Aquestive Therapeutics, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS (Unaudited) AQUESTIVE THERAPEUTICS, INC. Condensed Consolidated Balance Sheets (In thousands, except share and per share amounts) (Unaudited) March 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 27,498 $ 31,807 Trade and other receivables, net 10,209 6,955 Inventories, net 2,799 2,461 Prepaid expenses and other current assets 3,937 3,402 Total current assets 44,443 44,625 Property and equipment, net 6,279 6,873 Right-of-use assets, net 3,277 3,448 Intangible assets, net 89 102 Other non-current assets 7,835 7,836 Total assets $ 61,923 $ 62,884 Liabilities and stockholders’ deficit Current liabilities: Accounts payable $ 6,687 $ 7,089 Accrued expenses 6,371 8,569 Lease liabilities, current 787 728 Deferred revenue, current 437 693 Liability related to the sale of future revenue, current 1,905 1,450 Loans payable, current 3,863 2,575 Total current liabilities 20,050 21,104 Loans payable, net 34,193 34,329 Liability related to the sale of future revenue, net 50,383 47,524 Lease liabilities 2,635 2,846 Deferred revenue 4,699 3,633 Other non-current liabilities 1,761 1,945 Total liabilities 113,721 111,381 Contingencies (note 19) Stockholders’ deficit: Common stock, $.001 par value. Authorized 250,000,000 shares; 36,241,358 and 34,569,254 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 36 35 Additional paid-in capital 149,095 137,725 Accumulated deficit (200,929 ) (186,257 ) Total stockholders’ deficit (51,798 ) (48,497 ) Total liabilities and stockholders’ deficit $ 61,923 $ 62,884 See accompanying notes to the condensed consolidated financial statements. 3 Table of Contents AQUESTIVE THERAPEUTICS, INC. Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share data amounts) (Unaudited) Three Months Ended March 31, 2021 2020 Revenues $ 11,122 $ 8,765 Costs and expenses: Manufacture and supply 2,757 3,659 Research and development 3,659 4,354 Selling, general and administrative 13,231 14,613 Total costs and expenses 19,647 22,626 Loss from operations (8,525 ) (13,861 ) Other income/(expenses): Interest expense (2,761 ) (2,771 ) Interest expense related to the sale of future revenue, net (3,334 ) — Interest income and other income (expense), net (52 ) 102 Net loss before income taxes (14,672 ) (16,530 ) Income taxes — — Net loss $ (14,672 ) $ (16,530 ) Comprehensive loss $ (14,672 ) $ (16,530 ) Net loss per share - basic and diluted $ (0.41 ) $ (0.49 ) Weighted-average number of common shares outstanding - basic and diluted 35,563,275 33,569,694 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents AQUESTIVE THERAPEUTICS, INC. Condensed Consolidated Statements of Changes in Stockholders’ Deficit (In thousands, except share amounts) (Unaudited) Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity/Deficit Shares Amount For the period ended March 31, 2021: Balance at December 31, 2020 34,569,254 $ 35 $ 137,725 $ (186,257 ) $ (48,497 ) Common stock issued under public equity offering 1,672,104 1 10,196 — 10,197 Costs of common stock issued under public equity offering — — (306 ) — (306 ) Share-based compensation expense — — 1,507 — 1,507 Other — — (27 ) — (27 ) Net loss — — — (14,672 ) (14,672 ) Balance at March 31, 2021 36,241,358 $ 36 $ 149,095 $ (200,929 ) $ (51,798 ) For the period ended March 31, 2020: Balance at December 31, 2019 33,562,885 $ 34 $ 124,318 $ (130,474 ) $ (6,122 ) Share-based compensation expense — — 1,860 — 1,860 Vested restricted stock units 19,811 — (37 ) — (37 ) Net loss — — — (16,530 ) (16,530 ) Balance at March 31, 2020 33,582,696 $ 34 $ 126,141 $ (147,004 ) $ (20,829 ) See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents AQUESTIVE THERAPEUTICS, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended March 31, 2021 2020 Cash flows used for operating activities: Net loss $ (14,672 ) $ (16,530 ) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation, amortization, and impairment 755 887 Share-based compensation 1,507 1,860 Amortization of debt issuance costs and discounts 1,184 584 Interest expense related to the sale of future revenue 3,302 — Other, net 167 (144 ) Changes in operating assets and liabilities: Trade and other receivables, net (3,374 ) 3,738 Inventories, net (338 ) (228 ) Prepaid expenses and other assets (535 ) 53 Accounts payable (402 ) (1,908 ) Accrued expenses and other liabilities (2,501 ) (1,667 ) Deferred revenue 810 (282 ) Net cash used for operating activities (14,097 ) (13,637 ) Cash flows used for investing activities: Capital expenditures (103 ) (131 ) Net cash used for investing activities (103 ) (131 ) Cash flows used for financing activities: Proceeds from issuance of common stock, net 9,891 — Payments for taxes on share-based compensation — (37 ) Net cash provided by/(used for) financing activities 9,891 (37 ) Net decrease in cash and cash equivalents (4,309 ) (13,805 ) Cash and cash equivalents: Beginning of period 31,807 49,326 End of period $ 27,498 $ 35,521 Supplemental disclosures of cash flow information: Cash payments for interest $ 1,610 $ 2,188 Net decrease in capital expenditures included in accounts payable and accrued expenses (71 ) (84 ) See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents AQUESTIVE THERAPEUTICS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited, in thousands, except share and per share information) Note 1. Corporate Organization and Company Overview (A) Company Overview Aquestive Therapeutics, Inc. (“Aquestive” or “the Company”) is a pharmaceutical company focused on identifying, developing and commercializing differentiated products which leverage our proprietary PharmFilm ® technology to meet patients’ unmet medical needs and solve patients’ therapeutic problems. The Company has five products approved by the U.S. Food and Drug Administration (FDA), both proprietary and out-licensed, as well as a late-stage proprietary product pipeline focused on the treatment of diseases of the central nervous system, or CNS, and an earlier stage pipeline including for treatment of anaphylaxis. The Company’s licensees market their products in the U.S. and in some instances outside the U.S. The Company markets its proprietary product in the U.S. The Company believes that its proprietary and licensed products address the needs of these patient populations and the shortcomings of available treatments create opportunities for the development and commercialization of meaningfully differentiated medicines. Production facilities are located in Portage, Indiana, and corporate headquarters, sales and commercialization operations and primary research laboratory facilities are based in Warren, New Jersey. The Company is subject to risks common to companies in similar industries and stages of development, including, but not limited to, competition from larger companies, reliance on revenue from a limited number of products and customers, adequacy of existing and availability of additional operating and growth capital as and when required, uncertainty of regulatory approval for marketing its product candidates, reliance on a single manufacturing site, new technological innovations, dependence on key personnel, reliance on third-party service providers and sole source suppliers, dependence on patent-protected proprietary technology, ongoing government regulatory compliance requirements, dependence on the clinical and commercial success of its drug candidates, uncertainty of regulatory approval of its drug candidates, and uncertainty of broad adoption of its approved products, if any, by physicians and consumers. Aquestive is also subject to risks and uncertainties related to COVID-19 pandemic. (B) Equity Transactions Equity Offering of Common Stock On September 11, 2019, the Company entered into an equity distribution agreement to offer shares of common stock from time to time in an “at-the-market” (ATM) offering for an aggregate offering price of up to $25,000. On November 20, 2020, the Company began utilizing the ATM facility and through December 31, 2020 sold 930,993 shares which provided net proceeds of approximately $6,055 after deducting commissions and other transaction costs of $473. The Company continued to use the ATM facility in 2021 and from January 1, 2021 through March 31, 2021 sold 1,672,104 shares which provided net proceeds of approximately $9,891 after deducting commissions and other transaction costs of $306. On March 26, 2021, the Company entered into Amendment No. 1 to the equity distribution agreement, to permit the offering of an unlimited amount of shares of common stock of the Company thereunder, subject to the terms and conditions set forth in the equity distribution agreement. The Company filed a prospectus supplement to offer up to an additional $50,000 of shares of common stock pursuant to the amended equity distribution agreement. Note 2. Basis of Presentation The accompanying interim unaudited condensed consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and with Article 10 of Regulation S-X for interim financial reporting. In compliance with those rules, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2021 (the “2020 Annual Report on Form 10-K”). As included herein, the condensed consolidated balance sheet as of December 31, 2020 is derived from the audited consolidated financial statements as of that date. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results of interim periods have been included. The accompanying financial statements reflect certain reclassifications from previously issued financial statements to conform to the current presentation. The Company has evaluated subsequent events for disclosure through the date of issuance of the accompanying unaudited condensed financial statements. 