UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 FORM 10-Q

 ☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

 OR

 ☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 FOR THE TRANSITION PERIOD FROM TO      

 COMMISSION FILE NUMBER 001-39294

 ASSERTIO HOLDINGS, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware	85-0598378
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NUMBER)

 100 South Saunders Road, Suite 300

Lake Forest, Illinois 60045

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES; ZIP CODE)

 (224) 419-7106

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading Symbol(s):	Name of each exchange on which registered:
Common Stock, $0.0001 par value	ASRT	Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

The number of issued and outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of October 31, 2021 was 44,634,085.

ASSERTIO HOLDINGS, INC.

FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020
	Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020
	Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings
Item 1A.	Risk Factors
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.	Exhibits
	Signatures

2

Table of Content

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)

	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	58,726	$	20,786
Accounts receivable, net	36,145		44,350
Inventories, net	5,481		11,712
Prepaid and other current assets	12,193		17,406
Total current assets	112,545		94,254
Property and equipment, net	1,678		2,437
Intangible assets, net	179,143		200,082
Other long-term assets	5,939		6,501
Total assets	$	299,305	$	303,274
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	7,666	$	14,808
Accrued rebates, returns and discounts	43,830		63,114
Accrued liabilities	13,782		27,071
Current portion of long-term debt	12,257		11,942
Contingent consideration, current portion	7,200		6,776
Interest payable	4,193		1,793
Other current liabilities	11,552		7,182
Total current liabilities	100,480		132,686
Long-term debt	66,410		72,160
Contingent consideration	30,759		31,776
Other long-term liabilities	4,796		11,138
Total liabilities	202,445		247,760
Commitments and contingencies
Shareholders’ equity:
Common stock, $0.0001 par value, 200,000,000 shares authorized; 44,622,498  and 28,392,149 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	4		3
Additional paid-in capital	530,689		483,456
Accumulated deficit	(433,833)		(427,945)
Total shareholders’ equity	96,860		55,514
Total liabilities and shareholders' equity	$	299,305	$	303,274

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

3

Table of Content

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Product sales, net	$	25,997	$	33,664	$	77,271	$	61,974
Commercialization agreement, net	—		—		—		11,258
Royalties and milestones	416		299		1,391		1,158
Other revenue	(941)		602		(976)		1,709
Total revenues	25,472		34,565		77,686		76,099
Costs and expenses:
Cost of sales	3,050		6,462		10,936		13,099
Research and development expenses	—		1,316		—		3,983
Selling, general and administrative expenses	9,313		27,607		43,279		83,052
Amortization of intangible assets	7,175		5,587		20,939		18,237
Restructuring charges	—		268		1,089		6,787
Total costs and expenses	19,538		41,240		76,243		125,158
Income (loss) from operations	5,934		(6,675)		1,443		(49,059)
Other (expense) income :
Interest expense	(2,495)		(3,050)		(7,783)		(13,328)
Other gain (loss), net	344		253		747		(3,571)
Gain on sale of Gralise	—		—		—		126,655
Loss on extinguishment of convertible notes	—		—		—		(47,880)
Loss on sale of NUCYNTA	—		—		—		(14,749)
Loss on debt extinguishment	—		—		—		(8,233)
Total other (expense) income	(2,151)		(2,797)		(7,036)		38,894
Net income (loss) before income taxes	3,783		(9,472)		(5,593)		(10,165)
Income tax (expense) benefit	(46)		(1,050)		(294)		6,374
Net income (loss) and Comprehensive income (loss)	$	3,737	$	(10,522)	$	(5,887)	$	(3,791)
Basic net income (loss) per share	$	0.08	$	(0.35)	$	(0.14)	$	(0.15)
Diluted net income (loss) per share	$	0.08	$	(0.35)	$	(0.14)	$	(0.15)
Shares used in computing basic net income (loss) per share	44,969		29,891		42,550		24,958
Shares used in computing diluted net income (loss) per share	45,055		29,891		42,550		24,958

