenced administration of the ANI Pharmaceuticals, Inc.

As of December 31, 2023 there are 0.1 million shares of common stock available for issuance under the ESPP.

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

The Company issued 38 thousand, 29 thousand, and 14 thousand shares in the years ended December 31, 2023, 2022, and 2021, respectively.

The following table summarizes ESPP expense incurred under the 2016 Employee Stock Purchase Plan and included in the consolidated statements of operations:

(in thousands) Years Ended December 31,

2023 2022 2021

Selling, general, and administrative $ 360 $ 222 $ 87

Cost of sales 60 50 15

Research and development 47 41 21

Selling, general, and administrative

$ 467 $ 313 $ 123

Stock Incentive Plan

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

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”).

The options are granted at an exercise price equal to the fair market value of a share of our common stock on the respective grant date and are generally exercisable in four equal annual installments beginning on the first anniversary of the respective grant date.

The grants are made pursuant to inducement grants outside of our stockholder approved equity plan as permitted under the Nasdaq Stock Market listing rules.

We measure the cost of equity-based service awards based on the grant-date fair value of the award.

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

Prior to this approval, the Company granted equity-based incentive awards under the Sixth Amended and Restated 2008 Stock Incentive Plan (the “2008 Plan”), which was renamed, amended and restated to the 2022 Plan.

The 2022 Plan, among other things, increased the number of shares reserved for issuance thereunder by 1,150,000 shares.

As of December 31, 2023, 1.1 million shares of common stock were available for issuance under the 2022 Plan.

On May 23, 2023, the Company’s stockholders approved an amendment to the 2022 Plan (such amendment, the “2023 Stock Plan Amendment”).

Subject to adjustment, the 2023 Stock Plan Amendment increased the number of shares reserved for issuance under the 2022 Plan by 750,000 shares.

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

The options are granted at an exercise price equal to the fair market value of a share of the common stock on the respective grant date and are generally exercisable in four equal annual installments beginning on the first anniversary of the respective grant date.

The grants are made pursuant to inducement grants outside of the stockholder approved equity plan as permitted under the Nasdaq Stock Market listing rules.

The cost of equity-based service awards are measured based on the grant-date fair value of the award.

The cost is recognized ratably over the period during which an employee is required to provide service in exchange for the award or the requisite service period.

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 Stock Incentive Plans and Inducement Grant and included in our consolidated statements of operations:

(in thousands)

Years Ended December 31,

Cost of sales

Research and development

Stock-based compensation expense is recognized ratably over the vesting periods of the awards.

The following table summarizes stock-based compensation expense incurred for stock options, restricted stock awards, performance-based restricted stock units, and Inducement Grants and included in the consolidated statements of operations:

(in thousands) Years Ended December 31,

2023 2022 2021

Selling, general, and administrative $ 18,676 $ 13,094 $ 9,818

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

Outstanding stock options granted to employees and consultants generally vest over a period of four years and have 10-year contractual terms.

Outstanding stock options granted to non-employee directors generally vest over a period of one to four years and have 10-year contractual terms.

Upon exercise of an option, we issue new shares of our common stock or issue shares from treasury stock.

Research and development 863 710 543

Cost of sales 646 482 5

$ 20,185 $ 14,286 $ 10,366

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

Income tax benefits of approximately $ 3.3 million, $ 1.7 million, and $ 1.0 million were recognized for stock-based compensation-related tax deductions in the 2023, 2022, and 2021 consolidated statements of operations, respectively.

Stock Options

Outstanding stock options granted to employees and consultants generally vest over a period of four years and have 10-year contractual terms.

Outstanding stock options granted to non-employee directors generally vest over a period of one to four years and have 10-year contractual terms.

For 2023, 2022, and 2021, the fair value of each option grant was estimated using the Black-Scholes option-pricing model, using the following assumptions:

Years Ended December 31,

2023 2022 2021

Expected option life (years) 6.25 5.50 - 6.25

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0.68 % - 1.39 %

0.31 % - 1.63 %

Expected stock price volatility 49.0 % 48.4 % - 50.0 %

48.2 % - 49.5 %

49.2 % - 51.2 %

Dividend yield — — —

We use the simplified method to estimate the expected option life of options.

The Company uses the simplified method to estimate the expected option life of options.

The risk-free interest rate used is the yield on a U.S.

Treasury note as of the grant date with a maturity equal to the estimated life of the option.

We calculated an estimated volatility rate based on our historical stock price.

We have not issued a cash dividend on our common shares in the past nor do we have any current plans to do so in the future;

The calculated estimated volatility rate is based on ANI's historical stock price.

The Company has not issued a cash dividend on the common shares in the past nor does the Company have any current plans to do so in the future;

therefore, an expected dividend yield of zero was used.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

A summary of stock option activity under the 2022 Plan and Inducement Grants during the years ended December 31, 2023, 2022, and 2021 is presented below:

(in thousands, except per share and

remaining term data)

Exercise Price

remaining term data) Option

Shares Weighted

Exercise Price Fair Value Weighted

(years) Aggregate

Intrinsic Value

Outstanding December 31, 2020 936 $ 48.44 7.1 $ 372

Granted 168 33.09 $ 15.71

Exercised ( 42 ) 40.25 552

Forfeited ( 19 ) 59.84

Expired ( 55 ) 55.59

Outstanding December 31, 2021 988 $ 45.56 6.6 $ 6,786

Granted 36 34.52 $ 16.82

Exercised ( 23 ) 30.03 153

Forfeited ( 47 ) 36.91

Expired ( 47 ) 55.07

Outstanding at December 31, 2022 907 $ 45.47 5.6 $ 3,868

Granted 3 41.84 $ 22.12

Exercised ( 189 ) 44.09 2,894

Forfeited ( 21 ) 33.45

Expired ( 11 ) 55.15

Outstanding at December 31, 2023 689 $ 46.05 4.9 $ 8,370

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The cost is expected to be recognized over a weighted-average period of 1.1 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.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

During the year ended December 31, 2023, ANI received $ 8.3 million in cash from the exercise of stock options and recorded approximately $ 0.2 million tax provision related to these exercises.