7 Table of Contents Any reference in these notes to applicable guidance refers to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). Note 3. Summary of Significant Accounting Policies (A) Principles of Consolidation and Significant Accounting Policies The interim condensed consolidated financial statements presented herein include the accounts of Aquestive Therapeutics, Inc. and its wholly owned subsidiary, MonoSol Rx, Inc. Other than corporate formation activities, MonoSol Rx, Inc. has conducted no commercial, drug development or operational activities and has no customers or vendors. The results of operations and cash flows reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected in any other interim period or for the entire fiscal year. The Company’s significant accounting policies are described in the audited consolidated financial statements included in the 2020 Annual Report on Form 10-K. Subsequent to the date of those financial statements, there have been no significant changes to these policies other than those listed below. (B) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and contingent liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include allowances for rebates from proprietary product sales, the allowance for sales returns, the useful lives of fixed assets, valuation of share-based compensation and contingencies. (C) Recent Accounting Pronouncements As an emerging growth company, the Company has elected to take advantage of the extended transition period afforded by the Jumpstart Our Business Startups Act for the implementation of new or revised accounting standards and, as a result, the Company will comply with new or revised accounting standards no later than the relevant dates on which adoption of such standards is required for emerging growth companies. The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption . Recent Accounting Pronouncements Not Adopted as of March 31, 2021: In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) , amending existing guidance on the accounting for credit losses on financial instruments within its scope. The guidance provides for use of a forward-looking expected loss model for estimating credit losses, replacing the incurred loss model that is based on past events and current conditions. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for the Company beginning after December 15, 2022. The Company is currently evaluating the impact of the adoption of this guidance on its condensed consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which amends accounting for income taxes during interim periods and makes changes to certain income tax classifications. The new standard allows exceptions to the use of the incremental approach for intra-period tax allocation, when there is a loss from continuing operations and income or a gain from other items, and to the general methodology for calculating income taxes in an interim period, when a year-to-date loss exceeds the anticipated loss for the year. The standard also requires franchise or similar taxes partially based on income to be reported as income tax and the effects of enacted changes in tax laws or rates to be included in the annual effective tax rate computation from the date of enactment. The standard will be effective for the Company beginning January 1, 2022, with early adoption of the amendments permitted. The Company is currently evaluating the impact from the adoption of ASU 2019-12 on its consolidated financial statements. 8 Table of Contents In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . This Accounting Standards Update was issued to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. Among other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment. More specifically, the ASU reduces the number of models that may be used to account for convertible instruments from five to three, amends diluted EPS calculations for convertible instruments, modifies the requirements for a contract that may be settled in an entity’s own shares to be classified in equity and requires expanded disclosures intended to increase transparency. These amendments will be effective for the Company beginning January 1, 2024, with early adoption of the amendments permitted. The Company is currently evaluating the impact from the adoption of ASU 2020-06 on its consolidated financial statements. Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to the condensed consolidated financial statements of the Company. Note 4. Risks and Uncertainties The Company’s cash requirements for 2021 and beyond include expenses related to continuing development and clinical evaluation of its products, manufacture and supply costs, costs of regulatory filings, patent prosecution expenses and litigation expenses, expenses related to commercialization of its products, as well as costs to comply with the requirements of being a public company operating in a highly regulated industry. As of March 31, 2021, we had $27,498 of cash and cash equivalents. As of March 31, 2021, Aquestive has experienced a history of net losses and the Company’s accumulated deficits totaled $200,929 which have been partially funded by gross margins from sales of commercialized licensed and proprietary products, license fees, milestone and royalty payments from our commercial licensees and co-development parties, and with the balance of the related funding requirements met by the Company’s equity and debt offerings, including the Senior Secured Notes due 2025 (the “12.5% Notes”). In 2019, the Company raised funding totaling $52,226, consisting of net proceeds of $13,110 from the refinancing of debt in July 2019, $37,295 from the public offering of 8,050,000 common shares in December 2019, and $1,821 from the exercise of warrants in connection with the debt financing. On November 3, 2020, we entered into a Purchase and Sale Agreement (the “Monetization Agreement”) with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management (“Marathon”). Under the terms of the Monetization Agreement, we sold all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion’s apomorphine product, KYNMOBI®. KYNMOBI®, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the FDA on May 21, 2020. In exchange for the sale of these rights, we received an upfront payment of $40,000 and an additional payment of $10,000 through the achievement of the first milestone. We have received an aggregate amount of $50,000 through March 31, 2021 under the Monetization Agreement. Under the Monetization Agreement, additional aggregate contingent payments of up to $75,000 may be due to us upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total potential proceeds of $125,000. With the upfront proceeds of the monetization, we repaid $22,500 of the 12.5% Notes, and issued $4,000 of new 12.5% Notes in lieu of paying a prepayment premium on the early repayment of the 12.5% Notes, reducing the aggregate principal balance of 12.5% Notes outstanding to $51,500. In addition, the holders of the 12.5% Notes agreed to extend to December 31, 2021 our ability to access, at our option, and additional $30,000 of 12.5% Notes re-openers under the Indenture (as defined below). The first $10,000 senior notes re-opener represents a commitment of such amount by current holders of 12.5% Notes, at our option, contingent upon FDA approval of our product candidate Libervant. A second $20,000 senior notes re-opener represents a right, at our option, to market to current holders of our 12.5% Notes, and/or other lenders, additional senior notes up to such amount, contingent upon FDA approval of Libervant for U.S. market access. If and to the extent that we access these re-openers, we will grant warrants to purchase up to 714,000 shares of common stock, with the strike price calculated based on the 30-day volume weighted average closing price of our common stock at the warrant grant date. In addition, as of the closing of this transaction, we issued to the holders of the 12.5% Notes warrants to purchase 143,000 shares of our common stock. 9 Table of Contents The Company began utilizing its “At-The-Market” (ATM) facility in November 2020 which has generated net cash proceeds of approximately $15,945 as of March 31, 2021. On March 26, 2021, the Company entered into Amendment No. 1 to the equity distribution agreement, to permit the offering of an unlimited amount of shares of common stock of the Company thereunder, subject to the terms and conditions set forth in the equity distribution agreement. The Company filed a prospectus supplement to offer up to an additional $50,000 of shares of common stock pursuant to the amended equity distribution agreement. This ATM facility, as amended, has approximately $57,111 available at March 31, 2021. The characteristics described above provide indications that the Company’s ability to execute its near-term business objectives and achieve profitability over the longer term cannot be assured. Further, management views the impact of COVID-19 on the economy, its industry, its customers and suppliers and its own operations as constantly evolving, the future effects of which continue to be highly uncertain and unpredictable. Due to current or future interruptions and possible disruptions in health services, operations of the United States Food and Drug Administration (“FDA”), freight and other transportation services, supply, manufacturing, workforce health, availability of acceptable capital, financial and asset monetization markets, and availability of essential human and business requirements, and unforeseeable financial difficulties of the Company’s customers or vendors, the severity, rapidity of the spread, and duration of the COVID-19 pandemic may be expected to negatively affect a great number of businesses across the various industries, including Aquestive. The Company may experience financial and operational adversity in such areas as preclinical, clinical trials, regulatory review and approval of various product candidates, customer demand for products and services, customers’, ability to pay for goods and services, supply of pharmaceutical ingredients and other raw materials from approved vendors, ongoing availability of an appropriate labor force and skilled professionals, and additional capital, financial or monetization markets. Subject to and absent any material adverse effect of these and other possible COVID-19 effects, the Company expects that its anticipated revenues from licensed and proprietary products, cash on hand, expense management initiatives, milestone payments under the Monetization Agreement, and access to equity markets, including its ATM facility and shelf registration statement would be adequate to meet expected operating needs as the Company continues to execute its business strategy, and access to appropriate financial markets for debt or equity financings, or a combination of these potential sources of funds, although management can provide no assurance that any of these sources of funding, either individually or in combination, will be available on reasonable terms, if at all. In addition, the Company may be required to utilize available financial resources sooner than expected. Management has based its expectation on assumptions that could change or prove to be inaccurate, either due to the impact of COVID-19 or to unrelated factors including factors arising in the capital markets, asset monetization markets, regulatory approval process, regulatory oversight and other factors. Note 5. Revenues and Trade Receivables, Net The Company’s revenues include (i) sales of manufactured products pursuant to contracts with commercialization licensees, (ii) sales of its proprietary clobazam-based Sympazan oral film product, (iii) license and royalty revenues and (iv) co-development and research fees generally in the form of milestone payments. The Company recognizes revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To achieve this core principle, a five-step model is applied that includes (1) identifying the contract with a customer, (2) identifying the performance obligation in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing when, or as, an entity satisfies a performance obligation. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the current revenue recognition standard. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. At contract inception, we assess the goods promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a distinct good. When identifying our performance obligations, we consider all goods or services promised in a contract regardless of whether explicitly stated in the contract or implied by customary business practice. Our performance obligations consist mainly of transferring of goods and services identified in the contracts, purchase orders or invoices. Manufacture and supply revenue – this revenue is derived from products manufactured exclusively for specific customers according to their strictly-defined specifications, subject only to specified quality control inspections. Accordingly, at the point in time when quality control requirements are satisfied, revenue net of related discounts is recorded. 10 Table of Contents Proprietary product sales, net - this net revenue is recognized when product is shipped and title passes to the customer, typically at time of delivery. At the time of sale, estimates for various revenue allowances are recorded based on historical trends and judgmental estimates. For sales of Sympazan, returns allowances and prompt pay discounts are estimated based on contract terms and historical return rates, if available, and these estimates are recorded as a reduction of receivables. Similarly determined estimates are recorded relating to wholesaler service fees, co-pay support redemptions, Medicare, Medicaid and other rebates, and these estimates are reflected as a component of accrued liabilities. Once all related variable considerations are resolved and uncertainties as to collectable amounts are eliminated, estimates are adjusted to actual allowance amounts. Provisions for these estimated amounts are reviewed and adjusted on no less than a quarterly basis. License and Royalty Revenu e – license revenues are determined based on an assessment of whether the license is distinct from any other performance obligations that may be included in the underlying licensing arrangement. If the customer is able to benefit from the license without provision of any other performance obligations by the Company and the license is thereby viewed as a distinct or functional license, the Company then determines whether the customer has acquired a right to use the license or a right to access the license. For functional licenses that do not require further development or other ongoing activities by the Company, the customer is viewed as acquiring the right to use the license as, and when, transferred and revenues are generally recorded at a point in time, subject to contingencies or constraints. For symbolic licenses providing substantial value only in conjunction with other performance obligations to be provided by the Company, revenues are generally recorded over the term of the license agreement. Such other obligations provided by the Company generally include manufactured products, additional development services or other deliverables that are contracted to be provided during the license term. Payments received in excess of amounts ratably or otherwise earned are deferred and recognized over the term of the license or as contingencies or other performance obligations are met. Royalty revenue is estimated and recognized when sales under supply agreements with commercial licensees are recorded, absent any contractual constraints or collectability uncertainties. Co-development and Research Fees – co-development and research fees are earned through performance of specific tasks, activities or completion of stages of development defined within a contractual development or feasibility study agreement with a customer. The nature of these performance obligations, broadly referred to as milestones or deliverables, are usually dependent on the scope and structure of the project as contracted, as well as the complexity of the product and the specific regulatory approval path necessary for that product. Accordingly, the duration of the Company’s research and development projects may range from several months to approximately three years. Although each contractual arrangement is unique, common milestones included in these arrangements include those for the performance of efficacy and other tests, reports of findings, formulation of initial prototypes, production of stability clinical and/or scale-up batches, and stability testing of those batches. Additional milestones may be established and linked to clinical results of the product submission and/or approval of the product by the FDA and the commercial launch of the product. Revenue recognition arising from milestone payments is dependent upon the facts and circumstances surrounding the milestone payments. Milestone payments based on a non-sales metric such as a development-based milestone (e.g., an NDA filing or obtaining regulatory approval) represent variable consideration and are included in the transaction price subject to any constraints. If the milestone payments relate to future development, the timing of recognition depends upon historical experience and the significance a third party has on the outcome. For milestone payments to be received upon the achievement of a sales threshold, the revenue from the milestone payments is recognized at the later of when the actual sales are incurred or the performance obligation to which the sales relate to has been satisfied. Contract Assets - in certain situations, customer contractual payment terms provide for invoicing in arrears. Accordingly, some, or all performance obligations may be completely satisfied before the customer may be invoiced under such agreements. In these situations, billing occurs after revenue recognition, which results in a contract asset supported by the estimated value of the completed portion of the performance obligation. These contract assets are reflected as a component of other receivables within Trade and other receivables within the Condensed Consolidated Balance Sheet. As of March 31, 2021, and December 31, 2020, such contract assets were $2,197 and $3,081, respectively, consisting primarily of products and services provided under specific contracts to customers for which earnings processes have been met prior to shipment of goods or full delivery of completed services. Contract Liabilities - in certain situations, customer contractual payment terms are structured to permit invoicing in advance of delivery of a good or service. In such instances, the customer’s cash payment may be received before satisfaction of some, or any, performance obligations that are specified. In these situations, billing occurs in advance of revenue recognition, which results in contract liabilities. These contract liabilities are reflected as deferred revenue within the Condensed Consolidated Balance Sheet. As remaining performance obligations are satisfied, an appropriate portion of the deferred revenue balance is credited to earnings. As of March 31, 2021, and December 31, 2020, such contract liabilities were $5,136 and $4,326, respectively. 11 Table of Contents The Company’s revenues were comprised of the following: Three Months Ended March 31, 2021 2020 Manufacture and supply revenue $ 6,511 $ 6,916 License and royalty revenue 2,361 426 Co-development and research fees 438 263 Proprietary product sales, net 1,812 1,160 Total revenues $ 11,122 $ 8,765 Disaggregation of Revenue The following table provides disaggregated net revenue by geographic area: Three Months Ended March 31, 2021 2020 United States $ 9,850 $ 7,506 Ex-United States 1,272 1,259 Total revenues $ 11,122 $ 8,765 Ex-United States revenues are derived primarily from Indivior for product manufactured for markets outside of the United States. Trade and other receivables, net consist of the following: March 31, 2021 December 31, 2020 Trade receivables $ 8,128 $ 4,330 Contract and other receivables 2,657 3,081 Less: allowance for doubtful accounts (40 ) (40 ) Less: sales-related allowances (536 ) (416 ) Trade and other receivables, net $ 10,209 $ 6,955 The current portion of contract and other receivables totaled $2,657 and $3,081 as of March 31, 2021 and December 31, 2020, respectively, consisting primarily of contract assets and reimbursable costs incurred on behalf of customers. Contract assets consist of products and services provided under specific contracts to customers for which earnings processes have been met prior to shipment of goods or full delivery of completed services. Sales-related allowances for both periods presented are estimated in relation to revenues recognized for sales of Sympazan. The following table presents the changes in the allowance for doubtful accounts: March 31, 2021 December 31, 2020 Allowance for doubtful accounts at beginning of the period $ 40 $ 124 Additions charged to expense — 198 Write-downs charged against the allowance — (282 ) Allowance for doubtful accounts at end of the period $ 40 $ 40 12 Table of Contents Sales Related Allowances and Accruals Revenues from sales of products are recorded net of prompt payment discounts, wholesaler service fees, returns allowances, rebates and co-pay support redemptions. These reserves are based on estimates of the amounts earned or to be claimed on the related sales. These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale. The Company includes these estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved. The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts and other related information that may become known in the future. The adequacy of these provisions is reviewed on a quarterly basis. The following table provides a summary of activity with respect to sales related allowances and accruals for the three months ended March 31, 2021: Total Sales Related Allowances Balance at December 31, 