What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-03 · 110 added, 100 removed, 344 unchanged (38% of the section changed)

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risk inherent in commercializing a new product (including technology risks, financial risks, market risks and implementation risks and regulatory limitations) and the related risk of the failure to obtain such approval on our ability to access additional funding under the 12.5% Notes;

risks and uncertainties concerning the revenue stream from the monetization of our royalty rights for the product KYNMOBI ® , as well as the achievement of royalty targets worldwide or in any jurisdiction and certain other commercial targets required for contingent payments under the KYNMOBI monetization transaction;

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commercial targets required for contingent payments under the KYNMOBI monetization transaction;

risk of development of our sales and marketing capabilities;

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At a Type A meeting with the FDA in November 2020, the FDA confirmed that the issues identified in the CRL may be addressed by utilizing modeling and simulations for an updated dosing regimen.

We submitted a revised weight-based dosing regimen with modeling and simulations in December 2020.

In February 2021, the FDA provided feedback on the December 2020 submission which provided clarity regarding the information that the Agency expected to see in our population pharmacokinetic model and safety data as it relates specifically to the patient population included in the studies.

In June 2021, we resubmitted our NDA to the FDA.

We submitted a

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revised weight-based dosing regimen with modeling and simulations in December 2020.

In February 2021, the FDA provided feedback on the December 2020 submission which provided clarity regarding the information that the Agency expected to see in our population pharmacokinetic ('PK") model and safety data as it relates specifically to the patient population included in the studies.

In June 2021, we resubmitted our New Drug Application ("NDA") to the FDA.

In July 2021, the FDA accepted our resubmission filing of the NDA and assigned a Prescription Drug User Fee Act ("PDUFA") target goal date of December 23, 2021.

Based upon the FDA’s feedback at the Type A meeting as well as further guidance from the Agency, we continue to believe that no further clinical studies are necessary.

We have started to prepare for a commercial launch of Libervant, if approved for U.S.

The Company continues to actively engage with the FDA regarding its accepted NDA for Libervant ahead of the PDUFA target goal date as the FDA completed its mid cycle review of our application in September.

In addition to responding to a number of information requests, the FDA has concluded an audit of our post marketing adverse event reporting capabilities, requested and received additional information about the patent coverage for the product, approved for use the trade name for Libervant, and made recommendations for changes in language related to our packaging.

Concurrently, we have spoken with the FDA Office of Orphan Products Development.

We have provided additional information supplementing our original correspondence to the group and continue to believe that we have provided a strong set of facts supporting a decision by the FDA of clinical superiority to prior approved drugs for this indication to support a finding that Libervant represents a major contribution to patient care as compared to the device driven rectal and nasal spray alternatives.

Preparations are advancing with payer and sales force planning underway for the commercial launch of Libervant, if approved for U.S.

market access, as soon as possible after approval.

Upon FDA approval for U.S.

market access, if granted, we expect to launch with the existing sales force and then plan to expand in 2022.

We anticipate that capital available within our existing debt facility will be available, if we choose, to support the launch of this product in 2021.

We are seeking to demonstrate that Libervant will, if approved by the FDA, represent a "major contribution to patient care" within the meaning of FDA regulations and guidance, as compared to available treatment options, as the first, non-device delivered, oral diazepam-based product available to manage seizure clusters in epilepsy patients.

We anticipate that capital available within our existing debt facility will be available, if we choose, to support the launch of this product, if approved.

However, overcoming the orphan drug marketing exclusivity is difficult to establish, with limited precedent, and there can be no assurance that the FDA will agree with our position seeking to overcome such marketing exclusivity and approve Libervant for U.S.

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market access for Libervant.

Any failure to obtain FDA approval to demonstrate clinical superiority for or get U.S.

Any failure to obtain FDA approval to demonstrate clinical superiority or get U.S.

market access for Libervant would have a material adverse effect on our business, financial condition and results of operations in 2021 and later.

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The active programs in our complex molecule portfolio are:

• AQST-108-Sublingual Film (or SF) – is a "first of its kind" oral sublingual film formulation delivering systemic epinephrine that is in development for the treatment of anaphylaxis as well additional alternate indications.

