Athenex, Inc. (Form: 10-Q, Received: 11/09/2017 08:06:43)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)s

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

For the quarterly period ended September 30, 2017

☐	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: 001-38112

ATHENEX, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	43-1985966
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1001 Main Street, Suite 600 Buffalo, NY	14203
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(716) 427-2950

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☒ (Do not check if a small reporting company)	Small 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 ☒

As of October 27, 2017, the registrant had 57,995,264 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Exhibit Index		32
Signatures		33

PART I—FINANCI AL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

(In thousands, except share and per share data)

	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	19,262		$	33,125
Short-term investments		49,781			8,628
Accounts receivable, net of chargebacks, allowance for doubtful accounts, and other deductions of $2,832 and $155, respectively		6,459			2,777
Inventories		11,635			4,240
Prepaid expenses and other current assets		5,876			3,153
Total current assets		93,013			51,923
Property and equipment, net		8,824			5,810
Goodwill		37,691			37,552
Intangible assets, net		8,905			8,464
Other long-term assets		325			2,141
Total assets	$	148,758		$	105,890
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,622		$	7,174
Accrued expenses		21,594			18,956
Current portion of long-term debt - related parties		779			1,123
Current portion of long-term debt		842			766
Total current liabilities		29,837			28,019
Long-term liabilities:
Deferred compensation		2,199			2,174
Deferred rent		1,544			904
Deferred income tax liability		99			206
Capital lease obligation		179			-
Long-term debt - related parties		-			496
Convertible bonds		-			14,498
Convertible bonds - related parties		-			16,129
Derivative liability		-			8,795
Total liabilities		33,858			71,221
Commitments and contingencies (Note 14)
Stockholders' equity:
Common stock, par value $0.001 per share, 250,000,000 shares authorized at September 30, 2017 and December 31, 2016; 59,668,184 and 42,342,706 shares issued at September 30, 2017 and December 31, 2016, respectively; 57,995,264 and 40,685,786 shares outstanding at September 30, 2017 and December 31, 2016, respectively		60			42
Additional paid-in capital		419,854			237,581
Accumulated other comprehensive loss		(412	)		(1,304	)
Accumulated deficit		(297,993	)		(195,106	)
Less: treasury stock, at cost; 1,672,920 and 1,656,920 shares at September 30, 2017 and December 31, 2016, respectively		(7,406	)		(7,406	)
Total Athenex, Inc. stockholders' equity		114,103			33,807
Non-controlling interests		797			862
Total stockholders' equity		114,900			34,669
Total liabilities and stockholders' equity	$	148,758		$	105,890

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

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Revenue:
Product sales, net	$	13,662		$	5,235		$	21,978		$	14,543
License fees and consulting revenue		60			76			756			242
Grant revenue		272			305			436			653
Total revenue		13,994			5,616			23,170			15,438
Costs and operating expenses:
Cost of product sales		8,082			5,416			15,058			14,392
Research and development expenses		11,944			18,052			55,949			33,443
Selling, general, and administrative expenses		10,364			6,790			33,795			15,694
Total costs and operating expenses		30,390			30,258			104,802			63,529
Operating loss		(16,396	)		(24,642	)		(81,632	)		(48,091	)
Interest expense		353			5			6,010			8
Loss on derivative liability		6,548			-			15,411			-
Loss before income tax expense (benefit)		(23,297	)		(24,647	)		(103,053	)		(48,099	)
Income tax expense (benefit)		11			9			(52	)		(294	)
Net loss		(23,308	)		(24,656	)		(103,001	)		(47,805	)
Less: net loss attributable to non-controlling interests		(34	)		(34	)		(114	)		(144	)
Net loss attributable to Athenex, Inc.	$	(23,274	)	$	(24,622	)	$	(102,887	)	$	(47,661	)
Unrealized gain (loss) on investment, net of income taxes		4			(1	)		(30	)		62
Foreign currency translation adjustment, net of income taxes		242			(50	)		922			(477	)
Comprehensive loss	$	(23,028	)	$	(24,673	)	$	(101,995	)	$	(48,076	)
Net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted	$	(0.41	)	$	(0.61	)	$	(2.18	)	$	(1.20	)
Weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted		57,134,889			40,261,551			47,238,452			39,464,530

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

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(In thousands, except share data)

					Additional					Accumulated other									Total			Non-			Total
	Common Stock				paid-in		Accumulated			comprehensive			Treasury Stock						Athenex, Inc.			controlling			stockholders'
	Shares		Amount		capital		deficit			loss			Shares			Amount			stockholders' equity			interests			equity
Balance at December 31, 2015		40,330,124	$	40	$	206,679	$	(107,391	)	$	(223	)		(422,328	)	$	(1,545	)	$	97,560		$	484		$	98,044
Issuance of common stock		1,133,332		1		8,499		-			-			-			-			8,500		-				8,500
Issuance of common stock in connection with satisfaction of contingent consideration		315,810		1		2,842		-			-			-			-			2,843		-				2,843
Stock-based compensation cost	-		-			6,196		-			-			-			-			6,196		-				6,196
Restricted stock expense	-		-			3,973		-			-			-			-			3,973		-				3,973
Repurchase of common stock, at cost	-		-		-			-			-			(265,200	)		(2,311	)		(2,311	)	-				(2,311	)
Stock options exercised		5,440	-			14		-			-			-			-			14		-				14
Non-controlling interests	-			-	-			-			-		-			-			-				569			569
Net loss	-			-	-			(47,661	)		-			-			-			(47,661	)		(144	)		(47,805	)
Other comprehensive loss, net of tax	-			-	-		-				(415	)		-			-			(415	)	-				(415	)
Balance at September 30, 2016		41,784,706	$	42	$	228,203	$	(155,052	)	$	(638	)		(687,528	)	$	(3,856	)	$	68,699		$	909		$	69,608

					Additional					Accumulated other									Total			Non-			Total
	Common Stock				paid-in		Accumulated			comprehensive			Treasury Stock						Athenex, Inc.			controlling			stockholders'
	Shares		Amount		capital		deficit			loss			Shares			Amount			stockholders' equity			interests			equity
Balance at December 31, 2016		42,342,706	$	42	$	237,581	$	(195,106	)	$	(1,304	)		(1,656,920	)	$	(7,406	)	$	33,807		$	862		$	34,669
Sale of common stock, net of costs and discounts of $11,706		6,900,000		7		64,187		-			-			-			-			64,194			-			64,194
Conversion of bonds		8,522,728		9		98,920		-			-			-			-			98,929			-			98,929
Stock-based compensation cost		400,000		-		10,090		-			-			-			-			10,090			-			10,090
Research and development licensing fee satisfied with stock		568,182		1		6,249		-			-			-			-			6,250			-			6,250
Vesting of restricted stock		421,982		1		1,619		-			-			-			-			1,620			-			1,620
Stock options and warrants exercised		512,586		-		1,208		-			-			-			-			1,208			-			1,208
Repurchase of common stock		-		-		-		-			-			(16,000	)		-			-			-			-
Non-controlling interests		-		-		-		-			-			-			-			-			49			49
Net loss		-		-		-		(102,887	)		-			-			-			(102,887	)		(114	)		(103,001	)
Other comprehensive income, net of tax		-		-		-		-			892			-			-			892			-			892
Balance at September 30, 2017		59,668,184	$	60	$	419,854	$	(297,993	)	$	(412	)		(1,672,920	)	$	(7,406	)	$	114,103		$	797		$	114,900

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

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

	Nine months ended September 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(103,001	)	$	(47,805	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,585			1,330
Stock-based compensation expense		11,710			10,169
Change in fair value of contingent consideration		-			53
Change in fair value of derivative liability		15,411			-
Amortization of debt discount		3,349			-
Deferred rent expense		640			-
Loss on disposal of assets and impairment charges		80			937
Research and development license fees settled with convertible bond and stock		13,250			-
Interest incurred on converted bonds		2,759			-
Deferred income taxes		(108	)		(397	)
Changes in operating assets and liabilities:
Receivables, net		(3,682	)		301
Prepaid expenses and other assets		(2,722	)		(1,432	)
Inventories, net		(7,395	)		(960	)
Accounts payable and accrued expenses		3,480			2,638
Net cash used in operating activities		(63,644	)		(35,166	)
Cash flows from investing activities:
Purchase of property and equipment		(4,384	)		(1,120	)
Receipt of deposit		80			1,000
Payments for licenses		(1,550	)		(2,700	)
Purchases of short-term investments		(55,282	)		(9,750	)
Sale of short-term investments		14,114			10,326
Net cash used in investing activities		(47,022	)		(2,244	)
Cash flows from financing activities:
Proceeds from sale of stock		75,900			8,500
Proceeds from issuance of convertible bonds		30,000			35,000
Costs incurred related to the sale of stock		(10,168	)		-
Proceeds from exercise of stock options		1,208			14
Investment from non-controlling interest		49			569
Payment of contingent consideration		-			(3,185	)
Repayment of capital lease obligations and long-term debt		(896	)		(964	)
Purchase of treasury stock		-			(2,311	)
Net cash provided by financing activities		96,093			37,623
Net (decrease) increase in cash and cash equivalents		(14,573	)		213
Cash and cash equivalents, beginning of period		33,125			43,495
Effect of exchange rate changes on cash and cash equivalents		710			(177	)
Cash and cash equivalents, end of period	$	19,262		$	43,531
Non-cash investing and financing activities:
Stock issued in connection with the acquisition of QuaDPharma	$	-		$	343
Stock issued in connection with the acquisition of Polymed	$	-		$	2,500
Accrued purchases of property and equipment	$	150		$	57
Cost of equity raise in accounts payable and accrued expenses	$	-		$	327
Convertible bond issued in lieu of licensing cash payment	$	7,000		$	-
Common stock issued in lieu of licensing cash payment	$	6,250		$	-
Common stock issued upon the conversion of bonds	$	98,929		$	-
Property and equipment financed under capital lease	$	242		$	-

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

Athenex, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Company and Nature of Business

Organization and Description of Business

Athenex, Inc. (the “Company” or “Athenex”), originally known as Kinex Pharmaceuticals LLC, formed in November 2003, commenced operations on February 5, 2004, and operated as a limited liability company until it was incorporated in the State of Delaware under the name Kinex Pharmaceuticals, Inc. on December 31, 2012. The Company changed its name to Athenex, Inc. on August 26, 2015.

Athenex is a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. The Company’s mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. The Company has generated its clinical product candidates through its Orascovery and Src Kinase Inhibition research platforms, which are based on its understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. The Company has assembled a leadership team and has established operations in the U.S. and China across the pharmaceutical value chain to execute its mission to become a global leader in bringing innovative cancer treatments to the market and improving health outcomes. The Company’s primary activities since commencement have been conducting research and development internally and through corporate collaborators, in-licensing and out-licensing pharmaceutical compounds and technology, and conducting clinical trials.

Significant Risks and Uncertainties

The Company has incurred operating losses since its inception and, as a result, as of December 31, 2016 and September 30, 2017 had an accumulated deficit of $195.1 million and $298.0 million, respectively. Operations have been funded primarily through the sale of common stock and convertible bonds and, to a lesser extent, through revenue generated from our Global Supply Chain Platform and Commercial Platform. The Company will require significant additional funds in order to conduct clinical trials and to fund its operations. There can be no assurances, however, that additional funding will be available on favorable terms, or at all. If adequate funds are not available, the Company may be required to delay, modify, or terminate its research and development programs or reduce its planned commercialization efforts. The Company believes that it will be able to obtain additional working capital through equity financings or other arrangements to fund operations. If the Company is unable to obtain such additional financing, the Company will need to reevaluate future operating plans. Accordingly, there is substantial doubt regarding the Company’s ability to continue as a going concern.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of the business. The Company’s recurring losses from operations and negative cash flows from operations have raised substantial doubt regarding its ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Athenex is subject to a number of risks similar to other biopharmaceutical companies, including, but not limited to, the lack of available capital, possible failure of preclinical testing or clinical trials, inability to obtain marketing approval of product candidates, competitors developing new technological innovations, market acceptance of the Company’s products, and protection of proprietary technology. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate sufficient product revenue to achieve profitability.

Initial Public Offering

On June 13, 2017, the Company’s Registration Statement on Form S-1 (File No. 333-217928) relating to the initial public offering (“IPO”) of its common stock was declared effective by the Securities and Exchange Commission (“SEC”). Pursuant to such Registration Statement, the Company sold an aggregate of 6,900,000 shares of its common stock at a price of $11.00 per share for cash proceeds of $64.2 million, net of underwriting discounts and commissions of $6.1 million and offering costs of $5.6 million.

On June 14, 2017, the day of the IPO, convertible bonds with an aggregate principal value of $68.0 million, and a carrying value of $55.8 million, were converted into 7,727,273 shares of common stock. The IPO closed on June 19, 2017. On September 29, 2017, the remaining convertible bond with a principal value of $7.0 million was converted into 795,455 shares of common stock, at a 20% discount from the IPO price of $11 per share.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting ) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with GAAP. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments ) considered necessary for a fair presentation of the results of the Company for the periods presented. These condensed consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. Intercompany transactions and balances have been fully eliminated in consolidation.

Results of the operations for the three and nine months ended September 30, 2017 are not necessarily indicative of the results expected for the full fiscal year or for any future annual or interim period. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes for the years ended December 31, 2015 and 2016 included in the prospectus dated June 15, 2017, filed with the SEC pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended.

Use of Estimates

These condensed consolidated financial statements have been prepared in conformity with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenue and expenses during the reporting period. Such management estimates include those relating to assumptions used in contract research accruals, allowance for doubtful accounts, chargebacks, inventory reserves, income taxes, the estimated useful life and recoverability of long-lived assets, and the valuation of stock-based awards. Actual results could differ from those estimates.

Revenue Recognition

Product Sales, Chargebacks, Returns, and Discounts

The Company recognizes product revenue when there is persuasive evidence of an arrangement, the price is fixed or determinable, collectability is reasonably assured, and upon shipment to or delivery and acceptance by customers. Service revenue is recognized in the period such services have been rendered.

The Company’s specialty products sold through its Commercial Platform are distributed through independent pharmaceutical wholesalers. The wholesalers then generally sell to an end-user, normally a hospital, alternative healthcare facility, or an independent pharmacy, at a lower price previously established by the end-user and the Company. Sales are initially recorded at the list price sold to the wholesaler. Because these prices will be reduced for the end-user, the Company records a contra asset in accounts receivable and a reduction to revenue at the time of the sale, using the difference between the list price and the estimated end-user contract price. Upon the sale by the wholesaler to the end-user, the wholesaler will chargeback the difference between the original list price and price at which the product was sold to the end-user and such chargeback is offset against the initial estimated contra asset. As of September 30, 2017, the Company’s chargeback provision totaled $2.6 million.

The Company offers cash discounts, which approximate 2% of the gross sales price as an incentive for prompt customer payment, and, consistent with industry practice, the Company’s return policy permits customers to return products within a window of time before and after the expiration of product dating, most often 2% of gross purchases. The Company expects that its wholesale customers will make timely payments and take advantage of the cash discounts, and expects customers to use their right of return. Therefore, at the time of sale, product revenue and accounts receivable are reduced by the full amount of the discount offered and the return expected. The Company considers payment performance and historical return rates and adjusts the accrual to reflect actual experience. As of September 30, 2017, the Company’s accrual for cash discounts and return accrual were not material to the financial statements.

Concentration of Credit Risk, Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and investments. The Company deposits its cash equivalents in interest-bearing money market accounts and certificates of deposit. Although the Company deposits the cash with multiple financial institutions, cash balances may occasionally be in excess of

the amounts insured by the Federal Deposit Insurance Corporation. The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer and establishing a minimum allowable credit rating. The Company also has significant assets and liabilities held in its overseas manufacturing facility in Chin a, Taihao, and therefore is subject to foreign currency fluctuation. Also, due to government restrictions on transferring funds out of China, the total restricted net assets of the Company’s consolidated subsidiaries was $12.7 million and $15.7 million as of September 30, 2017 and December 31, 2016, respectively.

Recent Accounting Pronouncements Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) ”, and subsequent clarifying guidance, which will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue based on the transfer of goods or services to customers in an amount that the entity expects to be entitled to in exchange for those goods or services. The new guidance sets forth a five-step revenue recognition model that will need to be applied consistently to all contracts with customers to determine the amount and timing of revenue to be recognized. Also required are new disclosures to help users of financial statements better understand the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The new standard is required to be applied either retrospectively to each prior reporting period presented (“full retrospective approach”) or retrospectively with the cumulative effect of initial application recognized at the date of initial application (“modified retrospective approach”). The Company has established an implementation team focused on evaluating the effects of the new standard on the Company’s operations and made progress in its evaluation of the guidance. Based on our preliminary assessment, we expect the most significant impact be the expanded disclosure requirements. We are continuing to work on the plan for implementation of the new guidance, including reviewing accounting policies and evaluating updates to our control environment where applicable. We will adopt the requirements of the new standard on January 1, 2018 using the modified retrospective method. The modified retrospective method requires companies to recognize the cumulative effect of initially applying the new standard as an adjustment to opening retained earnings. We currently do not anticipate such adjustment to be material.

In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) ” which requires that lessees distinguish between finance and operating leases and recognize the assets and liabilities that arise from the leases on the balance sheet. This ASU is required to be adopted retrospectively and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is required to be applied on a modified retrospective basis. The Company is evaluating the effect of this standard on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ,” which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 is required to be adopted retrospectively and is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is evaluating the effect of this standard on its consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, “ Income Taxes (Topic 740): Intra-entity Transfers of Assets Other Than Inventory ,” which requires entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory when the transfers occur. This ASU is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (Topic 230): Restricted Cash .” The primary purpose of this ASU is to reduce the diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. This ASU will require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017. This ASU is required to be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate the effect of this standard on its consolidated financial statements to be material.

In May 2017, the FASB issued ASU 2017-09, “ Stock Compensation - Scope of Modification Accounting ,” which provides guidance as to when a modification of a share-based award must be accounted for. In general, if a modification of the terms and conditions of an award does not change the fair value of the award (or calculated value or intrinsic value, if used instead of fair value), does not change the vesting conditions of the award, and does not change the classification of the award as an equity instrument or a liability instrument, then an entity need not account for the modification. This guidance is effective in the first quarter of fiscal year

2018. The new rules are applied prospectively to awards modified after the adoption date. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.

Recently Adopted Accounting Pronouncements

In July 2015, the FASB issued ASU No. 2015-11, “ Inventory (Topic 330): Simplifying the Measurement of Inventory. ” This ASU requires inventory to be measured at the lower of cost or net realizable value. The amendment is required to be applied prospectively. The Company adopted ASU 2015-11 effective January 1, 2017. Adoption of ASU 2015-11 did not have a significant impact on the consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, “ Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ” which simplifies the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. Effective January 1, 2017, the Company adopted ASU 2016-09. The standard eliminated the requirement to defer recognition of excess tax benefits related to employee share-based awards until they are realized through a reduction to income taxes payable. The Company applied the modified retrospective method and there was no net cumulative effect adjustment to retained earnings on January 1, 2017 because the increase in deferred income tax assets for previously unrecognized excess tax benefits was fully offset by a valuation allowance. As permitted by the ASU, the Company will continue to use an estimated forfeiture rate in determining stock-based compensation expense.

In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ,” which addresses the classification of certain cash transactions on the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company early adopted ASU 2016-15 as of January 1, 2016 and applied its provisions retrospectively through the earliest period presented, which did not have a significant impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, “ Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment .” The primary purpose of the ASU is to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The ASU also applies the same test of goodwill to all reporting units, now including those with a zero or negative carrying amount of net assets. This ASU is required to be adopted on a prospective basis and is effective for any goodwill impairment tests in fiscal years beginning after December 15, 2019, although early adoption is permitted for any impairment tests performed after January 1, 2017. The Company adopted the new guidance on a prospective basis during the first quarter of 2017. The adoption of this ASU has not impacted the Company’s consolidated financial statements.

3. Inventories

Inventories consist of the following (in thousands):

	September 30, 2017		December 31, 2016
Raw materials and purchased parts	$	934	$	977
Work in progress		2,298		2,727
Finished goods		8,403		536
Total inventories	$	11,635	$	4,240

4. Intangible Assets, net

The Company’s identifiable intangible assets, net, consist of the following (in thousands):

	December 31, 2016
	Cost/Fair Value			Accumulated Amortization		Impairments		Net
Amortizable intangible assets:
Licenses	$	3,100		$	315	$	-	$	2,785
QuaDPharma customer list		204			58		146		-
Polymed customer list		1,593			414		-		1,179
Polymed technology		3,712			437		-		3,275
Indefinite-lived intangible assets:
CDE in-process research and development (IPR&D)		1,884			-		248		1,636
Effect of currency translation adjustment		(411	)		-		-		(411	)
Total intangible assets, net	$	10,082		$	1,224	$	394	$	8,464

	September 30, 2017
	Cost/Fair Value			Accumulated Amortization		Impairments		Net
Amortizable intangible assets:
Licenses	$	4,650		$	952	$	-	$	3,698
Polymed customer list		1,593			611		-		982
Polymed technology		3,712			672		-		3,040
Product rights		530			100		-		430
Indefinite-lived intangible assets:
CDE in-process research and development (IPR&D)		1,106			-		80		1,026
Effect of currency translation adjustment		(271	)		-		-		(271	)
Total intangible assets, net	$	11,320		$	2,335	$	80	$	8,905

As of December 31, 2016, licenses at cost include an Orascovery license of $0.4 million and a license purchased from Gland Pharma Ltd (“Gland”) of $2.7 million. The Orascovery license with Hanmi Pharmaceuticals Co. Ltd. (“Hanmi”) was purchased directly from Hanmi and is being amortized on a straight-line basis over a period of 12.75 years, the remaining life of the license agreement at the time of purchase. The license purchased from Gland is being amortized on a straight-line basis over a period of 5 years, the remaining life of the license agreement at the time of purchase. During the nine months ended September 30, 2017, the Company purchased additional licenses from Gland for $1.6 million which are being amortized over a period of 5 years.

The remaining intangible assets were acquired in connection with the acquisitions of Athenex Pharma Solutions (formerly referred to as QuaDPharma), Polymed, and CDE. Intangible assets are amortized using an economic consumption model over their useful lives. The Athenex Pharma Solutions customer list was being amortized on a straight-line basis over 7 years. The Polymed customer list and technology are amortized on a straight-line basis over 6 and 12 years, respectively. The CDE in-process research and development, or IPR&D, will not be amortized until the related projects are completed. IPR&D will be tested annually for impairment, unless conditions exist causing an earlier impairment test (i.e. abandonment of project). During the nine months ended September 30, 2017, the Company abandoned a project within IPR&D and therefore, the related balance of $0.1 million was written-off as impaired and is included within research and development expenses in the condensed consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2017. The weighted-average useful life for all intangible assets was 7.91 years as of September 30, 2017.

The Company recorded $0.4 million and $0.2 million of amortization expense for the three months ended September 30, 2017 and 2016, respectively, and $1.2 million and $0.5 million of amortization expense for the nine months ended September 30, 2017 and 2016, respectively.

5. Fair Value Measurements

Financial instruments consist of cash and cash equivalents, short-term investments, an equity investment, accounts receivable, accounts payable, accrued liabilities, and debt. Short-term investments, the equity investment, and the embedded derivative liability are stated at fair value. Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and debt, are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.

ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair val ue. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the ASC 820 are described as follows:

Level 1 —Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 —Inputs to the valuation methodology include:

•

Quoted prices for similar assets or liabilities in active markets;

•

Quoted prices for identical or similar assets or liabilities in inactive markets;

•

Inputs other than quoted prices that are observable for the asset or liability;

•

Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

•

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 —Inputs to the valuation methodology are unobservable, supported by little or no market activity, and are significant to the fair value measurement.

Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs. There were no transfers between Levels 1, 2 or 3 for any of the periods presented.

The following tables represent the fair value hierarchy for those assets and liabilities that the Company measures at fair value on a recurring basis (in thousands):

	Fair Value Measurements at December 31, 2016 Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	6,522	$	6,522	$	-	$	-
Short-term investments - certificates of deposit		8,628		8,628		-		-
Investment		340		340		-		-
Total assets	$	15,490	$	15,490	$	-	$	-
Liabilities:
Derivative liability	$	8,795	$	-	$	-	$	8,795
Total liabilities	$	8,795	$	-	$	-	$	8,795

	Fair Value Measurements at September 30, 2017 Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	7,706	$	7,706	$	-	$	-
Short-term investments - commercial paper		22,198		-		22,198		-
Short-term investments - corporate notes		10,084		-		10,084		-
Short-term investments - U.S. government bonds		19,498		-		19,498		-
Investment		325		325		-		-
Total assets	$	59,811	$	8,031	$	51,780	$	-

The Company classifies its certificates of deposit and money market funds within Level 1 because it uses quoted market prices to determine their fair value. The Company classifies its commercial paper, corporate notes, and U.S. government bonds within Level 2 because it uses quoted prices for similar assets or liabilities in active markets and each has a specified term and all level 2 inputs are observable for substantially the full term of each instrument.

The Company owns 68,000 shares of PharmaEssentia, a company publicly traded on the Taiwan OTC Exchange (“TWO”). As of September 30, 2017 and December 31, 2016, the Company’s investment in PharmaEssentia is value d at the closing price reported on the TWO. This investment is classified as a level 1 investment.

The Company bifurcated the embedded derivative feature from its convertible bonds and recorded it as a long-term liability. The derivative liability was measured at fair value as of the issuance date and remeasured at fair value at the end of the reporting period. The liability is measured at fair value using level 3 inputs. The derivative liability is discussed further in Note 7— Debt .

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments (in thousands):

	Derivative Liability
Balance as of December 31, 2016	$	8,795
Issuance of convertible bonds with embedded derivative		13,172
Change in fair value		15,411
Conversion of derivative liability to common stock		(37,378	)
Balance as of September 30, 2017	$	-

6. Income Taxes

The Company did not record a provision for federal income taxes for the nine months ended September 30, 2017 because it expects to generate a loss for the year ending December 31, 2017 and the Company’s net deferred tax assets continue to be offset by a full valuation allowance. Tax benefit to date relates to foreign tax benefit on losses in the Peoples Republic of China (“PRC”) offset by state franchise taxes and amortization of long-lived intangible assets in the U.S. and PRC.