2020 $ 2,138 Provision 2,164 Payments / credits (1,959 ) Balance at March 31, 2021 $ 2,343 Total reductions of gross product sales from sales-related allowances and accruals were $2,164 for the three months ended March 31, 2021. Accruals for returns allowances and prompt pay discounts are reflected as a direct reduction of trade receivables and accruals for wholesaler service fees, co-pay support redemptions and rebates as current liabilities. The accrued balances relative to these provisions included in Trade and other receivables, net and Accounts payable and accrued expenses were $536 and $1,807, respectively, as of March 31, 2021 and $416 and $1,722 , respectively, as of December 31, 2020. Concentration of Major Customers Customers are considered major customers when net revenue exceeds 10% of total revenue for the period or outstanding receivable balances exceed 10% of total receivables. For the year ended December 31, 2020, two customers exceeded the 10% threshold for revenue which were Indivior and Sunovion that represented 57% and 26%, respectively. As of December 31, 2020, four customers exceeded the 10% threshold for outstanding receivables which were Indivior, AmerisourceBergen, Sunovion, and Cardinal that represented 53%, 14%, 13%, and 10%, respectively. For the three months ended March 31, 2021, only Indivior exceeded the 10% threshold for revenue and represented approximately 64% of total revenue. As of March 31, 2021, three customers exceeded the 10% threshold for outstanding receivables which were Indivior, AmerisourceBergen, and Cardinal represented 66%, 12%, and 10%, respectively. Note 6. Material Agreements Commercial Exploitation Agreement with Indivior In August 2008, the Company entered into a Commercial Exploitation Agreement with Reckitt Benckiser Pharmaceuticals, Inc. (with subsequent amendments collectively, the “Indivior License Agreement”). Reckitt Benckiser Pharmaceuticals, Inc. was later succeeded to in interest by Indivior Inc. Pursuant to the Indivior License Agreement, the Company agreed to manufacture and supply Indivior’s requirements for Suboxone, a sublingual film formulation, both inside and outside the United States on an exclusive basis. Under the terms of the Indivior License Agreement, the Company is required to manufacture Suboxone in accordance with current Good Manufacturing Practice standards and according to the specifications and processes set forth in the related quality agreements with Indivior. Additionally, the Company is required to obtain Active Pharmaceutical Ingredients (“API”) for the manufacture of Suboxone directly from Indivior. The Indivior License Agreement specifies a minimum annual threshold quantity of Suboxone that the Company is obligated to fill and requires Indivior to provide the Company with a forecast of its requirements at various specified times throughout the year. 13 Table of Contents The Indivior License Agreement provides for payment by Indivior of a purchase price per unit that is subject to adjustment based on the Company’s ability to satisfy minimum product thresholds. Additionally, in the event Indivior purchases certain large quantities of Suboxone during a specified period, Indivior will be entitled to scaled rebates on its purchases. In addition to the purchase price for the Suboxone supplied, Indivior is required to make certain single digit percentage royalty payments tied to net sales (as provided for in the Indivior License Agreement) in each of the United States and in the rest of the world subject to annual maximum amounts and limited to the life of the related United States or international patents. In 2012, Indivior exercised its right to buy out its future royalty obligations in the United States under the Indivior License Agreement. Indivior remains obligated to pay royalties for all sales outside the United States. The Indivior License Agreement contains customary contractual termination provisions, including with respect to a filing for bankruptcy or corporate dissolution, an invalidation of the intellectual property surrounding Suboxone, and commission of a material breach of the Indivior License Agreement by either party. Additionally, Indivior may terminate the Indivior License Agreement if the FDA or other applicable regulatory authority declares the Company’s manufacturing site to no longer be suitable for the manufacture of Suboxone or Suboxone is no longer suitable to be manufactured due to health or safety reasons. The initial term of the Indivior License Agreement was seven years from the commencement date. Thereafter, the Indivior License Agreement automatically renews for successive one-year periods, unless either party provides the other with written notice of its intent not to renew at least one year prior to the expiration of the initial or renewal term. Supplemental Agreement with Indivior On September 24, 2017, the Company entered into an agreement with Indivior (the “Indivior Supplemental Agreement”). Pursuant to the Indivior Supplemental Agreement, the Company conveyed to Indivior all existing and future rights in the settlement of various ongoing patent enforcement legal actions and disputes related to the Suboxone product. The Company also conveyed to Indivior the right to sublicense manufacturing and marketing capabilities to enable an Indivior licensed generic buprenorphine product to be produced and sold by parties unrelated to Indivior or Aquestive. Under the Indivior Supplemental Agreement, the Company is entitled to receive certain payments from Indivior commencing on the date of the agreement through January 1, 2023. Once paid, all payments made under the Indivior Supplemental Agreement are non-refundable. Through February 20, 2019, the at-risk launch date of the competing generic products of Dr. Reddy’s Labs and Alvogen, the Company received an aggregate of $40,750 from Indivior under the Indivior Supplemental Agreement. Further payments under the Indivior Supplemental Agreement are suspended until adjudication of related patent infringement litigation is finalized. If such litigation is successful, in addition to the amounts already received as described in the foregoing, the Company may receive up to an additional $34,250, consisting of (i) up to $33,000 in the aggregate from any combination of (a) performance or event-based milestone payments and (b) single digit percentage royalties on net revenue earned by Indivior on sales of Suboxone and (ii) an additional $1,250 that was earned through the issuance of additional process patent rights to the Company. The aggregate payments under this Indivior Supplemental Agreement are capped at $75,000. All payments made by Indivior to the Company pursuant to the Indivior Supplemental Agreement are in addition to, and not in place of, any amounts owed by Indivior to the Company pursuant to the Indivior License Agreement. Indivior’s payment obligations under the Indivior Supplemental Agreement are subject to certain factors affecting the market for Suboxone and may terminate prior to January 1, 2023 in the event certain contingencies relating to that market occur. License Agreement with Sunovion Pharmaceuticals, Inc. On April 1, 2016, the Company entered into a license agreement with Cynapsus Therapeutics Inc. (which was later succeeded to in interest by Sunovion Pharmaceuticals, Inc.), referred to as the Sunovion License Agreement, pursuant to which Sunovion obtained an exclusive, worldwide license (with the right to sub-license) to certain intellectual property, including existing and future patents and patent applications, covering all oral films containing apomorphine for the treatment of off episodes in Parkinson’s disease patients. Sunovion used this intellectual property to develop its apomorphine product KYNMOBI ® , which was approved by the FDA on May 21, 2020 and commercially launched by Sunovion in September 2020. The FDA approval triggered Sunovion’s obligation to remit a payment of $4,000 which was received in September 2020 and was included in License and royalty revenues for the year ended December 31, 2020. In consideration of the rights granted to Sunovion under the Sunovion License Agreement, the Company received aggregate payments totaling $22,000 to date. In addition to the upfront payment of $5,000, the Company has also earned an aggregate of $17,000 in connection with specified regulatory and development milestones in the United States and Europe (the “Initial Milestone Payments”). As a result of the Monetization Agreement, we are no longer entitled to receive the remaining contingent royalty or milestone payments related to net sales thresholds of KYNMOBI ®. During the second quarter of 2020, the Company recorded minimum royalty revenue of $8,000 for minimum royalties which was reflected in License and royalty revenue. 14 Table of Contents Effective March 16, 2020, the Company entered into a first amendment (the “First Amendment”) to the Sunovion License Agreement. The First Amendment provides for the following: (i) inclusion of the United Kingdom and any other country currently in the European Union (EU) that later withdraws as a member country of the EU for purpose of determining the satisfaction of the condition triggering the obligation to pay the third milestone due under the Sunovion License Agreement, (ii) extension of the date after which Sunovion has the right to terminate the Sunovion License Agreement for convenience from December 31 2024 to March 31, 2028, (iii) modification of the effective inception date of the first minimum annual royalty due from Sunovion to the Company from January 1, 2020 to April 1, 2020, and (iv) modification of the termination provisions to reflect the Company’s waiver of the right to terminate the Sunovion License Agreement in the event that KYNMOBI ® was not commercialized by January 1, 2020. The Sunovion License Agreement will continue until terminated by Sunovion in accordance with the termination provisions of the First Amendment. The Sunovion License Agreement continues (on a country-by-country basis) until the expiration of all applicable licensed patents. Upon termination of the Sunovion License Agreement, all rights to intellectual property granted to Sunovion to develop and commercialize apomorphine-based products will revert to the Company. On October 23, 2020, the Company entered into a Second Amendment to the Sunovion License Agreement for the purpose of clarifying the rights and obligations of with respect to the prosecution and maintenance of the patents covered under the Sunovion License Agreement and to provide that, on and after March 31, 2028, in respect