AQST-108 is composed of the prodrug dipivefrin, which is contained within a unique polymeric matrix of Aquestive's Pharmfilm ® technology.

• AQST-109 – is a next generation prodrug sublingual film formulation of epinephrine that is in development for the treatment of allergic reactions, including anaphylaxis.

Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via auto-injectors, such as EpiPen® and Auvi-Q®, which require patients or caregivers to inject epinephrine into their thighs during an emergency allergic reaction.

As a result of this route of administration, many patients and their caregivers are reluctant to use currently available products, resulting in increased hospital visits and overall cost of care to treat anaphylactic events.

However, AQST-109 would, if approved by the FDA, allow a patient to simply place a dissolvable strip, approximately the size and weight of a postage stamp, under the tongue, providing an appropriate medication where it is needed, when it is needed and in a form preferred by patients.

The Company completed a first-in-human Phase 1 clinical trial for AQST-109 in Canada.

Recently reported top line data from this study support AQST-109's potential as the first orally administered epinephrine product for the treatment for anaphylaxis with safety, tolerably, PK and pharmacodynamics (PD) measures comparable to those of the auto-injector epinephrine products.

Further, we submitted a request for a pre-IND meeting for AQST-109 with the FDA and anticipate receiving a written response from the FDA by the end of 2021.

We are on track to conduct a crossover study using an adaptive design for AQST-109 in Canada beginning in the fourth quarter 2021.

This study will determine the final formulation and dose for AQST-109 and allow the Company to move forward to the manufacture of registration batches and a pivotal PK study in 2022.

• AQST-108 – is a sublingual film formulation delivering systemic epinephrine that is also in development by Aquestive for the treatment of certain types of allergic reactions other than anaphylaxis.

AQST-108 is composed of the prodrug dipivefrin which is enzymatically cleaved systemically into epinephrine after administration.

Dipivefrin is currently available outside of the U.S.

for ophthalmic indications.

Dipivefrin is enzymatically cleaved systemically into epinephrine after administration.

We submitted an IND for AQST-108 to the FDA on June 23, 2020.

The FDA confirmed that the drug candidate has the potential to be reviewed under the 505(b)(2) regulatory approval pathway.

We expect that this pathway will provide the means to more expedient and less costly development and filing.

We recently completed a second pharmacokinetic (PK) trial for AQST-108.

The Phase 1 study featured a 4-treatment crossover design that compared the pharmacokinetics, safety and pharmacodynamics of epinephrine administered in a sublingual film to that of epinephrine administered via both subcutaneous and intramuscular injections in 28 healthy adult subjects.

Based on top-line results, AQST-108 was generally well-

tolerated, with adverse events observed that are consistent with the known adverse events profile for epinephrine.

AQST-108 also achieved a similar time to maximal concentrations, or Tmax, when compared to both the subcutaneous and intramuscular injections of epinephrine.

The first PK trial for AQST-108 was a single ascending dose study that compared pharmacokinetics, safety and pharmacodynamics of epinephrine administered in a sublingual film at ascending dose levels in 6-12 healthy adult subjects per dose level.

In this study AQST-108 was generally well tolerated, with adverse events observed that are consistent with the known adverse events profile for epinephrine.

The data from both this Phase 1 PK trial and the previous trials collectively demonstrate that AQST-108 can consistently deliver epinephrine.

sublingually and, after receiving AQST-108, all subjects had measurable plasma concentrations of epinephrine.

We are preparing to request a meeting with the FDA in the second half of 2021 to review these results and discuss next steps in the development of AQST-108, as well as potential application beyond the treatment of anaphylaxis.

Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via subcutaneous or intramuscular injection.

The current market leader is a single-dose, pre-filled automatic injection device.

As a result of administration via subcutaneous or intramuscular injection, many patients and their caregivers are reluctant to use currently available products, resulting in increased hospital visits and overall cost of care to treat anaphylactic events.