During the year ended December 31, 2022, ANI received $ 0.7 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, 2021, ANI received $ 1.7 million in cash from the exercise of stock options and recorded a $ 0.1 million tax provision related to these exercises.

Restricted Stock Awards

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RSAs granted to non-officer directors generally vest over a period of one year .

Shares of our common stock delivered to employees and directors will be unrestricted upon vesting.

Shares of common stock delivered to employees and directors will be unrestricted upon vesting.

During the vesting period, the recipient of the restricted stock has full voting rights as a stockholder and would receive dividends, if declared, even though the restricted stock remains subject to transfer restrictions and will generally be forfeited upon termination of the officer prior to vesting.

The fair value of each RSA is based on the market value of our stock on the date of grant.

The fair value of each RSA is based on the market value of the Company's stock on the date of grant.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

A summary of RSA activity under the Plan during the years ended December 31, 2023, 2022, and 2021 is presented below:

Average Grant

Weighted Average

(in thousands, except per share and

remaining term data) Shares Weighted

Average Grant

Value Weighted Average

Remaining Term

remaining term data)

Unvested at December 31, 2020 352 $ 48.14 2.7

Granted 541 33.02

Vested ( 125 ) 48.32

Forfeited ( 61 ) 48.16

Unvested at December 31, 2021 707 $ 36.52 2.8

Granted 748 32.76

Vested ( 245 ) 36.99

Forfeited ( 69 ) 38.08

Unvested at December 31, 2022 1,141 $ 33.86 2.6

Granted 674 43.30

Vested ( 383 ) 34.59

Forfeited ( 81 ) 38.10

Unvested at December 31, 2023 1,351 $ 38.11 2.4

As of December 31, 2023, there was $ 41.5 million of total unrecognized compensation cost related to non-vested RSAs granted under the Plan, which is expected to be recognized over a weighted-average period of 2.4 years.

Performance-Based Restricted Stock Units

Awards may also be issued in the form of PSUs.

PSUs represent the right to receive a number of shares of Company common stock, contingent upon the achievement of specified performance objectives during a specified performance period.

PSUs granted to date vest over a three -year performance period.

On February 28, 2023, as part of the Company's equity compensation program, PSUs were granted to certain executives.

Of these PSUs, 50 % were market performance-based restricted stock units (“MPRSUs”), vesting of which is contingent upon the Company meeting certain total shareholder return (“TSR”) levels as compared to a select peer group over the over three years starting January 1, 2023.

The MPRSUs are also subject to the recipient’s continued employment or service through December 31, 2025.

The MPRSUs cliff vest at the end of the three -year period and have a maximum potential to vest at 200 % ( 85,099 shares) based on TSR performance.

The related share-based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized straight-line over the vesting term.

The estimated grant date fair value per share of the MPRSUs was $ 68.65 and was calculated using a Monte Carlo simulation model.

These MPRSUs are included at 100 % of the estimate number of shares at the end of the three -year performance period and are reflected under “Granted” in the table below.

The other 50 % of the PSUs were performance based restricted stock units (“PRSUs”), vesting of which is contingent upon the Company meeting certain adjusted non-GAAP year-on-year EBITDA growth rates over the over three years starting January 1, 2023.

The PRSUs are also subject to the recipient’s continued employment or service through December 31, 2025.

The PRSUs cliff vest at the end of the three-year period and have a maximum potential to vest at 200 % ( 85,099 shares) based on adjusted non-GAAP year-on-year EBITDA growth rates.

The related share-based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized straight-line over the vesting term.

The Company analyzed progress on the performance goals to assess the likelihood of achievement.

The estimated grant date fair value per share of the PRSUs was $ 41.84 based on the closing price of the stock on the date of grant.

These PRSUs are included at 100 % of the estimated number of shares at the end of the three -year performance period and are reflected under “Granted” in the table below.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

A summary of PSU activity under the Plan during the years ended December 31, 2023 and 2022 is presented below:

(in thousands, except per share and

remaining term data) Shares Weighted

Average Grant

Value Weighted Average

Remaining Term

Unvested at December 31, 2022 — $ — —

Granted 85 41.84

Forfeited ( 1 ) 41.84

Unvested at December 31, 2023 84 $ 41.84 2.0

As of December 31, 2023, there was $ 2.5 million of total unrecognized compensation cost related to non-vested PSUs granted under the Plan, which is expected to be recognized over a weighted-average period of 2.0 years.

On August 6, 2018, ANI Pharmaceuticals Canada Inc.

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rather, ANI Canada is subject to income taxes only in Canada and solely based on its stand-alone operations.

The foreign current and foreign deferred provisions (benefits) below represent our tax provision (benefit) from the Canadian, Indian, and Israeli taxing jurisdictions.

We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The foreign current and foreign deferred provisions (benefits) below represent the Company's tax provision (benefit) from the Canadian and Indian taxing jurisdictions.

The Company is required to establish a valuation allowance is required to be established for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

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

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.

Projected future taxable income and tax planning strategies in making this assessment.