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

4

Table of Content

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands)

(Unaudited)

	Common Stock			Additional Paid-In Capital*		Accumulated Earnings (Deficit)		Shareholders’ Equity
	Shares*	Amount*
Balances at December 31, 2020	28,392	$	3	$	483,456	$	(427,945)	$	55,514
Issuance of common stock upon exercise of options	73	—		—		—		—
Issuance of common stock in connection with stock offerings	14,400	1		44,860		—		44,861
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	211	—		(388)		—		(388)
Issuance of common stock in conjunction with vesting of performance stock units	13	—		—		—		—
Issuance of common stock upon exercise of warrant	347	—		—		—		—
Stock-based compensation	—	—		772		—		772
Net income and comprehensive income	—	—		—		4,544		4,544
Balances at March 31, 2021	43,436	$	4	$	528,700	$	(423,401)	$	105,303
Issuance of common stock upon exercise of options	—	—		193		—		193
Issuance of common stock under employee stock purchase plan	4	—		—		—		—
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	227	—		(19)		—		(19)
Issuance of common stock upon exercise of warrant	845	—		—		—		—
Stock split fractional shares settlement	(18)	—				—		—
Stock-based compensation	—	—		957		—		957
Net loss and comprehensive loss	—	—		—		(14,169)		(14,169)
Balances at June 30, 2021	44,494	$	4	$	529,831	$	(437,570)	$	92,265
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	128	—		(8)		—		(8)
Stock-based compensation	—	—		866		—		866
Net income and comprehensive income	—	—		—		3,737		3,737
Balances at September 30, 2021	44,622	$	4	$	530,689	$	(433,833)	$	96,860

(*) Adjusted to reflect the 1-for-4 reverse stock split effected on May 18, 2021.

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

5

Table of Content

	Common Stock			Additional Paid-In Capital*		Accumulated Earnings (Deficit)		Shareholders’ Equity
	Shares*	Amount*
Balances at December 31, 2019	20,222	$	2	$	457,757	$	(399,801)	$	57,958
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	109	—		(271)		—		(271)
Reacquisition of equity component of 2021 Notes and 2024 Notes	—	—		(16,814)		—		(16,814)
Stock-based compensation	—	—		1,934		—		1,934
Net income and comprehensive income	—	—		—		41,230		41,230
Balances at March 31, 2020	20,331	$	2	$	442,606	$	(358,571)	$	84,037
Issuance of common stock under employee stock purchase plan	19	—		49		—		49
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	54	—		(41)		—		(41)
Issuance of common stock in connection with the Zyla Merger	6,370	1		22,930		—		22,931
Issuance of warrants and stock options in conjunction with the Zyla Merger	—	—		11,626		—		11,626
Reacquisition of equity component of 2021 Notes and 2024 Notes	—	—		(2,718)		—		(2,718)
Stock-based compensation	—	—		3,593		—		3,593
Net loss and comprehensive loss	—	—		—		(34,499)		(34,499)
Balances at June 30, 2020	26,774	$	3	$	478,045	$	(393,070)	$	84,978
Issuance of common stock in conjunction with vesting of restricted stock units, net of employee's withholding liability	21	—		(17)		—		(17)
Stock-based compensation	—	—		1,511		—		1,511
Net loss and comprehensive loss	—	—		—		(10,522)		(10,522)
Balances at September 30, 2020	26,795	$	3	$	479,539	$	(403,592)	$	75,950

(*) Adjusted to reflect the 1-for-4 reverse stock split effected on May 18, 2021.