7. Debt

As of September 30, 2017 and December 31, 2016, the balances of this debt are as follows (in thousands):

	September 30, 2017		December 31, 2016
Current portion of promissory notes to related parties	$	779	$	1,123
Current portion of mortgage		798		766
Current portion of capital lease obligation		44		-
Long-term portion of promissory notes to related parties		-		496
Long-term portion of capital lease obligation		179		-
Convertible bonds		-		14,498
Convertible bonds - related parties		-		16,129
Derivative liability		-		8,795
Total	$	1,800	$	41,807

The promissory notes have a 36-month term beginning on July 1, 2015 and ending on June 1, 2018 with a 6% stated interest rate. The mortgage payments extend through July 30, 2018. Future minimum principal payments on these promissory notes and mortgage consist of $1.1 million and $0.5 million due in the remaining three months in 2017 and 2018, respectively.

In 2016 and 2017, the Company issued convertible bonds with an aggregate principal value of $75.0 million and a maturity date of October 1, 2018. Of the convertible bonds issued, an aggregate principal of $24.0 million were issued to related parties. On June 14, 2017, the IPO date, $68.0 million of these bonds, which had a carrying value of $55.8 million, were converted into 7,727,273 shares of common stock.

In March 2017, the Company signed an amendment to its license agreement with Hanmi, under which the Company received the rights to develop and sell drugs under the Orascovery program in additional territories, including Japan. This license amendment required an upfront fee of $7.0 million payable to Hanmi upon the execution of the agreement. In lieu of the payment, the Company issued a convertible bond to Hanmi with a par value of $7.0 million. This bond carried an interest rate of 10% per annum and a maturity date of October 1, 2018. This amendment included additional regulatory milestone payments and royalties based on sales. The occurrence of any milestone triggering events have not been deemed to be probable and no sales have yet occurred. On September 29, 2017, Hanmi converted its bond with a principal value of $7.0 million into 795,455 shares of common stock , at a 20% discount

from the IPO price of $11 per share, which resulted in a loss on the embedded derivat ive feature from the convertible bond of $6.5 million in the three months ended September 30, 2017.

8. Related Party Transactions

During the three and nine months ended September 30, 2017 and 2016, the Company entered into transactions with individuals and companies that have financial interests in the Company. Related party transactions included the following:

a. During 2014 and 2015, the Company issued promissory notes to two executives in the amount of $12.6 million to facilitate the executives’ purchase of the Company’s common stock. The notes were intended to be forgiven over a three-year period, as compensation to those executives. The Company accelerated the forgiveness of these promissory notes in 2016 and forgave the notes in full. Stock-based compensation expense related to these notes amounted to $0 and $1.0 million for the three months ended September 30, 2017 and 2016, respectively, and $0 and $3.1 million for the nine months ended September 30, 2017 and 2016, respectively.

Further, certain family members of executives perform consulting services for the Company. Such services were not significant to the condensed consolidated financial statements.

b. In 2015, CDE signed an agreement with Avalon BioMedical (Management) (“Avalon”) under which Avalon will receive certain administrative services and will occupy space at CDE’s research location. Avalon reimburses CDE for these administrative services as incurred and pays CDE a certain percentage of the total rent payment based on its staff headcount occupying the Hong Kong research and development facility (See Note 14— Commitments and Contingencies ). Certain members of the Company’s board and management collectively have a controlling interest in Avalon. The Company does not hold any interest in Avalon and does not have any obligations to absorb losses or any rights to receive benefits from Avalon. As of September 30, 2017 and December 31, 2016, Avalon held 678,880 shares of the Company’s common stock, which represented 1.1% and 1.7%, respectively of the Company’s total issued shares. Balances due from Avalon recorded on the condensed consolidated balance sheets were not significant.

c. The Company receives consulting and licensing revenue from PharmaEssentia, a company in which Athenex has an investment classified as available-for-sale (see Note 5— Fair Value Measurements ). The Company recorded no revenue from PharmaEssentia for the three months ended September 30, 2017 or 2016, and $0.5 million and $0 for the nine months ended September 30, 2017 and 2016, respectively.

d. The Company previously purchased pharmaceutical ingredients from Chongqing Taisheng Biotechnology Co., Ltd. (“Taisheng”), a company which is owned by a member of Athenex’s management. The Company made no purchases from Taisheng the three months ended September 30, 2017 or 2016 nor in the nine months ended September 30, 2017, but did purchase $0.2 million for the nine months ended September 30, 2016.

e. The Company receives clinical development services from ZenRx Limited and subsidiaries (“ZenRx”), a company for which one of our executive officers serves on the board of directors. In connection with such services, the Company made payments to ZenRx of $0.2 million and less than $0.1 million during the three months ended September 30, 2017 and 2016, respectively, and $0.5 million and less than $0.1 million during the nine months ended September 30, 2017 and 2016, respectively. As of each of September 30, 2017 and December 31, 2016, the Company owed ZenRx $0.1 million.

f. The Company receives consulting services from RSJ Consulting LLC (“RSJ”), a limited liability company for which one of our executive officers serves as the principal. Services incurred from RSJ amounted to less than $0.1 million and less than $0.1 million for the three months ended September 30, 2017 and 2016, respectively, and $0.1 million and $0.2 million for the nine months ended September 30, 2017 and 2016, respectively.

g. The Company issued and sold $24.0 million in convertible bonds in 2016 and 2017 to related parties. One of the holders of more than 5% of our outstanding common stock as of December 31, 2016, and an entity affiliated with one of our directors, each purchased $10.0 million in convertible bonds during 2016. Additionally, during the first quarter of 2017, the Company issued and sold $4.0 million in convertible bonds to two related parties. One of the holders of more than 5% of our outstanding common stock as of March 31, 2017 and a director of the Company each purchased $2.0 million in convertible bonds. On June 14, 2017, the IPO date, these bonds were converted into 2,727,273 shares of common stock.

9. Business and Economic Collaborative Agreements

New York State

On May 1, 2015, the Company executed an agreement for a medical technology research, development, innovation, and commercialization alliance with Fort Schuyler Management Corporation (“FSMC”), a not-for-profit corporation existing under the laws of the State of New York (the “State”). The Company has been granted $25 million by the State to build new corporate offices including a formulation lab with related equipment for the Company.

The Company, through its partnership with FSMC, Empire State Development (“ESD”), and The State University of New York (“SUNY”) Polytechnic, plans to execute a major expansion and establish a 315,000 square foot, ISO Class 5 high potency oral and sterile injectable pharmaceutical manufacturing facility in Dunkirk, New York. On September 4, 2017, the Company entered into a Grant Disbursement Agreement whereby the State will grant up to $200 million, plus any additional funds available from the previous $25 million ESD Grant for the Company’s corporate offices, to fund the construction of the new pharmaceutical manufacturing facility. The Company is entitled to lease the facility and all equipment purchased with grant funds at a rate of $1.00 per year for an initial 10-year term, and for the same rate if the Company elects to extend the lease for an additional 10-year term. In exchange, the Company committed to spending $1.52 billion on operational expenses in the facility in its first 10-year term, and an additional $1.50 billion on operational expenses if the Company elects to extend the lease for a second 10-year term. The Company does not have significant construction period risks and the State will fund a majority of the construction costs and hold ownership of the manufacturing and office facilities. As of September 30, 2017, construction on these facilities had not yet been completed.

10. Stockholders’ Equity

Common Stock

As of September 30, 2017 and 2016, 250 million common shares, par value $0.001, were authorized by the Company’s Board of Directors. The common shares are entitled to one vote per share and to receive dividends as declared.

On June 14, 2017, the Company completed an IPO of its common stock (refer to Note 1 – Company and Nature of Business for additional information). During the nine months ended September 30, 2017, the Company issued 6,900,000 shares of common stock at $11.00 per share in connection with the IPO, 8,522,728 shares of common stock from the conversion of the convertible bonds into common stock, 568,182 shares of common stock upon the IPO in connection with a licensing agreements, 512,586 shares from the exercise of warrants and options, and 821,982 shares from the vesting of restricted stock units and the grant of shares in connection with an executive’s employment agreement for cumulative increase to equity of $182.3 million.

Cost of Equity Raise

Costs incurred in raising equity, whether paid with cash or through the issuance of securities, are charged against the equity raised. These costs include underwriting discounts and commissions, legal fees, accounting services and amounts paid to consultants and amounted to $11.7 million, cumulatively, as of the IPO date. $1.8 million of these costs were deferred and included within other long-term assets on the consolidated balance sheet as of December 31, 2016. The total amount of $11.7 million was charged against the capital raised through the IPO.

Common Stock Option Plans

The Company has three common stock option plans adopted in 2013, 2007 and 2004 (the “Plans”) which authorize the grant of up to 11,800,000 common stock options to employees, directors, and consultants. Additionally, on June 14, 2017, the Company adopted its 2017 Omnibus Incentive Plan and 2017 Employee Stock Purchase Plan (the “2017 Plans”). Under the 2017 Plans, 5,200,000 shares of common stock are reserved for future issuance to employees, directors, and consultants, including 1,000,000 reserved for an Employee Stock Purchase Plan, which was established at IPO but no shares have as yet been issued. Management has valued the options at their grant date using the Black-Scholes option pricing model. See Note 11— Stock-Based Compensation for more information.

11. Stock-Based Compensation

Stock Options

The total fair-value of stock options vested and recorded as compensation expense during the three months ended September 30, 2017 and 2016 and the nine months ended September 30, 2017 and 2016 was $2.3 million, $2.3 million, $5.7 million, and $6.2 million, respectively. As of September 30, 2017 and December 31, 2016, $15.8 million and $11.0 million of unrecognized cost related to non-vested stock options was expected to be recognized over a weighted-average period of approximately 1.9 years and 1.6 years,

respectively. The total intrinsic value of options exercised was approximately $1.6 million and less than $0.1 million for the nine months ended September 30, 2017 and 2016, respectively.

The following table summarizes the status of the Company’s stock option activity granted under the Plans to employees, directors, and consultants (in thousands, except stock option amounts):

	Stock Options			Weighted- Average Exercise price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2016		9,280,689		$	6.26		7.26	$	43,994
Granted		1,691,232			11.28		-
Exercised		(178,520	)		6.77		-
Forfeited		(86,677	)		8.96		-
Expired		(9,323	)		3.57		-
Outstanding at September 30, 2017		10,697,401		$	7.02		7.26	$	112,169
Vested and exercisable at September 30, 2017		7,887,583		$	5.99		6.56	$	90,862

The Company determines the fair value of stock-based awards on the grant date using the Black-Scholes option pricing model, which is impacted by assumptions regarding a number of highly subjective variables. The following table summarizes the weighted-average assumptions used as inputs to the Black-Scholes model during the periods indicated:

	Nine months ended			Nine months ended
	September 30, 2017			September 30, 2016
Weighted average grant date fair value	$	6.90		$	5.29
Expected dividend yield		-	%		-	%
Expected stock price volatility		66	%		65	%
Risk-free interest rate		1.74	%		1.19	%
Expected life of options (in years)		6.2			5.9

Stock Grants

The Company grants common stock to key officers and directors as additional compensation in certain circumstances. The fair value of these grants is recorded as compensation expense throughout the requisite service period. Compensation cost recorded for the stock grants amounted to $0.5 million and $1.8 million for the three months ended September 30, 2017 and 2016, respectively, and $6.0 million and $4.0 million for the nine months ended September 30, 2017 and 2016, respectively.

Awards granted to non-employees

The Company has accounted for equity instruments issued to non-employees in accordance with the provisions of ASC 718, Compensation—Stock Compensation , and ASC 505, Equity . All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The expense is recognized in the same manner as if the Company had paid cash for the services provided by the non-employees.

Restricted Stock

The following table summarizes restricted stock activity:

	Shares of Restricted Stock			Weighted Average Fair Value
Nonvested at December 31, 2016		661,982		$	9.00
Granted		-			9.00
Vested		(421,982	)		9.00
Nonvested at September 30, 2017		240,000		$	9.00

Warrants

The Company has granted warrants to purchase common stock. The Company determined the fair value of the warrants on the grant date using the Black-Scholes option pricing model, consistent with the valuations of stock options described above. All warrants were fully vested and 344,000 were outstanding as of December 31, 2016. During June 2017, the holder exercised their warrants and as of September 30, 2017, there were no outstanding warrants.

Stock-Based Compensation Cost

The components of stock-based compensation and the amounts recorded within research and development expenses and selling, general, and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss consisted of the following for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options	$	2,349	$	2,319	$	5,690	$	6,196
Vesting of restricted stock grants		540		1,806		1,620		3,973
Stock awarded to directors and officers		-		-		4,400		-
Total stock-based compensation expense	$	2,889	$	4,125	$	11,710	$	10,169
Cost of product sales	$	48	$	-	$	96	$	-
Research and development expenses		567		1,820		1,475		4,984
Selling, general, and administrative expenses		2,274		2,305		10,139		5,185
Total stock-based compensation expense	$	2,889	$	4,125	$	11,710	$	10,169

12. Net Loss Per Share Attributable to Athenex, Inc. Common Stockholders

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares issued, outstanding, and vested during the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common share and common shares equivalents for the period using the treasury-stock method. For the purposes of this calculation, warrants for common stock and stock options are considered common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Stock options and other common stock equivalents		10,736,494		11,340,938		9,989,045		11,250,456
Unvested restricted shares		265,000		1,434,548		444,544		1,427,370
Total potential dilutive shares		11,001,494		12,775,486		10,433,589		12,677,826

13. Business Segment, Geographic, and Concentration Risk Information

The Company has three operating segments, which are organized based mainly on the nature of the business activities performed and regulatory environments in which they operate. The Company also considers the types of products from which the reportable segments derive their revenue (only applicable to two reportable segments). Each operating segment has a segment manager who is held accountable for operations and has discrete financial information that is regularly reviewed by the Company’s chief operating decision-maker. The Company’s operating segments are as follows:

Oncology Innovation Platform —This operating segment performs research and development on certain of the Company’s proprietary drugs, from the preclinical development of its chemical compounds, to the execution and analysis of its several clinical trials. This segment focuses specifically on the oral absorption cancer drug platform, the Src Kinase inhibitors, and the transmucosal drug delivery system. This segment performs research in the United States, Taiwan, Hong Kong, and mainland China.

Global Supply Chain Platform —This operating segment includes Athenex Pharma Solutions and Polymed. Athenex Pharma Solutions is a contract manufacturing company that provides small to mid-scale cGMP manufacturing of clinical and commercial products for pharmaceutical and biotech companies. Athenex Pharma Solutions also performs microbiological and analytical testing

for raw material and formulated products and is expanding to manufacture and sell pharmaceutical products under 503B regulations set forth by the U.S. Food and Drug Administration (“FDA”). Polymed markets and sells API and medical devices in North America, Europe, and Asia from its locations in Texas and China. Polymed also develops new compounds, processing techniques, and manufactures API at Taihao, a cGMP facility in Chongqing, China. Currently, a majority of the Company’s revenue is generated by this segment.

Commercial Platform —This operating segment includes Athenex Pharmaceutical Division, a newly-formed component that is focused on the manufacturing, distribution, and sales of generic pharmaceuticals. This segment provides services and products to external customers based mainly in the United States.

The segments operate in North America and Asia. The Company’s Oncology Innovation Platform segment operates and holds long-lived assets located in the United States, Taiwan, Hong Kong, and mainland China. The Commercial Platform segment operates and holds long-lived assets located in the United States. The Global Supply Chain Platform segment operates and holds long-lived assets located in the United States and China. For geographic segment reporting, product sales have been attributed to countries based on the location of the customer.

Segment information is as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net (loss) income attributable to Athenex, Inc.:
Oncology Innovation Platform	$	(22,558	)	$	(17,989	)	$	(83,836	)	$	(40,441	)
Global Supply Chain Platform		(1,564	)		(248	)		(4,693	)		(23	)
Commercial Platform		848			(6,385	)		(14,358	)		(7,197	)
Total consolidated net loss attributable to Athenex, Inc.	$	(23,274	)	$	(24,622	)	$	(102,887	)	$	(47,661	)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total revenue:
Oncology Innovation Platform	$	205		$	123		$	1,208		$	669
Global Supply Chain Platform		8,601			7,767			19,407			19,371
Commercial Platform		7,378			-			9,274			-
Total revenue for reportable segments		16,184			7,890			29,889			20,040
Intersegment revenue		(2,190	)		(2,274	)		(6,719	)		(4,602	)
Total consolidated revenue	$	13,994		$	5,616		$	23,170		$	15,438

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Total revenue by product group:
API sales	$	5,345	$	4,051	$	10,369	$	11,740
Medical device sales		562		649		1,128		1,525
Contract manufacturing revenue		250		517		934		1,229
Commercial product sales		7,505		18		9,547		50
License fees and consulting revenue		60		75		756		241
Grant revenue		272		306		436		653
Total consolidated revenue	$	13,994	$	5,616	$	23,170	$	15,438

Intersegment revenue is recorded by the selling segment when it is realized or realizable and all revenue recognition criteria are met. Upon consolidation, all i ntersegment revenue and related cost of sales are eliminated from the selling segment’s ledger.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Total depreciation and amortization:
Oncology Innovation Platform	$	130	$	49	$	342	$	146
Global Supply Chain Platform		548		484		1,569		1,139
Commercial Platform		243		45		674		45
Total consolidated depreciation and amortization	$	921	$	578	$	2,585	$	1,330

	September 30,		December 31,
	2017		2016
Total assets:
Oncology Innovation Platform	$	85,450	$	53,022
Global Supply Chain Platform		47,864		48,560
Commercial Platform		15,444		4,308
Total consolidated assets	$	148,758	$	105,890

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Total revenue:
United States	$	8,114	$	1,060	$	11,056	$	2,575
India		3,015		2,156		5,275		5,364
Austria		964		1,514		2,682		4,698
China		1,038		521		1,767		1,627
Taiwan		-		-		500		-
Other foreign countries		863		365		1,890		1,174
Total consolidated revenue	$	13,994	$	5,616	$	23,170	$	15,438

	September 30,		December 31,
	2017		2016
Total property and equipment, net:
United States	$	4,609	$	2,177
China		4,215		3,633
Total consolidated property and equipment, net	$	8,824	$	5,810

Customer revenue and accounts receivable concentration amounted to the following for the identified periods. These customers relate to the Commercial Platform segment and the Global Supply Chain Platform segment.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Percentage of total revenue by customer:
Customer A		18	%		38	%		20	%		35	%
Customer B		7	%		27	%		11	%		29	%
Customer C		16	%	-				11	%		-
Customer D		7	%	-				7	%		-

	September 30,			December 31,
	2017			2016
Percentage of total accounts receivable by customer:
Customer A		25	%		50	%
Customer B		8	%		9	%
Customer C		11	%		-

14. Commitments and Contingencies

Future minimum payments under the non-cancelable leases consisted of the following as of September 30, 2017 (in thousands):

Year ending December 31:	Minimum payments
2017 (remaining three months)	$	211
2018		1,263
2019		1,648
2020		1,657
2021		1,665
Thereafter		6,295
	$	12,739

Legal Proceedings

The Company is not a party to any pending or known threatened legal proceedings that, in the opinion of the Company, would have a material impact on the Company’s condensed consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes included in Part I, item I of this report and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2016, included in our final prospectus dated June 13, 2017, filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, or the Prospectus. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” beginning on page 30 in this report.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, business strategy, market size, potential growth opportunities, clinical development activities, the timing and results of clinical trials and potential regulatory approval and commercialization of product candidates. In some cases, forward-looking statements may be identified by terminology such as “believe,” “may,” “will,” “should,” “predict,” “goal,” “strategy,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek” and similar expressions and variations thereof. These words are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

As used in this Quarterly Report on Form 10-Q, the terms “Athenex,” “the Company,” “we,” “us,” and “our” refer to Athenex, Inc. and, where appropriate, its consolidated subsidiaries, unless the context indicates otherwise.

Overview

We are a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. We have generated our clinical product candidates through our Orascovery and Src Kinase Inhibition research platforms, which are based on our understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. We believe that our ability to overcome the challenges of oral delivery of chemotherapy and limitations associated with IV delivery, via our P-gp inhibitor, offers significant potential benefits to patient outcomes by allowing patients to stay on therapy longer and extending the potential opportunities to combine with other agents, including targeted therapies and immunotherapies that would otherwise be too toxic in combination with IV chemotherapy. We have assembled a leadership team and have established operations in the U.S. and China across the pharmaceutical value chain to execute our mission to become a global leader in bringing innovative cancer treatments to the market and improve health outcomes.

We have three segments operating in North America and Asia: our Oncology Innovation Platform, our Commercial Platform and our Global Supply Chain Platform. Our Oncology Innovation Platform include two core research and development centers, one in Hong Kong, China and one in the U.S.

Since inception, we have devoted substantially all of our resources to research and development of our lead product candidates under our Orascovery and Src Kinase Inhibition platforms. We have incurred significant net loss es since inception. As of September 30, 2017, we had an accumulated deficit of approximately $298.0 million. Our recurring losses from operations and negative cash flows from operations have raised substantial doubt regarding our ability to continue as a g oing concern, and as a result, our independent registered public accounting firm has noted this in their opinion on our consolidated financial statements for the year ended December 31, 2016, which was issued prior to our raising $64.2 million of net proce eds in our June 2017 IPO described below. As a result of the acquisitions of Athenex Pharma Solutions in 2014 and Polymed in 2015, we started to generate revenue from those businesses. Our Commercial Platform launched sales of generic injectable products i n 2017. Product sales totaled $22.0 million and $14.5 million for the nine months ended September 30, 2017 and 2016, respectively. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our e xpenses will increase significantly in connection with our ongoing activities, as we:

•

Continue investment in acquiring or in-licensing other drugs and technologies;

•

Continue preclinical and clinical development of our programs;

•

Continue investment in our manufacturing facilities;

•

Hire additional research, development and business personnel;

•

Maintain, expand and protect our intellectual property portfolio; and

•

Incur additional costs associated with operating as a public company.

We have funded our operations to date primarily from the issuance and sale of our common stock and convertible bonds and, to a lesser extent, through revenue generated from our Global Supply Chain Platform and Commercial Platform. Cash used in operations for the nine months ended September 30, 2017 was $63.6 million compared with cash used in operations of $35.2 million for the nine months ended September 30, 2016. As of September 30, 2017, we had cash and cash equivalents of $19.3 million and short-term investments of $49.8 million.

On June 14, 2017, we completed the initial public offering (IPO) of our common stock pursuant to a registration statement on Form S-1. In the IPO, we sold an aggregate of 6,900,000 shares of our common stock, which included 900,000 shares of common stock purchased by the underwriters upon the full exercise of their options to purchase additional common stock, at a price to the public of $11.00 per share. We received aggregate cash proceeds of approximately $64.2 million from the IPO, net of underwriting discounts and commissions and offering expenses. Upon the IPO, convertible bonds with an aggregate principal value of $68.0 million, and a carrying value of $55.8 million, were converted into 7,727,273 shares of common stock. On September 29, 2017, the remaining convertible bond with a principal value of $7.0 million was converted into 795,455 shares of common stock, at a 20% discount from the IPO price of $11 per share.

Key Components of Results of Operations

Revenue

We derive our consolidated revenue primarily from (i) the sales of API and medical devices by our Global Supply Chain Platform; (ii) the sales of generic injectable products by our Commercial Platform; (iii) licensing and collaboration projects conducted by our Oncology Innovation Platform, which generates revenue in the form of upfront payments, milestone payments and payments received for providing research and development services for our collaboration projects and for other third parties; and (iv) grant awards from government agencies and universities for our continuing research and development efforts.

We do not anticipate revenue being generated from sales of our product candidates under development in our Oncology Innovation Platform until we have obtained regulatory approval. We cannot assure you that we will succeed in achieving regulatory approval for our drug candidates as planned, or at all.

Cost of Product Sales

Along with sourcing from third party manufacturers, we manufacture clinical products in our cGMP facility in New York and APIs at our cGMP facility in China. Cost of product sales primarily includes the cost of finished products, raw materials, labor costs, manufacturing overhead expenses and reserves for expected scrap, as well as transportation costs. Cost of product sales also includes depreciation expense for production equipment, amortization of certain licenses, changes to our excess and obsolete inventory reserves, and certain direct costs such as shipping costs, net of costs charged to customers.

Research and Development Expenses

Research and development expenses consist of the costs associated with in licensing of product candidates, conducting preclinical studies and clinical trials, activities related to regulatory filings and other research and development activities. Our current research and development activities mainly relate to the clinical development of the following programs:

Orascovery platform —Comprised of our in-licensed and novel P-gp inhibitor, HM30181A, that is combined with various chemotherapeutic agents and enables them to be absorbed into the blood when given orally:

•

Oraxol, combining HM30181A with an oral dosage form of paclitaxel;

•

Oratecan, combining HM30181A with an oral dosage form of irinotecan;

•

Oradoxel, combining HM30181A with an oral dosage form of docetaxel; and

•

Oratopo, combining HM30181A with an oral dosage form of topotecan.

Src Kinase Inhibition platform —Targets the tyrosine kinase protein in regulating cell growth that leads to blockade of metastasis:

•

KX-01 ointment, Src kinase inhibitor that is being topically administered to treat skin cancers and pre-cancers;

•

KX-01 oral, Src kinase inhibitor that is being orally administered to treat certain solid and liquid tumors; and

•

KX-02, Src kinase inhibitor that is orally administered to treat brain cancer, such as glioblastoma multiforme (GBM).

We expense research and development costs as incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment or clinical site activations. We do not allocate employee-related costs, depreciation, rental and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs under research and development.

We cannot determine with certainty the duration, costs and timing of the current or future preclinical or clinical studies of our drug candidates. The duration, costs, and timing of clinical studies and development of our drug candidates will depend on a variety of factors, including:

•

The scope, rate of progress, and costs of our ongoing, as well as, any additional clinical studies and other research and development activities;

•

Clinical study results;

•

Clinical study enrollment rates;

•

Significant and changing government regulation; and

•

The timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a drug candidate could mean a significant change in the costs and timing associated with the development of that drug candidate.