As of December 31, 2023 and 2022, the consolidated valuation allowance was $ 0.4 million and $ 0.4 million, respectively, related solely to deferred tax assets for net operating loss carryforwards in certain U.S.

state jurisdictions.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

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

Total income tax expense (benefit) for income taxes consists of the following for the years ended December 31:

(in thousands) 2023 2022 2021

Current income tax provision

Federal $ 9,117 $ 152 $ 1,296

State 3,534 249 1,320

Foreign 26 66 691

Total 12,677 467 3,307

Deferred income tax benefit

Federal ( 7,601 ) ( 13,382 ) ( 12,163 )

State ( 3,946 ) ( 1,722 ) ( 5,122 )

Foreign ( 29 ) ( 128 ) 336

Total ( 11,576 ) ( 15,232 ) ( 16,949 )

Change in valuation allowance ( 8 ) ( 4 ) 187

Total benefit for income taxes

The difference between our expected income tax provision from applying U.S.

Federal statutory tax rates to the pre-tax income and actual income tax provision relates primarily to the effect of the following:

Total expense (benefit) for income taxes $ 1,093 $ ( 14,769 ) $ ( 13,455 )

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

The difference between expected income tax expense (benefit) from applying U.S.

Federal statutory tax rates to the pre-tax income (loss) and actual income tax expense (benefit) relates primarily to the effect of the following:

As of December 31,

2023 2022 2021

US Federal statutory rate 21.0 % 21.0 % 21.0 %

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Effective income tax rate 5.5 % 23.6 % 24.0 %

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

Deferred income taxes reflect the net tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes.

Our deferred income tax assets and liabilities consisted of the following:

Deferred income tax assets and liabilities consisted of the following:

As of December 31,

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Accruals for chargebacks and returns 17,358 15,344

Intangible asset

Inventories 4,569 5,292

Intangible assets 40,193 33,431

Net operating loss carryforwards 2,900 5,994

Capitalized research expenditures 11,294 4,708

Other 7,450 11,840

Total deferred tax assets $ 102,247 $ 91,883

Deferred tax liabilities:

Intangible assets

Depreciation $ ( 5,658 ) $ ( 5,776 )

Other liabilities ( 5,440 ) ( 4,298 )

Total deferred tax liabilities $ ( 11,098 ) $ ( 10,074 )

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Deferred tax assets, net of deferred tax liabilities and valuation allowance $ 90,711 $ 81,363

As of December 31, 2022, we had U.S.

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 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.

As of December 31, 2023, U.S.

federal net operating loss carryforwards were approximately $ 8.0 million, all of which arose as a result of the 2013 merger with BioSante Pharmaceuticals, Inc.

Net operating loss carryforwards related to the 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.

Internal Revenue Code;

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

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.

Significant judgment is required in evaluating our tax positions and determining our provision for income taxes.

We establish liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

These liabilities are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable.

We adjust these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit.

The provision for income taxes includes the impact of changes to the liability that is considered appropriate.

We identified no material uncertain income tax positions as of December 31, 2022 and 2021.

We are subject to income tax audits in all jurisdictions for which we file tax returns.

Tax audits by their nature are often complex and can require several years to complete.

All of our income tax returns remain subject to examination by tax authorities due to the availability of net operating loss carryforwards.

COMMITMENTS AND CONTINGENCIES

Operating Leases

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

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.

Discount rates used in the calculation of our lease liability ranged between 3.99 % and 8.95 %.

and the current annual limitation is approximately $ 0.8 million per year.

Additionally, as of December 31, 2023, there were total net operating losses in various states of approximately $ 13.0 million which begin to expire through 2042, and in Canada of $ 1.0 million that expire through 2038.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

Rent expense for the years ended December 31, 2022 and 2021 consisted of the following:

Year Ended December 31,

The Company is subject to income taxes in numerous jurisdictions in the U.S., Canada, and India.

Significant judgment is required in evaluating the tax positions and determining the provision for income taxes.

Liabilities are established for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due.

These liabilities are established when it is believed that certain positions might be challenged despite the belief that our tax return positions are fully supportable.

These liabilities are adjusted in light of changing facts and circumstances, such as the outcome of a tax audit.

The provision for income taxes includes the impact of changes to the liability that is considered appropriate.

There were no material uncertain income tax positions identified as of December 31, 2023 and 2022.

The Company is subject to income tax audits in all jurisdictions for which tax returns are filed.

Tax audits by their nature are often complex and can require several years to complete.

All of the Company's income tax returns remain subject to examination by tax authorities due to the availability of net operating loss carryforwards.

COMMITMENTS AND CONTINGENCIES

Operating Leases

All existing leases as of December 31, 2023 are classified as operating leases.

As of December 31, 2023, there are 14 operating leases for facilities and office equipment with remaining terms expiring from 2025 through 2028 and a weighted average remaining lease terms of 3.9 years and 2.6 years, as of December 31, 2023 and 2022, respectively.

During April 2023, the Company entered into a lease agreement for additional warehouse space in East Windsor, New Jersey.

Additionally, during October 2023, the Company entered into an amendment for the Middleton, Wisconsin location which expanded the Company's square footage and also extended the termination date to December 2028.

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

Leases with an initial term of twelve months or less are not recorded on the balance sheet, and the Company does not separate lease and non-lease components of contracts.

The Company’s lease agreements do not provide for determination of the interest rate implicit in the lease.

Therefore, the Company used a benchmark approach to derive an appropriate incremental borrowing rate.

The Company’s incremental borrowing rate is the rate of interest that the lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived an incremental borrowing rate, which was used to discount its lease liabilities.