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

6

Table of Content

ASSERTIO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2021		2020
Operating Activities
Net loss	$	(5,887)	$	(3,791)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Gain on sale of Gralise	—		(126,655)
Loss on sale of NUCYNTA	—		14,749
Loss on extinguishment of Convertible Notes	—		47,880
Loss on prepayment of Senior Notes	—		8,233
Depreciation and amortization	21,698		19,468
Amortization of debt discount, debt issuance costs and royalty rights	159		5,614
Recurring fair value measurement of assets and liabilities	1,902		5,485
Stock-based compensation	2,596		7,038
Provision for inventory and other assets	(86)		2,561
Changes in assets and liabilities, net of acquisition:
Accounts receivable	8,205		24,944
Inventories	6,317		(792)
Prepaid and other assets	5,777		1,837
Accounts payable and other accrued liabilities	(22,405)		(18,447)
Accrued rebates, returns and discounts	(19,284)		(43,265)
Interest payable	2,400		(4,449)
Net cash provided by (used in) operating activities	1,392		(59,590)
Investing Activities
Purchases of property and equipment	—		(10)
Cash acquired in Zyla Merger	—		7,585
Proceeds from sale of NUCYNTA	—		368,965
Proceeds from sale of Gralise	—		130,261
Proceeds from sale of investments	—		6,000
Net cash provided by investing activities	—		512,801
Financing Activities
Payments in connection with convertible notes	(335)		(264,731)
Payment in connection with Series A-1 and A-2 debt	(4,750)		(10,000)
Payment of contingent consideration	(2,495)		(261)
Payments in connection with Senior Notes settlement	—		(171,775)
Payments on Revolver	—		(10,000)
Payments on Promissory Note	—		(3,000)
Payment of Royalty Rights	(510)		—
Proceeds from issuance of common stock	44,861		—
Proceeds from exercise of stock options	193		—
Shares withheld for payment of employee's withholding tax liability	(416)		(814)
Net cash provided by (used in) financing activities	36,548		(460,581)
Net increase (decrease) in cash and cash equivalents	37,940		(7,370)
Cash and cash equivalents at beginning of year	20,786		42,107
Cash and cash equivalents at end of period	$	58,726	$	34,737
Supplemental Disclosure of Cash Flow Information
Net cash paid for income taxes	$	—	$	865
Cash paid for interest	$	5,216	$	12,100

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

7

Table of Content

ASSERTIO HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited) 

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements of Assertio Holdings, Inc. (the Company or Assertio) and its subsidiaries and the related footnote information of the Company have been prepared pursuant to the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, the accompanying interim unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation of the information for the periods presented. Certain amounts in prior periods have been reclassified to conform with current period presentation. The results for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the entire year ending December 31, 2021 or future operating periods.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020 included in Assertio Holdings, Inc.’s Annual Report on Form 10-K filed with the SEC on March 12, 2021 (the 2020 Form 10-K). The Condensed Consolidated Balance Sheet as of December 31, 2020 has been derived from the audited financial statements at that date, as filed in the Company’s 2020 Form 10-K. The Company’s significant one-time 2020 transactions such as the sale of the NUCYNTA franchise, sale of Gralise, repayment of its debt obligations, and merger with Zyla Life Sciences are discussed in the 2020 Form 10-K.

Stock Split

On May 18, 2021, the Company effected a 1-for-4 reverse stock split of its issued and outstanding common stock. The par value of the common stock was not adjusted as a result of the reverse stock split. All common stock share and per-share data included in these financial statements have been retrospectively adjusted to reflect the effect of the reverse stock split for all periods presented.

Revenue Reclassification

During the third quarter, the Company made certain reclassifications within Total Revenues related to product sales adjustments for previously divested products. Product sales adjustments for previously divested products were reclassified from Product sales, net to Other revenue on the Condensed Consolidated Statements of Comprehensive Income, which impacted previously reported amounts for the three and nine months ended September 30, 2020. The reclassifications were made so the line item Product sales, net would reflect net sales of the Company’s current commercialized products. Prior period results were recast to conform with these changes, and resulted in a increase to Other revenue and an equal and offsetting decrease to Product sales, net of $0.6 million and $1.7 million for the three and nine months ended September 30, 2020, respectively. Total net revenue as previously reported remains unchanged.