of any jurisdiction or jurisdictions covered under the Sunovion License Agreement, Sunovion may terminate its rights to the licensed Patents under the Sunovion License Agreement upon 180 days prior written notice. Purchase and Sale Agreement with an affiliate of Marathon Asset Management (“Marathon”) On November 3, 2020, we entered into a Purchase and Sale Agreement (the “Monetization Agreement”) with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management (“Marathon”). Under the terms of the Monetization Agreement, we sold all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion’s apomorphine product, KYNMOBI ® . KYNMOBI ® , an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the U.S. Food and Drug Administration (FDA) on May 21, 2020. In exchange for the sale of these rights, we received an upfront payment of $40,000 and an additional payment of $10,000 through the achievement of the first milestone. We have received an aggregate amount of $50,000 through March 31, 2021 under the Monetization Agreement. Under the Monetization Agreement, additional aggregate contingent payments of up to $75,000 may be due to us upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total potential proceeds of $125,000. See Note 15 Sale of Future Revenue for further details on the accounting for the Monetization Agreement. Agreement to Terminate CLA with KemPharm In March 2012, the Company entered into an agreement with KemPharm, Inc. (“KemPharm”), to terminate a Collaboration and License Agreement entered into by the Company and KemPharm in April 2011. Under the termination arrangement, the Company has the right to participate in any and all value that KemPharm may derive from the commercialization or any other monetization of KP-415 and KP-484 compounds or their derivatives. Among these monetization transactions are those related to any business combinations involving KemPharm and collaborations, royalty arrangements, or other transactions from which KemPharm may realize value from these compounds. The Company has received payment of $500 under this arrangement during June 2020 in connection with the FDA’s acceptance of a New Drug Application (“NDA”) filing for KP-415. On March 2, 2021 KemPharm announced FDA approval of KP 415 (AZTARYS TM ) a new once-daily treatment for ADHD. The Company’s share of the milestone payments associated with KP 415 regulatory approval may reach $2,000. Note 7. Financial Instruments – Fair Value Measurements Certain assets and liabilities are reported on a recurring basis at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: 15 Table of Contents • Level 1 — Observable quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable prices that are based on inputs not quoted on active markets but corroborated by market data. • Level 3 — Unobservable inputs that are supported by little or no market activity, such as pricing models, discounted cash flow methodologies and similar techniques. The carrying amounts reported in the balance sheets for trade and other receivables, prepaid and other current assets, accounts payable and accrued expenses, and deferred revenue approximate their fair values based on the short-term maturity of these assets and liabilities. The Company granted warrants to certain Note Holders in connection with its debt repayment and debt refinancing during 2020 and 2019, respectively. Those warrants were valued based on Level 3 inputs and their fair value was based primarily on an independent third-party appraisal prepared as of the grant date consistent with generally-accepted valuation methods of the Uniform Standards of Professional Appraisal Practice, the American Society of Appraisers and the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation. See Note 14 Warrants for further information on these warrants. The Company’s 12.5% Senior Secured Notes contain a repurchase offer or put option which gives holders of the option the right, but not the obligation, to require the Company to redeem on the Notes up to a capped portion of milestone payments resulting from the Monetization Agreement. This put option was valued based on Level 3 inputs and its fair value was based primarily on an independent third-party appraisal consistent with generally accepted valuation methods of the Uniform Standards of Professional Appraisal Practice, the American Society of Appraisers and the American Institute of Certified Public Accountants Accounting and Valuation Guide. See Note 13 12.5% Senior Secured Notes and Loans Payable for further discussion. Note 8. Inventories, Net The components of Inventory, net are as follows: March 31, 2021 December 31, 2020 Raw material $ 833 $ 789 Packaging material 965 1,128 Finished goods 1,001 544 Total inventory, net $ 2,799 $ 2,461 Note 9. Property and Equipment, Net Useful Lives March 31, 2021 December 31, 2020 Machinery 3-15 yrs $ 18,719 $ 21,333 Furniture and fixtures 3-15 yrs 769 1,209 Leasehold improvements (a) 21,265 21,333 Computer, network equipment and software 3-7 yrs 2,388 2,999 Construction in progress 970 877 44,111 47,751 Less: accumulated depreciation and amortization (37,832 ) (40,878 ) Total property and equipment, net $ 6,279 $ 6,873 (a) Leasehold improvements are amortized over the shorter of the lease term or their estimated useful lives. Total depreciation, amortization, and impairment related to property and equipment was $743 and $714 for the three-month periods ended March 31, 2021 and 2020, respectively. 16 Table of Contents Note 10. Right-of-Use Assets and Lease Obligations The Company leases all realty used as its production and warehouse facilities, corporate headquarters, commercialization operations center and research and laboratory facilities. None of its three leases include the characteristics specified in ASC 842, Leases, that require classification as financing leases and, accordingly, these leases are accounted for as operating leases. These leases provide remaining terms between 2.0 years and 5.5 years, including renewal options expected to be exercised to extend the lease periods. The Company does not recognize a right-to use asset and lease liability for short-term leases, which have terms of 12 months or less, on its consolidated balance sheet. For longer-term lease arrangements that are recognized on the Company’s consolidated balance sheet, the right-of-use asset and lease liability is initially measured at the commencement date based upon the present value of the lease payments due under the lease. These payments represent the combination of the fixed lease and fixed non-lease components that are due under the arrangement. The costs of associated with the Company’s short-term leases, as well as variable costs relating to the Company’s lease arrangements, are not material to the consolidated financial results. The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement. Measurement of the operating lease liability reflects an estimated discount rate of 16.9% applied to minimum lease payments, including expected renewals, based on the incremental borrowing rate experienced in the Company’s collateralized debt refinancing. Right-of-use assets recorded upon adoption of ASC 842 totaled $4,048. The Company’s lease costs are recorded manufacture and supply, research and development and selling, general and administrative expenses in its consolidated statements of income. For the three-month period ended March 31, 2021, total operating lease expenses totaled $433 including variable lease expenses such as common area maintenance and operating costs of $119. For the three-month period ended March 31, 2020, total operating lease expenses totaled $442 including variable lease expenses such as common area maintenance and operating costs of $106. Maturities of the Company’s operating lease liabilities are as follows: Remainder of 2021 $ 967 2022 1,295 2023 944 2024 565 2025 565 2026 424 Total lease payments 4,760 Less: imputed interest (1,338 ) Total operating lease liabilities $ 3,422 Note 11. Intangible Assets, Net and Other non-current Assets The following table provides the components of identifiable intangible assets, all of which are finite lived: 17 Table of Contents March 31, 2021 December 31, 2020 Purchased technology-based intangible $ 2,358 $ 2,358 Purchased patent 509 509 2,867 2,867 Less: accumulated amortization (2,778 ) (2,765 ) Intangible assets, net 89 102 Royalty receivable 7,000 7,000 Other 835 836 Total other non-current assets $ 7,835 $ 7,836 Amortization expense was $13 for each of the three-month periods ended March 31, 2021 and 2020. During the remaining life of the purchased patent, estimated annual amortization expense is $50 for each of the years from 2021 to 2022. During the second quarter of 2020, under the Sunovion License Agreement, the Company recognized $8,000 of royalty revenue and corresponding royalty receivable, related to the $1,000 annual minimum guaranteed royalty that is due in each of the next eight years. In connection with the Monetization Agreement, the Company performed an assessment under ASC 860 Transfer and Servicing to determine whether the existing receivable was transferred to Marathon and concluded it was not transferred. Royalty receivable consists of seven annual minimum payments due from Sunovion, the last of which is due in March 2028. The current portion of the royalty receivable is included in Trade and other receivables, net. See Note 15 Sale of Future Revenue for further details on how this receivable relates to the Monetization transaction. Note 12. Accrued Expenses Accrued expenses consisted of the following: March 31, 2021 December 31, 2020 Accrued compensation $ 3,659 $ 6,330 Accrued distribution expenses 1,807 1,722 Other 905 517 Total accrued expenses $ 6,371 $ 8,569 Note 13. 