The weighted average incremental borrowing rates as of December 31, 2023 and 2022 is 8.12 % and 3.99 %, respectively.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In addition, the Company does not have any finance leases, any sublease arrangements, or any leases where the Company is considered the lessor.

Lease expense consisted of the following for the years ended December 31:

(in thousands) 2023 2022 2021

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Total lease costs $ 2,252 $ 937 $ 288

A maturity analysis of our operating leases follows:

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Consolidated Balance Sheet as of December 31, 2023:

(in thousands)

Future payments:

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 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.

Total minimum lease payments 6,662

effects of discounting ( 990 )

Present value of future minimum lease payments 5,672

current lease liability, included in accrued expenses and other ( 1,561 )

Non-current lease liability, included in other non-current liabilities $ 4,111

Government Regulation

Our products and facilities are subject to regulation by a number of federal and state governmental agencies, such as the Drug Enforcement Administration (“DEA”), the Food and Drug Administration (“FDA”), the Centers for Medicare and Medicaid Services (“CMS”), Health Canada, the Central Drugs Standard Control Organization (“CDSCO”), The Narcotics Control Bureau (“NCB”), and India’s Ministry of Health and Family Welfare (“MoHFW”).

The FDA, in particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of our products.

The DEA, Health Canada, and NCB maintain oversight over our products that are considered controlled substances.

The Company's products and facilities are subject to regulation by a number of federal and state governmental agencies, such as the Drug Enforcement Administration (“DEA”), the Food and Drug Administration (“FDA”), the Centers for Medicare and Medicaid Services (“CMS”), the Central Drugs Standard Control Organization (“CDSCO”), The Narcotics Control Bureau (“NCB”), and India’s Ministry of Health and Family Welfare (“MoHFW”).

The FDA, in particular, maintains oversight of the formulation, manufacture, distribution, packaging, and labeling of all of ANI's products.

The DEA and NCB maintain oversight over products that are considered controlled substances.

Unapproved Products

Two of our products, Esterified Estrogen with Methyltestosterone (“EEMT”) and Opium Tincture, are marketed without approved NDAs or ANDAs.

During the years ended December 31, 2022, 2021, and 2020, net revenues for these products totaled $ 14.2 million, $ 16.2 million, and $ 16.9 million, respectively.

Three products, Esterified Estrogen with Methyltestosterone (“EEMT”), Opium Tincture, Thyroid Tablets, and are marketed without approved NDAs or ANDAs.

During the years ended December 31, 2023, 2022, and 2021, net revenues for Esterified Estrogen with Methyltestosterone (“EEMT”), Opium Tincture and Thyroid Tablets products totaled $ 22.4 million, $ 14.2 million, and $ 16.2 million, respectively.

The Company obtained the rights to Hyoscyamine, a product without an approved NDA as of December 27, 2023, which we plan to launch commercially in early 2024 (see further discussion below).

The FDA's policy with respect to the continued marketing of unapproved products appears in the FDA's September 2011 Compliance Policy Guide Sec.

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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 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.

If we decide to withdraw the products from the market, net revenues for generic pharmaceutical products would decline materially, and if we decide to seek FDA approval, we would face increased expenses and might need to suspend sales of the products until such approval was obtained, and there are no assurances that we would receive such approval.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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 we decide to withdraw the products from the market, our net revenues for generic pharmaceutical products would decline materially, and if we decide to seek FDA approval, we would face increased expenses and might need to suspend sales of the products until such approval was obtained, and there are no assurances that we would receive such approval.

In addition, one group of products that we manufacture on behalf of a contract customer is marketed by that customer without an approved NDA.

If the FDA took enforcement action against such customer, the customer may be required to seek FDA approval for the group of products or withdraw them from the market.

Our contract manufacturing revenues for the group of unapproved products for the years ended December 31, 2022, 2021, and 2020 were $ 2.6 million, $ 2.4 million, and $ 2.8 million, respectively.

One group of products that the Company manufactured on behalf of a contract customer, Hyoscyamine, was marketed by that customer without an approved NDA.

Contract manufacturing revenues for Hyoscyamine, for the years ended December 31, 2023, 2022, and 2021 were $ 1.9 million, $ 2.6 million, and $ 2.4 million , respectively.

On December 27, 2023 the Company purchased the intellectual property and product rights to Hyoscamine from Alvogen, Inc.

Legal proceedings

We are involved, and from time to time may become involved, in various disputes, governmental and/or regulatory inquiries, investigations, government reimbursement related actions and litigation.

The Company is involved, and from time to time may become involved, in various disputes, governmental and/or regulatory inquiries, investigations, government reimbursement related actions and litigation.

These matters are complex and subject to significant uncertainties.

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.

While we believe that we have valid claims and/or defenses in the litigation and other matters described below, litigation is inherently unpredictable, particularly where the damages sought are substantial or indeterminate or when the proceedings, investigations or inquiries are in the early stages, 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;

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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 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.

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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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 condensed consolidated statements of operations under the selling, general, and administrative expense line item.

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.

ANI Pharmaceuticals, Inc.

3 unchanged sentences

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 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.

On August 3, 2021, the Company entered into a Settlement Agreement with Arbor Pharmaceuticals, LLC to resolve all claims related to Civil Action 17-4910, Arbor Pharmaceuticals, LLC (“Arbor”) v.

ANI Pharmaceuticals, Inc., which was pending trial in the United States District Court for the District of Minnesota.

Under the terms of the agreement, ANI paid Arbor $ 8.4 million and Arbor dismissed the action with prejudice.

Neither party admitted wrongdoing in reaching this settlement.

The Company paid the settlement from cash on the balance sheet

On December 3, 2020, class action complaints were filed against the Company on behalf of putative classes of direct and indirect purchasers of the drug Bystolic.