Impact of COVID-19 on our Business

    Following the outbreak of COVID-19 during early 2020, the Company’s priority was and remains the health and safety of its employees, their families, and the patients it serves. As a result, in March 2020, the Company initiated remote working arrangements and maintained flexible work arrangements for individuals, which continued through the remainder of 2020 and into 2021. In addition to the health and safety of its employees, the Company is focused on ensuring that it continues making its products accessible to the patients who need them. Because COVID-19 impacted the Company’s ability to see in-person providers who prescribe its products, the Company adapted its approach during 2020 and increased its virtual visits. Additionally, due to the limitations on elective surgeries and changes in patient behavior since the outbreak of COVID-19, the Company has experienced a decline and subsequent volatility in prescriptions associated with those elective procedures. The extent to which the Company’s operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak, actions by government authorities to contain the outbreak or treat its impact, the emergence of new COVID-19 variants and the related potential for new surges in infections, and the distribution, public acceptance and efficacy of COVID-19 vaccines including for emerging variants.

8

Table of Content

NOTE 2. REVENUE

Disaggregated Revenue

The following table reflects summary revenue, net for the three and nine months ended September 30, 2021 and 2020 (in thousands): 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Product sales, net:
INDOCIN products (1)	$	14,541	$	13,773	$	42,214	$	19,207
CAMBIA	5,038		7,449		17,628		21,503
Zipsor	1,999		3,395		6,802		9,261
SPRIX (1)	2,272		5,642		6,911		7,244
Other products	2,147		3,405		3,716		4,759
Total product sales, net	25,997		33,664		77,271		61,974
Commercialization agreement revenue, net	—		—		—		11,258
Royalties and milestone revenue	416		299		1,391		1,158
Other revenue	(941)		602		(976)		1,709
Total revenues	$	25,472	$	34,565	$	77,686	$	76,099

(1)Products acquired in connection with the May 20, 2020 Zyla Merger.

Product Sales, net:

For the three and nine months ended September 30, 2021, product sales primarily consisted of sales from INDOCIN Products, CAMBIA, Zipsor and SPRIX. The Company began shipping and recognizing product sales for INDOCIN Products and SPRIX upon the Zyla Merger on May 20, 2020.

Other product net sales includes product sales for non-promoted products (OXAYDO and SOLUMATRIX) which were acquired from Zyla in May 2020.

The Company records contract liabilities in the form of deferred revenue resulting from prepayments from customers. As of September 30, 2021, contract liabilities were $0.3 million and included in Other Current Liabilities on the Condensed Consolidated Balance Sheet.

Pro Forma Information

Supplemental unaudited proforma information is based upon accounting estimates and judgments that the Company believes are reasonable. This supplemental unaudited pro forma financial information has been prepared for comparative purposes only, and is not necessarily indicative of what actual results would have occurred, or of results that may occur in the future. The pro forma consolidated product sales, net for the three and nine months ended September 30, 2020, as if the acquisition of Zyla had occurred on January 1, 2020, was $33.7 million and $89.1 million, respectively.

Commercialization Agreement Revenue, net

The Company ceased recognizing commercialization revenue and related costs for NUCYNTA effective with the closing of the transaction to sell its rights, title and interest in and to the NUCYNTA franchise to Collegium on February 13, 2020. In connection with the sale, the Commercialization Agreement terminated at closing with certain specified provisions of the Commercialization Agreement surviving in accordance with the terms of the purchase agreement. During the nine months ended September 30, 2020, the Company recognized net revenue from the Commercialization Agreement of $11.3 million. This included variable royalty revenue of $13.1 million offset by the amortization of the $1.8 million net contract asset in connection with the termination of the Commercialization Agreement.