Research and development activities are central to our business model. We expect our research and development expenses to continue to increase for the foreseeable future as we continue to support the clinical trials of Oraxol, Oratecan, Oradoxel, Oratopo, KX-01 ointment, KX-01 oral and KX-02, as well as initiate and prepare for additional clinical and preclinical studies. We also expect spending to increase in the research and development for API, 503B and specialty products. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will likely impact our clinical development programs and plans.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses primarily consist of compensation, including salary, employee benefits and stock-based compensation expenses for sales and marketing personnel, and for administrative personnel that support our general operations such as executive management, legal counsel, financial accounting, information technology, and human resources personnel. SG&A expenses also includes professional fees for legal, patents, consulting, auditing and tax services, as well as other direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies used in the selling, marketing, general and administrative activities. We expect to incur additional SG&A expenses in connection with our becoming a public company, which may increase further when we are no longer able to rely on the “emerging growth company” exemption pursuant to the JOBS Act.

We anticipate that our SG&A expenses will increase in future periods to support increases in our research and development and commercialization activities. We expect these increases will likely result in increased headcount, increased share compensation charges, expanded infrastructure and increased costs for insurance. We also anticipate increase s to legal, compliance, accounting and investor and public relations expenses associated with being a public company.

Results of Operations

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

The following table sets forth a summary of our condensed consolidated results of operations for the three months ended September 30, 2017 and 2016, together with the changes in those items in dollars and percentage. This information should be read together with our consolidated financial statements and related notes included elsewhere in this document. Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.

	Three Months Ended September 30,
	2017			2016			Change
	(in thousands)			(in thousands)			(in thousands)			%
Revenue	$	13,994		$	5,616		$	8,378			149	%
Cost of product sales		(8,082	)		(5,416	)		(2,666	)		49	%
Research and development expenses		(11,944	)		(18,052	)		6,108			-34	%
Selling, general, and administrative expenses		(10,364	)		(6,790	)		(3,574	)		53	%
Interest expense		(353	)		(5	)		(348	)	NM
Loss on derivative liability		(6,548	)		-			(6,548	)	NM
Income tax (expense) benefit		(11	)		(9	)		(2	)		22	%
Net loss		(23,308	)		(24,656	)		1,348
Less: net loss attributable to non-controlling interests		(34	)		(34	)		-			0	%
Net loss attributable to Athenex, Inc.	$	(23,274	)	$	(24,622	)	$	1,348

Revenue

Revenue for the three months ended September 30, 2017 was $14.0 million, an increase of $8.4 million, or 149%, as compared to $5.6 million for the three months ended September 30, 2016. The increase was primarily attributable to the 2017 launch of specialty products sold through our Commercial Platform, which contributed revenue of $7.4 million during the period. API sales increased by $1.3 million. This was offset by $0.3 million decrease in contract manufacturing revenue.

Cost of Product Sales

Cost of product sales for the three months ended September 30, 2017 totaled $8.1 million, an increase of $2.7 million, or 49%, as compared to $5.4 million for the three months ended September 30, 2016. This was primarily due to the increase of $3.8 million cost of product sales in the recently launched specialty products, offset by the decrease of $1.1 million cost of product sales in the contract manufacturing and API. The increase in gross profit was driven primarily by the sale of Sodium Bicarbonate, of which there was a shortage during the period. Changes in availability of products could increase or decrease our revenue and gross profit in the future.

Research and Development Expenses

Research and development expenses for the three months ended September 30, 2017 totaled $11.9 million, a decrease of $6.1 million, or 34%, as compared to $18.1 million for the three months ended September 30, 2016. This was primarily due to decreased licensing fees and decreased preclinical program expenses, and included the following:

•

$4.6 million decrease in the costs of drug licensing fees to Gland and SunGen;

•

$1.7 million decrease in employee and executive compensation primarily due to a shift in focus of certain personnel to supporting selling, general and administrative functions; and

•

$1.2 million decrease in the cost of preclinical studies as several of the Company's drugs progressed into the clinical stages.

These decreases were partially offset by a $1.4 million increase related to the research and development of our clinical studies, 503B products and API products.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses for the three months ended September 30, 2017, totaled $10.4 million, an increase of $3.6 million, or 53%, as compared to $6.8 million for the three months ended September 30, 2016. This was primarily due to the establishment of our Commercial Platform in the third quarter of 2016, as well as additional costs associated with being a public company beginning in June 2017, and included the following:

•

$2.5 million increase in employee and executive compensation due to the expansion of our sales and marketing force and a shift in focus of certain personnel to general and administrative functions;

•

$0.6 million in selling and marketing expenses related to the Commercial Platform; and

•

$0.5 million increase in professional fees and other office expenses.

Interest Expenses

Interest expense for the three months ended September 30, 2017 totaled $0.4 million, an increase of $0.3 million as compared to $0.1 million for the three months ended September 30, 2016. The increase was due to the interest incurred on convertible bonds we issued between the third quarter of 2016 and the second quarter of 2017, which had all been converted into common stock as of September 30, 2017.

Loss on Derivative Liability

Loss on derivative liability for the three months ended September 30, 2017 increased by $6.5 million. This increase was due to the increase in our stock price changing the fair value of the derivatives embedded within the convertible bonds we issued between the third quarter of 2016 and the second quarter of 2017.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

The following table sets forth a summary of our condensed consolidated results of operations for the nine months ended September 30, 2017 and 2016, together with the changes in those items in dollars and percentage. This information should be read together with our consolidated financial statements and related notes included elsewhere in this document. Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.

	Nine Months Ended September 30,
	2017			2016			Change
	(in thousands)			(in thousands)			(in thousands)			%
Revenue	$	23,170		$	15,438		$	7,732			50	%
Cost of product sales		(15,058	)		(14,392	)		(666	)		5	%
Research and development expenses		(55,949	)		(33,443	)		(22,506	)		67	%
Selling, general, and administrative expenses		(33,795	)		(15,694	)		(18,101	)		115	%
Interest expense		(6,010	)		(8	)		(6,002	)	NM
Loss on derivative liability		(15,411	)		-			(15,411	)	NM
Income tax benefit		52			294			(242	)		-82	%
Net loss		(103,001	)		(47,805	)		(55,196	)
Less: net loss attributable to non-controlling interests		(114	)		(144	)		30			-21	%
Net loss attributable to Athenex, Inc.	$	(102,887	)	$	(47,661	)	$	(55,226	)

Revenue

Revenue for the nine months ended September 30, 2017 was $23.2 million, an increase of $7.7 million, or 50%, as compared to $15.4 million for the nine months ended September 30, 2016. The increase was primarily attributable to the launch of 11 specialty products sold through our Commercial Platform since March 2017, which contributed $9.3 million of the revenue increase in the current year. Revenue from licensing fees and proprietary products sales increased by $0.5 million and $0.2 million, respectively. These were offset by the decreases of $1.4 million in API sales, $0.4 million in medical devices sales, $0.3 million in contract manufacturing revenue and $0.2 million in grant revenue.

Cost of Product Sales

Cost of product sales totaled $15.1 million for the nine months ended September 30, 2017, an increase of $0.7 million, or 5%, from the nine months ended September 30, 2016. The launch of our specialty products from the Commercial Platform in 2017 resulted in an increase of $5.1 million cost of product sales, offset by a $4.4 million decrease in API, medical device and contract manufacturing cost of product sales. The increase in gross profit was driven primarily by the sale of Sodium Bicarbonate, of which there was a shortage in the third quarter of 2017.

Research and Development Expenses

Our research and development expenses increased by $22.5 million, or 67%, to $55.9 million for the nine months ended September 30, 2017 from $33.4 million for the nine months ended September 30, 2016, primarily due to the increased costs of drug licensing fees and the advancement of our clinical pipeline, and included the following:

•

$17.3 million increase resulting from the drug licensing fees to Hanmi, Gland and Amphastar;

•

$7.3 million increase in the costs of clinical studies, primarily for Oraxol, KX-01 ointment, and Oratecan;

•

$1.8 million increase in general product development and supplies related to 503B products;

•

$1.0 million increase in API research and development expenses; and

•

$0.7 million increase in the amortization of the license fees;

These increases were partially offset by a $3.5 million decrease in compensation expenses due to a shift in focus of certain personnel to supporting selling, general and administrative functions and a $2.1 million decrease in the preclinical study costs as our proprietary drugs entered the clinical stages.

Selling, General, and Administrative Expenses

Our selling, general and administrative expenses increased by $18.1 million, or 115%, from $15.7 million for the nine months ended September 30, 2016 to $33.8 million for the nine months ended September 30, 2017 primarily due to an increase in employee compensation, and included the following:

•

$13.3 million increase in employee and executive compensation, due to the expansion of our sales and marketing force and a shift in focus of certain personnel to general and administrative functions, and stock-based compensation awarded to the executive and employee upon the IPO;

•

$2.3 million increase in office expenses, rent and utilities, and other expenses related to the expansion of our business operations;

•

$1.7 million in selling and marketing costs related to the launch of our generic injectable products and the branding of our proprietary products; and

•

$0.8 million increase in professional fees, which included accounting, legal and consulting fees.

Interest Expenses

Interest expenses increased by $6.0 million for the nine months ended September 30, 2017. This was primarily due to the interest incurred on the convertible bonds issued between the third quarter of 2016 and the second quarter of 2017, which had all been converted into common stock as of September 30, 2017.

Loss on Derivative Liability

Loss on derivative liability increased by $15.4 for the nine months ended September 30, 2017. This was primarily due to the increase in our stock price changing the fair value of the derivatives embedded within the convertible bonds we issued between the third quarter of 2016 and the second quarter of 2017.

Liquidity and Capital Resources

Capital Resources

Since our inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted from funding our research and development programs and selling, general and administrative costs associated with our operations. We incurred net losses of $103.0 million and $47.8 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, we had an accumulated deficit of $298.0 million. Our primary use of cash is to fund research and development costs. Our operating activities used $63.6 million and $35.2 million of cash during the nine months ended September 30, 2017 and 2016, respectively. Our principal sources of liquidity as of September 30, 2017 were cash and cash equivalents totaling of $19.3 million and short-term investments totaling $49.8 million, which are generally U.S. government or high quality investment grade corporate debt securities.

Pursuant to our IPO in June 2017, the Company sold an aggregate of 6,900,000 shares of its common stock at a price of $11.00 per share for cash proceeds of $64.2 million, net of underwriting discounts and commissions of $6.1 million and offering costs of $5.6 million.

Based on our current operating plan, we expect that our existing cash, cash equivalents and short-term investments as of September 30, 2017, will enable us to fund our operating expenses and capital expenditures requirements through March 2018. We expect that our expenses will increase substantially as we continue to fund clinical development of our Orascovery and Src Kinase Inhibition research programs, fund new and ongoing research and development activities and working capital and other general corporate purposes. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to accurately estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development and commercialization of our drug candidates.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section.

Our future capital requirements will depend on many factors, including:

•

the costs, timing and outcome of regulatory reviews and approvals;

•

the ability of our drug candidates to progress through clinical development successfully;

•

the initiation, progress, timings, costs and results of nonclinical studies and clinical trials for our other programs and potential drug candidates;

•

the number and characteristics of the drug candidate we pursue;

•

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property related claims;

•

the extent to which we acquire or in-license other products and technologies; and

•

our ability to maintain and establish collaboration arrangements on favorable terms, if at all.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and government grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights of holders of common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interest of holders of common stock. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or research programs or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or drug candidates that we would otherwise prefer to develop and market ourselves.

We believe that the existing cash and cash equivalents and short term investments will not be sufficient to enable us to complete all necessary development or commercially launch our proprietary drug candidates. If we are unable to raise capital when needed or on attractive terms, we will be forced to delay, reduce or elimin ate our research and development programs or future commercialization efforts. Our inability to obtain additional funding when needed could seriously harm our business.

Cash Flows

The following table provides information regarding our cash flows for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,
	2017			2016
	(in thousands)
Net cash (used in) operating activities	$	(63,644	)	$	(35,166	)
Net cash (used in) investing activities		(47,022	)		(2,244	)
Net cash provided by financing activities		96,093			37,623
Net effect of foreign exchange rate changes		710			(177	)
Net (decrease) increase in cash and cash equivalents	$	(13,863	)	$	36

Net Cash Used in Operating Activities

The use of cash was primarily resulted from our net loss adjusted for non-cash charges and changes in components of working capital. The primary use of our cash in the periods presented was to fund our research and development, regulatory and other clinical trial costs, drug licensing costs, inventory purchase, and other expenditures related to sales, marketing and administration.

Net cash used in operating activities was $63.6 million for the nine months ended September 30, 2017. This resulted principally from our net loss of $103.0 million, adjusted for non-cash charges of $49.7 million, and by cash used in our operating assets and liabilities of $10.3 million. Our net non-cash charges during the nine months ended September 30, 2017 primarily consisted of $15.4 million of fair value change in derivative liabilities, $13.3 million of licensing fees settled by bonds and equity, $11.7 million of stock-based compensation expense, $3.7 million of convertible bonds interest, $3.3 million amortization of debt discount, and $2.6 million depreciation and amortization expense.

Net cash used in operating activities was $35.1 million for the nine months ended September 30, 2016. The resulted principally from our net loss of $47.8 million, adjusted for non-cash charges of $12.1 million, and by cash provided from our operating assets and liabilities of $0.5 million. Our non-cash charges during the nine months ended September 30, 2016 primarily consisted of $10.0 million of stock-based compensation expense.

Net Cash Used in Investing Activities

Net cash used in investing activities was $47.0 million for the nine months ended September 30, 2017, compared to $2.2 million used in investing activities for the nine months ended September 30, 2016. The increased use in cash from investing activities was primarily due to cash used in purchasing short-term investments, including commercial paper, corporate notes, and U.S. government bonds.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $96.1 million for the nine months ended September 30, 2017, including $75.9 million from the issuance of common stock, which resulted in net proceeds of $65.7 million from the IPO due to $6.1 million of underwriting discounts and commissions and $4.1 million of certain offering costs, and $30.0 million from the issuance of convertible bonds, compared with $37.6 million for the nine months ended September 30, 2016, which included $35.0 million from the issuance of convertible bonds, $8.5 million from the issuance of common stock, offset by $3.1 million payment of contingent consideration and $2.3 million purchase of treasury stock.

Contractual Obligations

A summary of our contractual obligations as of September 30, 2017 is as follows:

	Payments Due by Period
	Remainder of 2017		1 to 3 years		3 to 5 years		More than 5 years		Total Amounts Committed
	(in thousands)
Operating leases	$	211	$	2,911	$	3,322	$	6,295	$	12,739
Long-term debt		798		-		-		-		798
Long-term debt - related parties		287		492		-		-		779
Capital lease obligation		11		212		-		-		223
Licensing fees		1,013		4,400		-		-		5,413
	$	2,320	$	8,015	$	3,322	$	6,295	$	19,952

The operating leases include (1) the rental of our global headquarters in the Conventus Center for Collaborative Medicine in Buffalo, NY, (2) the rental of our research and development facility in the Integrated Circuit Development Centre in Hong Kong, (3) the rental of the Commercial Platform headquarters in Chicago, IL, and (4) the rental of our clinical research and development facility in Cranford, NJ. Of the total amounts committed, $9.4 million are committed for the rental of our Buffalo, NY global headquarters, $0.2 million are committed for our Hong Kong research and development facility, $2.6 million are committed for our Commercial Platform headquarters in Schaumburg, IL, and $0.5 million are committed for our research and development center in New Jersey. The above amounts do not include the interest that will be incurred on our debt.

Off Balance Sheet Arrangements

We do not maintain any off balance sheet partnerships, arrangements, or other relationships with unconsolidated entities or others, often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the periods. We evaluate our estimates and judgments on an ongoing basis, including but not limited to, estimating the useful lives of long-lived assets, assessing the impairment of long-lived assets, stock-based compensation expenses, and the realizability of deferred income tax assets. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Changes in the accounting estimates are likely to occur from period to period. Actual results could be significantly different from these estimates. There have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Operations included in our prospectus filed on June 15, 2017 with the SEC, except for the determination of the fair value of our common stock, which was used in estimating the fair value of stock-based awards at grant date. Prior to IPO, our stock was not publicly traded, therefore we estimated the fair value of our common stock as discussed in the prospectus. Following our IPO, we established a policy, using the closing sale price per share of our common stock as quoted on the NASDAQ Global Market on the date of grant for purposes of determining the exercise price per share of our share-based awards to purchase common stock.

Recent Accounting Pronouncements

In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission, or other authoritative accounting bodies to determine the potential impact they may have on our condensed consolidated financial statements. See Note 2 of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.

JOBS Act

Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, an “emerging growth company” can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, as a result, we will adopt new or revised accounting standards at the same time as other public companies that are not emerging growth companies. There are other exemptions and reduced reporting requirements provided by the JOBS Act that we are currently evaluating. For example, as an emerging growth company, we are exempt from Sections 14A(a) and (b) of the Exchange Act which would otherwise require us to (1) submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes;” and (2) disclose certain executive compensation related matters. We also rely on an exemption from the rule requiring us to provide an auditor’s attestation report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and the rule requiring us to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will continue to remain an “emerging growth company” until the earliest of the following: (1) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering, (2) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1 billion, (3) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years, or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

A significant portion of our business is located outside the United States and, as a result, we generate revenue and incur expenses denominated in currencies other than the U.S. dollar, a majority of which is denominated in Renminbi, or RMB. In the nine months ended September 30, 2017 and 2016, approximately 5% and 6%, respectively, of our sales, excluding intercompany sales, were denominated in foreign currencies. As a result, our revenue can be significantly impacted by fluctuations in foreign currency exchange rates. We expect that foreign currencies will represent a lower percentage of our sales in the future due to the anticipated growth of our U.S. business. Our international selling, marketing, and administrative costs related to these sales are largely denominated in the same foreign currencies, which somewhat mitigates our foreign currency exchange risk rate exposure.

Currency Convertibility Risk

A portion of our revenues and expenses, and a portion of our assets and liabilities are denominated in RMB. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China, or PBOC. However, the unification of exchange rates does not imply that the RMB may be readily convertible into U.S. dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approvals of foreign currency payments by the PBOC or other institutions require submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Additionally, the value of the RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

Interest Rate Sensitivity

We had cash and cash equivalents of $19.3 million as of September 30, 2017, which consisted primarily of bank deposits and money market funds. In addition, we also had short term investments of $49.8 million as of September 30, 2017. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our condensed consolidated financial condition or results of operations. We do not believe that our cash or cash equivalents have significant risk of default or illiquidity.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017. The term “disclosure controls and procedures,” as defined in Rule 13a15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that

information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible contro ls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2017, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a15(d) and 15d15( d) of the Exchange Act that occurred during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth in our Quarterly Report on Form 10-Q filed for the quarter ended June 30, 2017.

Item 2. Unregistered Sales of Equi ty Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

On September 29, 2017, we issued 795,455 shares of common stock through the conversion of our convertible bond with a principal value of $7.0 million. These transactions were exempt from the registration requirements of the Securities act in reliance upon Section 4(a)(2) of the Securities Act.

Use of Proceeds

On June 13, 2017, our Registration Statement on Form S-1(File no.333-217928) relating to the IPO of our common stock was declared effective by the SEC.

There has been no material change in the expected use of the net proceeds from our IPO, as described in our final prospectus filed with the SEC on June 15, 2017 pursuant to Rule 424(b)

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine S afety Disclosures.

Not applicable

Item 5. Other Information.

Not applicable

Item 6. E xhibits.

The exhibits filed or furnished as part of this Quarterly Report on Form 10Q are set forth below.

		Incorporated by Reference (Unless Otherwise Indicated)
Exhibit Number	Exhibit Title	Form	File	Exhibit	Filing Date

10.30	Grant Disbursement Agreement dated September 4, 2017 by and between New York State Urban Development Corporation d/b/a Empire State Development and Athenex, Inc.	—	—	—	Filed herewith
31.1	Certification of the Chief Executive Officer and Chairman of the Board of Directors pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith

31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith

32.1	Certification of the Chief Executive Officer and Chairman of the Board of Directors and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith

101.INS	XBRL Instance Document.	—	—	—	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document.	—	—	—	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.	—	—	—	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.	—	—	—	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.	—	—	—	Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.	—	—	—	Filed herewith

SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Athenex, Inc.

Date: November 9, 2017	By:	/s/ Johnson Y.N. Lau
		Chief Executive Officer (Board Chairman and Principal Executive Officer)
Date: November 9, 2017	By:	/s/ J. Nicholas Riehle
		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 10.30

CAPITAL GRANT

This GRANT DISBURSEMENT AGREEMENT (“Agreement”) includes all exhibits and attachments hereto and is made on the terms and by the parties listed below and relates to the Project described below:


NEW YORK STATE	95 Perry Street, Suite 500
URBAN DEVELOPMENT	Buffalo, New York 14203-3030
CORPORATION d/b/a	Contact: Ms. Jean Williams, Senior Project Manager
EMPIRE STATE DEVELOPMENT	Phone: (716) 846-8243
(“ESD” or “GRANTOR”):	E-mail: jean.williams@esd.ny.gov


THE GRANTEE:	Athenex, Inc. 1001 Main Street, Suite 600 Buffalo, New York 14203 Contact: Ms. Teresa Bair, VP Corporate Development & Legal Affairs Phone: (716) 427-2868 E-mail: tbair@athenex.com Federal Taxpayer ID#: 43-1985966


PROJECT NAME:	Athenex Capital

PROJECT LOCATION:	3178 Lakeshore Drive East, Dunkirk

PROJECT NUMBER:	AB127

GRANT AMOUNT:	$200,000,000

FUNDING SOURCE:	SP APPROP Chautauqua Erie High Tech Mfg


ESD APPROVAL DATE:	April 17, 2017

PACB APPROVAL DATE:	May 17, 2017

EXPIRATION DATE:	10 years from Manufacturing Facility Completion as set forth in the Alliance Agreement (defined below)

TERMS AND CONDITIONS

1.	The Project

The Grantee shall:

(a)

complete the project as set forth in the ESD General Project Plan attached hereto as Exhibit A (the “Project”) and the Agreement for Medical Technology, Research, Development, Innovation and Commercialization Alliance between Fort Schuyler Management Corporation (“FSMC”) and Kinex Pharmaceuticals, Inc., the predecessor corporation of Grantee dated May 1, 2015 (hereinafter the “ Alliance Agreement”).

(b)

comply with the design and construction requirements attached hereto as Exhibit B.

2.	Employment Goals & Reporting

(a)

The Grantee represents and warrants that it shall achieve the employment goals as set forth in Exhibit C by retaining existing or hiring new Full-time Permanent Employees

(b)

For purposes of this Agreement, a Full-time Permanent Employee shall mean (i) a full-time, permanent, private-sector employee on the Grantee’s payroll, who has worked at the Project Location for a minimum of thirty-five hours per week for not less than four consecutive weeks and who is entitled to receive the usual and customary fringe benefits extended by Grantee to other employees with comparable rank and duties; or (ii) two part-time, permanent, private-sector employees on Grantee’s payroll, who have worked at the Project Location for a combined minimum of thirty-five hours per week for not less than four consecutive weeks and who are entitled to receive the usual and customary fringe benefits extended by Grantee to other employees with comparable rank and duties. Baseline Employment shall mean the number of Full-time Permanent Employees set forth in Exhibit H.

(c)

Grantee shall submit, by February 1 of each year during the term of this Agreement, the Employment Reporting Form attached hereto as Exhibit H, indicating the average number of Grantee's Full-time Permanent Employees for the 12 month period ending as of December 31 of the prior year. Full-time Permanent Employee Count, for each calendar year during the term of this Agreement, shall mean the greater of (i) the average number of Full-time Permanent Employees for the prior calendar year, computed by adding the number of Full-time Permanent Employees as of the Grantee’s last payroll date in the months of March, June, September and December and dividing that sum by 4, or (ii) the number of Full-time Permanent Employees as of the Grantee’s last payroll date in December of such year.

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 2

3.	Conditions Precedent to Disbursement of the Grant

No grant funds shall be disbursed unless the Grantee is in compliance with the Terms and Conditions of this Agreement, including, but not limited to, Exhibit E (Disbursement Terms), and the following conditions have been satisfied (and as to 3(d) and 3(e) below continue to be satisfied prior to each disbursement):

(a)

If the Grant Amount exceeds $100,000, or if, as described in Exhibit A, it is expected that there will be additional grants that in the aggregate exceed $100,000, ESD has received an opinion of Grantee’s counsel, in substantially the form appended to this Agreement as Exhibit D.

(b)

Any necessary approval has been issued by the Director of the Budget of the State of New York, and the Grant funds have been received by ESD.

(c)

ESD has received the out-of-pocket expenses incurred by ESD in the making of the Grant, if any, as set forth in Exhibit E.

(d)

There have been no materially adverse changes in the financial condition of the Grantee since the date of submission of its application to ESD.

(e)

The Grantee employs at least the Baseline Employment as evidenced by the Employment Reporting Form attached hereto as Exhibit H.

4.	Disbursement and Recapture Terms

Subject to the terms and conditions contained in this Agreement, ESD shall disburse the Grant to the Grantee as follows:

(a)

ESD shall reimburse the Grantee for Project expenditures incurred by the Grantee as set forth in Exhibit E to this Agreement. Disbursements will be made upon submittal to ESD of a Payment Requisition Form, together with such supporting documentation as ESD may reasonably require, in the form attached to this Agreement as Exhibit F and its attachments, and Exhibit H.

(b)

In no event will ESD make any payment which would cause ESD’s aggregate disbursements to exceed the Grant Amount.

(c)

The Grant, or a portion thereof, may be subject to recapture by ESD as provided in Exhibit C.

5.	Non Discrimination and Contractor & Supplier Diversity

The Grantee will comply with ESD’s Non-Discrimination and Contractor & Supplier Diversity policies set forth in Exhibit G to this Agreement.

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 3

6.	No Limited Liability of ESD

ESD shall not in any event whatsoever be liable for any injury or damage, cost or expense of any nature whatsoever that occurs as a result of or in any way in connection with the Project and the Grantee hereby agrees to indemnify and hold harmless ESD, the State and their respective agents, officers, employees and directors (collectively, the “Indemnitees”) from and against any and all such liability other than that caused by the gross negligence or the willful misconduct of the Indemnitees. Nothing in this provision shall serve to affect or limit any potential for liability of FSMC under the Alliance Agreement.