The data from our previously completed Phase 1 dose escalation study demonstrated that AQST-108 achieved similar ranges of mean values of maximum concentration (Cmax) and time to reach maximum concentration (Tmax) to that reported for injectables provided a greater total exposure (AUC0-t;

area under the curve) than that reported for the injectables and had less interpatient variability when compared to the degree of variation (CV%) data reported for injectables, and was well tolerated, with no study participants discontinuing participation due to an adverse event.

We believe that, as a result of its sublingual administration, AQST-108 will improve patient adherence and lower the total cost of care.

• AQST-109 – is a next generation prodrug sublingual film formulation of epinephrine that Aquestive intends to develop for treatment of allergic reactions including anaphylaxis.

In vitro tests and preclinical studies indicate that AQST-109 has the potential to absorb more extensively, convert more rapidly to systemic epinephrine, utilize less drug and provide a unique profile when compared to AQST-108.

In March 2021, Health Canada approved our first in human study dossier.

We are conducting a two part Phase 1 PK trial of AQST-109 in Canada and are on track to report top-line data from this study in the second half of 2021.

We intend to request a pre-IND meeting with the FDA once study results are available.

Based on top-line results of a recent second Phase 1 PK trial in 28 healthy adult volunteers, AQST-108 was generally well-tolerated, with adverse events observed that are consistent with the known adverse events profile for epinephrine.

We are on track to request a pre-IND meeting with the FDA in 2022 and plan to disclose the indication and path forward for development once we have received feedback from the agency.

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• AQST-305 – is a sublingual film formulation of octreotide, a small peptide that has a similar pharmacological profile to natural somatostatin, for the treatment of acromegaly, as well as severe diarrhea and flushing associated with carcinoid syndrome.

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We are the sole and exclusive supplier and manufacturer of Suboxone Sublingual Film and have produced over 2.2 billion doses of Suboxone since its launch in 2010.

As of June 30, 2021, Suboxone branded products retain approximately 40% film market share as generic film-based products have penetrated this market.

As of September 30, 2021, Suboxone branded products retain approximately 38% film market share as generic film-based products have penetrated this market.

We have filed patent infringement lawsuits against certain companies relating to generic film-based products for buprenorphine-naloxone.

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Contingencies, contained herein.

• Exservan TM (riluzole) – has been developed, utilizing our proprietary PharmFilm technology, for the treatment of amyotrophic lateral sclerosis (ALS).

• Exservan TM (riluzole) – has been developed for the treatment of amyotrophic lateral sclerosis (ALS).

We believe that Exservan, via our orally administered dosage form, can bring meaningful assistance to patients who are diagnosed with ALS and face difficulties swallowing traditional forms of medication.

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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.

We received an aggregate amount of $50,000 through June 30, 2021 under the Monetization Agreement.

Under the Monetization Agreement, additional aggregate contingent payments of up to $75.0 million may be due us upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total potential gross proceeds under the Monetization Agreement of $125.0 million.

We received an aggregate amount of $50,000 through September 30, 2021 under the Monetization Agreement.

Under the Monetization Agreement, additional aggregate contingent payments of up to $75.0 million may be due us upon the achievement of worldwide royalty and other

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commercial targets within a specified timeframe, which could result in total potential gross proceeds under the Monetization Agreement of $125.0 million.

• Zuplenz – an oral soluble film formulation of ondansetron, a 5-HT antagonist approved for the treatment of nausea and vomiting associated with chemotherapy and post-operative recovery.

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As an emerging growth company, we have elected to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we will comply with new or revised accounting standards not later than on the relevant dates on which adoption of such standards is required for emerging growth companies.

In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act, subject to certain conditions contained therein and, as a result, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (iii) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

These exemptions will apply for a period of five

years following the consummation of our IPO or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.

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compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

These exemptions will apply for a period of five years following the consummation of our IPO or until we no longer meet the requirements of being an emerging growth company, whichever is earlier.

We are also a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a “smaller reporting company,” and have either:

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Proprietary Product Sales, Net

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We commercialized our first proprietary CNS product, Sympazan, in December 2018.

We currently sell Sympazan through wholesalers for distribution through retail and specialty pharmacies.

Revenues from sales of proprietary product are recorded net of prompt payment discounts, wholesaler service fees, returns allowances, rebates and co-pay support

redemptions, each of which are described in more detail below.