Royalties and Milestone Revenue

9

Table of Content

In November 2010, the Company entered into a license agreement with Tribute Pharmaceuticals Canada Ltd. (now known as Miravo Pharmaceuticals) granting them the rights to commercially market CAMBIA in Canada. Miravo independently contracts with manufacturers to produce a specific CAMBIA formulation in Canada. The Company receives royalties on net sales on a quarterly basis as well as certain one-time contingent milestone payments upon the occurrence of certain events. The Company recognized revenue related to CAMBIA in Canada of $0.4 million and $1.4 million for the three and nine months ended September 30, 2021, respectively, and $0.3 million and $1.2 million for the three and nine months ended September 30, 2020, respectively.

Other Revenue

Other revenue consists of sales adjustments for previously divested products, which includes adjustments to reserves for product sales allowances (gross-to-net sales allowances) and can result in reductions to total revenue during the period. Sales adjustments for previously divested products primarily include Gralise, which was divested in January 2020, Nucynta and Lazanda and were $(0.9) million and $(1.0) million for the three and nine months ended September 30, 2021, respectively, and $0.6 million and $1.7 million for the three and nine months ended September 30, 2020, respectively.

NOTE 3. ACCOUNTS RECEIVABLES, NET

The following table reflects accounts receivables, net, as of September 30, 2021 and December 31, 2020 (in thousands): 

	September 30, 2021		December 31, 2020
Receivables related to product sales, net	$	36,145	$	40,784
Receivables from Collegium	—		3,566
Total accounts receivable, net	$	36,145	$	44,350

As of September 30, 2021 and December 31, 2020, allowances for cash discounts for prompt payment were $0.7 million and $1.3 million, respectively.

NOTE 4.  INVENTORIES, NET

The following table reflects the components of inventory, net as of September 30, 2021 and December 31, 2020 (in thousands): 

	September 30, 2021		December 31, 2020
Raw materials	$	1,480	$	1,136
Work-in-process	204		1,340
Finished goods	3,797		9,236
Total	$	5,481	$	11,712

As of September 30, 2021 and December 31, 2020, inventory reserves were $2.2 million and $2.3 million, respectively.

NOTE 5. PROPERTY AND EQUIPMENT, NET

The following table reflects property and equipment, net as of September 30, 2021 and December 31, 2020 (in thousands): 

10

Table of Content

	September 30, 2021		December 31, 2020
Furniture and office equipment	$	2,680	$	2,680
Laboratory equipment	20		20
Leasehold improvements	10,522		10,523
	13,222		13,223
Less: Accumulated depreciation and amortization	(11,544)		(10,786)
Property and equipment, net	$	1,678	$	2,437

Depreciation expense was $0.2 million and $0.8 million for the three and nine months ended September 30, 2021, respectively, and $0.6 million and $1.2 million for the three and nine months ended September 30, 2020, respectively. Depreciation expense is recognized in Selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Comprehensive Income.

NOTE 6.  INTANGIBLE ASSETS

The following table reflects the gross carrying amounts and net book values of intangible assets as of September 30, 2021 and December 31, 2020 (dollar amounts in thousands): 

	September 30, 2021							December 31, 2020
	Remaining Useful Life  (In years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Products rights:
INDOCIN	10.6	$	154,100	$	(17,443)	$	136,657	$	154,100	$	(7,812)	$	146,288
SPRIX	5.6	39,000		(7,568)		31,432		39,000		(3,389)		35,611
CAMBIA	1.3	51,360		(41,422)		9,938		51,360		(36,163)		15,197
Zipsor	Less than 1 year	27,250		(26,134)		1,116		27,250		(24,381)		2,869
Oxaydo	—	300		(300)		—		300		(183)		117
Total Intangible Assets		$	272,010	$	(92,867)	$	179,143	$	272,010	$	(71,928)	$	200,082

Amortization expense was $7.2 million and $20.9 million for the three and nine months ended September 30, 2021, respectively, and $5.6 million and $18.2 million for the three and nine months ended September 30, 2020, respectively.