7.	Responsibility Provisions

The Grantee shall at all times during the Agreement term remain responsible. The Grantee agrees, if requested by the President and Chief Executive Officer of ESD or his or her designee, to present evidence of its continuing legal authority to do business in New York State, integrity, experience, ability, prior performance, and organizational and financial capacity.

8.	Representations, Warranties and Covenants

The Grantee represents, warrants and covenants that:

(a)

It has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder.

(b)

This Agreement was duly authorized, executed and delivered by the Grantee and is binding and enforceable against the Grantee in accordance with its terms.

(c)

It is a duly organized corporation, validly existing and in good standing under the laws of the State of its incorporation, has the corporate power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged and is duly qualified as a foreign corporation and in good standing under the laws of each other jurisdiction in which such qualification is required and shall maintain its corporate existence in good standing in each such jurisdiction.

(d)

There are no actions, suits or proceedings or, to the knowledge of Grantee, threatened against, or affecting Grantee before any court, governmental entity or arbitrator, which may, in any one case or in the aggregate, materially adversely affect the financial condition, operations, properties or business of the Grantee, except as may have been disclosed in writing to ESD.

(e)

Grantee is in compliance and shall continue to comply in all material respects with all material applicable laws, rules, regulations and orders.

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 4

(f)

The information contained in the application submitted by the Grantee in connection with the project and the Grant, as such application may have been amended or supplemented (the “Application”), is incorporated herein by reference in its entirety. In the event of an inconsistency between the descriptions, conditions, and terms of this Agreement and those contained in the Application, the provisions of this Agreement shall govern. The Grantee hereby acknowledges that ESD has relied on the statements and representations made by the Grantee in the Application in making the Grant. The Grantee hereby represents and warrants that it has made no material misstatement or omission of fact in the Application or otherwise in connection with the Grant and, except as otherwise disclosed in writing to ESD , there has been no adverse material change in the financial condition of Grantee from the date of submission of the Application to the date hereof and that all other the information contained in the Application continues on the date hereof to be materially correct and complete.

(g)

The Grantee covenants that it will neither hold itself out as, nor claim to be an officer, employee, agent or representative of ESD or the State by reason hereof, and that it will not by reason thereof, make any claim, demand or application for any right or privilege applicable to an officer, employee, agent or representative of ESD or the State, including without limitation, worker's compensation coverage, unemployment insurance benefits, social security coverage or retirement membership or credit.

(h)

Neither the Grantee nor any of the members of its Board of Directors or other governing body or its employees have given anything of value to influence any official act or the judgment of any person in the award of the Grant or the performance of any of the terms of this Agreement.

(i)

After Manufacturing Facility Completion, it shall maintain business operations at the Project Location for the term of this Agreement.

(j)

The Grant shall be used solely for Project expenses in accordance with the terms and conditions of this Agreement and the Alliance Agreement.

(k)

The Grantee is solely responsible and has sufficient funding for all Project costs in excess of the Grant.

(l)

Grantee will use ESD grant funds, and submit payment requisitions, exclusively for eligible expenses related to capital works or purposes in accordance with IRS rules and regulations relating to ESD's bonds and in accordance with the New York Debt Reform Act. Grantee acknowledges that grant funds must be used solely for authorized capital purposes and not for operating expenses or other working capital items or non-capital purposes, irrespective of whether the funds are still used for the benefit of the Project. Grantee acknowledges that the consequences of breaching this covenant could result in violations of state law and/or large bond issuances being treated as taxable instead of tax exempt for federal and state tax

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 5

purposes, loss of certain federal subsidies to the state, adverse ratings changes for such bonds, and disproportionate negative financial consequences to the state and bondholders. Grantee recognizes its financial obligations, risks and liabilities for breach of this covenant. ESD may, from time to time, request information from Grantee to confirm its compliance with this covenant and Grantee acknowledge s its obligation under Section 9 (a) (ii) of the GDA to provide information upon request to ESD .

9.	Default and Remedies

(a)

Each of the following shall constitute a default by the Grantee under this Agreement:

(i)

Failure to perform or observe any obligation or covenant of the Grantee contained herein, other than an employment default as set forth in (iv) below, to the reasonable satisfaction of ESD and within the time frames established under this Agreement.

(ii)

Failure to comply with any request for information reasonably made by ESD to determine compliance by the Grantee with the terms of this Agreement or otherwise reasonably requested by ESD in connection with the Grant.

(iii)

The making by the Grantee of any false statement or the omission by the Grantee to state any material fact in or in connection with this Agreement or the Grant.

(iv)

Provided ESD and FSMC meet their obligations under this Agreement and the Alliance Agreement, failure of the Grantee, for any time period, to meet the minimum employment goals or investment goals required by Exhibit C in any respect that is material to this Agreement.

(v)

A default beyond any applicable grace period by the Grantee, or any entity which Grantee directly or indirectly controls, is controlled by, or is under common control with, under any other agreement with ESD.

(vi)

Any manifestation, on the part of the Grantee, of an intention either: (x) to terminate business operations and/or (y) to restructure, under the terms of any bankruptcy or insolvency statute or law, its business at the Project Location. This includes, without limitation, the announced or actual cessation of business activities at the Project Location, the initiation of proceedings under any dissolution statute, or the execution of an assignment for the benefit of creditors, or the solicitation of any composition and/or arrangement with creditors, or the issuance of “closing” or “termination” notices to employees under any state or federal statute, or the filing of any voluntary petition under any chapter of the United States Bankruptcy Code, or the failure by the Grantee to obtain the dismissal, within sixty (60) days of

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 6

filing, of any involuntary proceeding brought under any chapter of the United States Bankruptcy Code.

(vii)

If the number of the Grantee’s Full-Time Permanent Employees, as that term is defined in this Agreement, that are situated at the Project Location as of the Grantee’s last payroll date on or prior to the end of any quarter (with the quarters being those the quarterly dates of March 31, June 30, September 30 and December 31, as set forth in the Report of Employment that is annexed as Exhibit H to this Agreement) is less than fifty percent (50%) of the number of Full Time-Permanent Employees, situated at the Project Location, required in accordance with the Employment Goals that are to be achieved as of the next Reporting Date, as specified in Exhibit C.

(b)

Upon the serving of notice to the Grantee of the occurrence of a default (which notice shall specify the nature of the default), ESD shall have the right to terminate this Agreement, provided however, that if the default is pursuant to paragraph 9(a)(i) or 9(a)(ii) or 9(a)(iv) no default shall be deemed to have occurred if Grantee cures such default within ten (10) days of notice of default from ESD, or if the default pursuant to paragraph 9(a)(i) or 9(a)(ii) or 9(a)(iv) cannot be reasonably cured within such ten day period, Grantee commences to cure such default within the ten day cure period and cures the default within ninety (90) days thereafter, provided further that ESD shall not be obligated to make any disbursements during any such cure period. Defaults occurring under the terms and provisions of paragraph 9(a)(iii), 9(a)(v), 9(a)(vi) and 9(a)(vii) are not subject to the cure provisions provided herein.

(c)

Upon termination of this Agreement, ESD may (i) withhold any Grant proceeds not yet disbursed. Notwithstanding the foregoing, if ESD determines that any Grant proceeds had previously been released based upon fraudulent representations or other willful misconduct, ESD may require repayment of all funds and may refer the matter to the appropriate authorities for prosecution. ESD shall be entitled to exercise any other rights and seek any other remedies provided by law.

10.

Term

The term of this Agreement shall commence on the date hereof and expire on the Expiration Date, as set forth on the first page of this Agreement.

11.	Books and Records; Project Audit

(a)

The Grantee will maintain accurate books and records concerning the project for the term of this Agreement and for three (3) years from the expiration or earlier termination of this Agreement and will make those books and records available to ESD, its agents, officers and employees during Grantee’s business hours upon reasonable request.

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 7

(b)

ESD shall have the right, upon reasonable notice, to conduct, or cause to be conducted, one or more audits, including field inspections, of the Grantee to assure that the Grantee is in compliance with this Agreement. This right to audit shall continue for three (3) years following the expiration or earlier termination of this Agreement.

12.	Maintenance of Insurance

Grantee shall maintain in full force and effect insurance described in the Alliance Agreement. In addition,

(a)

The Grantee shall name Grantor as additional insured on all liability policies and provide the Grantor with copies of all certificates for the required insurance coverages in form and substance satisfactory to the Grantor. In addition, the Grantee shall provide the Grantor with copies of renewal certificates or temporary binders in the event renewal policies have not been issued, in a timely manner. The Grantee must, in any event, provide Grantor with satisfactory confirmation of renewal coverage by the renewal date. Grantor shall also require all contractors working at the Project Location, including the selected builder, to provide insurance with limits to be agreed to by the Grantor, naming Grantor and FSMC as additional insured on all liability policies.

( b )

In the event that the Grantee fails to maintain the insurance required hereby, the Grantee shall, on demand, obtain such insurance within 2 business days. If Grantee fails to obtain such insurance within 2 business days after such demand, Grantor may obtain such insurance and pay the premiums therefor and the Grantee shall, on demand, reimburse the Grantor for any insurance premiums paid, together with interest thereon computed at the highest rate per annum allowable under New York State law.

( c )

The Grantee will not take any action, or knowingly permit any condition to exist, with respect to the Project Location which may, in any manner, partially or wholly invalidate the insurance on the Project Location required hereby.

13.	Survival of Provisions

It is agreed that: (a) the provisions of Sections 6, 8(g), (j) and (l) and 9, 11, 12, 13, 14, 15, 16, 17, 18, 21 and 22 (except insofar as any of the aforesaid Sections have been waived in accordance with the terms of Exhibit I to this Agreement) shall survive the expiration or early termination of this Agreement; and (b) such expiration or early termination shall not serve to limit, alter or modify any of the Grantee’s obligations or responsibilities under the aforesaid Sections, and/or ESD’s rights under such Sections, referenced in subsection (a) of this Section 13 of this Agreement. It is further agreed, moreover, that notwithstanding the expiration or early termination of this Agreement, ESD shall nevertheless retain the right to pursue, through and until the expiration of any applicable period of limitations established under the statutory or common law of the State of New York, any claim or claims arising

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 8

from any Section of this Agreement, including but not limited to the above referenced Sections 6, 8 (g), (j) and (l) and 9 , 1 1 , 12, 13, 14, 15, 16, 1 7, 18, 21 and 22 of this Agreement.

14.

Notices

(a)

All notices, demands, requests or other communications permitted or required hereunder shall be in writing and shall be transmitted either:

(i)

via certified or registered United States mail, return receipt requested;

(ii)

by facsimile transmission;

(iii)

by personal delivery;

(iv)

by expedited delivery service; or

(v)

by e-mail.

Such notices shall be addressed as follows or to such different addresses as the parties may from time-to-time designate:

Empire State Development

Name:

Ms. Jean Williams

Title :

Senior Project Manager

Address:

95 Perry Street, Suite 500, Buffalo, NY 14203-3030

Telephone Number:

(716) 846-8243

E-Mail Address:

jean.williams@esd.ny.gov

With a copy to:

Title :

General Counsel

Address:

633 Third Avenue, 34 ^th Floor, New York, NY 10017

Telephone Number:

(212) 803-3750

Facsimile Number:

(212) 803-3975

Athenex, Inc.

Name:

Ms. Teresa Bair

Title:

VP Corporate Development & Legal Affairs

Address:

1001 Main Street, Suite 600, Buffalo, NY 14203

Telephone Number:

(716) 427-2868

E-Mail Address:

tbair@athenex.com

(b)

Any such notice shall be deemed to have been given either at the time of personal delivery or, in the case of expedited delivery service or certified or registered United States mail, as of the date of mailing to the address provided herein, or in the case of facsimile transmission or email, upon receipt of a record, by the sender, that such a transmission has been completed.

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 9

(c)

The parties may, from time to time, specify any new or different address in the United States as their address for purpose of receiving notice under this Agreement by giving fifteen (15) days written notice to the other party sent in accordance herewith. The parties agree to mutually designate individuals as their respective representatives for the purposes of receiving notices under this Agreement. Additional individuals may be designated in writing by the parties for purposes of implementation and administration/billing, resolving issues and problems and/or for dispute resolution.

15.	No Assignment

The Grantee may not assign or transfer this Agreement or any of its rights hereunder without the advance written consent of ESD.

16.

No Waiver

No waiver of either party’s rights arising under this Agreement, or any other source, can occur unless such waiver shall be in writing and signed by such party and such written document manifests a clear and unequivocal intent by such party to waive its contractual or other legal rights. The term "waiver" as used herein is a term of art as used in the legal profession. Neither party may be estopped from asserting any of its legal rights, including but not limited to its rights under this agreement, unless such party has signed a written document that clearly and unequivocally states that the other party may detrimentally rely upon the terms of such written document. Absent such written document, there shall be no estoppel against such party and the other party’s alleged detrimental reliance shall be deemed to be unreasonable. The term "estoppel" is used herein is a term of art as used in the legal profession.

17.	Integration/Modification

This Agreement and the Alliance Agreement contain the entire agreement of the parties with respect to the subject matter hereof and, together with the Alliance Agreement, supersedes all prior oral or written agreements or statements relating to such subject matter. In addition, this Agreement may be modified only by a written instrument executed by the party against whom enforcement of such modification is sought.

18.	Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of New York. This Agreement shall be construed without the aid of any presumption or other rule of law regarding construction against the party drafting this Agreement or any part of it. In case any one or more of the provisions of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such provision(s) had never been contained herein. In the event of a conflict

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 10

between the Directors’ materials attached hereto as Exhibit A and any other term or condition of this Agreement, then the term or condition of this Agreement shall govern.

19.	Confidentiality of Information

Information contained in reports made to ESD or otherwise obtained by ESD relating to trade secrets, operations and commercial or financial information, including but not limited to the nature, amount or source of income, profits, losses, financial condition, marketing plans, manufacturing processes, production costs, productivity rates, or customer lists, provided that such information is clearly marked “Confidential” by the Grantee, will be kept confidential by ESD, to the extent such information is determined by ESD to be exempt from public disclosure under the Freedom of Information Law and not otherwise required by law to be disclosed. Notwithstanding the foregoing, ESD will not be liable for any information disclosed, in ESD’s sole discretion, pursuant to the Freedom of Information Law or other applicable law, or which ESD is required to disclose pursuant to legal process.

20.	Special Provisions

The Grantee shall comply with the special provisions, if any, set forth in Exhibit I.

21.	Litigation Costs

If any action or proceeding is commenced to enforce and/or involves the enforcement of the terms and conditions of this Agreement, each party will pay its own costs and fees, including, without limitation, its attorneys’ fees.

22. Waiver

The Grantee knowingly and expressly waives the right to a trial by jury under the terms of this Agreement.

ESD Capital Grant Disbursement Agreement Terms & Conditions – Page 11

Athenex Capital , Project Number AB127

This agreement is entered into as of the latest date written below:

NEW YORK STATE URBAN DEVELOPMENT CORPORATION

d/b/a EMPIRE STATE DEVELOPMENT

/s/ Illegible for E. Lee

(Signature) Edwin Lee,
Vice President, Loans and Grants

8/30/17

(date)

Athenex, Inc.

/s/ Johnson Yiu-Nam Lau

(Signature)

Johnson Yiu-Nam Lau, CEO

(Printed name and title)

9/4/17

(date)

Rev. 03/29/2017

ESD CAPITAL GRANT DISBURSEMENT AGREEMENT EXHIBITS

EXHIBIT A

General Project Plan

EXHIBIT B

Report

EXHIBIT C

Employment Goals & Recapture Terms

EXHIBIT D

Opinion of Counsel

EXHIBIT E

Disbursement Terms

EXHIBIT F

Payment Requisition Form

EXHIBIT F-1

Grant Utilization Request Form

EXHIBIT F-2

Financial Condition Documentation

EXHIBIT F- 3

Project Cost Documentation

EXHIBIT F- 4

Equity and Total Project Cost Expenditure Documentation

EXHIBIT G

Non-Discrimination and Contractor & Supplier Diversity – Requirements and Procedures

EXHIBIT G-1

M/WBE Participation / Equal Opportunity Policy Statement

EXHIBIT G-2

Staffing Plan

EXHIBIT G-3

Workforce Employment Utilization Report

EXHIBIT G-4

M/WBE Utilization Plan

EXHIBIT G-5

Waiver Request Form

EXHIBIT G-6

M/WBE Contractor Compliance and Payment Report

EXHIBIT H

Employment Reporting Form (With Company’s NYS Form 45 Attached)

EXHIBIT I

Special Provisions

Exhibit I-1

ESD Investment Regulations

EXHIBIT A: GENERAL PROJECT PLAN

See Materials Attached

~~C. Athenex Capital (AB127)~~

~~April~~ 17 , ~~2017~~

~~General Project Plan~~

~~Grantee:~~

~~Athenex, Inc. ("Athenex" or the "Company")~~

~~ESD Investment:~~

~~A grant of up to $200 million to be used for design/build costs of a new~~ production facility pursuant to an Agreement For Medical Technology Research, Development, Innovation, and Commercialization Alliance between Athenex, Inc. (formerly known as Kinex Pharmaceuticals, Inc.) and Fort Schuyler Management Company, dated May 21,2015, as amended ("Agreement"). To the extent the construction of the facility is less than $200 million, under the Agreement, remaining ESD funds may be used for the purchase of machinery and equipment.

~~Project Location:~~

~~3178 Lakeshore Drive East, Dunkirk, NY, Chautauqua County~~

~~Proposed Project:~~

~~Establishment of new production facility in Western New York~~

~~Project Type:~~

~~Business expansion~~

~~Regional Council:~~

~~The Western New York ("WNY") Regional Economic Development Council~~ oversees the implementation of the Buffalo Billion Investment Development Plan. This project is part of Governor Andrew M. Cuomo's Buffalo Billion Initiative to promote advanced technology, manufacturing and smart growth; increase highly-skilled jobs; and maintain and attract young people to the WNY Region.

~~Employment:~~

~~Initial employment at time of application to ESD: 0~~ ~~Current employment level: 0~~ ~~Projected employment by the fifth year of Manufacturing Facility operation following Manufacturing Facility Completion: 450~~

~~Background:~~

~~Industry~~ -

~~Biopharmaceutical~~

~~Company History~~ - ~~Based in Buffalo, New York, Athenex was formed in 2003 and has been funded from inception by approximately $200 million in private financings.~~

Athenex is a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer. The Company's mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. Athenex has generated its clinical product candidates through its

~~Athenex Capital (AB127)~~

~~April 17, 207~~

Orascovery and Src Kinase Inhibition research platforms, which are based on the company's understanding of human absorption biology and novel approaches to inhibiting kinase activity, respectively. Athenex believes that its ability to overcome the challenges of oral delivery of chemotherapy and limitations associated with IV delivery, via the company's P-gp inhibitor, offers significant potential benefits to patient outcomes by allowing patients to stay on therapy longer and extending the potential opportunities to combine with other agents, including targeted and immunotherapies that would otherwise be too toxic in combination with IV chemotherapy.

Athenex has assembled a leadership team and has established global operations in the U.S. and China across the pharmaceutical value chain to execute its mission to become a global leader in bringing innovative cancer treatments to the market and improve health outcomes.

The Company has a business model positioned to capture value by creating opportunities through multiple levers for growth. The company has built a commercial sales and marketing infrastructure in the U.S. and intends to continue to further build out this segment. Athenex expects this segment to start selling existing in-licensed therapeutically related oncology products in 2017 as a means of funding commercial infrastructure.

Athenex believes internalization of its supply chain is uniquely suited to execute in both the U.S. and China, two of the world's largest pharmaceutical markets. Athenex intends to utilize cGMP manufacturing facilities in New York State and China as a mechanism to access the U.S. and China markets and minimize supply disruptions. Athenex intends to manufacture certain of its proprietary drugs and its partnered drugs commercialized around the world.

~~The Company has acquired three businesses in the past several years: (1) in September~~

2014, ~~the company acquired QuaDPharma, LLC, now known as Athenex Pharma Solutions, LLC, which provides cGMP manufacturing, packaging and laboratory services; (2) in June~~

2015, Athenex acquired Polymed Therapeutics, Inc. and Chongqing Taihao Pharmaceutical Co Ltd, collectively Polymed. Polymed markets and sells API and medical devices throughout the world. Through its cGMP facility in Chongqing, China, Polymed manufactures API and conducts research and development of novel drugs and therapies; and (3) in July 2015, Athenex acquired Comprehensive Drug Enterprises Limited in Hong Kong, which primarily performs research and development activities.

~~Athenex Capital (AB127)~~

~~April 17, 207~~

Athenex's Commercial Platform currently markets API produced by its Global Supply Chain Platform, including 14 products in the specialty and generic market segment in the U.S. and products under Section 503B of the Food, Drug and Cosmetics Act, through the Company's compounding pharmacy facility in Newstead, NY.

~~Ownership~~ ~~- Privately owned~~

~~Market~~ -

~~Pharmaceuticalindustry~~

~~ESP Involvement~~ - In February 2016, Governor Cuomo announced a major public-private partnership with Athenex in accordance with an agreement between Athenex (then known as Kjnex Pharmaceuticals, Inc.) and Fort Schuyler Management Company ("FSMC"), entitled Agreement for Medical Technology Research, Development, Innovation, and Commercialization Alliance, dated May 21, 2015, as amended ("Agreement"). This public-private partnership includes $225 million in state funding for the establishment of a North American corporate headquarters and innovation center in Buffalo ($25 million) and for the construction of a pharmaceutical manufacturing facility in Dunkirk ($200 million).

FSMC is a SUNY Poly affiliated, private, not-for-profit, 501(c)(3) corporation that develops, constructs and manages world-class research, development and commercialization facilities to enable public-private partnerships.

The first part of the grant under the Agreement, in the amount of $25 million, was funded from the Buffalo Billion Initiative for the establishment of Athenex's North American corporate headquarters in Buffalo. ESD Directors approved the funding on February 18, 2016; the funding is currently being utilized for the construction, fit-up and equipping of office and research and development lab space in the 51,000-square-foot 6 ^th floor of the newly-constructed Conventus Building on the Buffalo Niagara Medical Campus. The office space was complete in late fall 2016; the research and development component is nearing completion. FSMC will own the facility improvements, as well as the furniture, fixtures, machinery and equipment it purchased; the Company is currently occupying the space under a long-term lease. Any moneys remaining from the $25 million headquarters will be invested in the Dunkirk manufacturing project. That amount is presently anticipated to be less than $1 million.

The current grant under the Agreement, in the amount of $200 million, is part of a special appropriation for Chautauqua and Erie County High Technology Manufacturing, New York State ("NYS"), and is for the construction of a ~~+/-~~ 315,000-square-foot state-of-the-art pharmaceutical manufacturing facility. Athenex will use this facility to manufacture sterile high potency oncology drugs in a specialized, controlled environment for shipment around the world. These drugs are some of the most important oncology drugs globally for patients suffering from cancer.

~~Athenex Capital (AB127)~~

~~April 17, 207~~

Under the Agreement, FSMC will retain ownership of the facility and the equipment purchased with grant moneys. Athenex is entitled to lease the facility and all equipment for an initial 10-year term, and Athenex may extend the lease for an additional 10-year term. Athenex is responsible for all operating costs and expenses for the facility. In exchange, pursuant to the Agreement, Athenex has committed to spending $1.52 billion on operational expenses in its first 10-year term in the facility, and an additional $1.5 billion on operational expenses if the term of the lease is extended for a second 10-year term. Athenex has also committed to hiring 450 employees within the first 5 years of Manufacturing Facility operation following Manufacturing Facility Completion.

The total NYS investment for both projects under the Agreement will not exceed $225 million, and the combined projects are expected to yield a $1.62 billion investment by Athenex over the ten years following completion of the projects.

~~Past ESP Support~~ ~~- Funding for the past five years to the Grantee (through FSMC), totaling $25 million, is summarized in the following chart.~~


~~Program~~	~~Project #~~	~~Amount~~	~~Date Start (ESD Directors'~~ ~~Approval date)~~	~~Date End~~ ~~(Project Completion: Contract Expiration)~~	~~Purpose~~
~~Buffalo Regional Innovative Cluster~~	~~AA725~~	~~$25,000,000~~	~~February 18, 2016~~	~~Ten years from Manufacturing Facility Completion~~	~~Capital - Athenex's Buffalo Headquarters~~

~~The Project:~~

~~Completion~~ ~~- Construction Completion: December 2019~~
~~Operational Facility: June 2021~~

~~Activity~~ - Under the terms of the Agreement, the Company will construct a +/- .315,000-square- foot state-of-the-art pharmaceutical manufacturing facility to include production support, engineering support, enhanced warehousing, local administrative offices, conference rooms and personnel welfare areas. The project also involves the purchase and installation of new machinery and equipment.

The land and improvements will be owned by Fort Schuyler Management Corporation or another entity as designated by BSD. Machinery and equipment purchased with funds provided by BSD will be owned by FSMC or another entity as designated by BSD. The land, improvements and machinery and equipment will be leased to the Company in accordance with the terms of the Agreement.

The Company paid for and acquired the 33.6-acre site in June 2016 and transferred ownership of the land to FSMC pursuant to an amendment to the Agreement. The land, improvements, and machinery and equipment, to the extent such M&E is purchased with grant funds, will be owned by FSMC, or another entity as designated by BSD, and will be leased to the Company in accordance with the Agreement.

~~Athenex Capital (AB127)~~

~~April 17, 207~~

~~Provided FSMC performs its obligations under the Agreement and following Manufacturing Facility Completion, the Company commits to invest and spend $1.52 billion in the Manufacturing~~ ~~Operation and an additional $1.5 billion over a subsequent ten (10) year period in the event the ten year term is renewed.~~

~~Results~~ - Under the Agreement, the Company will employ 450 permanent employees at the Project Location by the fifth year of Manufacturing Facility operation following Manufacturing . Facility Completion as those terms are defined, and as is further specified, in the Agreement. Of the 450 new permanent jobs, at least 300 jobs will be created over the first 2.5 years of the Manufacturing Facility operation following the Manufacturing Facility Completion.