Revenues from sales of proprietary product are recorded net of prompt payment discounts, wholesaler service fees, returns allowances, rebates and co-pay support redemptions, each of which are described in more detail below.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales.

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• the cost of acquiring, developing and manufacturing clinical study materials;

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• costs associated with preclinical and clinical activities and regulatory operations.

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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, and recorded these payments 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..

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.

We have received an aggregate amount of $50,000 through June 30, 2021 under the Monetization Agreement.

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

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achievement of the first milestone, and recorded these payments 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..

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.

We have received an aggregate amount of $50,000 through September 30, 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.

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The interest-bearing account has no minimum amount to be maintained in the account nor any fixed length of period for which interest is earned.

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Comparison of the Three and Nine Months Ended September 30, 2021 and 2020

The following table sets forth our revenue data for the periods indicated.

Three Months Ended

Six Months Ended June 30,

September 30,

Nine Months Ended September 30,

(In thousands, except %) 2021 2020 $ % 2021 2020 $ %

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Total revenues $ 13,287 $ 8,260 $ 5,027 61 % $ 39,754 $ 38,700 $ 1,054 3 %

For the three months ended June 30, 2021, total revenues decreased 29% or $6,330 compared to same period in the prior year.

For the six months ended June 30, 2021, total revenues decreased 13% or $3,973 compared to the same period in the prior year.

The decrease was due to lower license and royalty revenue, partly offset by higher Sympazan and manufacture and supply revenue.

Manufacture and supply revenue increased 47% or $3,406 for the three months ended June 30, 2021 compared to the same period in the prior year.

Manufacture and supply revenue increased 21% or $3,001 for the six months ended June 30, 2021 compared to the same period in the prior year.

For the three months ended September 30, 2021, total revenues increased 61% or $5,027 compared to same period in the prior year.

The increase was primarily due to higher manufacturing and supply revenue as well as Sympazan revenue.

For the nine months ended September 30, 2021, total revenues increased 3% or $1,054 compared to the same period in the prior year.

The increase was primarily due to higher Sympazan revenue and manufacture and supply revenue, offset by lower license and royalty revenue.

Manufacture and supply revenue increased 77% or $4,544 for the three months ended September 30, 2021 compared to the same period in the prior year.

Manufacture and supply revenue increased 38% or $7,545 for the nine months ended September 30, 2021 compared to the same period in the prior year.

This increase was due to higher Suboxone manufacturing volume.

License and royalty revenue decreased 82% or $10,617 to $2,311 for the three months ended June 30, 2021 compared to the same period in the prior year.

License and royalty revenue decreased 65% or $8,682 for the six months ended June 30, 2021 compared to the same period in the prior year.

This decrease was due to a milestone earned of $4,000 as well as royalty revenue of $8,000 recognized upon the FDA approval of Sunovion’s KYNMOBI ™ product during the second quarter of 2020 that did not occur in 2021.

License and royalty revenue remained flat for the three months ended September 30, 2021 compared to the same period in the prior year.

License and royalty revenue decreased 63% or $8,682 for the nine months ended September 30, 2021 compared to the same period in the prior year.

This was partly offset by an increase in milestones earned from KemPharm, Inc.

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which was terminated in the first quarter of 2021.

Co-development and research fees increased 71% or $190 for the three months period ended June 30, 2021 compared to the same period in the prior year.

Co-development and research fees increased 69% or $365 for the six months ended June 30,

2021 compared to the same period in the prior year.

Co-development and research fees increased 53% or $182 for the three months period ended September 30, 2021 compared to the same period in the prior year.

Co-development and research fees increased 63% or $547 for the nine months ended September 30, 2021 compared to the same period in the prior year.

The increase was driven by the timing of the achievement of research and development performance obligations and are expected to fluctuate from one reporting period to the next.

Proprietary product sales, net increased 57% or $691 for the three months ended June 30, 2021 compared to the same period in the prior year.

Proprietary product sales, net increased 56% or $1,343 for the six months ended June 30, 2021 compared to the same period in the prior year.