The following table reflects future amortization expense the Company expects for its intangible assets (in thousands): 

Year Ending December 31,	Estimated Amortization Expense
2021 (remainder)	$	7,176
2022	26,895
2023	18,412
2024	18,413
2025	18,413
Thereafter	89,834
Total	$	179,143

NOTE 7.  OTHER LONG-TERM ASSETS

11

Table of Content

The following table reflects other long-term assets as of September 30, 2021 and December 31, 2020 (in thousands): 

	September 30, 2021		December 31, 2020
Investment, net	$	1,579	$	1,579
Operating lease right-of-use assets	912		1,955
Prepaid asset and deposits	2,692		1,936
Other	756		1,031
Total other long-term assets	$	5,939	$	6,501

Investment consists of the Company’s $3.5 million investment in a company engaged in medical research. This investment is structured as a long-term loan receivable with a convertible feature and is valued at amortized cost. As a result of the Company’s adoption of ASU 2016-13 Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020, the Company estimated an expected credit loss of approximately $1.9 million on its investment, which was recognized in Other (expense) income in the Company’s Condensed Consolidated Statement of Comprehensive Income in the first quarter of 2020. To calculate the expected credit loss allowance, the Company utilized a probability-of-default method (PDM). This process estimates the probability of the loan being successfully paid back or converted into equity based on the ability of the investee to obtain FDA acceptance of its research. The Company’s expected credit losses can vary from period to period based on several factors, such as progress of the medical research and FDA submission, and overall economic environment and the ability of the investee to fund its operations. As of September 30, 2021, the Company continues to assess an estimated $1.9 million expected credit loss on its investment based on evaluation of probability of default that exist.

NOTE 8.  ACCRUED LIABILITIES

The following table reflects accrued liabilities as of September 30, 2021 and December 31, 2020 (in thousands): 

	September 30, 2021		December 31, 2020
Accrued compensation	$	2,685	$	5,498
Accrued restructuring costs	1,294		8,744
Other accrued liabilities	9,803		12,829
Total accrued liabilities	$	13,782	$	27,071

NOTE 9.  DEBT

The following table reflects the Company’s debt as of September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020
13% Senior Secured Notes due 2024	$	75,500	$	80,250
Royalty rights obligation	3,167		3,533
2.50% Convertible Notes due 2021	—		335
Total principal amount	78,667		84,118
Unamortized debt discounts	—		(16)
Carrying value	78,667		84,102
Less: current portion of long-term debt	(12,257)		(11,942)
Net, long-term debt	$	66,410	$	72,160

13% Senior Secured Notes due 2024

12

Table of Content

In accordance with the Zyla Merger, Assertio assumed $95.0 million aggregate principal amount of 13% senior secured notes due 2024 (the Secured Notes) issued pursuant to an indenture (the Existing Indenture) entered into on January 31, 2019, by and among Zyla Life Sciences, the guarantors party thereto (the Guarantors) and Wilmington Savings Fund Society, FSB (as successor to U.S. Bank National Association), as trustee and collateral agent (the Trustee). The Secured Notes were issued in two series: $50.0 million of Series A-1 Notes and $45.0 million of Series A-2 Notes.

As of May 20, 2020, the Existing Indenture was modified by a Supplemental Indenture (the Supplemental Indenture and the Existing Indenture, as so modified, the Indenture), pursuant to which Assertio (the Issuer) assumed the obligations as issuer of the Secured Notes and the subsidiaries of Assertio became guarantors of the Secured Notes. The Supplemental Indenture, among other things, provides for certain amendments to the restrictive covenants in the Indenture.

Interest on the Secured Notes accrues at a rate of 13% per annum and is payable semi-annually in arrears on May 1 and November 1 of each year (each, a Payment Date). The Existing Indenture also requires payments of outstanding principal on the Secured Notes equal to 10% per annum of the issued principal amount, payable semi-annually on each Payment Date.