In addition to the state-of-the-art production facility, the Company is also creating a new North American Headquarters on the Buffalo Niagara Medical Campus, further establishing the Western New York region as an important area for the Company and for the biopharmaceutical industry.

~~Upon completion of the project, the Grantee will furnish a final report describing the impact and effectiveness of the project.~~

~~Financing Uses~~	~~Amount~~	~~Financing Sources~~	~~Amount~~	~~Percent~~
~~Design/Build~~	~~$178,892,601~~	~~ESD Grant~~	~~$200,000,000~~	~~12%~~
~~Machinery & Equipment~~	~~29,250,000~~	~~Company Equity~~	~~1,528,142,601~~	~~88%~~
~~Facility/Operational Costs over ten (10) years~~	~~1,520,000,000~~
~~Total Project Costs~~	~~$1,728,142,601~~	~~Total Project~~ ~~Financing~~	~~$1,728,142,601~~	~~100%~~

~~Grantee Contact~~ -

~~Teresa Bair~~

~~VP Corporate Development & Legal Affairs~~

~~1001 Main Street, Suite 600~~

~~Buffalo, New York 14203~~

~~Phone: (716) 427-2868~~

~~Project Team~~ -

~~Origination~~

~~Project Management~~

~~Legal~~

~~Contractor & Supplier Diversity Design & Construction~~

~~Environmental~~

~~Christopher Schoepflin Jean Williams Stephen Gawlik Geraldine Ford Dennis Conroy~~

~~Soo Kang~~

~~Athenex Capital (AB127)~~

~~April 17, 207~~

~~Financial Terms and~~ ~~Conditions~~ :

~~The Company will comply with the Agreement.~~

Up to $200 million plus any additional funds available from the $25 million headquarters project, will be deposited incrementally into an account (the "Imprest Account") at a bank mutually acceptable to ESD (as set forth in writing by ESD) and the Grantee. Funds in the Imprest Account, from the time of deposit and until disbursed from such account in accordance with terms approved by the ESD Directors, will be invested in accordance with ESD's Investment Guidelines. Funds from the Imprest Account will be used in furtherance of the Agreement. ESD shall be provided with copies of all account statements and reports in accordance with the reporting requirement. Interest earned on the funds deposited in the Imprest Account must be returned to ESD quarterly.

Funds will be deposited in the Imprest Account as an advance upon ESD's receipt of an invoice and other documentation as ESD reasonably requires. The Grantee may, no more frequently than monthly, seek authorization to release funds from the Imprest Account to pay for invoices due and payable during the course of site and infrastructure development and facility construction, in compliance with ESD Design and Construction Requirements, assuming all project approvals have been completed and funds are available. Each subsequent disbursement request from the Imprest Account will include the current month's invoices and proof of payment for invoices submitted for the previous month. Payments will be made upon presentation to ESD of an invoice and such other documentation, including but not limited to standard industry AIA documentation and compliance with protocols adopted in ~~accordance~~ with recommendations by Guidepost Solutions as ESD may reasonably require. In no event shall ESD's or Guidepost Solutions' review unreasonably delay the progress of the project and/or timely payment of contractors.

~~All disbursements must be requested during the term of the Agreement.~~

The Grantee will report annually on Operational Costs and, within ten years of Manufacturing Facility Completion. The Grantee will document $1.52 Billion in operational and facility costs in accordance with the Agreement.

In partial consideration for the making of the Grant, and pursuant to the Agreement, the Grantee will employ 450 new permanent employees at the Project Location by the fifth year of Manufacturing Facility operation following Manufacturing Facility Completion as those terms are defined, and as is further specified, in the Agreement. Of the 450 new permanent jobs, at least 300 jobs will be created over the first 2.5 years of the Manufacturing Facility operation following the Manufacturing Facility Completion.

~~Athenex Capital (AB127)~~

~~April 17, 207~~

~~Grantee Investment Commitment: Provided FSMC performs its obligations under the~~ Agreement and following Manufacturing Facility Completion, the Company commits to invest and spend $1.52 billion in the Manufacturing Operation and an additional $1.5 billion over a subsequent ten (10) year period in the event the ten year term is renewed.

~~The Agreement may be subject to termination if job and investment commitments are not met by the Company.~~

ESD may reallocate the project funds to another form of assistance, at an amount no greater than $200 million for this project if ESD and Grantee jointly determine that the reallocation of the assistance would better serve the needs of the Grantee and the State of New York. In no event shall the total amount of any assistance to be so reallocated exceed the total amount of assistance approved by the Directors.

~~Statutory Basis - Chautauqua and Erie County High Technology Manufacturing:~~

The funding was authorized in the 2016-2017 New York State budget and reappropriated in the 2017-2018 New York State budget. No residential relocation is required as there are no families or individuals residing on the site.

~~Design~~ & ~~Construction:~~

ESD's Design & Construction ("D&C") staff will make periodic site visits, attend monthly requisition meetings, and review payment requisitions and recommend payment when its requirements have been met per the Grant Disbursement Agreement. Prior expenditures must be fully documented per D8iC requirements.

~~Environmental Review:~~

ESD, as lead agency, has completed an environmental review of the proposed project, pursuant to the requirements of the State Environmental Quality Review Act ("SEQRA") and the implementing regulations of the New York State Department of Environmental Conservation. This review, which was determined to be a Type I Action, found that the proposed project would not result in significant adverse impacts on the Environment.

~~Therefore, ESD staff recommends that the Directors make a Determination of No Significant Effect on the Environment.~~

~~Athenex Capital (AB127)~~

~~April 17, 207~~

~~Non-Discrimination and Contractor & Supplier Diversity:~~

~~ESD~~ ^’ ~~s Non-Discrimination and Contractor & Supplier Diversity policies will apply to this Project.~~

The Grantee shall be required to include minorities and women in any job opportunities created, to solicit and utilize Minority and Women Business Enterprise (MWBEs) for any contractual opportunities generated in connection with the Project and shall be required to use Good Faith Efforts (pursuant to 5 NYCRR §142.8) to achieve an overall MWBE Participation Goal of 30% related to the total value of ESD’s funding.

ESD's Service-Disabled Veteran-Owned Business ("SDVOB") policies will also apply to this Project. The Grantee shall be required to solicit and utilize SDVOBs in the fulfillment of the requirements of this contract. The Grantee must demonstrate the use of good faith efforts pursuant to 9 NYCRR §252.2 to achieve a goal of 3% for SDVOB participation.

~~Attachment:~~ ~~Resolution~~

EXHIBIT B: REPORTS – DESIGN & CONSTRUCTION REQUIREMENTS

See Attached Requirements

EMPIRE STATE DEVELOPMENT TABLE OF CONTENTS

•

Scheduled Payment Requirements

•

Tables of Approval Authority and Facsimile Signature

•

Contract Change Order

•

Schedule of Change Order

•

Summary – Request for Payment

•

Request for Payment

•

Monthly Project Status Cost Control Report

•

Cost Control Instructions

•

Contractor’s Affidavit

•

List of Subcontractors/Vendor Submitted with Request for Payment

•

Contractor’s Receipt and Waiver of Lien

•

Subcontractor’s Receipt and Waiver of Lien

•

Affidavit and Final Waiver of Claims and Liens and Release of Rights

•

Unconditional Waiver and Release

•

Consultant’s Code Certification Letter

•

Contractor’s Certification of Completed Construction

•

Consultant’s Certification of Completed Construction

•

Pile Driving Report

•

Survey Statement

•

Typical Job Sign

Requirements for Progress Payment Projects

The following design and construction submissions and review documents shall be supplied to ESD:

Design Phase

The Grantee shall furnish:

•

Project budget

•

Plans & specifications w/description of project scope

•

Design phase cost estimates (incl. quantities and unit prices)

•

Code and zoning analysis

•

Special agency approvals (health, transportation, utility, asbestos etc.)

•

Design/Construction Schedule

•

Proposed/selected architects/engineers copy of agreement

•

Project Status Cost Control – See Attachment

•

Table of Approval Authority – See Attachment

•

Consultants code certification letter – See Attachment

Construction Phase

The Grantee shall furnish the following:

At the start of construction:

•

Copy of the building permit

•

Asbestos Free Building Certificate for alterations and demolitions (copy submitted to municipality)

•

Copy of the plans with building department approval stamp

•

Construction and CM Agreements

•

Certificates of Insurance

•

Current construction schedule

•

Trade payment breakdown

Scheduled Payment Requirement (4/17)

During construction:

•

Progress schedules and updates

•

Minutes of project meetings

•

Building Department amendments and approvals

•

Proof of expenditures:

Payment Applications and Certificate of Payment

Invoices

Change orders

Partial lien waivers

•

Foundation survey (new construction only)

•

Architect’s bulletins

•

Access to all field inspection and test reports with architect's or engineer's approvals

•

Approved project Status Cost Control Report – (See Attachment)

•

Change Issue and Change Order Logs (if change orders are being funded by ESD)

•

Access to approved shop drawings

•

Payment and performance bonds

•

Labor and material bonds

•

Progress photos

•

Public Projects Protocol Checklist

At the completion of construction:

•

Final punch lists

•

Final Lien Waivers

•

Temporary Certificate of Occupancy (TCO)

•

Certificate of Occupancy (CO)

•

Contractor's Affidavit and Final Waiver of Claims and Liens and Release of Rights

•

Insurance underwriter’s approval/release of surety

•

Contractor's Certifications of Completed Construction ‑ See Attachment

•

Consultant's Certification of Completed Construction (for NYC Local Laws and other specific items of work where certifications are desired) ‑ See Attachment

Scheduled Payment Requirement (4/17)

Final survey

•

As built drawings (digital format acceptable)

•

Access to guarantees & warrantees, operations and maintenance manuals

•

Dedication of offsite infrastructure to local municipality

•

Applicable regulatory agency/authority approval

Inspections

•

ESD will inspect throughout the construction phase until final completion.

Provisions for ESD Field Representative

The Grantee/Developer/Contractor shall provide an appropriate space at the job site with a desk, telephone, computer with internet and project website access, plan table, file cabinet, heat and air conditioning satisfactory to ESD.

Scheduled Payment Requirement (4/17)

( Name of Project )

Table of Approval Authority and Facsimile Signature

(Owner)

Name/Title/Firm	Facsimile Signature	Initials	Documents Requiring Approval	Approval Auth ($ Limit)
(Examples)			(See (A) below for Examples)

Director
Design and Construction

Sr. Vice-President
Facilities Administration

Sr. Vice-President
Business and Finance

The above individuals have been delegated authority as stated, in accordance with a meeting of the Board of Directors on .



	Secretary

(A)	Examples of Documents Requiring Approval

(1)

Payment Requisitions

(2)

Change Orders

(3)

Owner Agreements

(4)

Contracts

Attachment E 1-4 06/16

(Name of Project)

Table of Approval Authority and Facsimile Signature

(Construction Management Firm)

Name/Title/Firm	Facsimile Signature	Initials	Documents Requiring Approval	Approval Auth ($ Limit)
(Examples)			(See (A) below for Examples)

Construction Manager

Project Manager

Controller

President

The above individuals have been delegated authority as stated, in accordance with a meeting of the Board of Directors on .



	Secretary

(A)	Examples of Documents Requiring Approval

(1)

Construction Payment Requisitions

(2)

Change Orders

(3)

Subcontracts

(4)

Owner Agreements

(4)

Contracts

Attachment E 1-4 06/16

(Name of Project)

Table of Approval Authority and Facsimile Signature

(Contractor)

Name/Title/Firm	Facsimile Signature	Initials	Documents Requiring Approval	Approval Auth ($ Limit)
(Examples)			(See (A) below for Examples)

Construction Superintendent

Controller

Vice President

President

The above individuals have been delegated authority as stated, in accordance with a meeting of the Board of Directors on .



	Secretary

(A)	Examples of Documents Requiring Approval

(1)

Construction Payment Requisitions

(2)

Change Orders

(3)

Purchase Orders

(4)

Owner Agreements

(5)

Contracts

Attachment E 1-4 06/16

(Name of Project)

Table of Approval Authority and Facsimile Signature

(Architect)

Name/Title/Firm	Facsimile Signature	Initials	Documents Requiring Approval	Approval Auth ($ Limit)
(Examples)			(See (A) below for Examples)

Partner-in-Charge

Principal

Controller

The above individuals have been delegated authority as stated, by agreement of the Partnership on .

(A)	Examples of Documents Requiring Approval

(1)

Construction Payment Requisitions

(2)

Change Orders

(3)

Architect Invoices

(4)

Architect/Consultant Contracts

Attachment E 1-4 06/16

Summary - Request for Payment

Project			Requisition No.

Name & Address of Contractor			Project No.

			Contract No.

Requisition Amount
Original Contract
Approved Change Orders
Extras
Credits
Net Change (Add-Deduct)
Adjusted Contract
Work Completed To Date
On Contract
By Change Order Extras
By Change Order Credits
Net Change (Add-Deduct)
Total Work Completed To Date
Amount Earned To Date
Less % Retainer
Amount Due To Date
Less Previous Payments
Contract
Other (Explain Below)
Payment Due This Estimate

Remarks:

The following items are included in this Request for Payment:

□	Summary - Request for Payment	□	Schedules of Change Order
□	Request for Payment	□	Contractor's Receipt and Waiver of Lien Subcontractors' Receipt and Waiver of
□	Contractor Affidavit	□	Lien (if Applicable)
□	List of Subcontractors

New York State Urban Development Corporation

d/b/a Empire State Development

Request for Payment

Project			Requisition No.

Name & Address of Contractor			Project No.

			Contract No.

In accordance with the provisions of the Construction Contract/Letter Agreement dated and Contractor's cost breakdown (schedule of values) attached thereto,

this requisition is submitted for the smount of $ due for work performed up to the day of and as itemized below by the trades listed in the cost breakdown.

Contractor (Signature)

Date

		Trade Item Total	Amounts Completed To Date		Amounts all Previous			%
	Trade Item	Amount	Material	Labor	Total	Requisitions	Amount This Requisition	Compl
1
2
3
4
5
6
7
8
9
10
11
	Total
	Less ( )% Retainer Line (32)
	Totals

Progress □ Satisfactory □ Unsatisfactory (If unsatisfactory, attach memo of explaination

Construction is % Completed.

I certify that I have checked and verified the above application for payment and that to the best of knowledge and belief: (1) It is true and correct statement of work



Architect	Date	Date

Approved:



ESD Construction Project Manager	Date	ESD Construction Cost Estimator	Date

105b-(6/16)			Date

MONTHLY PROJECT STATUS COST CONTROL REPORT

As of

(Project)

Total Project Cost:

Project Number:

Contract Completion Date:

Estimated Completion Date:

Actual Completion Date:

FULL COST REPORT SHALL HAVE ONE PAGE

FOR PROJECT TOTAL COST AND ADDITONAL PAGES

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

FOR EACH FUNDING SOURCE, INCLUDING ESDC.

(2+3)

(5+6)

INVOICED

PROJECTED COST

Description

Conctract/ Consultant

Budget (Date)

Original Contact/ Commitments*

Cumulative Approved C.O.'s/Amend

Revised Contract Commitments*

Prior Month Thru _________

This Month (Date)

Total To Date

Balance To Be Completed

Total Estimated Cost

(Over/Under) Budget

% Complete

(Sample Line Items Only - Use Additonal Sheet if Required)

● Design

A/E Fees

Reimb. & Extra Services

Other (List each item)

● Related Design & Construction

Cost

Borings & Soils

Environmental

Survey

Special Consultants (List)

Other (List)

● Testing & Inspection

Soils/Foundation

Other (List)

● SUBTOTAL SOFT COSTS

● Construction

General Contract

Other Items (List each item)

● SUBTOTAL Excluding Contingency

● Construction Contingency

● SUBTOTAL HARD COSTS

● Project Contingency

● TOTAL PROJECT COST

* Asterisk Commited Items not yet under formal contract

Prepared By:

Date:

Approved By:

Date:

Monthly Project Status Cost Control Report Instructions

ESDC requires that a Monthly Cost Control Report be submitted on all projects funded during construction. This also includes projects in the planning stage which will be funded during construction.

The Cost Report is a management tool for tracking latest costs for all line items against the Budget. On a monthly basis, it keeps the Developer and ESDC informed, and highlights construction cost status, potential problems and variances.

The attached sample Monthly Project Status Cost Control Report illustrates how costs should be listed and separated by line item, for soft costs/other items and construction.

Several items in the form should be highlighted:

Column 1 ‑ Budget ‑‑ This is the budget approved by the Developer and ESDC. Once approved, this column should not be changed.

Contingency

The Construction Contingency shown in "Budget" (Column 1) should not be changed. As the contingency is used up and allocated to various line items, the balance should be shown in the line item for Construction Contingency, under "Total Estimated Cost" (Column 9).

Column 2 ‑ "Original Contract/Commitments" ‑‑ List approved contracts; also, firm commitments not yet under contract should be listed, and marked with an asterisk.

Column 3 ‑ "Cumulative Approved Change Orders/Amendments" ‑‑ List only items approved by ESDC.

Column 4 ‑ "Revised Contract/Commitments" ‑‑ Self explanatory.

Column 5 ‑ "Invoiced Prior Months Thru" ‑‑ Self explanatory.

Column 6 ‑ Invoiced "This Month" ‑‑ Self explanatory.

Column 7 ‑ Invoiced "To Date" ‑‑ Self explanatory.

Column 8 ‑ "Balance to be Completed" ‑‑ Subtract "Revised Contract/Commitments" (Col 9) from Total Invoiced to Date (Col 7).

Column 9 ‑ "Total Estimated Cost" ‑‑ This is Projected Cost for the project ‑‑ Add "Invoiced To Date" (Col 7) and "Balance to be Completed" (Col 8).

Column 10 ‑ "(Over/Under) Budget" ‑‑ Subtract "Total Estimated Project Cost" (Col 9) from "Budget"

Attachment D-1 (6/16)

ESD Project No.:

New York State Urban Development Corporation

d/b/a Empire State Development

Design and Construction Department

CONTRACTOR’S AFFIDAVIT

STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

, being first duly sworn, deposes and says:

I, , am the of (the “Contractor”), a [corporation; limited liability company; limited partnership] organized and existing under the laws of the State of New York, having its principal offices at .

That the Contractor is the general contractor for (the “Project”) pursuant to a construction contract dated the day of , 20 (the Construction Agreement”) between the Contractor and (the “Owner”).

That the Contractor has received all payments due it under the Construction Agreement as of Requisition No. , dated the day of , 20 .

That the Contractor has to the date hereof performed all its obligations pursuant to the Construction Agreement and has paid to its subcontractors and vendors the amounts due to them for the work performed and the materials furnished by each of them in connection with the Construction Agreement, for amounts up to and including Requisition No. .

That annexed hereto as “Attachment 1” is a list of all subcontractors and vendors who have performed work and labor or furnished materials and equipment in connection with the Construction Agreement. If none, state “None.”

Contractor:
Name:		Title:

Sworn to before me this day of , 20 .

Notary Public

My commission expires:

Project			Requisition No.

Name & Address of Contractor			Project No.

			Contract No.

DC-105c (3/016)

LIST OF SUBCONTRACTORS/VENDOR SUBMITTED WITH REQUEST FOR PAYMENT

The following Subcontractors/Vendors are included for payment with this requisition:

Trade

Subcontractor or Vendor

Amount of Subcontract

Attachment A – 02/15

ESD Project No.:

ESD Requisition No.:

CONTRACTOR’S RECEIPT AND WAIVER OF LIEN

State of New York	)
	) ss.:
County of	)

(“Contractor”), in connection with the construction of a project of the New York State Urban Development Corporation d/b/a Empire State Development (“ESD”) known as (the “Project”) and the payment by (“Owner”) to Contractor of certain sums requisitioned by the Contractor pursuant to its Request for Payment No. dated , ,20, (the “Requisition”), DOES HEREBY CERTIFY AND ACKNOWLEDGE that it has received the cumulative amount of $ , representing all sums due and owing to it in accordance with its agreement with the Owner

dated , ,20 , other than sums, if any, withheld by the Owner in accordance with such agreement and approved by the Owner and ESD, for work performed or materials supplied for the Project to the date of , 20 , and DOES HEREBY FOREVER RELEASE AND WAIVE for itself, its successor and assigns any and all rights, claims and demands it has or may have against the Owner and ESD, including any and all rights which it has or may have pursuant to the New York Lien Law to file any lien or notice of lien against the Project or any property of the Owner on account of or deriving from labor performed or materials furnished for the Project to the date of the previously submitted requisition dated , 20 .

IN WITNESS WHEREOF, Contractor has caused this Receipt and Waiver to be duly executed and the seal of the Contractor to be affixed as of the date of the Requisition by the undersigned duly authorized officer.

Contractor:

Name: Title:

On the day of , 20 , before me, the subscriber personally appeared to me personally known, who being by me duly sworn, did depose and say that he/she resides at that he/she is of the entity described in and which executed the foregoing instrument.

Notary Public

My commission expires:

DC-105g (03/16)

ESD Project No.:

ESD Requisition No.:

SUBCONTRACTOR’S RECEIPT AND WAIVER OF LIEN

State of New York	)
	) ss.:
County of	)

(“Subcontractor”), in connection with the construction of a project of the New York State Urban Development Corporation d/b/a Empire State Development (“ESD”) known as , (the “Project”) and the payment to the Subcontractor by (the “Contractor”) of certain sums requisitioned by the Contractor pursuant to the Contractor’s Request for Payment No. dated , , 20 submitted to (“Owner”), (the “Requisition”), DOES HEREBY CERTIFY AND ACKNOWLEDGE that it has received the cumulative amount of $ , representing all sums due and owing to it in accordance with its agreement with the Contractor dated , 20 , other than sums, if any, withheld by the Contractor in accordance with such agreement and approved by the Owner and ESD, for work performed or materials supplied for the Project to the date of , 20 , and DOES HEREBY FOREVER RELEASE AND WAIVE for itself, its successor and assigns any and all rights, claims and demands it has or may have against the Owner and ESD, including any and all rights which it has or may have pursuant to the New York Lien Law to file any lien or notice of lien against the Project or any property of the Owner on account of or deriving from labor performed or materials furnished for the Project to the date of the previously submitted requisition dated , , 20 .

IN WITNESS WHEREOF, Subcontractor has caused this Receipt and Waiver to be duly executed and the seal of Subcontractor to be affixed as of the date of the Requisition by the undersigned duly authorized officer.

Contractor:
Name:		Title:

On this day of , 20 , before me the subscriber personally appeared to me, personally known, who being by me duly sworn, did depose and say that he/she resides at _________ ___________ that he/she is of the entity described in and which executed the foregoing instrument.

Notary Public

My commission expires:

DC-105i (03/16)

ESD Project No.

ESD Requisition No.

SUBCONTRACTOR’S AFFIDAVIT, FINAL WAIVER OF CLAIMS AND LIENS, AND RELEASE OF RIGHTS

STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

The undersigned, who is the of (the “Subcontractor”) which performed work under a subcontract with _ (“Contractor”) for Project # declares that its Subcontract with the Contractor is in the total amount of $ , which includes extras and all change orders to the date hereof.

In consideration of the amounts and sums previously received, and the last and final payment of $ being full and final payment of the amount due, the Subcontractor does hereby acknowledge that it has been paid in full for all work it performed on the Project and that it further hereby releases _______ (“Owner”) and the New York State Urban Development Corporation d/b/a Empire State Development (“ESD”) from any and all claims and liens, and further waives any and all rights to liens upon the premises described below (which may be more particularly described by an Exhibit “A” attached), and upon improvements now or hereafter made thereon, and upon the monies or other considerations due or to become due from the Owner or ESD or from any other person, firm or corporation, said claims and liens and rights to liens being on account of labor, services, materials, fixtures or apparatus furnished by or which may be furnished at any time hereafter by or at the request of the undersigned. The premises as to which said claims and liens and rights to liens are hereby released are identified as follows:

Project Name:

Address or Project:

City: County: State:

The undersigned further represents and warrants that he/she is duly authorized and empowered to sign and execute this wavier on his/her own behalf and on behalf of the Subcontractor for which he/she is signing; that Subcontractor has properly performed all work and furnished all the materials of the specified quality per plans and specifications and in a good and workmanlike manner, fully and completely; that Subcontractor has been paid in full for all work it performed on the Project; that Subcontractor has paid its subcontractors, vendors and suppliers for all the labor, materials, equipment and services that Subcontractor has used or been supplied or may hereafter use or be supplied to the above premises, and that Subcontractor has no outstanding and unpaid payment applications, invoices, retentions, holdbacks, chargebacks or unbilled work or materials, as of the date of the aforementioned last and final payment application of invoice; and that any materials which have been supplied or incorporated into the above premises were either taken from Subcontractor’s fully-paid or open stock or were fully paid for and supplied as stated on the statement accompanying the last and final payment application or invoice.

The undersigned further agrees to reimburse and does hold harmless and fully indemnify Owner, ESD and for any losses or expenses should any such claim, lien, or right to a lien be asserted (by the undersigned or by any laborer, materialman or subcontractor of the undersigned), including, without implied limitation, attorneys’ fees incurred in the defense thereof.

In addition, for and in consideration of the amounts and sums received, the Subcontractor hereby waives, releases and relinquishes any and all claims, rights or causes of action whatsoever the Subcontractor had, has or may have against the Owner and ESD arising out of or in the course of the work performed on the above-mentioned project, contract or event.

Contractor:
By:		Title:

On this day of , 20 , before me the subscriber personally appeared to me, personally known, who being by me duly sworn, did depose and say that he/she resides at that he/she is of the entity described in and which executed the foregoing instrument.

Notary Public

My Commission expires:

DC-105i (03/16)

ESD Project No.:

ESD Requisition No.