1 unchanged sentence

On March 15, 2021, the plaintiffs in these actions filed amended complaints.

All amended complaints are substantively identical.

The plaintiffs in these actions allege that, beginning in 2012, Forest Laboratories, the manufacturer of Bystolic, entered into anticompetitive agreements when settling patent litigation related to Bystolic with seven potential manufacturers of a generic version of Bystolic:

All amended complaints were substantively identical.

The plaintiffs in these actions alleged that, beginning in 2012, Forest Laboratories, the manufacturer of Bystolic, entered into anticompetitive agreements when settling patent litigation related to Bystolic with seven potential manufacturers of a generic version of Bystolic:

Hetero, Torrent, Alkem/Indchemie, Glenmark, Amerigen, Watson, and various of their corporate parents, successors, subsidiaries, and affiliates.

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The plaintiffs named the Company as a defendant based on the Company’s January 8, 2020 Asset Purchase Agreement with Amerigen.

Under the terms of the 2020 Asset Purchase Agreement, Amerigen agreed to indemnify ANI for certain liabilities relating to Bystolic, including liabilities that arose prior to closing of the asset purchase.

The complaints alleged that the 2013 patent litigation settlement agreement between Forest and Amerigen violated federal and state antitrust laws and state consumer protection laws by delaying the market entry of generic versions of Bystolic.

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Plaintiffs sought damages, trebled or otherwise multiplied under applicable law, injunctive relief, litigation costs and attorneys’ fees.

The complaints did not specify the amount of damages sought from the Company or other defendants and the Company at this early stage of the litigation cannot reasonably estimate the potential damages that the plaintiffs will seek.

The cases have been consolidated in the United States District Court for the Southern District of New York as In re Bystolic Antitrust Litigation, Case No.

The complaints did not specify the amount of damages sought from the Company or other defendants and the Company.

The cases were consolidated in the United States District Court for the Southern District of New York as In re Bystolic Antitrust Litigation, Case No.

20-cv-005735 (LJL).

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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 newly amended complaints contained substantially similar claims.

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.

After full briefing and oral argument, on February 21, 2023, the court granted the Company and the defendants’ motion to dismiss all actions with prejudice.

Plaintiffs filed an appeal in the Second Circuit.

Oral arguments were held on December 6, 2023 and a decision from the court is pending.

ANI continues to dispute any liability in this matter.

On March 24, 2021, Azurity Pharmaceuticals, Inc.

(“Azurity”) filed a complaint in the United States District Court for the District of Minnesota against ANI Pharmaceuticals, Inc., asserting that ANI’s vancomycin hydrochloride oral solution drug product infringes U.S.

(“Azurity”) filed a complaint in the United States District Court for the District of Minnesota against ANI, asserting that ANI’s vancomycin hydrochloride oral solution drug product infringes U.S.

The complaint sought injunctive relief, damages, including lost profits and/or royalty, treble damages, and attorneys’ fee and costs.

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Under the terms of the agreement, Azurity granted ANI a non-exclusive, non-transferable, non-sublicensable, royalty-bearing license under its patents to sell ANI product in the United States and dismissed the action with prejudice.

In exchange, we paid Azurity $ 1.9 million of royalties from past sales and we will pay Azurity a royalty equal to 20 % of gross margin of sales of the ANI product for a contractually defined term.

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

In exchange, ANI paid Azurity $ 1.9 million of royalties from past sales and will pay Azurity a royalty equal to 20 % of gross margin of sales of the ANI product for a contractually defined term.

On April 1, 2021, United Therapeutics Corp.

and Supernus Pharmaceuticals, Inc.

(“UTC/Supernus”) filed a complaint in the United States District Court for the District of Delaware against ANI Pharmaceuticals, Inc., asserting that ANI’s proposed Treprostinil extended release drug product, which is subject to ANI’s Abbreviated New Drug Application No.

(“UTC/Supernus”) filed a complaint in the United States District Court for the District of Delaware against ANI, asserting that ANI’s proposed Treprostinil extended release drug product, which is subject to ANI’s Abbreviated New Drug Application No.

215667, infringes U.S.

7,417,070, 7,544,713, 8,252,839, 8,349,892, 8,410,169, 8,747,897, 9,050,311, 9,278,901, 9,393,203, 9,422,223, 9,593,066 and 9,604,901 (“the Asserted Patents”).

The complaint seeks injunctive relief , attorneys' fee and costs.

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.

The complaint sought injunctive relief , attorneys' fee and costs.

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.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

On October 3, 2022, Azurity filed a complaint in the United States District Court for the District of New Jersey against Novitium, seeking a declaratory judgment that Novitium’s manufacture, use, sale, importation and/or offer to sell Bionpharma Inc.’s (“Bionpharma”) enalapril maleate oral solution drug product (the “Product”) would infringe U.S.

11,040,023 and 11,141,405 (the “Novitium Action”).

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

On October 12, 2022, Bionpharma filed a motion in the New Jersey court to intervene on Novitium’s behalf in the litigation and on October 14, 2022, Novitium and Bionpharma jointly moved to transfer venue to the District of Delaware.

Transfer was granted on January 20, 2023.

On March 27, 2023, the transferred Novitium Action (assigned Delaware Civil Action No.

23-163-MSG) was consolidated with the Delaware Third Wave Suits against Bionpharma (Civil Action Nos.

21-1286-MSG, 21-1455-MSG), which include Azurity’s infringement claims against Bionpharma involving the same patents asserted in the Novitium Action, as well as Bionpharma’s antitrust claims against Azurity.