The Secured Notes are senior secured obligations of the Issuer and are secured by a lien on substantially all assets of the Issuer and the guarantors. The stated maturity date of the Secured Notes is January 31, 2024. Upon the occurrence of a Change of Control, subject to certain conditions (as defined in the Existing Indenture), holders of the Secured Notes may require the Issuer to repurchase for cash all or part of their Secured Notes at a repurchase price equal to 100% of the principal amount of the Secured Notes to be repurchased, plus accrued and unpaid interest to the date of repurchase.

The Company may redeem the Secured Notes at its option, in whole or in part from time to time, at a redemption price equal to 100% of the principal amount of the Secured Notes being redeemed, plus accrued and unpaid interest, if any, through the redemption date. No sinking fund is provided for the Secured Notes.

Pursuant to the Supplemental Indenture, Assertio and its restricted subsidiaries must also comply with certain covenants, including limitations on the issuance of debt; the issuance of preferred and/or disqualified stock; the payment of dividends and other restricted payments; the prepayment, redemption or repurchase of subordinated debt; mergers, amalgamations or consolidations; engaging in certain transactions with affiliates; and the making of investments. In addition, the Issuer must maintain a minimum level of consolidated liquidity, based on unrestricted cash on hand and availability under any revolving credit facility, equal to the greater of (1) the quotient of the outstanding principal amount of the Secured Notes divided by 9.5 and (2) $7.5 million. The Company was in compliance with its covenants with respect to the Secured Notes as of September 30, 2021.

The Company had Senior Secured Notes obligations of $75.5 million as of September 30, 2021, with $9.5 million classified as current and $66.0 million classified as non-current debt in the Company’s Condensed Consolidated Balance Sheets.

Royalty Rights Obligation

In accordance with the Zyla Merger, the Company assumed a royalty rights agreements (the Royalty Rights) with each of the holders of its Secured Notes pursuant to which the Company will pay the holders of the Secured Notes an aggregate 1.5% royalty on Net Sales (as defined in the Existing Indenture) through December 31, 2022. The Royalty Rights were determined to be a freestanding element with respect to the Secured Notes and the Company is accounting for the Royalty Rights obligation relating to future royalties as a debt instrument.

The Company has Royalty Rights obligations of $3.2 million as of September 30, 2021, with $2.8 million classified as current and $0.4 million classified as non-current debt in the Company’s Condensed Consolidated Balance Sheets.

The accounting for the Royalty Rights requires the Company to make certain estimates and assumptions about the future net sales. The estimates of the magnitude and timing of net sales are subject to significant variability due to the extended time period associated with the financing transaction and are thus subject to significant uncertainty.

13

Table of Content

Convertible Notes

2.50% Convertible Senior Notes Due 2021

On September 9, 2014, the Company issued $345.0 million aggregate principal amount of 2.50% Convertible Senior Notes Due 2021 (the 2021 Notes). The 2021 Notes were issued pursuant to an indenture, as supplemented by a supplemental indenture dated September 9, 2014, between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the Trustee), and mature on September 1, 2021, unless earlier converted, redeemed, or repurchased. The 2021 Notes bear interest at the rate of 2.50% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning March 1, 2015.

On February 19, 2020, the Company entered into purchase agreements with a limited number of holders of the Company’s outstanding 2021 Notes to repurchase $102.5 million aggregate principal amount of 2021 Notes. On April 8, 2020, the Company completed its public tender offers to purchase the $42.1 million in aggregate principal amount outstanding 2021 Notes. As of December 31, 2020, only $0.3 million in aggregate principal amount of the 2021 Notes were outstanding and were classified as part of current portion of long-term debt on the Company’s Condensed Consolidated Balance Sheets.

On September 1, 2021, the remaining $0.3 million in aggregate principal amount of the 2021 Notes matured and were paid. As of September 30, 2021 there were no outstanding aggregate principal amount of the 2021 Notes.