SUBCONTRACTOR’S AFFIDAVIT, CONTINGENT FINAL WAIVER OF CLAIMS AND LIENS, AND RELEASE OF RIGHTS

STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

In consideration of the amounts and sums previously received, and upon receipt and payment of the last and final payment of $ being full and final payment of the amount due, the Subcontractor does hereby acknowledge that it has been paid in full for all work it performed on the Project and that it further hereby releases _______ (“Owner”) and the New York State Urban Development Corporation d/b/a Empire State Development (“ESD”) from any and all claims and liens, and further waives any and all rights to liens upon the premises described below (which may be more particularly described by an Exhibit “A” attached), and upon improvements now or hereafter made thereon, and upon the monies or other considerations due or to become due from the Owner or ESD or from any other person, firm or corporation, said claims and liens and rights to liens being on account of labor, services, materials, fixtures or apparatus furnished by or which may be furnished at any time hereafter by or at the request of the undersigned. The premises as to which said claims and liens and rights to liens are hereby released are identified as follows:

Project Name:

Address or Project:

City: County: State:

Contractor:
By:		Title:

Notary Public

My Commission expires:

DC-105i (03/16)

ESD Project No.:

ESD Requisition No.:

CONTRACTOR’S AFFIDAVIT, FINAL WAIVER OF CLAIMS AND LIENS, AND RELEASE OF RIGHTS

STATE OF NEW YORK	)
	) ss.:
COUNTY OF	)

The undersigned, who is the of (the “Contractor”) which performed work under a contract with for Project # (the “Contract”) declares that its Contract with the Owner is in the total amount of $ , which includes extras and all change orders to the date hereof.

In consideration of the amounts and sums previously received, and the last and final payment of $ being full and final payment of the amount due, the Contractor does hereby acknowledge that it has been paid in full for all work it performed on the Project and that it further hereby releases the Owner and the New York State Urban Development Corporation d/b/a Empire State Development (“ESD”) from any and all claims and liens, and further waives any and all rights to liens upon the premises described below (which may be more particularly described by an Exhibit “A” attached), and upon improvements now or hereafter made thereon, and upon the monies or other considerations due or to become due from the Owner or ESD or from any other person, firm or public or private entity, said claims and liens and rights to liens being on account of labor, services, materials, fixtures or apparatus furnished by or which may be furnished at any time hereafter by or at the request of the undersigned. The premises as to which said claims and liens and rights to liens are hereby released are identified as follows:

Project Name:

Address or Project:

City: County: State:

The undersigned further represents and warrants that he/she is duly authorized and empowered to sign and execute this wavier on his/her own behalf and on behalf of the Contractor for which he/she is signing; that Contractor has properly performed all work and furnished all the materials of the specified quality per plans and specifications and in a good and workmanlike manner, fully and completely; that Contactor has been paid in full for all work it performed on the Project; that Contractor has paid its subcontractors, vendors and suppliers for all the labor, materials, equipment and services that Contractor has used or been supplied or may hereafter use or be supplied to the above premises, and that Contractor has no outstanding and unpaid payment applications, invoices, retentions, holdbacks, chargebacks or unbilled work or materials, as of the date of the aforementioned last and final payment application of invoice; and that any materials which have been supplied or incorporated into the above premises were either taken from Contractor’s fully-paid or open stock or were fully paid for and supplied.

In addition, for and in consideration of the amounts and sums received, the Contractor hereby waives, releases and relinquishes any and all claims, rights or causes of action whatsoever the Contractor had, has or may have against the Owner and ESD arising out of or in the course of the work performed on the above-mentioned project, contract or event.

Contractor
By:		Title:

Notary Public

My commission expires:

DC-105i (03/16)

ESD Project No.:

UNCONDITIONAL WAIVER AND RELEASE OF CLAIMS AND LIENS, AND RELEASE OF RIGHTS

State of New York	)
	) ss.:
County of	)

The undersigned (the " ") has been paid and has received full payment for all services furnished by and/or employees or others acting for or claiming by, through or under f rom to on the job of (Owner) in connection with the construction of a project of the New York State Urban Development Corporation d/b/a Empire State Development (“ESD”), known as (the “Project”) pursuant to a contract executed with dated , , 20 (the “Contract”).

represents and warrants that and all persons and entities acting for or claiming by, through or under have fully performed and furnished all services to have been performed or furnished by pursuant to its obligations under the Contract and that there is not now due or owing any amount of money or wages to any party or entity in connection with this Project or any part thereof. The does hereby release for itself and any party or entity claiming by, through or under , from any and all rights which it has or may have pursuant to the New York Lien Law to file any lien or notice of lien against the Project, mechanic's liens, stop notice, bond right or claim of any nature whatsoever that the undersigned has or may have with respect to the above referenced Project.

The further agrees to reimburse and does hold harmless and fully indemnify ESD, its successors and assigns for any losses or expenses should any such claim, lien, or right to a lien be asserted by the or by any person or entity acting for or claiming by, through or under the Architect, including, without implied limitation, attorney's fees incurred in the defense thereof.

In addition, for and in consideration of the amounts and sums received, the undersigned hereby waives, releases and relinquishes ESD from any and all claims, rights or causes of action whatsoever arising out of or in the course of the work performed on the above-mentioned Project.

Entity:
Name:		Title:

Notary Public

My Commission expires:

DC-105g (03/16)

CONSULTANT'S CODE CERTIFICATION LETTER

The following Certification Letter shall be included in the initial report submitted to ESDC for approval.

DATE

Empire State Development

633 Third Avenue

New York, NY 10017-6754

Attention:

(insert senior architect/construction manager or loans & grant project

manager assigned to project)

(insert title)

Design and Construction or Loans & Grant

Re:	Consultant’s Code Certification of Architect (Engineer)

(Insert Location and Name of Project)

Gentlemen:

The undersigned, a principal of the firm of , duly qualified and registered to practice architecture/engineering in the State of New York, in connection with the project, does hereby certify that final plans and specifications will be designed to conform with the (insert name of applicable building code) and applicable municipal regulations.

IN WITNESS WHEREOF, I have hereunto set my hand this day of , 20___.

SIGNATURE

ARCHITECT'S (OR ENGINEER'S) NAME SEAL

Attachment A – 02/15

CONTRACTOR'S CERTIFICATION OF COMPLETED CONSTRUCTION

The following Certification shall be submitted to ESD at completion of construction on Contractor's letterhead.

DATE

Empire State Development

633 Third Avenue

New York, NY 10017-6754

Attention:

(insert senior architect/construction manager or loan & grant project manager

assigned to project)

(insert title)

Design and Construction or Loans & Grant

Re:	Contractor’s Certification of Completed Construction

(Insert Location and Name of Project)

Gentlemen:

The undersigned, an officer of (firm name), in connection with the project, does hereby certify that construction of all work required by the construction agreement has been completed in accordance with final construction documents, the (insert name of applicable building code) and applicable municipal regulations.

IN WITNESS WHEREOF, I have hereunto set my hand this day of , 20___.

Notary Public

SIGNATURE

OFFICER'S NAME & TITLE

DC-105g (03/16)

CONSULTANT'S CERTIFICATION OF COMPLETED CONSTRUCTION

The following Certification shall be submitted to ESD at completion of construction on Consultant's letterhead.

DATE

Empire State Development

633 Third Avenue

New York, NY 10017-6754

Attention:

(insert senior architect/construction manager or loan & grant project manager

assigned to project)

(insert title)

Design and Construction or Loans & Grant

Re:	Consultant’s Certification of Completed Construction

(Insert Location and Name of Project)

Gentlemen:

The undersigned, a principal of the firm of

duly qualified and registered to practice architecture/engineering in the State of New York, in connection with the (insert location and name of project) project, does hereby certify that to the best of our knowledge construction of work required by the contract has been completed in accordance with the drawings approved by the (insert name of approving agency) and requirements of the (insert name of applicable building code) .

IN WITNESS WHEREOF, I have hereunto set my hand this day of , 20___.

SIGNATURE

ARCHITECT'S (OR ENGINEER'S) NAME SEAL

ESD CONSTRUCTION SIGN

The contractor shall supply and install one sign identifying the project at commencement of construction which shall remain in place until development is completed. The sign can be a minimum of 4 ft. X 8 ft., up to a maximum of 8 ft. X 16 ft., and constructed of 3/4 in. thick exterior grade plywood, secured or supported to comply with all applicable codes and good construction practice. Exact location will be determined by ESD according to local conditions. The sign shall be painted white, front and back, with three coats of exterior grade enamel. Refer to the ESD Construction Sign Template for additional information. The exact text and layout shall be provided by the ESD, Department of Design & Construction at the time of contract award.

GRAPHIC SPECIFICATIONS

Size: Minimum of 4 'high X 8' wide Maximum of 8 'high X 16' wide

Logo: The New York State/Empire State Development brand logo shall be teal and located in tight to the upper left corner

Font: Proxima, Proxima Bold

Substitute Font: Arial, Arial Bold

Bold font for project name, and principal official’s names

Colors:

Teal lettering on white background

Pantone ® –7474 C

CMYK – 96/9/32/29

RGB – 0/118/129

Hex – #007681

Dark gray lettering on white background

Pantone ® –7 C

CMYK – 9/10/9/81

RGB – 63/63/63

Hex – #3F3F3F

NAME RECOGNITION

The following principals should be included on any public signage publicizing Empire State Development construction and development projects:

▪ Andrew M. Cuomo, Governor

▪ Kathleen C. Hochul, Lieutenant Governor

▪ Howard A. Zemsky, ESD, President, CEO & Commissioner

▪ U.S. Senators Schumer and Gillibrand (list both or neither)

▪ U.S. Congressional delegation for the area the project is located in (list all or none)

▪ State Assembly Members and Senators who have funded the project

▪ Local Mayor, County Executive and/or Supervisor

▪ Construction Manager/Firm

▪ Architect

▪ All funders and investors

Name of Project (in Spanish as applicable)

Description of Project (in Spanish as applicable)

Andrew M. Cuomo , Governor

Kathleen C. Hochul , Lieutenant Governor

Howard A. Zemsky , ESD President, CEO & Commissioner

U.S. Senators Schumer and Gillibrand (list both or neither)

U.S. Congressional delegation for the area the project is located in (list all or none) State Assembly Members and Senators who have funded the project

Local Mayor, County Executive and/or Supervisor Construction Manager/Firm

Architect

All funders and investors

A Construction Management Plan (CWMP) shall be submitted to ESDC prior to the commencement of the project. Best efforts shall be made throughout the project to abide by the plan and achieve a ___% recycling rate (by weight) for construction and demolition waste on this project.

Using the template in Appendix A or your own planning document, provide the following information to form a CWMP:

Project Name, Contractor, Designated Construction/Demolition Plan Manager; Project Site Address, Estimated Construction Dates, Project Scope

Contractor commitment to reducing waste on this project to the extent practicable and establishment of a Reuse/Recycling Goal (by weight) for all materials generated by this project.

Projected Waste Materials – list (or check) the materials that will be generated by the project.

Reuse/Recycling Plan. List each material proposed to be reused or recycled during the course of the project. For each:

▪

Estimate the percentage of total project materials and tonnage

▪

Describe the means by which it will be handled at the site (sorted, stored, protected from contamination, etc.);

▪

Identify the hauler and proposed destination for the material

Monthly P rogress Reports shall be submitted to ESDC.

Using the template in Appendix B or your own, submit Monthly Progress Reports documenting the disposition (Recycled/Reused vs. Disposed) of all jobsite waste.

For each item pulled from the jobsite, provide:

Date removed

Amount in tons

Receiving party

Disposition (reuse, recycled, disposed). Appendix B contains two tables – one for materials destined for reuse/recycling , another for materials destined for disposal

Attach legible copies of on-site logs, weight tickets and/or receipts to verify . Receipts shall be from recycling and/or disposal site operators who can legally accept the materials for the purpose of reuse, recycling or disposal. If mixed construction and demolition waste is sorted off-site, provide documentation from the processor stating the average percentage of mixed C&D waste they are recycling. The documentation shall be in conformance with the latest annual recycling report to the NYS Department of Environmental Conservation pursuant to 6NYCRR Part 360 regulations, or a letter containing the same information if the report is not available.

A Final Report shall be submitted to ESDC summarizing the quantity and type of material reused, recycled and disposed of from this project and attesting that the reuse/recycling goal was / was not achieved. (see Appendix C ).

Appendix A

Construction Waste Management Plan

1.	Project Name:

Contractor:

Designated Construction/Demolition Waste Management Plan Manager :

Project Site Address :

Estimated Construction Dates:

Project Scope (indicate general work to be done, type of structure, building size, space constraints, etc.):

2.	Waste Reduction Efforts: ________________ (contractor) and all subcontractors will also employ sustainable materials management practices on this project to the extent practicable.

•

Job site workers will be asked to take note of what they are throwing away and encouraged to suggest ways to minimize or eliminate waste.

•

____________ (contractor) will, to the extent practicable, work with suppliers to provide materials to the site in minimal, reusable and recyclable packaging.

Reuse/Recycling Goal : Throughout the above-described project, ___________ (contractor) will make a good faith effort to reuse/ recycle ___% (by weight) of the waste generated by this project.

3.	Projected Waste Materials (check all materials anticipated to be generated by this project):

☐	Asphalt	☐	Glass	☐	Roofing – asphalt shingles
☐	Brick	☐	Gypsum drywall	☐	Vinyl
☐	Cans and bottles	☐	Insulation	☐	Wood – dimensional lumber
☐	Carpet	☐	Land clearing debris	☐	Wood - pallets
☐	Carpet pad	☐	Metal wire, pipe, cutoffs, etc	☐	Wood – plywood, OSB, particleboard,
☐	Ceiling tile	☐	Metal – structural		other engineered lumber
☐	Concrete	☐	Paper and Cardboard	☐	Wood – treated, varnished, painted
☐	Electronic equipment	☐	Plastic - stretch wrap, paint
☐	Flooring		buckets, bags, polystyrene, pipe
☐	Furniture	☐	Reusable items (list):
☐	Other (specify):

Reuse/ Recycling Plan. In the space below list the materials from above that are targeted for reuse or recycling. Select materials that will be generated in the largest quantities and, based on the availability of reuse or recycling services and feedback from subcontractors and your waste hauler, are estimated to have the highest reuse/recycling potential. For each material:

•

Provide estimated percentage of total project materials and estimated tonnage

•

Describe how the material will be handled at the jobsite (including procedures to sort, separate and keep it free from contaminants, etc.)

•

Indicate who will remove it from the site and where it is destined to be recycled or reused. See example.


Material	Estimated % of total project materials / Estimated tons	Handling at Job Site	Hauler, Destination
Example: Corrugated Cardboard	10% / 2 tons	Separated, flattened and placed in designated containers. No pizza boxes, paper plates, paper towels, etc. No material that is more than 50% covered with mud, paint or other contaminants	_______ (hauler) will pick up the containers and deliver them to ________ (recycler ).”

Name / Title

Appendix B

Construction Waste Management

Monthly Progress Report

Project Name:

Contractor:

Designated Construction/Demolition Waste Management Plan Manager :

Project Site Address :

Period covered by this report: _____________________ to _________________________

Materials Recycled / Reused:
Date	Material	Hauler / Destination	Quantity (tons)





TOTAL

Materials to Disposal:
Date	Material	Hauler / Destination	Quantity (tons)




TOTAL

Documentation per ESDC requirements to verify the above information is attached.

Percent of materials removed from site that were reused/recycled this period: ______%

Appendix C

Construction Waste Management

FINAL Report

Project Name:

Contractor:

Designated Construction/Demolition Waste Management Plan Manager :

Project Site Address :

Project Completion Date: _____________________

Based on monthly progress reports, the total amounts of materials recycled, reused and disposed from this project is:

Materials Recycled / Reused:


Material	Tons (add tonnage from monthly reports)



TOTAL

Materials to Disposal:


Material	Tons (add tonnage from monthly reports)



TOTAL

•

TOTAL TONS FROM JOBSITE:______ TOTAL TONS RECYCLED/REUSED:______ PERCENT RECYCLED/REUSED: _____

•

___________________ [CONTRACTOR)] DID / DID NOT ACHIEVE A GOAL OF ____% REUSE/RECYCLING ON THIS PROJECT

Name / Title

CONSTRUCTION FORMS REVIEW PROTOCOL

Project
ESD Project Number
Requisition/Gurf #
Construction Mgr

ESD		Guidepost	Description	Received?	Reviewed?	Comments
Reqmt #	Form #	Protocol #
			Section 1 - Design Phase
			Project Plan and Proposed Budget Narrative
			Schematic Plans & Outline Specification (CSI form)
			Design Development Cost estimates (incl. applicable unit prices/quantities)
			Code / Zoning/ SEQR Analysis /Agency Approvals
			Proposed D+C Funding Draw Schedule for project by month
			Standard form of Agreement between Owner, Architect & Const.Manager (e.g. AIA B-Series)
			Section 2 -Start of Construction
			Building Permit Copy
			Asbestos Free Building Certificate
			Plans and Specs Signed and Sealed
			General Conditions of the contract for construction (AIA A201)
			Agreement Between Owner and Contractor, where basis is Cost +Fee with GMP AIA A-Series)
22			Construction & Demolition Waste Management Plan (Optional)
	ACORD		Certificates of Insurance - For Workers Comp and Disability Non-ACORD)
			Current Milestone construction schedule
			Trade Payment Breakdown

			Section 3 - During Construction
07	105-A	1	Summary Request For Payment Breakdown
			a) Period reviewed
			b) Net changes
			c) Adjustments to contract
			d) Work completed to date
			e) Less retainer
			f) Amount due to date
			g) Less previous payments
			h) Total payment due
07	105-B		Request For Payment Breakdown
08	D,D-1	6	Monthly Project Status Cost Control Report (CCR)
			a) Review monthly subcontractor invoice amounts (G702/703)
			a(i) Recommendations/ clarifications warranted? (RFI)
			b) Budget, budget change orders and revised budget
			c) Invoice amounts for prior reimbursements, this month’s reimbursement and total to date.
			d) Projected cost amounts
			e) Over/under budget amounts
			f) % completed
	G703/G704	2	Application & Certification for Payment Including Continuation Sheets
			a) Check all amounts
			b) Current payment due
			c) Signed and Notarized dated certification by construction manager
		8	Invoices
			a) Review of all subcontractor invoices for amounts
10	105-C	3	Contractors Affidavit
			a) Signed and notarized and signed dated by officer

12	105-G	4	Contractor's Receipt and Waiver of Lien
			a) Signed and Notarized dated by contractor
11	105-D		List of Subcontractors
13	105-H	4	Subcontractors Receipt and Waiver of Lien
			a) Signed and Notarized dated by subcontractor
		5	Affidavit That All Taxes Are Paid
			a) Signed and notarized dated by an officer
16	C		Arch/Eng Consultants Code Certification
			Archaeological site report
20			Survey Statement
			Foundation Survey
19			Pile Driving Report (if Applicable)
			Progress schedules and updates
			Minutes of Project Meetings
			Architect's Bulletins
			Building Dept. Amendments
			Building Dept. Approvals
05	105-E		Schedule of Change Orders
04	106-C		Change Order Impact
	106-C		Justification For Change
			Approved Change Orders
			Labor & Performance Bonds
			Payment & Performance Bonds
			Section 4- At Completion of Construction
			Transmittal Letter of As-Builts, Proj.Manuals and Warranties
			Temporary Certificate of Occupancy (TCO)
			Original Building Permit issued
			Certificate of Occupancy (CO)/or Cert. of Completion
			Controlled Inspection and Test Reports with A/E approvals

14	105-I		ESD Affidavit & Final Release and Waiver of Liens
15	B-2,3,4,5		Unconditional Waiver & Release A/E/CM (if Applicable)
			Release of Surety (AIA 706/706A)
17,18	B,C		Contractor's/Consultant's Cert. of Completed Construction
			NY Board of Fire Underwriters/or AHJ Approval (except in NYC)

			Section 5- All Phases
		12	GPS Certification and Authorization to do business in NYS
			a) Prior to any disbursement to requisitioning entity, ensure the Certification regarding, bribery, collusive bidding and fair pricing has been executed by the requisitioning entity.
			b) Prior to any disbursement ensure that requisitioning entity is authorized to do business in NYS,
THIS CONSTRUCTION FORMS REVIEW PROTOCOL WAS REVIEWED BY THE SIGNATORY BELOW, WHO CERTIFIES THAT IT IS ACCURATE AND BASED ON THE ATTACHED DOCUMENTATION
Grantee:
Signature:				Date:

Name:				Title:

	ESD Reviewed:
Signature:				Date:

Name:				Title:

CONTINUATION SHEET

AIA DOCUMENT G703

PAGE OF PAGES

AIA Document G702, APPLICATION AND CERTIFICATION FOR PAYMENT, containing

APPLICATION NO:

Contractor's signed certification is attached.

APPLICATION DATE:

In tabulations below, amounts are stated to the nearest dollar.

PERIOD TO:

Use Column I on Contracts where variable retainage for line items may apply.

ARCHITECT'S PROJECT NO:

ITEM

DESCRIPTION OF WORK

SCHEDULED

ADDS/DEDUCTS

REVISED

WORK COMPLETED

TOTAL

BALANCE

RETAINAGE

NET BILLING

NO.

VALUE

SCHEDULED

FROM PREVIOUS

THIS PERIOD

MATERIALS

COMPLETED

COMPLETE

TO FINISH

RETAINAGE

THIS PERIOD

(ORIGINAL GMP)

VALUE

APPLICATION

PRESENTLY

AND STORED

(I ÷ E)

(E - I)

THIS PERIOD

RELEASED

(E + G)

STORED

TO DATE

APPLICATION

THIS PERIOD

(NOT IN - F OR G)

(F+G+H)

GRAND TOTALS

0.00

Users may obtain validation of this document by requesting of the license a completed AIA Document D401 - Certification of Document's Authenticity

EXHIBIT C: EMPLOYMENT and INVESTMENT GOALS AND RECAPTURE TERMS

Athenex Capital Project #AB127

Provided ESD and FSMC perform their obligations under this Agreement and the Alliance Agreement, the Grantee will employ 450 new Full-time Permanent Employee at the Project Location by the fifth year of Manufacturing Facility operation following Manufacturing Facility Completion as those terms are defined, and as is further specified, in the Agreement for Medical Technology, Research, Development, Innovation and Commercialization Alliance between Fort Schuyler Management Corporation (“FSMC”) and Kinex Pharmaceuticals, Inc., the prior name of Grantee dated May 1, 2015 (hereinafter the “ Alliance Agreement”). Of the 450 new Full-time Permanent Employee, at least 300 jobs will be created over the first 2.5 years of the Manufacturing Facility operation following the Manufacturing Facility Completion.

In addition, provided ESD and FSMC perform their obligations under this Agreement and the Alliance Agreement, Grantee commits to invest and spend $1.52 billion in the Manufacturing Operation during the ten year term of the lease as those terms are defined and further specified in the Alliance Agreement and an additional $1.5 billion over a subsequent ten (10) year period in the event the ten year lease term is renewed.

Grant Funds may be subject to recapture by ESD in the event of default by Grantee of the Alliance Agreement in accordance with terms of the Alliance Agreement.

EXHIBIT D: OPINION OF COUNSEL

[Letterhead of Counsel to the Grantee]

[Date]

Empire State Development

95 Perry Street, Suite 500

Buffalo, NY 14203

Attn:

Ms. Jean Williams, Senior Project Manager

Re:	Athenex Capital, Project #AB127

Ladies and Gentlemen:

We have acted as special counsel to Athenex, Inc., a corporation (the “Grantee”), in connection with the execution and delivery of the Grant Disbursement Agreement dated [Date of Agreement] (the “Agreement”) between New York State Urban Development Corporation d/b/a Empire State Development (“ESD”) and the Grantee.

This opinion letter is being furnished to you at our client’s request pursuant to Section 3(a) of the Agreement. Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Agreement.

In rendering the opinions set forth herein, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate for the purposes of this opinion letter, including (a) the Agreement, (b) the certificate of incorporation of the Grantee and (c) the by-laws of the Grantee. We have also examined and relied upon such other matters of law, documents, certificates of public officials and representations of officers and other representatives of the Grantee as we have deemed relevant, appropriate or necessary to the rendering of our opinions.

In rendering the opinions expressed below, we have assumed the legal capacity of all natural persons signing documents and that the signatures of persons signing all documents in connection with which this opinion letter is rendered are genuine, all documents submitted to us as originals or duplicate originals are authentic and all documents submitted to us as copies, whether certified or not, conform to authentic original documents. Additionally, we have assumed and relied upon the accuracy and completeness of all certificates and other statements, documents, records, financial statements and papers reviewed by us, and the accuracy and completeness of all representations, warranties, confirmations, schedules and exhibits contained in the Agreement, with respect to the factual matters set forth therein.

As to any facts material to the opinions expressed herein that we did not independently establish or verify, we have relied upon written statements and representations of officers and other representatives of the Grantee and of certain public officials. We have also assumed and relied upon the accuracy and completeness of all certificates and other statements, representations, documents, records, financial statements and papers reviewed by us, and the

accuracy and completeness of all representations, warranties and exhibits contained in the Agreement with respect to the factual matters set forth therein.

Based upon the foregoing and subject to the assumptions, qualifications and other matters set forth herein, we are of the opinion that:

The Grantee is validly existing and in good standing under the laws of the State of New York and has full power and authority to execute and deliver the Agreement and to perform its obligations thereunder.

The Agreement has been duly authorized, executed and delivered by the Grantee and (assuming its due authorization, execution and delivery by ESD) is binding on and enforceable against the Grantee in accordance with its terms, subject to applicable bankruptcy, insolvency reorganization, arrangement, liquidation, moratorium, fraudulent conveyance or transfer and other similar laws relating to or affecting creditors’ rights generally from time to time in effect and to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), and except as rights under the Agreement to indemnity and contribution may be limited by federal or state laws.

We are admitted to practice in the State of New York and we express no opinion as to any matters governed by any laws other than the laws of the State of New York. The opinions expressed herein that are based on the laws of the State of New York are limited to the laws generally applicable in transactions of the type covered by the Agreement.

This opinion letter is for the benefit solely of ESD and not for the benefit of any other person. We are opining herein only as of the date hereof and we undertake no, and disclaim any, obligation to advise you of any changes in any matter set forth herein, regardless of whether changes in such matters come to our attention after the date hereof. No attorney-client relationship exists or has existed with ESD by reason of our preparation, execution and delivery of this opinion letter. By providing this opinion letter and permitting reliance hereon by you, we are not acting as your counsel and have not assumed any responsibility to advise you with respect to the adequacy of this opinion letter for your purposes. This opinion letter may not be relied upon by any other person or for any other purpose or used, quoted or otherwise referred to for any other purpose.