On August 3, 2023, Azurity filed an amended complaint against Novitium seeking damages for supplying Bionpharma's ANDA product.

On November 14, 2023, the court dismissed all of Azurity's claims against Novitium with prejudice and dismissed Novitium as a party from the Delaware Third Wave Suits.

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.

On September 29, 2023, Orphalan SA ("Orphalan") filed a complaint in the United States District Court for the District of Delaware against Novitium, asserting that Novitium's proposed triethylenetetramine tetrachloride drug product, which is subject to Novitium's Abbreviated New Drug Application No.

218493, infringes U.S.

10,988,436 and 11,072,577.

The complaint seeks damages, injunctive relief, attorneys' fees and costs.

On December 1, 2023, Orphalan voluntarily dismissed the action without prejudice.

Novitium disputes any liability in this matter.

On November 21, 2023, Harmony Biosciences, LLC, Bioprojet Societe Civile de Recherche and Bioprojet Pharma SAS filed a compliant in the United States District Court for the District of Delaware against Novitium and certain other defendants named in the complaint, asserting, among other things, that Novitium's proposed pitolisant hydrochloride drug product, which is subject to Novitium's Abbreviated New Drug Application No.

218495, infringes U.S.

Patent Nos 8,207,197, 8,354,430 and 8,486,947.

The complaint seeks damages, injunctive relief, attorneys' fees and costs.

Novitium disputes any liability in this matter.

Ranitidine Related Litigation

1 unchanged sentence

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.

The public nuisance claim asserts that the widespread sale of ranitidine products in the state created a public nuisance that requires a state-wide medical monitoring program of New Mexico residents for the development of colorectal cancer, stomach cancer, gastrointestinal disorders and liver disease.

As damages, New Mexico asks that the defendants fund this medical monitoring program.

The negligence claims assert that the defendants were negligent in selling the product, essentially alleging that it was unreasonable to have the product on the market.

With respect to that claim, New Mexico asserts that it paid for ranitidine products through state-funded insurance and health-care programs.

On December 15, 2020, the case was removed to federal court and transferred to the In re Zantac multidistrict litigation (“MDL”) pending in the United States District Court for the Southern District of Florida.

New Mexico moved for remand to state court.

The MDL court granted the remand motion on February 25, 2021.

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

As damages for the nuisance claim, New Mexico asked that the defendants fund this medical monitoring program.

With respect to the nuisance claim, New Mexico asserted that it paid for ranitidine products through state-funded insurance and health-care programs.

On April 16, 2021, New Mexico filed an amended complaint in the New Mexico First Judicial District Court in Santa Fe County.

It did not name ANI in the amended complaint, effectively voluntarily dismissing ANI from the action.

Novitium is named as a Defendant in the amended complaint.

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.

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

The case is currently in discovery.

Novitium was named as a defendant in the amended complaint.

On September 1, 2023, the court entered an order dismissing Novitium without prejudice.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

Federal Court Personal Injury Litigation .

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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 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.

The Koepsel action was filed within the existing multi-district litigation concerning ranitidine-containing drugs pending in the Southern District of Florida, In re Zantac MDL , 20 MDL 2924 (the "MDL").

A Master Personal Injury Complaint (“MPIC”) in that MDL that was filed on June 22, 2020 also named ANI and Novitium as defendants.

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, after ANI was dismissed, the district court dismissed the MPIC claims against generic

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

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

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

On December 31, 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.

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

An Amended Master Personal Injury Complaint was filed on February 8, 2021, which did not name ANI but did name Novitium.

An Amended MPIC was filed on February 8, 2021, which did not name ANI but did name Novitium.

By opinion dated July 8, 2021, the district court dismissed all claims against the generic manufacturer defendants with prejudice on preemption grounds.

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.

The plaintiffs have appealed to the Eleventh Circuit Court of Appeals.

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

ANI was served with complaints in five of those additional cases:

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

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.

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

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.

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

Counsel for the plaintiffs have been notified that Novitium did not sell an over the counter ranitidine product and sold a generic prescription ranitidine product for a limited period of time, from December 2018 until September 2019.

Novitium’s product was voluntarily recalled in October 2019.

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.

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Novitium currently is named as a defendant in more than 700 short form complaints.

The plaintiffs have taken multiple appeals from decisions issued by the district court in the MDL to the Eleventh Circuit.

On September 8, 2023, the Eleventh Circuit remanded a subset of the MDL appeals back to the district court for entry of final judgments pursuant to Rule 58.

The defendants filed a motion with the Eleventh Circuit to remand a similarly situated appeal for similar entry of a final judgment.

In addition, the defendants are seeking a stay from the Eleventh Circuit of all non-remanded related appeals in order to have all of the related appeals decided together.

The district court has entered final judgments and the appeals are now pending before the Eleventh Circuit.

ANI and Novitium dispute any liability in these matters.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

State Court Personal Injury Litigation

5 unchanged sentences

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.

The Ross action was consolidated with the coordinated proceedings in Illinois, which have been dismissed, as discussed below.

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.

2 unchanged sentences

Walgreen Co., et.

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

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

2022LA001007 (naming both Novitium and ANI);

1 unchanged sentence

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.

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

2022LA001012 (naming Novitium);

18 unchanged sentences

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.

Plaintiffs filed a master long-form complaint on March 9, 2023 naming Novitium as a defendant.

ANI is not named as a defendant.

The Keller Postman firm has confirmed that its clients are no longer pursuing claims against ANI.

When the court ruled the cases needed to be re-filed as single-plaintiff cases, Novitium was never served.