5.00% Convertible Senior Notes Due 2024

On August 13, 2019, the Company issued $120.0 million aggregate principal of Convertible Senior Notes Due

2024 (the 2024 Notes). On February 19, 2020, the Company entered into purchase agreements with a limited number of holders of the Company’s outstanding 2024 Notes to repurchase $85.5 million aggregate principal amount of 2024 Notes. On April 8, 2020, the Company completed its public tender offers to purchase the remaining $34.5 million in aggregate principal amount outstanding 2024 Notes. As of December 31, 2020 there were no outstanding aggregate principal amount of the 2024 Notes.

Senior Secured Notes

On April 2, 2015, the Company issued $575 million aggregate principal amount of senior secured notes pursuant to a Note Purchase Agreement dated March 12, 2015 (Note Purchase Agreement). On February 13, 2020, the Company repaid in full all outstanding indebtedness, and terminated all commitments and obligations, under its Note Purchase Agreement.

Interest Expense

Debt discount and royalty rights are amortized as interest expense using the effective interest method. The following table reflects debt related interest included in the Interest expense in the Company’s Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Stated coupon interest	$	2,454	$	2,938	$	7,624	$	7,714
Amortization of debt discount, and royalty rights	41		103		159		5,614
Total interest expense	$	2,495	$	3,041	$	7,783	$	13,328

NOTE 10.  STOCK-BASED COMPENSATION

The Company’s stock-based compensation generally includes stock options, restricted stock units (RSUs), performance share units (PSUs), and purchases under the Company’s employee stock purchase program (ESPP).

The following table reflects stock-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Comprehensive Income for the three and nine months September 30, 2021 and 2020 (in thousands).

14

Table of Content

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of sales	$	—	$	2	$	—	$	43
Research and development expense	—		18		—		261
Selling, general and administrative expense	866		1,491		2,596		5,735
Restructuring charges	—		—		—		999
Total	$	866	$	1,511	$	2,596	7,038

During the nine months ended September 30, 2021 the Company granted 1.7 million RSUs at an average fair market value of $3.54 per share.

NOTE 11.  LEASES

As of September 30, 2021, the Company has non-cancelable operating leases for its offices and certain office equipment. The Company has the right to renew the term of the Lake Forest lease for one period of five years, provided that written notice is made to the Landlord no later than twelve months prior to the expiration of the initial term of the lease which is on December 31, 2023. In connection with the Zyla Merger, the Company assumed an operating lease for offices in Wayne, Pennsylvania. The Wayne, Pennsylvania office lease terminates in 2022 and will not be renewed. The Company relocated its corporate headquarters from Newark, California to Lake Forest, Illinois in 2018 and subsequently entered into two subleases which, together, account for the entirety of the Newark facility. Operating lease costs and sublease income related to the Newark facility are accounted for in Other gain (loss) in the Condensed Consolidated Statements of Comprehensive Income.

The following table reflects lease expense for the three and nine months ended September 30, 2021 and 2020 (in thousands):

		Three Months Ended September 30,				Nine Months Ended September 30,
	Financial Statement Classification	2021		2020		2021		2020
Operating lease cost	Selling, general and administrative expenses	$	54	$	424	$	256	$	797
Operating lease cost	Other gain (loss), net	148		148		443		443
Total lease cost		$	202	$	572	$	699	$	1,240
Sublease Income	Other gain (loss), net	$	347	$	347	$	1,040	$	1,040

The following table reflects supplemental cash flow information related to leases for the three and nine ended September 30, 2021 and 2020 (in thousands):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	667	861	2,129	2,085

The following table reflects supplemental balance sheet information related to leases as of September 30, 2021 and December 31, 2020 (in thousands):

	Financial Statement Classification	September 30, 2021		December 31, 2020
Liabilities
Current operating lease liabilities	Other current liabilities	$	2,252