Very truly yours,

EXHIBIT E: DISBURSEMENT TERMS

Disbursement

Upon compliance with the terms of this Agreement, and receipt of the fees as set forth below, ESD shall disburse the Grant to the Grantee as follows:

Fees due: Reimbursement for out-of-pocket expenses : $494.84

Up to $200,000,000 plus any additional funds available from the $25 million headquarters project (ESD Project No. AA725), will be deposited incrementally, as set forth below, into an ESD held account (the “Imprest Account”). Funds in the Imprest Account, from the time of deposit and until disbursed from such account in accordance with terms to be approved by the ESD Directors, will be invested in accordance with ESD’s Investment Guidelines. Funds from the Imprest Account will be used for facility design and construction costs and machinery and equipment (“Project Costs”). Interest earned on the funds deposited in the Imprest Account shall be returned to ESD on a quarterly basis.

I.	Initial Advance

An Initial Advance of $50,000,000 will be deposited as an advance in the Imprest Account upon ESD’s receipt of an invoice and other documentation as ESD requires. The Grantee may, no more frequently than monthly unless otherwise approved by ESD, seek authorization to release funds from the Imprest Account to pay for design/construction invoices due and payable as Project Costs in compliance with ESD Design and Construction Requirements, assuming all project approvals have been completed and funds are available. Grantee may seek additional authorizations to release funds from the Imprest Account as needed to pay for Machinery and Equipment costs as Project Costs, assuming all project approvals have been completed and funds are available. Each subsequent disbursement request from the Imprest Account will include the current month’s invoices and proof of payment for invoices submitted for the previous month. Expenditures must be incurred on or after September 23, 2014 to be considered eligible project costs and ESD funds may only be used to pay and/or reimburse eligible project costs incurred on or after April 17, 2017.

II.	Second Advance

A Second Advance of $50,000,000 will be deposited as an additional advance in the Imprest Account upon full documentation of eligible expenditures of at least 75% of the Initial Disbursement ($37,500,000). The Grantee may, no more frequently than monthly unless otherwise approved by ESD, seek authorization to release funds from the Imprest Account to pay for design/construction invoices due and payable as Project Costs in compliance with ESD Design and Construction Requirements, assuming all project approvals have been completed and funds are available. Grantee may seek additional authorizations to release funds from the Imprest Account as needed to pay for Machinery and Equipment costs as Project Costs, assuming all project approvals have been completed and funds are available. Each subsequent payment requisition will include the current month’s invoices and proof of payment for invoices submitted for the previous month.

EXHIBIT E: DISBURSEMENT TERMS, continued

Expenditures must be incurred on or after September 23, 2014 to be considered eligible project costs and ESD funds may only be used to pay and/or reimburse eligible project costs incurred on or after April 17, 2017.

III.	Third Advance

A Third Advance of $50,000,000 will be deposited as an additional advance in the Imprest Account upon full documentation of eligible expenditures of at least 100% of the Initial Disbursement and 75% of the Second Disbursement ($87,500,000 cumulative). The Grantee may, no more frequently than monthly unless otherwise approved by ESD, seek authorization to release funds from the Imprest Account to pay for design/construction invoices due and payable as Project Costs in compliance with ESD Design and Construction Requirements, assuming all project approvals have been completed and funds are available. Grantee may seek additional authorizations to release funds from the Imprest Account as needed to pay for Machinery and Equipment costs as Project Costs, assuming all project approvals have been completed and funds are available. Each subsequent payment requisition will include the current month’s invoices and proof of payment for invoices submitted for the previous month. Expenditures must be incurred on or after September 23, 2014 to be considered eligible project costs and ESD funds may only be used to pay and/or reimburse eligible project costs incurred on or after April 17, 2017.

IV.	Final Advance

A Final Advance of $50,000,000 plus any additional funds available from the $25 million headquarters project will be deposited as an additional advance in the Imprest Account upon full documentation of eligible expenditures of at least 100% of the Initial and Second Disbursement and 75% of the Third Disbursement ($137,500,000 cumulative). The Grantee may, no more frequently than monthly unless otherwise approved by ESD, seek authorization to release funds from the Imprest Account to pay for invoices due and payable for Project Costs in compliance with ESD Design and Construction Requirements, assuming all project approvals have been completed and funds are available. Each subsequent payment requisition will include the current month’s invoices and proof of payment for invoices submitted for the previous month. Expenditures must be incurred on or after September 23, 2014 to be considered eligible project costs and ESD funds may only be used to pay and/or reimburse eligible project costs incurred on or after April 17, 2017.

Payments will be made upon presentation to ESD of an invoice and such other documentation, as ESD may require.

The Grantee will report annually on Operational Costs and, within ten years of Manufacturing Facility Completion provide a detailed report describing the impact and effectiveness of the project containing such information and in a format as reasonably required by ESD. The Grantee will document $1.52 Billion in operational and facility costs in accordance with the Alliance Agreement.

EXHIBIT E: DISBURSEMENT TERMS, continued

Expenditure investment goals as required in Exhibit C must be incurred on or after September 23, 2014 to be considered eligible project costs.

Within 12 months of the Final Advance, ESD will require full documentation of eligible expenditures including invoices and proof of payment of 100% of the Initial Disbursement, Second Disbursement, Third Disbursement and Final Disbursement ($200,000,000 cumulative).

ESD reserves the right to require additional documentation to support payment requisitions and/or draw down requests.

Grantee must submit all documentation for the final disbursement of the Grant by no later than April 1, 2022 or such other date as agreed to by the parties in writing.

Wire Transfer Information:

If ESD assistance is $10,000 or greater, please provide a Letter from a financial officer of the Grantee certifying to the accuracy of the following information:

Bank Name:

ABA #:

Account Name:

Account #:

EXHIBIT F: CAPITAL GRANT PAYMENT REQUISITION FORM

Athenex Capital, Project #AB127

Disbursement Request Amount:

50,000,000

ESD funds may be applied by Grantee in payment or reimbursement of the following costs:

Minimum Expense Incurred (per Exhibit E)		See Exhibit E
Employment Goals (per Exhibit E)	Eligible Expenses	A: Actual Costs Incurred (this request)	B: ESD Share (this request)	C: Cumulative Amount Previously Received from ESD	D: Grant Amount (Cumulative if multi- year grant)		E: (D-C-B) Grant Balance Remaining
N/A	Design/Build, Machinery & Equipment	Advance	50,000,000	0	$	50,000,000	0
N/A	Design/Build, Machinery & Equipment	N/A	0	0		50,000,000	50,000,000
N/A	Design/Build, Machinery & Equipment	N/A	0	0		50,000,000	50,000,000
N/A	Design/Build, Machinery & Equipment	N/A	0	0		50,000,000	50,000,000
	TOTAL	N/A	50,000,000	0	$	200,000,000	150,000,000

CERTIFICATION

I hereby warrant and represent to Empire State Development (“ESD”) that:

To the best of my knowledge, information and belief, the expenditures for which Athenex, Inc. is seeking payment and/or reimbursement comply with the requirements of the Agreement between ESD andAthenex, Inc., are eligible expenses, and that the payment and/or reimbursement of expenditures for which it is seeking payment and/or reimbursement from ESD does not duplicate reimbursement or disbursement of costs and/or expenses from any other source. These findings will be subject to audit by ESD’s Internal Audit Department.

I have the authority to submit this invoice on behalf of Athenex, Inc. The project, or portion thereof for which this invoice relates, has been completed in the manner outlined in the Agreement.

I hereby attach the following documents for ESD approval, in support of this requisition (note N/A if not applicable for this request):


N/A	Exhibit B:	Design & Construction Requirements
N/A	Exhibit G-2:	Staffing Plan
N/A	Exhibit G-3:	Workforce Employment Utilization Report
N/A	Exhibit G-4:	M/WBE Utilization Plan
N/A	Exhibit G-5:	Waiver Request Form
N/A	Exhibit G-6:	M/WBE Contractor Compliance and Payment Report
N/A	Exhibit H:	Report of Employment & NYS-45 form including cover page and NYS-45-ATT attachment (with social security numbers blocked out and location indicated as necessary) or equivalent documentation of employees, location, status, and payroll information.
_ X _	A copy of all current policies of insurance (or certificates thereof) in full compliance with the terms and conditions of Section 12 of the Agreement

EXHIBIT F: CAPITAL GRANT PAYMENT REQUISITION FORM, continued

There have been no materially adverse changes in the financial condition of the Grantee, except as disclosed in writing to ESD, from the date of submission of the Application to the date hereof.

The Grantee has acted responsibly from the date of submission of the Application to the date hereof in full compliance with the terms and conditions of Section 7 of the Agreement.

Representations, Warranties and Covenants made in Section 8 of the Agreement are still true, complete and accurate, unless waived in Exhibit I of the Agreement.

Signature:	/s/ Richard P. Nassar	Print Name:	Richard P. Nasar

Title:	Vice President of Operations	Date:	8/31/17

At any point in the course of your project, ESD would appreciate feedback regarding this ESD program. Please comment on the application, project approval, and/or payment reimbursement process or any other interactions with ESD related to the project. You may submit your feedback under separate cover to Edwin Lee, VP – Loans and Grants, 633 Third Avenue, NY, NY 10017. Please include your Project Number and Project Name which are listed at the top of this exhibit on your submission.

Thank you.

EXHIBIT F-1: Grant Utilization Request Form

Withdrawal of Funds from Imprest Account

Athenex Capital, #AB127 (attn: Jean Williams)

ESD funds may be applied by Grantee in payment or reimbursement of the following costs for the above-referenced project; Submit current invoices due and payable.

Request #

Vendor:

Amount:

SUMMARY OF INVOICES DUE AND PAYABLE: [An Excel spreadsheet needs to be used and attached to this form]

Item #	Amount	Invoice Date	Vendor	Description	Payment Date
		[SEE ATTACHED SPREADSHEET PROVIDED BY GRANTEE]
TOTAL

PROGRAM FUNDING STATUS


1	Total Grant Amount	$200,000,000
2	Total Grant Funds Utilized/Disbursed to Date (including this request)
3	Balance of Grant Funds to be Requested (Line 1 minus Line 2)

CERTIFICATION

I hereby warrant and represent to Empire State Development ("ESD") that:

To the best of my knowledge, information and belief, the expenditures for which Athenex Inc. is seeking authorization comply with the requirements of the Agreement between ESD Athenex Inc. are Eligible Expenses, and that the payment, reimbursement, and/or approval of expenditures for which Grantee is seeking payment, reimbursement, or approval from ESD does not duplicate reimbursement or disbursement of costs and/or expenses from any other source.

2)	I have the authority to submit this request on behalf of Athenex Inc. The required information has been submitted to ESD in the manner outlined in the Agreement.

3)	Grantee is current on all reporting required by ESD, if applicable. If Grantee is not current on reporting, this request will not be considered.

4)	There have been no materially adverse changes in the financial condition of the Grantee, except as disclosed in writing to ESD, from the date of submission of the Application to the date hereof.

5)	The Grantee has acted responsibly from the date of submission of the Application to the date hereof in full compliance with the terms and conditions of Section 7 of the Agreement.

6)	Representations, Warranties and Covenants made in Section 8 of the Agreement are still true, complete and accurate, unless waived in Exhibit I of the Agreement.

Signature:				Date:

Print Name:				Title:

EXHIBIT F-2: FINANCIAL CONDITION DOCUMENTATION

Intentionally Deleted

EXHIBIT F-3: DOCUMENTATION OF PROJECT COSTS

Intentionally Deleted

EXHIBIT F-4: EQUITY EXPENDITURES AND PROJECT COST AFFIDAVIT

Intentionally Deleted

EXHIBIT G: PARTICIPATION BY MINORITY GROUP MEMBERS AND WOMEN WITH RESPECT TO STATE CONTRACTS: REQUIREMENTS AND PROCEDURES

I.	General Provisions

Empire State Development (ESD) is required to implement the provisions of New York State Executive Law Article 15-A and 5 NYCRR Parts 142-144 (“MWBE Regulations”) for all State contracts as defined therein, with a value (1) in excess of $25,000 for labor, services, equipment, materials, or any combination of the foregoing or (2) in excess of $100,000 for real property renovations and construction.

The Recipient of the subject Grant Disbursement Agreement (the “Recipient” and the “Contract,” respectively) agrees, in addition to any other nondiscrimination provision of the Contract and at no additional cost to ESD, to fully comply and cooperate with the ESD in the implementation of New York State Executive Law Article 15-A. These requirements include equal employment opportunities for minority group members and women (“EEO”) and contracting opportunities for certified minority and women-owned business enterprises (“MWBEs”). Recipient’s demonstration of “good faith efforts” pursuant to 5 NYCRR §142.8 shall be a part of these requirements. These provisions shall be deemed supplementary to, and not in lieu of, the nondiscrimination provisions required by New York State Executive Law Article 15 (the “Human Rights Law”) or other applicable federal, state or local laws.

Failure to comply with all of the requirements herein may result in a finding of non-responsiveness, non-responsibility and/or a breach of contract, leading to the withholding of funds or such other actions, liquidated damages pursuant to Section VII of this Appendix or enforcement proceedings as allowed by the Contract.

II.	Contract Goals

For purposes of this Contract, the ESD hereby establishes an overall goal of 30% for Minority and Women-Owned Business Enterprises (“MWBE”) participation (based on the current availability of qualified MBEs and WBEs).

For purposes of this grant, ESD conducted a comprehensive search and determined that the Contract does not offer sufficient opportunities to set specific goals for participation by Service-Disabled Veteran-Owned Business Enterprises (“SDVOBs”) as subcontractors, service providers, and suppliers to Contractor. Nevertheless, Bidder/Contractor is encouraged to make good faith efforts to promote and assist in the participation of SDVOBs on the Contract for the provision of services and materials. The directory of New York State Certified SDVOBs can be viewed at: http://ogs.ny.gov/Core/SDVOBA.asp

For purposes of providing meaningful participation by MWBEs on the Contract and achieving the Contract Goals established in Section II-A hereof, Recipient should reference the directory of New York State Certified MWBEs found at the following internet address: http://www.esd.ny.gov/mwbe.html

EXHIBIT G: PARTICIPATION BY MINORITY GROUP MEMBERS AND WOMEN WITH RESPECT TO STATE CONTRACTS: REQUIREMENTS AND PROCEDURES

Additionally, Recipient is encouraged to contact the Division of Minority and Woman Business Development ((518) 292-5250; (212) 803-2414; or (716) 846-8200) to discuss additional methods of maximizing participation by MWBEs on the Contract.

Where MWBE goals have been established herein, pursuant to 5 NYCRR §142.8, Recipient must document “good faith efforts” to provide meaningful participation by MWBEs as subcontractors or suppliers in the performance of the Contract. In accordance with Section 316-a of Article 15-A and 5 NYCRR §142.13, the Recipient acknowledges that if Recipient is found to have willfully and intentionally failed to comply with the MWBE participation goals set forth in the Contract, such a finding constitutes a breach of contract and the Recipient shall be liable to the ESD for liquidated or other appropriate damages, as set forth herein.

III.	Equal Employment Opportunity (EEO)

Recipient agrees to be bound by the provisions of Article 15-A and the MWBE Regulations promulgated by the Division of Minority and Women's Business Development of the Department of Economic Development (the “Division”). If any of these terms or provisions conflict with applicable law or regulations, such laws and regulations shall supersede these requirements.

Recipient shall comply with the following provisions of Article 15-A:

Recipient and subcontractors shall undertake or continue existing EEO programs to ensure that minority group members and women are afforded equal employment opportunities without discrimination because of race, creed, color, national origin, sex, age, disability or marital status. For these purposes, EEO shall apply in the areas of recruitment, employment, job assignment, promotion, upgrading, demotion, transfer, layoff, or termination and rates of pay or other forms of compensation.

The Recipient shall submit an EEO policy statement to the ESD with the executed Contract.

If Recipient or subcontractor does not have an existing EEO policy statement, the ESD may provide the Recipient or subcontractor a model statement (see EXHIBIT G-1: M/WBE Participation/Equal Employment Opportunity Policy Statement).

The Recipient’s EEO policy statement shall include the following language:

The Recipient will not discriminate against any employee or applicant for employment because of race, creed, color, national origin, sex, age, disability or marital status, will undertake or continue existing EEO programs to ensure that minority group members and women are afforded equal employment opportunities without discrimination, and shall make and document its conscientious and active efforts to employ and utilize minority group members and women in its work force.

EXHIBIT G: PARTICIPATION BY MINORITY GROUP MEMBERS AND WOMEN WITH RESPECT TO STATE CONTRACTS: REQUIREMENTS AND PROCEDURES

The Recipient shall state in all solicitations or advertisements for employees that, in the performance of the Contract, all qualified applicants will be afforded equal employment opportunities without discrimination because of race, creed, color, national origin, sex, age, disability or marital status.

The Recipient shall request each employment agency, labor union, or authorized representative of workers with which it has a collective bargaining or other agreement or understanding, to furnish a written statement that such employment agency, labor union, or representative will not discriminate on the basis of race, creed, color, national origin, sex age, disability or marital status and that such union or representative will affirmatively cooperate in the implementation of the Recipient's obligations herein.

The Recipient will include the provisions of Subdivisions (a) through (c) of this Subsection 4 and Paragraph “E” of this Section III, which provides for relevant provisions of the Human Rights Law, in every subcontract in such a manner that the requirements of the subdivisions will be binding upon each subcontractor as to work in connection with the Contract.

EXHIBIT G-2: Staffing Plan

To ensure compliance with this Section, the Recipient shall submit a staffing plan to document the composition of the proposed workforce to be utilized in the performance of the Contract by the specified categories listed, including ethnic background, gender, and Federal occupational categories. Recipients shall complete the Staffing plan form and submit it as part of the executed Contract.

EXHIBIT G-3: Work Force Employment Utilization Report (“Workforce Report”)

Once a contract has been awarded and during the term of Contract, Recipient is responsible for updating and providing notice to the ESD of any changes to the previously submitted Staffing Plan. This information is to be submitted on a quarterly basis during the term of the contract to report the actual workforce utilized in the performance of the contract by the specified categories listed including ethnic background, gender, and Federal occupational categories. The Workforce Report must be submitted to report this information.

Separate forms shall be completed by Recipient and any subcontractor performing work on the Contract.

EXHIBIT G: PARTICIPATION BY MINORITY GROUP MEMBERS AND WOMEN WITH RESPECT TO STATE CONTRACTS: REQUIREMENTS AND PROCEDURES

In limited instances, Recipient may not be able to separate out the workforce utilized in the performance of the Contract from Recipient's and/or sub's total workforce. When a separation can be made, Recipient shall submit the Workforce Report and indicate that the information provided related to the actual workforce utilized on the Contract. When the workforce to be utilized on the contract cannot be separated out from Recipient's and/or subcontractor's total workforce, Recipient shall submit the Workforce Report and indicate that the information provided is Recipient's total workforce during the subject time frame, not limited to work specifically under the contract.

Recipient shall comply with the provisions of the Human Rights Law, all other State and Federal statutory and constitutional non-discrimination provisions. Recipient and subcontractors shall not discriminate against any employee or applicant for employment because of race, creed (religion), color, sex, national origin, sexual orientation, military status, age, disability, predisposing genetic characteristic, marital status or domestic violence victim status, and shall also follow the requirements of the Human Rights Law with regard to non-discrimination on the basis of prior criminal conviction and prior arrest.

IV.	MWBE Utilization Plan

The Recipient represents and warrants that Recipient has submitted an MWBE Utilization Plan (EXHIBIT G-4) either prior to, or at the time of, the execution of the Contract.

Recipient agrees to use such MWBE Utilization Plan for the performance of MWBEs on the Contract pursuant to the prescribed MWBE goals set forth in Section II-A of this Exhibit.

Recipient further agrees that a failure to submit and/or use such MWBE Utilization Plan shall constitute a material breach of the terms of the Contract. Upon the occurrence of such a material breach, ESD shall be entitled to any remedy provided herein, including but not limited to, a finding of Recipient non-responsiveness.

Waivers

For Waiver Requests Recipient should use the Waiver Request Form (EXHIBIT G-5).

If the Recipient, after making good faith efforts, is unable to comply with MWBE goals, the Recipient may submit a Request for Waiver form documenting good faith efforts by the Recipient to meet such goals. If the documentation included with the waiver request is complete, the ESD shall evaluate the request and issue a written notice of acceptance or denial within twenty (20) days of receipt.

EXHIBIT G: PARTICIPATION BY MINORITY GROUP MEMBERS AND WOMEN WITH RESPECT TO STATE CONTRACTS: REQUIREMENTS AND PROCEDURES

If the ESD, upon review of the MWBE Utilization Plan and updated Quarterly MWBE Contractor Compliance Reports determines that Recipient is failing or refusing to comply with the Contract goals and no waiver has been issued in regards to such non-compliance, the ESD may issue a notice of deficiency to the Recipient. The Recipient must respond to the notice of deficiency within seven (7) business days of receipt. Such response may include a request for partial or total waiver of MWBE Contract Goals.

VI.	Quarterly MWBE Contractor Compliance Report

Recipient is required to submit a Quarterly MWBE Contractor Compliance and Payment Report (EXHIBIT G-6) to the ESD by the 10 ^th day following each end of quarter over the term of the Contract documenting the progress made towards achievement of the MWBE goals of the Contract.

VII.	Liquidated Damages/Recapture - MWBE Participation

Where ESD determines that Recipient is not in compliance with the requirements of the Contract and Recipient refuses to comply with such requirements, or if Recipient is found to have willfully and intentionally failed to comply with the MWBE participation goals, Recipient shall be obligated to pay to the ESD liquidated damages or be subject to recapture of grant proceeds (“Recapture”).

Such liquidated damages or Recapture shall be calculated as an amount equaling the difference between:

All sums identified for payment to MWBEs had the Recipient achieved the contractual MWBE goals; and

All sums actually paid to MWBEs for work performed or materials supplied under the Contract.

In the event a determination has been made which requires the payment of liquidated damages (and such identified sums have not been withheld by the ESD) or Recapture, Recipient shall pay such liquidated damages or Recapture to the ESD within sixty (60) days after such determination unless prior to the expiration of such sixtieth day, the Recipient has filed a complaint with the Director of the Division of Minority and Woman Business Development pursuant to Subdivision 8 of Section 313 of the Executive Law in which event the liquidated damages or Recapture shall be payable if Director renders a decision in favor of the ESD.

EXHIBIT G-1: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

M/WBE PARTICIPATION / EQUAL EMPLOYMENT OPPORTUNITY POLICY STATEMENT

I, _Richard P. Nassar__________________________________ ( REPRESENTATIVE), of the _Athenex Inc_________________________ (AWARDEE/CONTRACTOR) agree to adopt the following policies with respect to the project being developed or services rendered at Dunkirk Manufacturing Facility

3799 Lake Shore Drive East Town of Dunkirk, NY 14048.

M/WBE PARTICIPATION (M/WBE)

This organization will and will cause its contractors and subcontractors to take good faith actions to achieve the M/WBE contract participations goals set by the State for that area in which the State-funded project is located, by taking the following steps:

(1)

Actively and affirmatively solicit bids for contracts and subcontracts from qualified State certified MBEs or WBEs, including solicitations to M/WBE contractor associations.

(2)

Request a list of State-certified M/WBEs from ESD’s Office of Contractor and Supplier Diversity and solicit bids from them directly.

(3)

Ensure that plans, specifications, request for proposals and other documents used to secure bids will be made available in sufficient time for review by prospective M/WBEs.

(4)

Where feasible, divide the work into smaller portions to enhance participations by M/WBEs and encourage the formation of joint venture and other partnerships among M/WBE contractors to enhance their participation.

(5)

Document and maintain records of bid solicitation, including those to M/WBEs and the results thereof. Contractor will also maintain records of actions that its subcontractors have taken toward meeting M/WBE contract participation goals.

(6)

Ensure that progress payments to M/WBEs are made on a timely basis so that undue financial hardship is avoided, and that bonding and other credit requirements are waived or appropriate alternatives developed to encourage M/WBE participation.

EQUAL EMPLOYMENT OPPORTUNITY POLICY (EEO)

(a)

This organization will not discriminate against any employee or applicant for employment because of race, creed, color, national origin, sex, age, disability or marital status, will undertake or continue existing programs of affirmative action to ensure that minority group members are afforded equal employment opportunities without discrimination, and shall make and document its conscientious and active efforts to employ and utilize minority group members and women in its work force on state contracts.

(b)

This organization shall state in all solicitation or advertisements for employees that in the performance of the State contract all qualified applicants will be afforded equal employment opportunities without discrimination because of race, creed, color, national origin, sex disability or marital status.

EXHIBIT G-1: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

M/WBE PARTICIPATION / EQUAL EMPLOYMENT OPPORTUNITY POLICY STATEMENT

(c)

At the request of the contracting agency, this organization shall request each employment agency, labor union, or authorized representative will not discriminate on the basis of race, creed, color, national origin, sex, age, disability or marital status and that such union or representative will affirmatively cooperate in the implementation of this organization’s obligations herein.

(d)

This organization will include the provisions of sections (a) through (c) of this agreement in every subcontract in such a manner that the requirements of the subdivisions will be binding upon each subcontractor as to work in connection with the State contract.

Agreed on this 31 day of _August____________________ , 2017 .

By:		/s/ Richard P. Nassar
		(SIGNATURE)

Print Name:		Richard P. Nassar
Title:		Vice President of Operations

Minority Business Enterprise Liaison

_Richard P. Nassar________________________________ (Name of Designated Liaison) is designated as the Minority Business Enterprise Liaison responsible for administering the Minority and Women-Owned Business Enterprises- Equal Employment Opportunity (M/WBE-EEO) program.