The counts in the master complaint include strict liability for failure to warn/design defects, general negligence, negligent misrepresentation, negligent storage and transport, apparent manufacturer liability, common law fraud, unjust enrichment, civil conspiracy, and breach of express and implied warranties.

The complaint further alleges violations of the Illinois Consumer Fraud Act.

Pursuant to the court’s standing order, the generic defendants filed a motion to dismiss pursuant to IL 2-615 (failure to state a claim on the face of the complaint) on April 13, 2023, claiming preemption by federal law.

On August 10, 2023, the court dismissed all claims against the generic defendants, including Novitium, with prejudice on preemption grounds.

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

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.

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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.

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

On January 19, 2023, the court 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.

On September 21, 2023, the plaintiff leadership filed a master complaint in the JCCP.

The master complaint does not name any generic defendants.

However, the short form complaints allow individual plaintiffs to name "other defendants," leaving open the option for individual plaintiffs to name generic manufacturers as defendants.

The master complaint alleges strict liability (design defect and failure to warn), negligent failure to warn, and general negligence.

In December 2023, the Keller Postman firm filed approximately 200 individual plaintiff short form complaints in the JCCP that name generic defendants.

Novitium is named in 28 of the short form complaints which reference the allegations for the master complaint.

ANI is not named.

Pennsylvania.

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Glaxo SmithKline LLC, et.

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

al., 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.

al., 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.

2 unchanged sentences

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.

The generic defendants filed their preliminary objections to Plaintiffs’ consolidated long-form generic complaint on March 20, 2023.

The court sustained the generics’ objection that plaintiffs’ failure to warn/design defect claims were preempted by federal law;

therefore, all allegations related to failure to warn/design defects are dismissed.

The court also sustained the generics’ preliminary objections relating to the counts of strict liability-design defect and breach of implied warranty to the extent Pennsylvania substantive law applies.

The court noted the substantive law of another state may not conflict with federal law, and, further, strict liability and breach of implied warranty causes of action of another state may apply in individual cases.

This is a determination that can only be made after short form complaints are filed.

It is the generics’ position that the court’s ruling on the preliminary orders effectively dismissed the generics from the case unless and until a non-resident plaintiff names a generic in a short form complaint.

Out of an abundance of caution, however, the generics, including Novitium, all filed answers to the long form complaint in June 2023.

In January 2024, plaintiffs filed short form complaints naming generic defendants, including Novitium in one complaint, Titus .

ANI and Novitium dispute any liability in these matters.

Other Industry Related Matters

On or about September 20, 2017, the Company and certain of its employees were served with search warrants and/or grand jury subpoenas to produce documents and possibly testify relating to a federal investigation of the

generic pharmaceutical industry.

We have been cooperating and intend to continue cooperating with the investigation.

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

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.

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.

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

Subsequently, the Company 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 ANI has 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.

In the third quarter of 2019, we began purchasing materials that are intended to be used commercially in anticipation of FDA approval of Cortrophin Gel and the resultant product launch.

In the third quarter of 2019, the purchase of materials commenced that were intended to be used commercially in anticipation of FDA approval of Cortrophin Gel and the resultant product launch.

The FDA granted approval of the sNDA of this product on October 29, 2021.

Prior to FDA approval, under U.S.

GAAP, we were prohibited from capitalizing these pre-launch purchases of materials as inventory, and accordingly, they were charged to expense in the period in which they were incurred.

GAAP, the Company was prohibited from capitalizing these pre-launch purchases of materials as inventory, and accordingly, they were charged to expense in the period in which they were incurred.

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

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.

During the year ended December 31, 2021, the Company recognized $ 0.8 million of charges for the purchase of materials.

Other charges were incurred 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, the Company 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 2023 and 2022 .

RELATED PARTY TRANSACTIONS

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.

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.

Thoma is the former Chief Executive Officer of SPI Pharmaceuticals, Inc.

(“SPI”), who retired in October 2020.

SPI supplies ingredients to the Company.

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.

On March 8, 2021, the Company entered into an Equity Commitment and Investment Agreement with the PIPE Investor, pursuant to which 25,000 shares were purchased for $ 1,000 per share and an aggregate purchase price of $ 25.0 million on November 19, 2021.

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

In connection with the acquisition of Novitium, the Company entered into employment agreements with the two executives and founders of Novitium, Muthusamy Shanmugam, Head of R&D and COO of NJ Operations of ANI, and Chad Gassert, Sr.

Vice President, Corporate Development and Strategy of ANI.

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

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.

Shanmugam also serves on the Company's board of directors.

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

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

A summary of payments to related parties is presented below:

Years Ended December 31,

(in thousands) 2023 2022 2021 (1)

Scitus Pharma Services $ 3,646 $ 2,075 $ —

2 unchanged sentences

Nuray Chemical Private Limited — 1,110 365

(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.

$ 11,881 $ 6,955 $ 390

____________________

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

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

As of December 31, 2023, the outstanding balances due to Scitus and SS Pharma were $ 0.7 million and $ 0.6 million, respectively.

There was no outstanding balance due to Nuray or Esjay at December 31, 2023.

On December 12, 2023, the Company paid $ 12.5 million of cash consideration to the Company Members of Novitium for the achievement of the "ANDA Filing Earn-Out," as defined in the Novitium acquisition agreement, as discussed in Note 2.

The Company paid Mr.

Shanmugam and Esjay, and Mr.

Gassert's company Chali Properties LLC, approximately $ 6.7 million and $ 1.9 million, respectively, for their portion of the cash consideration due to them as part of the Novitium acquisition.