12.5 % Senior Secured Notes and Loans Payable 12.5% Senior Secured Notes On July 15, 2019, the Company completed the private placement of up to $100,000 aggregate principal of its 12.5% S Notes (the “Notes”) and issued warrants for 2,000,000 shares of common stock (the “Warrants”), $0.001 per value per share. Upon closing of the Indenture for the 12.5% Notes (the “Base Indenture”), the Company issued $70,000 of the 12.5% Notes (the “Initial Notes”) along with the Warrants and rights of first offer (the “First Offer Rights”) to the Noteholders participating in this transaction. Issuance of the Initial Notes and Warrants provided net proceeds of $66,082. On November 3, 2020, the Company entered into the First Supplemental Indenture (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) by and among the Company and U.S. Bank National Association, as Trustee (the “Trustee”) and Collateral Agent thereunder to the Base Indenture, by and between the Company and the Trustee. Under the Supplemental Indenture, the Company repaid $22,500 of its $70,000 outstanding 12.5% Notes from the upfront proceeds received under the Monetization Agreement. Further, the Company entered into an additional Purchase Agreement with its lenders whereby the Company issued in aggregate $4,000 of additional 12.5% Notes (the “2020 Additional Notes”) in lieu of paying a prepayment premium to two lenders on the early repayment of the 12.5% Notes discussed above. The result of these two transactions reduced the net balance of the Company’s 12.5% Senior Notes outstanding in the aggregate to $51,500 at December 31, 2020, and such aggregate principal amount remains outstanding as of March 31, 2021. The $4,000 principal issuance shall be repaid proportionally over the same maturities as the other 12.5% Notes. The Company also paid to one its lenders a $2,250 premium as result of the early retirement of debt. 18 Table of Contents The Company accounted for the $22,500 debt repayment as a debt modification of the 12.5% Notes. The fees paid to lenders inclusive of (i) $2,250 early premium prepayment and (ii) $4,000 issuance of Additional Notes in lieu of paying a prepayment penalty have been recorded as additional debt discount, amortized over the remaining life of the 12.5% Notes using the effective interest method. Loan origination costs of $220 associated with Additional Notes were expensed as incurred. Existing deferred discounts and loan origination fees on the 12.5% Notes are amortized as an adjustment of interest expense over the remaining term of modified debt using the effective interest method. The Amendment contains a provision whereby as the Company receives any cash proceeds from the Monetization Agreement, each Noteholder has the right to require the Company to redeem all or any part of such Noteholder’s outstanding 12.5% Notes at a repurchase price in cash equal to 112.5% of the principal amount, plus accrued and unpaid interest. This repurchase offer is capped at 30% of the cash proceeds received by the Company as the contingent milestones are attained, if any, up through June 30, 2025. A valuation study was performed by an independent third party appraiser and updated as of March 31, 2021. Based on the valuation study, the put option was valued at $590, of which $399 has been recorded in Accrued expenses and $191 has been recorded in Other non-current liabilities. The embedded put option is deemed to be a derivative under ASC 815 Derivatives and Hedging , which requires the recording of the embedded put option at fair value and subject to remeasurement at each reporting period. In addition, the holders of the 12.5% Notes have extended to December 31, 2021 from March 31, 2021, the Company’s ability to access, at the Company’s option, $30,000 of 12.5% Notes re-openers under the Indenture. The first $10,000 12.5% Notes represents a commitment of such amount by current holders of 12.5% Notes, at the option of the Company, contingent upon FDA approval of the Company’s product candidate Libervant (diazepam) Buccal Film for the management of seizure clusters. A second $20,000 12.5% Notes re-opener represents a right, at the Company’s option, to market to current holders of the Company’s 12.5% Notes, and/or other lenders, additional 12.5% Notes up to such amount, contingent upon FDA approval of Libervant for U.S. market access. The 12.5% Notes provide a stated fixed interest rate of 12.5%, payable quarterly in arrears, with the initial quarterly principal repayment of 12.5% Notes due on September 30, 2021 and the final quarterly payment due at maturity on June 30, 2025. The Company has recorded $3,863 as Loan Payable, Current to reflect this obligation in its Consolidated Balance Sheet. Principal payments are scheduled to increase annually from 10% of the face amount of the debt then outstanding during the first four quarters to 40% of the 12.5% Notes during the final four quarters. A debt maturity table is presented below: Remainder of 2021 $ 2,575 2022 7,725 2023 12,875 2024 18,025 2025 10,300 Total $ 51,500 The Company may elect, at its option, to redeem the 12.5% Notes at any time at premiums that range from 101.56% of outstanding principal if prepayment occurs on or after the fifth anniversary of the issue date of the Initial Notes to 112.50% if payment occurs during the third year after the issuance of the Notes. In the event that redemption of the 12.5% Notes occurs prior to July 15, 2021, a make-whole fee is required, based on the present value of remaining interest payments using an agreed-upon discount rate linked to the then-current U.S. Treasury rate. The Indenture also includes change of control provisions under which the Company may be required to redeem the 12.5% Notes at 101% of the remaining principal plus accrued interest at the election of the Noteholders. The Company capitalizes legal and other third-party costs incurred in connection with obtaining debt as deferred debt issuance costs and applies the unamortized portion as a reduction of the outstanding face amount of the related loan in accordance with ASU 2015-3, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs . Similarly, the Company amortizes debt discounts, such as those represented by warrants issued to its lenders, and offsets those as a direct reduction of its outstanding debt. Amortization expense arising from deferred debt issuance costs and debt discounts related to the 12.5% Notes for the three-months ended March 31, 2021 and 2020 were $1,152 and $584, respectively. Unamortized deferred debt issuance costs and deferred debt discounts totaled $13,444 and $9,078 as of March 31, 2021 and 2020, respectively. 19 Table of Contents Collateral for the loan under the 12.5% Notes consists of a first priority lien on substantially all property and assets, including intellectual property, of the Company. This secured obligation provides payment rights that are senior to all existing and future subordinated indebtedness of the Company and provides Lenders with perfected security interests in substantially all of the Company’s assets. Note 14. Warrant s Warrants were issued in conjunction with the Initial Notes (the “Initial Warrants”) and Additional Notes (the “Additional Warrants”) expire on June 30, 2025 and entitle the Noteholders to purchase up to 2,143,000 shares of the Company’s common stock at $0.001 per share and included specified registration rights. Management estimated the fair value of the Initial Warrants to be $6,800 and the Additional Warrants to be $735, each assisted by an independent third-party appraiser. The fair value of the respective Warrants is treated as a debt discount, amortizable over the term of the respective Warrants, with the unamortized 12.5% Notes portion applied to reduce the aggregate principal amount of the 12.5% Notes in the Company’s unaudited condensed balance sheet. Additionally, since the Warrants issued do not provide warrant redemption or put rights within the control of the holders that could require the Company to make a payment of cash or other assets to satisfy the obligations under the Warrants, except in the case of a “cash change in control”, the fair value attributed to the Warrants is presented in Additional Paid-in Capital in Company’s unaudited condensed balance sheet. There were no Warrants exercised during the three-month periods ended March 31, 2021 or March 31, 2020, respectively. Note 15. Sale of Future Revenue On November 3, 2020, we entered into the Monetization Agreement with Marathon. Under the terms of the Monetization Agreement, we sold all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion’s apomorphine product, KYNMOBI®. KYNMOBI®, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the FDA on May 21, 2020. In exchange for the sale of these rights, we received an upfront payment of $40,000 and an additional payment of $10,000 through the achievement of the first milestone. We have received an aggregate amount of $50,000 through March 31, 2021 under the Monetization Agreement. Under the Monetization Agreement, additional aggregate contingent payments of up to $75,000 may be due to us upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total potential proceeds of $125,000. We recorded the upfront proceeds of $40,000 and subsequent first milestone of $10,000, reduced by $2,909 of transaction costs, as a liability related to the sale of future revenue that will be amortized using the effective interest method over the life of the Monetization Agreement. As future contingent payments are received, they will increase the balance of the liability related to the sale of future revenue. Although we sold all of our rights to receive royalties and milestones, as a result of our ongoing obligations related to the generation of these royalties, we will account for these royalties as revenue. Our ongoing obligations include the maintenance and defense of the intellectual property and to provide assistance to Marathon in executing a new license agreement for KYNMOBI ® in the event Sunovion terminates the Sunovion License Agreement in one or more jurisdictions of the licensed territory under the Sunovion License Agreement. During the second quarter of 2020, under the Sunovion License Agreement, the Company recognized $8,000 of royalty revenue and corresponding royalty receivable, related to the $1,000 annual minimum guaranteed royalty that is due in each of the next eight years. In connection with the Monetization Agreement, the Company performed an assessment under ASC 860, Transfer and Servicing to determine whether the existing receivable was transferred to Marathon and concluded that the receivable was not transferred. 