MWBE Contract Goals

30% Minority and Women’s Business Enterprise Participation

EEO Contract Goals

0 % Minority Labor Force Participation

0 % Female Labor Force Participation

____________________________________________

(Authorized Representative)

Print Name:		Richard P. Nassar

Title:		Vice President of Operations
Date:		August 31, 2017

EXHIBIT G-2: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

STAFFING PLAN

Submit with Bid or Proposal – Instructions on page 2


Solicitation No.:	Reporting Entity:	Report includes Contractor’s/Subcontractor’s: ☐ Work force to be utilized on this contract ☐ Total work force ☐ Offeror ☐ Subcontractor Subcontractor’s Name:
Offeror’s Name:
Offeror’s Address:

Enter the total number of employees for each classification in each of the EEO-Job Categories identified

EEO-Job Category

Total Work force

Work force by Gender

Work force by

Race/Ethnic Identification

Total

Male

(M)

Total

Female

(F)

White

(M) (F)

Black

(M) (F)

Hispanic

(M) (F)

Asian

(M) (F)

Native American

(M) (F)

Disabled

(M) (F)

Veteran

(M) (F)

Officials/Administrators

Professionals

Technicians

Sales Workers

Office/Clerical

Craft Workers

Laborers

Service Workers

Temporary /Apprentices

Totals

EXHIBIT G-2: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

STAFFING PLAN

PREPARED BY (Signature):

______________________________________________________

NAME:

TITLE:

DATE:

TELEPHONE NO.:

ALTERNATE TEL:

EMAIL ADDRESS:

Submit completed with bid or proposal M/WBE 101 (Rev 04/2012)

General Instructions: All Offerors and each subcontractor identified in the bid or proposal must complete an EEO Staffing Plan (M/WBE 101) and submit it as part of the bid or proposal package. Where the work force to be utilized in the performance of the State contract can be separated out from the contractor’s and/or

Subcontractor’s total work force, the Offeror shall complete this form only for the anticipated work force to be utilized on the State contract. Where the work force to be utilized in the performance of the State contract cannot be separated out from the contractor’s and/or Subcontractor’s total work force, the Offeror shall complete this form for the contractor’s and/or Subcontractor’s total work force.

Instructions:

Enter the Solicitation number that this report applies to along with the name and address of the Offeror.

Check off the appropriate box to indicate if the Offeror completing the report is the contractor or a subcontractor.

Check off the appropriate box to indicate work force to be utilized on the contract or the Offerors’ total work force.

Enter the total work force by EEO job category.

Break down the anticipated total work force by gender and enter under the heading ‘Work force by Gender’

Break down the anticipated total work force by race/ethnic identification and enter under the heading ‘Work force by Race/Ethnic Identification’. Contact the M/WBE Permissible contact(s) for the solicitation if you have any questions.

Enter information on disabled or veterans included in the anticipated work force under the appropriate headings.

Enter the name, title, phone number and email address for the person completing the form. Sign and date the form in the designated boxes.

EXHIBIT G-2: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

STAFFING PLAN

RACE /ETHNIC IDENTIFICATION:

Race/ethnic designations as used by the Equal Employment Opportunity Commission do not denote scientific definitions of anthropological origins. For the purposes of this report, an employee may be included in the group to which he or she appears to belong, identifies with, or is regarded in the community as belonging. However, no person should be counted in more than one race/ethnic group. The race/ethnic categories for this survey are:

WHITE (Not of Hispanic origin) All persons having origins in any of the original peoples of Europe, North Africa, or the Middle East.

BLACK a person, not of Hispanic origin, who has origins in any of the black racial groups of the original peoples of Africa.

HISPANIC a person of Mexican, Puerto Rican, Cuban, Central or South American or other Spanish culture or origin, regardless of race.

ASIAN & PACIFIC ISLANDER a person having origins in any of the original peoples of the Far East, Southeast Asia, the Indian subcontinent or the Pacific Islands.

NATIVE INDIAN (NATIVE AMERICAN/ALASKAN NATIVE) a person having origins in any of the original peoples of North America, and who maintains cultural identification through tribal affiliation or community recognition.

OTHER CATEGORIES:

DISABLED INDIVIDUAL any person who: - has a physical or mental impairment that substantially limits one or more major life activity(ies)

- has a record of such an impairment; or

- is regarded as having such an impairment.

VIETNAM ERA VETERAN a veteran who served at any time between and including January 1, 1963 and May 7, 1975.

GENDER Male or Female

EXHIBIT G-3: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

WORKFORCE EMPLOYMENT UTILIZATION REPORT

Contract No.:

Reporting Entity:

☐ Contractor

☐ Subcontractor

Reporting Period:

☐ January 1, 20 - March 31, 20 ☐ April 1, 20 - June 30, 20

☐ July 1, 20 - September 30, 20 ☐ October 1, 20 - December 31, 20

Contractor’s Name:

Report includes:

☐ Work force to be utilized on this contract

☐ Contractor/Subcontractor’s total work force

Contractor’s Address:

Enter the total number of employees in each classification in each of the EEO-Job categories identified.

EEO - Job Category

Total Work Force

Work force by Gender

Work force by Race/Ethnic Identification

Male

(M)

Female

(F)

White

(M) (F)

Black

(M) (F)

Hispanic

(M) (F)

Asian

(M) (F)

Native American

(M) (F)

Disabled

(M) (F)

Veteran

(M) (F)

Officials/Administrators

Professionals

Technicians

Sales Workers

Office/Clerical

Craft Workers

Laborers

Service Workers

Temporary / Apprentices

Totals

Submit the above completed form to:

Empire State Development

Office of Contractor and Supplier Diversity

633 Third Avenue, 33 ^rd Floor

New York, NY 10017

EXHIBIT G-3: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

WORKFORCE EMPLOYMENT UTILIZATION REPORT

General Instructions: The work force utilization (M/WBE 102) is to be submitted on a quarterly basis during the life of the contract to report the actual work force utilized in the performance of the contract broken down by the specified categories. When the work force utilized in the performance of the contract can be separated out from the contractor’s and/or subcontractor’s total work force, the contractor and/or subcontractor shall submit a Utilization Report of the work force utilized on the contract. When the work force to be utilized on the contract cannot be separated out from the contractor’s and/or subcontractor’s total work force, information on the total work force shall be included in the Utilization Report. Utilization reports are to be completed for the quarters ended 3/31, 6/30, 9/30 and 12/31 and submitted to the M/WBE Program Management Unit within 15 days of the end of each quarter. If there are no changes to the work force utilized on the contract during the reporting period, the contractor can submit a copy of the previously submitted report indicating no change with the date and reporting period updated.

Instructions for completing:

Enter the number of the contract that this report applies to along with the name and address of the Contractor preparing the report.

Check off the appropriate box to indicate if the entity completing the report is the contractor or a subcontractor.

Check off the box that corresponds to the reporting period for this report.

Check off the appropriate box to indicate if the work force being reported is just for the contract or the Contractor’s total work force.

Enter the total work force by EEO job category.

Break down the total work force by gender and enter under the heading ‘Work force by Gender’

Break down the total work force by race/ethnic background and enter under the heading ‘Work force by Race/Ethnic Identification’. Contact the M/WBE Program Management Unit at (518) 474-5513 if you have any questions.

Enter information on any disabled or veteran employees included in the work force under the appropriate heading.

Enter the name, title, phone number and email address for the person completing the form. Sign and date the form in the designated boxes.

EXHIBIT G-3: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

WORKFORCE EMPLOYMENT UTILIZATION REPORT

RACE/ETHNIC IDENTIFICATION

WHITE (Not of Hispanic origin) All persons having origins in any of the original peoples of Europe, North Africa, or the Middle East.

BLACK a person, not of Hispanic origin, who has origins in any of the black racial groups of the original peoples of Africa.

HISPANIC a person of Mexican, Puerto Rican, Cuban, Central or South American or other Spanish culture or origin, regardless of race.

ASIAN & PACIFIC ISLANDER a person having origins in any of the original peoples of the Far East, Southeast Asia, the Indian subcontinent or the Pacific Islands.

OTHER CATEGORIES

o DISABLED INDIVIDUAL	any person who:	- has a physical or mental impairment that substantially limits one or more major life activity(ies)
		- has a record of such an impairment; or
		- is regarded as having such an impairment.
o VIETNAM ERA VETERAN	a veteran who served at any time between and including January 1, 1963 and May 7, 1975.
o GENDER	Male	or Female

EXHIBIT G-4: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

M/WBE UTILIZATION PLAN

INSTRUCTIONS:

This form must be submitted with any bid, proposal, or proposed negotiated contract or within a reasonable time thereafter, but prior to contract award. This MWBE Utilization Plan must contain a detailed description of the supplies and/or services to be provided by each certified Minority and Women-owned Business Enterprise (M/WBE) under the contract. Attach additional sheets if necessary.

Federal Employer Identification No. (FEIN):
Offeror’s Name:	Region/Location of Work:
Offeror’s Address:	Solicitation No.:
City, State, Zip Code:	Project No.:
Telephone No.:	M/WBE Goals in the Contract: MBE -	% WBE - %

Certified M/WBE Subcontractors/Suppliers

Federal Employer Identification Number (FEIN), Name, Address, Phone, Fax and Email Address.

Classification

Federal ID No.

Detailed Description of Work

(Attach additional sheets, if necessary)

Dollar Value of Subcontracts /

Supplies / Services and intended performance dates of each component of the contract.

NYS ESD CERTIFIED

☐ MBE

☐ WBE

NYS ESD CERTIFIED

☐ MBE

☐ WBE

EXHIBIT G-4: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

M/WBE UTILIZATION PLAN

6. IF UNABLE TO FULLY MEET THE MBE AND WBE GOALS SET FORTH IN THE CONTRACT, OFFEROR MUST SUBMIT A WAIVER REQUEST FORM (FORM E4).
PREPARED BY (Signature):	DATE:	TELEPHONE NO.:	EMAIL ADDRESS:
Preparer’s Name (Print or Type):		FOR OCSD-M/WBE USE ONLY
Preparer’s Title:		REVIEWED BY:		DATE:
Date:

SUBMISSION OF THIS FORM CONSTITUTES THE OFFEROR’S ACKNOWLEDGEMENT AND AGREEMENT TO COMPLY WITH THE M/WBE REQUIREMENTS SET FORTH UNDER NYS EXECUTIVE LAW, ARTICLE 15-A, 5 NYCRR PART 143, AND THE ABOVE-REFERENCED SOLICITATION. FAILURE TO SUBMIT COMPLETE AND ACCURATE INFORMATION MAY RESULT IN A FINDING OF NONCOMPLIANCE AND POSSIBLE TERMINATION OF YOUR CONTRACT.		UTILIZATION PLAN APPROVED?
		☐ YES ☐ NO Date:

		Contract No.:

		Project No. (if applicable):

		Contract Award Date:

		Estimated Date of Completion:

		A mount Obligated Under the Contract:

		Description of Work:

		NOTICE OF DEFICIENCY ISSUED?

		☐ YES ☐ NO Date of Issue:

		NOTICE OF ACCEPTANCE ISSUED?

		☐ YES ☐ NO Date of Issue:

EXHIBIT G-5: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

WAIVER REQUEST FORM

Waiver Applicant

Offeror / Contractor Name:

Fed ID No.:

Address:

Solicitation/Contract No.:

City, State, Zip Code:

M/WBE Goals:

MBE: % WBE: %

By submitting this form and the required information, the offeror / contractor certifies that every “Good Faith Effort” has been taken to promote M/WBE participation pursuant to the M/WBE requirements set forth under the contract. Review

5 NYCRR §142.8, Contractor’s Good Faith Efforts, on page 2 of this form for the precise definition of “Good Faith Effort”.

Contractor is requesting a:

1. ☐ MBE Waiver – A waiver of the MBE Goal for this procurement is requested.

☐ Total ☐ Partial

2. ☐ WBE Waiver – A waiver of the WBE Goal for this procurement is requested.

☐ Total ☐ Partial

3. ☐ Waiver Pending ESD Certification – (Check here if subcontractors or suppliers of Contractor are not certified M/WBE, but an application for certification has been filed with Empire State Development).

Date of such filing with Empire State Development Corporation:

PREPARED BY (Signature): _______________________________________ Date:

SUBMISSION OF THIS FORM CONSTITUTES THE OFFEROR/CONTRACTOR’S ACKNOWLEDGEMENT AND AGREEMENT TO COMPLY WITH THE M/WBE REQUIREMENTS SET FORTH UNDER NYS EXECUTIVE LAW, ARTICLE 15-A AND 5 NYCRR PART 143. FAILURE TO SUBMIT COMPLETE AND ACCURATE INFORMATION MAY RESULT IN A FINDING OF NONCOMPLIANCE AND/OR TERMINATION OF THE CONTRACT.

EXHIBIT G-5: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

WAIVER REQUEST FORM

Name and Title of Preparer (Printed or Typed):

Telephone Number:

Email Address:

Submit with the bid or proposal or if submitting after award submit to:

Empire State Development

Office of Contractor and Supplier Diversity

633 Third Avenue, 33 ^rd Floor

New York, New York 10017

***** FOR M/WBE USE ONLY *****

REVIEWED BY:

DATE:

Waiver Granted: ☐ YES MBE: ☐ WBE: ☐

☐ Total Waiver ☐ Partial Waiver

☐ ESD Certification Waiver ☐ *Conditional

☐ Notice of Deficiency Issued

* Comments:

EXHIBIT G-5: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

WAIVER REQUEST FORM

5 NYCRR § 142.8 - Contractor’s Good Faith Efforts

(a)

The contractor must document its good faith efforts toward meeting certified minority and women-owned business enterprise utilization plans by providing, at a minimum :

(1)

Copies of its solicitations of certified minority and women-owned business enterprises and any responses thereto;

(2)

If responses to the contractor’s solicitations were received, but a certified minority or woman-owned business enterprise was not selected, the specific reasons that such enterprise was not selected;

(3)

Copies of any advertisements for participation by certified minority and women-owned business enterprises timely published in appropriate general circulation, trade and minority or women-oriented publications, together with the listing(s) and date(s) of the publication of such advertisements;

(4)

Copies of any solicitations of certified minority and/or women-owned business enterprises listed in the directory of certified businesses;

(5)

The dates of attendance at any pre-bid, pre-award, or other meetings, if any, scheduled by the State agency awarding the State contract, with certified minority and women-owned business enterprises which the State agency determined were capable of performing the State contract scope of work for the purpose of fulfilling the contract participation goals;

(6)

Information describing the specific steps undertaken to reasonably structure the contract scope of work for the purpose of subcontracting with, or obtaining supplies from, certified minority and women-owned business enterprises.

(b)

In addition to the information provided by the contractor in paragraph (a) above, the State agency may also consider the following to determine whether the contractor has demonstrated good faith efforts:

(1)

Whether the contractor submitted an alternative utilization plan consistent with the subcontract or supplier opportunities in the contract;

(2)

The number of certified minority and women-owned business enterprises in the region listed in the directory of certified businesses that could, in the judgment of the State agency, perform work required by the State contract scope of work;

(3)

The actions taken by the contractor to contact and assess the ability of certified minority and women-owned business enterprises located outside of the region in which the State contract scope of work is to be performed to participate on the State contract;

(4)

Whether the contractor provided relevant plans, specifications or terms and conditions to certified minority and women-owned business enterprises sufficiently in advance to enable them to prepare an informed response to a contractor request for participation as a subcontractor or supplier;

(5)

The terms and conditions of any subcontract or provision of suppliers offered to certified minority or women-owned business enterprises and a comparison of such terms and conditions

EXHIBIT G-6: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

M/WBE CONTRACTOR COMPLIANCE AND PAYMENT REPORT

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PROJECT SPONSOR/DEVELOPER

(or “REPORTING COMPANY”):

FEDERAL EIN #:

ADDRESS:

TOWN/COUNTY/ZIP:

CONTACT PERSON:

TELEPHONE:

EMAIL:

ESD/OCSD REPRESENTATIVE:

PROJECT NAME:

PROJECT #:

PROJECT START DATE:

PERCENT COMPLETE:

ACTUAL COMPLETION DATE:

Attach M/WBE executed contracts, final lien waivers, cancelled checks, etc., or other documentation describing the “ Good Faith Efforts ” taken to achieve M/WBE program. This report should be completed and signed by an officer of the Reporting Company .

PRIME CONTRACTOR

(Federal EIN #, Firm’s Name, Address, Contact Person, Title and Phone # with area code)

CONTRACT AMOUNT

M/WBE SUBCONTRACTOR

(Federal EIN #, Subcontractor Name, Address, Contact Person, Title and Phone # with area code)

SCOPE OF SERVICES

M/WBE

CONTRACT AMOUNT

M/WBE PAYMENTS PREVIOUSLY REPORTED

M/WBE PAYMENTS ON CURRENT REPORT

TOTAL M/WBE PAYMENTS TO DATE

EXHIBIT G-6: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

M/WBE CONTRACTOR COMPLIANCE AND PAYMENT REPORT

-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

CERTIFICATION: I, (Print Name), the (Title) of the Reporting Company above, do certify that (i) I have read this Compliance Report and (ii) to the best of my knowledge, information and belief, the information contained herein is complete and accurate.

SIGNATURE: DATE:

SUBMIT REPORT TO: OFFICE OF CONTRACTOR AND SUPPLIER DIVERSITY

EMPIRE STATE DEVELOPMENT – Contract Admin

633 THIRD AVENUE, 35 ^rd FLOOR

NEW YORK, NY 10017

Completed Exhibits may also be emailed directly to OCSD at ocsd@esd.ny.gov . All email submissions must include the name and contact information of the individual or firm submitting the information.

QUESTIONS? Please contact the OCSD’s Project Managers or email the division at ocsd@esd.ny.gov .

Danah Alexander	Denise Ross	Edwina Telemaque	Geraldine Ford	Jazmin Thomas
Project Manager, OCSD	Project Manager, OCSD	Project Manager, OCSD	Project Manager, OCSD	Project Assistant, OCSD
(212) 803-3244	(212) 803-3226	(212) 803-3109	(716) 846-8205	(212) 803-3571
danah.alexander@esd.ny.gov	denise.ross@esd.ny.gov	edwina.telemaque@esd.ny.gov	geraldine.ford@esd.ny.gov	jazmin.thomas@esd.ny.gov

NYC – Bronx, Brooklyn, Queens	Capital District	Central New York	Finger Lakes	ESD Procurement Contracts
Long Island	Mid-Hudson	Southern Tier	Western New York	ESD Subsidiaries – QWDC, ESNMC
North Country	NYC-Manhattan, Staten Island	Contracts: DED Procurement Contracts	ESD Subsidiaries – ECHDC, USA Niagara
Mohawk Valley	Client: College of Nanoscale Science & Engineering (New York Polytechnic)
ESD Subsidiaries – AYCDC, HCDC, MSCD

NEW YORK STATE URBAN DEVELOPMENT CORPORATION

d\b\a EMPIRE STATE DEVELOPMENT

Athenex Capital, Project Number AB127

EXHIBIT H : REPORT OF EMPLOYMENT (WITH NYS FORM 45 ATTACHED)

Complete EITHER Table A (as Annual Report*) OR Table B (with every Payment Request)

Attach NYS-45 form including cover page and NYS-45-ATT (with blocked out social security numbers and location indicated as necessary. If the reported employment figures on Exhibit H vary materially from those reported to the New York State Department of Labor on NYS-45, please attach an explanation identifying reasons for any difference.

Annual Report: Sent to Portfolio Management; Empire State Development; 633 Third Avenue; New York, NY 10017

FULL-TIME PERMANENT EMPLOYEES

For purposes of this Agreement, a Full-time Permanent Employee shall mean

(a)

a full-time, permanent, private-sector employee on the Grantee’s payroll, who has worked at the Project Location for a minimum of thirty-five hours per week for not less than four consecutive weeks and who is entitled to receive the usual and customary fringe benefits extended by Grantee to other employees with comparable rank and duties; or

(b)

two part-time, permanent, private-sector employees on Grantee’s payroll, who have worked at the Project Location for a combined minimum of thirty-five hours per week for not less than four consecutive weeks and who are entitled to receive the usual and customary fringe benefits extended by Grantee to other employees with comparable rank and duties.

Table A: Annual Report due every February 1 for prior calendar year

FULL-TIME PERMANENT EMPLOYEES	As of Grantee’s last payroll date on or prior to the end of the designated quarter				ANNUAL AVERAGE (Based on the four quarterly numbers)
FULL-TIME PERMANENT EMPLOYEES	March 31, 20__	June 30, 20__	Sept. 30, 20__	Dec. 31, 20__	ANNUAL AVERAGE (Based on the four quarterly numbers)
At Project Location
At Other New York Locations (if applicable)

Table B: With every Payment Request


FULL-TIME PERMANENT EMPLOYEES	as of _____/______/____ (date of request)
At Project Location
At Other New York Locations (if applicable)

The information included herein is correct to the best of my knowledge and belief.

Signature: Date:

Print Name and Title:

Any false statement herein may cause the borrower or grantee to be in default under its grant disbursement agreement with ESD .

EXHIBIT I: SPECIAL PROVISIONS

In the event of any conflict between Exhibit A of this Agreement and any other provisions of this Agreement, the terms of such other provisions shall govern.

It is noted that the Service-Disabled Veteran-Owned Business goal that was indicated in Exhibit A has been waived.

Grantee Investment Commitment: Provided FSMC performs its obligations under the Alliance Agreement and following Manufacturing Facility Completion as defined in the Alliance Agreement, the Grantee commits invest and spend $1.52 billion in the Manufacturing Operation and an additional $1.5 billion over a subsequent ten (10) year period in the event the initial ten year term is renewed.

ESD reserves the right to require additional documentation to support payment requisitions. Payments from Grantee to any vendors, contractors or other parties shall be subject to detailed review and approval by ESD and at ESD’s direction, any 3rd party designated by ESD. ESD reserves the right to seek additional documentation and/or certifications from Grantee, its vendors, contractors and/or suppliers regarding the project, including but not limited to, the expenditure of grant funds, the procurement of goods and services by the Grantee and/or potential conflicts of interest.

Grant funds shall be subject to compliance with all reasonable protocols and guidelines established by ESD, including those recommended by Guidepost Solutions, including but not limited to, standards related to the procurement of contractors, goods, services, and/or equipment, the expenditure of grant funds, the payment of invoices and the acquisition of property.

As a condition to the receipt of Grant funds, Grantee agrees to the following:

1.	The Manufacturing Facility shall be constructed at the Project Location on property owned by FSMC.

2.	The Manufacturing Facility shall be owned by FSMC or another entity as designated by Grantor.

3.	All machinery and equipment purchased with Grant Funds shall be the property of FSMC or another entity as designated by Grantor

4.	Grantee shall lease the Manufacturing Facility from FSMC in accordance with terms contained in the Alliance Agreement.

5.	Construction of the Manufacturing Facility shall be subject to payment of NYS Prevailing Wages in accordance with Article 9 of the NYS Labor Law.

EXHIBIT I: SPECIAL PROVISIONS , continued

Grantor shall execute documents reasonably required by ESD that: a) releases and discharges FSMC from any claims or causes of actions arising out of funds owned or alleged to be owed by FSMC to Grantee prior to the date of this Agreement, including the cost to purchase the property on which the Manufacturing Facility shall be constructed; b) relieves FSMC of any obligation under the terms of the Alliance Agreement to direct the design and construction of the Manufacturing Facility or to directly purchase the Manufacturing Equipment, it being the intent of Grantor and Grantee, that Grantee shall direct the design and construction of the Manufacturing Facility and to directly purchase the Machinery and Equipment.

7.	All contracts for the design and/or construction of the Manufacturing Facility shall be assignable to ESD and/or its designee, upon demand of ESD, in the event Grantee abandons construction of the Manufacturing Facility.

EXHIBIT I-1: ESD INVESTMENT REGULATIONS

(With respect to funds in the Imprest Accounts)

Permissible Investments

The Corporation may invest its Investment Funds in any and all of the following, if and to the extent permitted by statutes, regulations and bond resolutions applicable at the time of investment of such Investment Funds:

Any bonds and other obligations which as to principal and interest constitute direct obligations of, or are unconditionally guaranteed by the United States of America;

Any bonds and other obligations which as to principal and interest constitute direct obligations of the State or the Corporation or which are unconditionally guaranteed by the State as to payment of principal and interest;

Bonds and other obligations of governmental authorities, political subdivisions, Federal Agencies, Government Sponsored Enterprises (GSE’s) or public authorities of the State or of the United States of America, which are securities in which the Corporation lawfully may invest pursuant to applicable statutes, regulations and bond resolutions including but not limited to Federal National Mortgage Association (FNMA), Federal Farm Credit Bank (FFCB), Federal Home Loan Bank (FHLB), Federal Home Loan Mortgage Corporation (FHLMC-“Freddie Mac”), and Student Loan Marketing Association (SLMA-“Sallie Mae”);

Prime Commercial Paper issued by domestic banks, corporations and financial companies rated "A-1" or "P-1" by Standard & Poor's Corporation or Moody's Investors Service, Inc.;

Certificates of Deposit of banks or trust companies authorized to do business in this State, including commercial banks who participates in New York State Excelsior Linked Deposit programs and are authorized program depositories, which certificates of deposit are fully insured by the Federal Deposit Insurance Corporation or fully secured, as required by Section 4.3.1 below, by securities of the character described in clauses (1), (2) or (3) of this paragraph;

Units, shares or interest in a mutual fund or money market fund of regulated investment companies which seek to maintain a constant net asset value per share of $1.00 and have been rated in one of the two highest categories by at least one nationally recognized ratings organization and invests in instruments described in clauses (1), (2) or (3) of this paragraph.

Rev.9/8/16

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Johnson Y.N. Lau, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Athenex, Inc. (the registrant);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

(Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2017

/s/ Johnson Y.N. Lau

Johnson Y.N. Lau

Chief Executive Officer and Chairman of the Board of Directors

(Principal executive officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, J. Nick Riehle, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Athenex, Inc. (the registrant);

(a)

(b)

(Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2017

/s/ J. Nick Riehle

J. Nick Riehle

Chief Financial Officer

(Principal financial and accounting officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Johnson Y.N. Lau, Chief Executive Officer and Chairman of the Board of Directors (principal executive officer) of Athenix, Inc. (the “registrant”), and J. Nick Riehle, Chief Financial Officer (principal financial and accounting officer) of the registrant, each hereby certifies that, to the best of their knowledge:

1. The registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, to which this Certification is attached as Exhibit 32.1 (the “Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the registrant at the end of the period covered by the Report and results of operations of the registrant for the periods covered by the Report.

Date: November 9, 2017

/s/ Johnson Y.N. Lau

Johnson Y.N. Lau

Chief Executive Officer and Chairman of the Board of Directors

(Principal executive officer)

/s/ J, Nick Riehle

J. Nick Riehle

Chief Financial Officer

(Principal financial and accounting officer)