On February 22, 2024, the Company paid $ 12.5 million of cash consideration to the Company Members of Novitium for the achievement of the "Gross Profit Earn-Out," as defined in the Novitium acquisition agreement, as discussed in Note 2.

The Company paid Mr.

Shanmugam and Esjay, and Mr.

Gassert's company Chali Properties LLC, approximately $ 6.7 million and $ 1.9 million, respectively, for their portion of the cash consideration due to them as part of the Novitium acquisition.

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 to 2022 , based on this definition, the Company was organized as one operating and reporting 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:

Effective in the first quarter of 2022 and prospectively, in conjunction with the principal completion of the buildout of infrastructure in the areas of commercialization of rare disease therapies and the launch of Cortrophin Gel, it was determined that the Company has 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.

1 unchanged sentence

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.

The CODM evaluates the performance of the Company as two operating segments based on revenues and 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

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

Accordingly, the Company does not present total assets by operating segment.

ANI Pharmaceuticals, Inc.

2 unchanged sentences

For the years ended December 31, 2023, 2022, and 2021

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

Year Ended December 31,

(in thousands) 2023 2022 2021

Generics, Established Brands, and Other $ 374,699 $ 274,699 $ 216,136

Rare Disease 112,117 41,686 —

Total net revenues $ 486,816 $ 316,385 $ 216,136

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

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

Generics, Established Brands, and Other $ 152,990 $ 78,958 $ 63,418

Rare Disease 12,498 ( 18,348 ) ( 18,571 )

Depreciation and amortization ( 59,791 ) ( 56,973 ) ( 47,252 )

Corporate and other unallocated expenses (1)

Total operating loss

( 58,726 ) ( 38,920 ) ( 37,388 )

Total operating income (loss) $ 46,971 $ ( 35,283 ) $ ( 39,793 )

Interest expense, net ( 26,940 ) ( 28,052 ) ( 11,922 )

Other income (expense), net ( 159 ) 670 ( 4,343 )

Loss before benefit for income taxes

Income (loss) before expense (benefit) for income taxes $ 19,872 $ ( 62,665 ) $ ( 56,058 )

____________________

(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.

Operations are located in the United States and India.

The Company has ceased operations at the Oakville, Ontario, Canada location as of March 31, 2023.

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,

(in thousands) Years Ended December 31,

Location of Operations 2023 2022 2021

United States $ 486,251 $ 312,427 $ 211,893

Canada 565 3,958 4,243

Total Revenue $ 486,816 $ 316,385 $ 216,136

ANI Pharmaceuticals, Inc.

and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2023, 2022, and 2021

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

(in thousands) December 31, 2023 December 31, 2022

United States $ 43,163 $ 40,343

India 1,430 1,047

Total property and equipment, net $ 44,593 $ 43,246

(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.

____________________

(1) Amounts as of December 31, 2023 and 2022 exclude the land and building at the Canada facility, which are classified as held for sale as of December 31, 2023 and 2022.

These assets have a carrying value of $ 8.0 million.

SUBSEQUENT EVENTS

On February 14, 2024, the Company granted RSA and PSU awards to officers and employees of the Company under the 2022 Plan.

The Company granted 525,729 RSAs to employees and officers of the Company.

These RSAs vest over four years .

The Company granted 73,588 PSUs to employees and officers of the Company ( 66,433 to officers of the Company).

PSU performance will be measured over three years from January 1, 2024 through December 31, 2026 and will cliff-vest contingent upon the achievement of specified performance objectives.

PSUs granted to date vest over a three-year performance period.

Additionally, on February 15, 2024, the Company granted 13,054 RSAs to new employees of the Company, which will vest over four years .

On February 16, 2024, ANI Pharmaceuticals Canada, Inc.

and 1540700 Ontario Limited entered into an agreement of purchase and sale for the Oakville, Ontario manufacturing facility for a purchase price of 19.2 million Canadian Dollars, or approximately $ 14.2 million US Dollars, based on the current exchange rate.

The first and second deposits, each amounting to approximately 1.0 million Canadian Dollars or approximately $ 0.7 million US Dollars, based on the current exchange rate, were received on February 20, 2024, and February 27, 2024, respectively.

The remaining balance of the purchase price, less deposits, will be paid upon closing, which is expected to occur by the end of March 2024.

The closing of the transaction is subject to customary termination conditions, including the buyer’s right to terminate the agreement if the property is materially damaged prior to the closing.

On February 22, 2024, the Company paid $ 12.5 million to the Company Members of Novitium for the achievement of the "Gross Profit Earn-Out," as defined in the Novitium acquisition agreement, as discussed in Note 2.

On November 15, 2010, ANI, formerly Biosante, entered into an assignment and technology transfer agreement and stock subscription agreement (collectively the "CG Agreement") with CG Oncology, Inc.

formerly, Cold Genesys, Inc.

(“CG Oncology”), pursuant to which the Company sold to CG Oncology exclusive, worldwide rights to develop and commercialize BioSante’s oncolytic virus technology.

The technology includes a replication-competent adenovirus that has completed clinical trials for treatment of superficial bladder cancer.

Under the terms of the CG Agreement, the Company receive d an equity investment in CG Oncology, an upfront cash payment and the right to receive future royalty payments.

Historically, this equity investment was recorded at cost and as of December 31, 2023, this equity investment was valued at zero .

On January 24, 2024, CG Oncology completed their Initial Public Offering, at an offering price of $ 19.00 per share.

The Company currently holds 219,925 shares of common stock in CG Oncology.

As of February 27, 2024 these shares are valued at approximately $ 10.2 million.

On February 28, 2024, CG Oncology disputed the Company's rights to receive royalties.

The dispute is unresolved at this time.

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