20 Table of Contents As royalties are remitted to Marathon from Sunovion, the collection of the royalty receivable and balance of the liability related to the sale of future revenue will be effectively repaid over the life of the agreement. In order to determine the amortization of the liability related to the sale of future revenue, we are required to estimate the total amount of future royalty and milestone payments to Marathon over the life of the Monetization Agreement and contingent milestone payments from Marathon to the Company. The sum of future royalty payments less the $50,000 in proceeds received and future contingent payments will be recorded as interest expense over the life of the Monetization Agreement. At execution, the estimate of this total interest expense resulted in an effective annual interest rate of approximately 24.9%. This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the life of the Monetization Agreement. The Company will periodically assess the estimated royalty and milestone payments to Marathon from Sunovion and contingent milestone payments from Marathon to the Company. To the extent the amount or timing of such payments is materially different from the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of royalty and milestone payments to Marathon from Sunovion, and correspondingly, the amount of interest expense recorded by the Company, most of which are not under our control. Such factors include, but are not limited to, changing standards of care, the initiation of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in government health authority imposed restrictions on the use of products, significant changes in foreign exchange rates as the royalties remitted to Marathon are made in U.S. dollars (USD) while a portion of the underlying sales of KYNMOBI ® will be made in currencies other than USD, and other events or circumstances that are not currently foreseen. Changes to any of these factors could result in increases or decreases to both royalty revenue and interest expense related to the sale of future revenue. The following table shows the activity of the liability related to the sale of future for the three months ended March 31, 2021: Liability related to the sale of future revenue, net at December 31, 2020 $ 48,974 Royalties related to the sale of future revenue (20 ) Amortization of issuance costs 32 Interest expense related to the sale of future revenue 3,302 Liability related to the sale of future revenue, net (includes current portion of $1,905) $ 52,288 Note 16. Net Loss Per Share Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares. As a result of the Company’s net loss incurred for the three months ended March 31, 2021 and 2020, all potentially dilutive instruments outstanding would have anti-dilutive effects on per-share calculations for this period. Therefore, basic and diluted net loss per share were the same for all periods presented as reflected below. Three Months Ended March 31, 2021 2020 Numerator: Net loss $ (14,672 ) $ (16,530 ) Denominator: Weighted-average number of common shares – basic 35,563,275 33,569,694 Loss per common share – basic and diluted $ (0.41 ) $ (0.49 ) As of March 31, 2021 and 2020, respectively, the Company’s potentially dilutive instruments included 3,905,192 and 2,947,192 options to purchase common shares and 13,491 and 44,036 unvested RSUs that were excluded from the computation of diluted weighted average shares outstanding because these securities had an antidilutive impact due to the losses reported. Similarly excluded as of March 31, 2021 and 2020, were potentially dilutive warrants for the purchase of 1,714,429 and 1,571,429 common shares, respectively. 21 Table of Contents Note 17. Share-Based Compensation The Company recognized share-based compensation in its Condensed Consolidated Statements of Operations and Comprehensive Loss during 2021 and 2020 as follows: Three Months Ended March 31, 2021 2020 Manufacture and supply $ 82 $ 63 Research and development 232 182 Selling, general and administrative 1,193 1,615 Total share-based compensation expenses $ 1,507 $ 1,860 Share-based compensation from: Restricted stock units $ 38 $ 464 Stock options 1,469 1,396 Total share-based compensation expenses $ 1,507 $ 1,860 Share-Based Compensation Equity Awards The following tables provide information about the Company’s restricted stock unit and stock option activity during the three-month period ended March 31, 2021: Restricted Stock Unit Awards (RSUs): Number of Units Weighted Average Grant Date Fair Value (in thousands) Unvested as of December 31, 2020 14 $ 11.38 Granted — — Vested — — Forfeited — — Unvested as of March 31, 2021 14 $ 11.38 Grant date fair value of shares vested during the period $ — Unrecognized compensation costs as of March 31, 2021 $ 67 Unrecognized compensation costs related to awards of RSUs are expected to be recognized over a weighted-average period of less than one year. Stock Option Awards: Number of Options Weighted Average Exercise Price (in thousands) Outstanding as of December 31, 2020 3,259 $ 8.14 Granted 656 5.30 Exercised, Forfeited, Expired (10 ) (3.55 ) Outstanding as of March 31, 2021 3,905 $ 7.67 Vested and expected to vest as of March 31, 2021 3,742 $ 7.78 Exercisable as of March 31, 2021 1,592 $ 10.22 22 Table of Contents The fair values of stock options granted during the three months ended March 31, 2021 were estimated using the Black-Scholes pricing model based on the following assumptions: Expected dividend yield 0 % Expected volatility 100 % Expected term (years) 6.1 Risk-free interest rate 1.0 The weighted average grant date fair value of stock options granted during the three months ended March 31, 2021 was $4.19 During the three-month period ended March 31, 2021, stock options were granted with an exercise price of $5.30 and accordingly, given the Company’s share price of $5.20 at March 31, 2021, certain shares granted during this period provided intrinsic value at that date totaling $66. As of March 31, 2021, $6,704 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 1.9 years from the date of grant. Note 18. Income Taxes The Company has accounted for income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts and respective tax bases of existing assets and liabilities, as well as net operating loss carryforwards and research and development credits. Valuation allowances are provided if it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company has considered the impact of the CARES Act in relation to the 2021 income tax provision. However, due to the full valuation allowance and no ability or intent to carryback the 2021 net operating loss, no impact is expected. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items. For the three months ended March 31, 2021 and 2020, the Company recorded no income tax benefit from its pretax losses of $14,672 and $16,530, due to realization uncertainties. The Company’s U.S. Federal statutory rate is 21%. The primary factor impacting the effective tax rate for the three-month periods ended March 31, 2021 is the anticipated full year operating loss which will require full valuation allowances against any associated net deferred tax assets. Note 19. Contingencies Litigation and Contingencies From time to time, we have been and may again become involved in legal proceedings arising in the course of our business, including product liability, intellectual property, commercial litigation, or environmental or other regulatory matters. Patent-Related Litigation Indivior Inc., Indivior UK Ltd., and Aquestive Therapeutics, Inc. v. Dr. Reddy’s Labs. S.A. and Dr. Reddy’s Labs., Inc. , On February 7, 2018, we and Indivior Inc. and Indivior UK Ltd. (collectively, “Indivior”) initiated a lawsuit against Dr. Reddy’s Laboratories S.A. and Dr. Reddy’s Laboratories, Inc. (collectively, “Dr. Reddy’s”) asserting infringement of U.S. Patent No. 9,855,221 (the “221 patent”). On April 3, 2018, we and Indivior initiated a separate lawsuit against Dr. Reddy’s asserting infringement of U.S. Patent No. 9,931,305 (the “’305 patent”). On May 29, 2018, the lawsuits regarding the ’221 and ’305 patents were consolidated which was originally initiated by Indivior against Dr. Reddy’s asserting infringement of U.S. Patent No. 9,687,454 (the “’454 patent”). On February 19, 2019, the Court granted the parties’ agreed stipulation to drop the ’221 patent from the case. On January 8, 2020, the Court entered a stipulated order of non-infringement of the ’305 patent based on the Court’s claim construction ruling, and we and Indivior preserved our rights to appeal the claim construction ruling. 23 Table of Contents On November 22, 2019, Dr. Reddy’s filed an amended answer and counterclaims asserting conspiracy to monopolize against us and monopolization, attempted monopolization, and conspiracy to monopolize against Indivior under federal and New Jersey antitrust laws. The Court denied our motion to dismiss Dr. Reddy’s counterclaims on August 24, 2020. Fact discovery on Dr. Reddy’s antitrust counterclaims concluded on January 29, 2021. On March 11, 2021, the court entered a stipulated order dismissing Dr. Reddy’s counterclaims against Aquestive. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter. Indivior Inc., Indivior UK Ltd., and Aquestive Therapeutics, Inc. v. Teva Pharmaceuticals USA, Inc. , On February 7, 2018, we and Indivior initiated a lawsuit against Teva Pharmaceuticals USA, Inc. (“Teva”) asserting infringement of the ’221 patent. On April 3, 2018, we and Indivior initiated a separate lawsuit against Teva asserting infringement of the ’305 patent. On May 29, 2018, the lawsuits regarding the ’221 and ’305 patents were consolidated which was originally initiated by Indivior against Teva asserting infringement of the ’454 patent. The parties agreed that the case would be governed by the final judgment against Dr. Reddy’s (described above). We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter. Indivior Inc., Indivior UK Ltd., and Aquestive Therapeutics, Inc. v. Alvogen Pine Brook LLC , On September 14, 2017, Indivior initiated a lawsuit against Alvogen Pine Brook LLC (“Alvogen”) asserting infringement of the ’454 patent. On February 7, 2018, we and Indivior filed an Amended Complaint, adding us as a plaintiff and asserting infringement of U.S. Patent No. 9,855,221 (the “’221 patent”). On April 3, 2018, we and Indivior initiated a separate lawsuit against Alvogen asserting infringement of the ’305 patent. On May 29, 2018, the cases were consolidated. On February 26, 2019, the Court granted the parties’ agreed stipulation to drop the ’221 patent from the case. On January 9, 2020, the Court entered a stipulated order of non-infringement of the ’305 patent based on the Court’s claim construction ruling, and we and Indivior preserved our rights to appeal the claim construction ruling. On November 21, 2019, Alvogen filed an amended answer and counterclaims asserting monopolization, attempted monopolization, and conspiracy to monopolize against us and Indivior under federal and New Jersey antitrust laws. The court denied our motion to dismiss Alvogen’s counterclaims on August 24, 2020. On November 2, 2020, Alvogen filed a second amended answer and counterclaims, removing its allegations of monopolization and attempted monopolization against us and asserting only conspiracy to monopolize against us. Fact discovery on Alvogen’s antitrust counterclaims concluded on January 29, 2021. Expert discovery is ongoing and is scheduled to continue through the beginning of August 2021. Dispositive motions are currently due August 27, 2021. There is no trial date set. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter. BioDelivery Sciences International, Inc. v. Reckitt Benckiser Pharmaceuticals, Inc., RB Pharmaceuticals Limited and MonoSol Rx, LLC , On September 20, 2014, BioDelivery Sciences International, Inc. (“BDSI”) initiated a lawsuit against us and RB seeking a declaratory judgment of non-infringement and invalidity of U.S. Patent No. 8,475,832 (the “’832 patent”), U.S. Patent No. 7,897,080 (the “’080 patent”), and U.S. Patent No. 8,652,378 (the “’378 patent”). On December 12, 2014, BDSI voluntarily dismissed the ’378 patent from the case. On December 12, 2015, the parties jointly moved the Court for a stay of the case pending inter partes review of the ’832 patent and reexamination of the ’080 patent. On February 10, 2021, the parties submitted a covenant not to sue regarding the ’378 patent, as well as a joint status report notifying the court that BDSI will file a notice of dismissal of the case. On March 8, 2021, BDSI filed a notice of dismissal, resolving the case. Reckitt Benckiser Pharmaceuticals, Inc. and MonoSol Rx, LLC v. BioDelivery Sciences International, Inc. and Quintiles Commercials US, Inc. , On September 22, 2014, we and RB initiated a lawsuit against BDSI and Quintiles Commercial US, Inc. (“Quintiles”) asserting infringement of U.S. Patent No. 8,765,167 (the “’167 patent”) in the District of New Jersey (Civil Action No. 3:14-cv-5892). On July 22, 2015, the case was transferred to the Eastern District of North Carolina. BDSI filed requests for inter partes review (“IPR”) of the ’167 patent before the Patent Trial and Appeal Board (“PTAB”), and on May 6, 2016, the Court stayed the case pending the outcome and final determination of the IPR proceedings. On March 24, 2016, the PTAB issued final written decisions finding the ’167 patent was not unpatentable, and the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) remanded those decisions for further proceedings before the PTAB. Following the PTAB’s February 7, 2019 decision on remand denying institution, BDSI appealed that decision to the Federal Circuit. The Federal Circuit granted our motion to dismiss the appeal, and denied BDSI’s request for rehearing en banc . BDSI filed a petition for writ of certiorari to the Supreme Court of the United States (“Supreme Court”), which the Supreme Court denied on October 5, 2020. On January 4, 2021, the parties submitted a joint status report to the Eastern District of North Carolina stating their agreement that all proceedings and appeals of the IPR on the ’167 patent are complete and that, as a result, the stay of the matter may be lifted. The parties are awaiting further action from the Court. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter. 24 Table of Contents Aquestive Therapeutics, Inc. v. BioDelivery Sciences International, Inc. , On November 11, 2019, we initiated a lawsuit against BDSI asserting infringement of the ’167 patent in the Eastern District of North Carolina. On April 1, 2020, the Court denied BDSI’s motion to stay and its motion to dismiss the complaint. On April 16, 2020, BDSI filed its Answer and Counterclaims to the complaint, including counterclaims for non-infringement, invalidity, and unenforceability of the ’167 patent. On May 7, 2020, we filed a Motion to Dismiss BDSI’s unenforceability counterclaim and a Motion to Strike BDSI’s corresponding affirmative defenses. On May 28, 2020, BDSI amended its counterclaims and filed an Answer and Amended Counterclaims, which included additional allegations in support of BDSI’s unenforceability counterclaim. On June 25, 2020, we filed a Motion to Dismiss BDSI’s Amended Counterclaim for unenforceability and a Motion to Strike BDSI’s corresponding affirmative defense of unenforceability. BDSI filed its opposition to our Motion to Dismiss and Strike on July 16, 2020, and we filed our Reply on July 30, 2020. On March 16, 2021, the court issued an order granting-in-part and denying-in-part Aquestive’s motion to dismiss BDSI’s counterclaims asserting unenforceability of the ’167 patent. Aquestive filed its answer to the remaining portions of BDSI’s counterclaims on April 6, 2021. Also, on April 6, 2021, the court issued an order requiring the parties to conduct a Rule 26(f) conference by May 6, 2021, and to submit a joint discovery plan by May 20, 2021. BDSI also filed on April 6, 2021 a renewed motion to dismiss Aquestive’s complaint. Aquestive’s opposition to BDSI’s renewed motion to dismiss is currently due April 27, 2021. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter. Antitrust Litigation State of Wisconsin, et al. v. Indivior Inc., Reckitt Benckiser Healthcare (UK) Ltd., Indivior PLC, and MonoSol Rx, LLC , On September 22, 2016, forty-one states and the District of Columbia, or the States, brought a lawsuit against Indivior and us in the U.S. District Court for the Eastern District of Pennsylvania alleging violations of federal and state antitrust statutes and state unfair trade and consumer protection laws relating to Indivior’s launch of Suboxone Sublingual Film in 2010 and seeking an injunction, civil penalties, and disgorgement. After filing the lawsuit, the case was consolidated for pre-trial purposes with the In re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litigation, MDL No. 2445, or the Suboxone MDL, a multidistrict litigation relating to putative class actions on behalf of various private plaintiffs against Indivior relating to its launch of Suboxone Sublingual Film. While we were not named as a defendant in the original Suboxone MDL cases, the action brought by the States alleges that we participated in an antitrust conspiracy with Indivior in connection with Indivior’s launch of Suboxone Sublingual Film and engaged in related conduct in violation of federal and state antitrust law. We moved to dismiss the States’ conspiracy claims, but by order dated October 30, 2017, the Court denied our motion to dismiss. We filed an answer denying the States’ claims on November 20, 2017. Daubert motions were filed on September 28, 2020, and oppositions were filed on October 19, 2020. On February 19, 2021, the court issued an order denying all Daubert motions. On March 8, 2021, Aquestive filed a motion for summary judgment. The States’ response to Aquestive’s summary judgment motion is due April 15, 2021, and Aquestive’s reply is due May 11, 2021. No trial date has yet been set. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. Humana and Centene Action s Humana Inc. v. Indivior Inc, Indivior Solutions Inc., Indivior PLC, Reckitt Benckiser Healthcare (UK) Ltd., and Aquestive Therapeutics, Inc. , Centene Corporation, Wellcare Health Plans, Inc., New York Quality Healthcare Corporation d/b/a Fidelis Care, and Health Net, LLC v. Indivior Inc, Indivior Solutions Inc., Indivior PLC, Reckitt Benckiser Healthcare (UK) Ltd., and Aquestive Therapeutics, Inc. , On September 18, 2020, Humana, Inc. (“Humana”), a health insurance payor, filed a lawsuit against us and Indivior in the Eastern District of Pennsylvania alleging facts similar to those at issue in the Antitrust Case and the Suboxone MDL described above, which lawsuit was assigned to the same judge that is presiding over Antitrust Case and Suboxone MDL. Humana’s Complaint alleges five causes of action against us, including conspiracy to violate the RICO Act, fraud under state law, unfair and deceptive trade practices under state law, insurance fraud, and unjust enrichment. 25 Table of Contents On September 21, 2020, Centene Corporation (“Centene”) and other related insurance payors filed a similar lawsuit against us and Indivior in the Eastern District of Missouri. The counsel representing Humana is also representing Centene. On September 21, 2020, the Centene action was provisionally transferred to the Eastern District of Pennsylvania by the United States Judicial Panel on Multidistrict Litigation. On January 15, 2021, we filed a motion to dismiss the Centene and Humana complaints. The other defendants in the actions also filed motions to dismiss on the same date. Centene and Humana filed their oppositions to the motions to dismiss on February 22, 2021, and Aquestive and the other defendants filed reply briefs on March 16, 2021. There is currently no hearing set on the motions to dismiss and the parties are awaiting action from the court on the motions to dismiss. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. California Litigation Neurelis, Inc. v. Aquestive Therapeutics, Inc. , On December 5, 2019, Neurelis filed a lawsuit against us in the Superior Court of California, County of San Diego alleging the following three causes of action: (1) Unfair Competition under California Business and Professional Code § 17200; (2) Defamation; and (3) Malicious Prosecution. Neurelis filed a First Amended Complaint on December 9, 2019, alleging the same three causes of action. We filed a Motion to Strike Neurelis’s Complaint under California’s anti-SLAPP (“strategic lawsuit against public participation”) statute on January 31, 2020, which Neurelis opposed. On August 6, 2020, the Court issued an order granting in part and denying in part our anti-SLAPP motion. We filed a notice of appeal to the California Court of Appeal on September 1, 2020, and Neurelis filed a notice of cross-appeal on October 5, 2020. We filed our opening appeal brief on January 27, 2021, and Neurelis filed its combined opening and responsive appeal brief on March 30, 2021. Aquestive’s combined response and reply brief is due June 1, 2021 and briefing on the appeal is anticipated to end in July 2021. There is no date yet set for a hearing on the appeal. The trial court proceedings remain stayed while the appeal is pending. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. Stockholder Class Action On March 1, 2021, a securities class action lawsuit was filed in the United States District Court of the District of New Jersey alleging that the Company and certain of its officers engaged in violations of the federal securities laws relating to public statements made by the Company relating to the approval of Libervant. We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter. Note 20. Subsequent Events (A) Continued Utilization of the At-The-Market Facility The Company continued utilization of its At-The-Market facility from April 1 through April 30, 2021 and sold 367,886 shares which generated net proceeds of approximately $1,679.