Proprietary product sales, net increased 18% or $301 for the three months ended September 30, 2021 compared to the same period in the prior year.

Proprietary product sales, net increased 40% or $1,644 for the nine months ended September 30, 2021 compared to the same period in the prior year.

The increase was due to a steady rise in acceptance with the medical and patient communities over time which led to increased prescriptions and improved payor approval rates for Sympazan.

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Expenses and Other:

Three Months Ended

June 30, Change Six Months Ended June 30, Change

September 30, Change Nine Months Ended September 30, Change

(In thousands, except %) 2021 2020 $ % 2021 2020 $ %

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Interest expense related to the sale of future revenue, net (3,767) — (3,767) 100 % (10,567) — (10,567) 100 %

Interest income and other income, net 373 18 355 1,972 % 321 120 201 168 %

Manufacture and supply costs and expenses increased 26% or $927 for the three months ended June 30, 2021 compared to the same period in the prior year.

The increase was due to higher manufacture and supply costs to support volume growth.

Manufacture and supply costs and expenses remained flat for the six months ended June 30, 2021 compared to the same period in the prior year.

Research and development expenses increased 11% or $415 for the three months ended June 30, 2021 compared to the same period in the prior year.

Research and development expenses decreased 3% or $280 for the six months ended June 30, 2021 compared to the same period in the prior year.

Interest and other (expense) income, net (33) 8 (41) (513) % 288 128 160 125 %

Manufacture and supply costs and expenses increased 48% or $1,422 for the three months ended September 30, 2021 compared to the same period in the prior year.

Manufacture and supply costs and expenses increased 14% for the nine months ended September 30, 2021 compared to the same period in the prior year.

The increase in manufacture and supply costs was due to volume growth of Suboxone.

Research and development expenses decreased 35% or $2,534 for the three months ended September 30, 2021 compared to the same period in the prior year.

Research and development expenses decreased 18% or $2,814 for the nine months ended September 30, 2021 compared to the same period in the prior year.

Research and development expenses are driven primarily by the timing of clinical trial and other product development activities associated with our pipeline.

Selling, general and administrative expenses decreased 5% or $760 for the three months ended June 30, 2021 as compared to the same period in the prior year.

Selling, general and administrative expenses decreased 8% or $2,142 for the six months ended June 30, 2021 as compared to the same period in the prior year.

The decrease was driven by our continued expense management efforts.

Interest expense remained flat for the three and six months ended June 30, 2021 compared to the same period in the prior year.

Interest expense related to the sale of future revenue, net was $3,466 and $6,800 for the three and six months ended June 30, 2021, respectively.

Selling, general and administrative expenses increased 3% or $326 for the three months ended September 30, 2021 as compared to the same period in the prior year.

The increase was driven by litigation expense that arise through the course of business, partially offset by lower sales and marketing costs and share-based compensation expense.

Selling, general and administrative expenses decreased 5% or $1,816 for the nine months ended September 30, 2021 as compared to the same period in the prior year.

The decrease was primarily driven by lower sales and marketing costs, patent costs and share-based compensation expense.

Interest expense remained flat for the three and nine months ended September 30, 2021 compared to the same period in the prior year.

Interest expense related to the sale of future revenue, net was $3,767 and $10,567 for the three and nine months ended September 30, 2021, respectively.

This amount is due to the accounting associated with the sale of future revenue related to KYNMOBI® sold to Marathon on November 3, 2020 and does not represent a monetary obligation or cash outflow at any time during the life of the transaction.

See note 15 for details.

Interest income and other income, net increased $355 and $201, respectively, for the three and six months ended June 30, 2021 compared to the same periods in the prior year.

Interest and other (expense) income, net decreased $41 and increased $160, respectively, for the three and nine months ended September 30, 2021 compared to the same periods in the prior year.

This was due to the fair value adjustment of the put option related to the 12.5% Notes.

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We have experienced a history of net losses.

Our accumulated deficits totaled $213,296 as of June 30, 2021.

The net losses and accumulated deficits were partially offset by gross margins from sales of commercialized licensed and proprietary products,

license fees, milestone and royalty payments from commercial licensees and co-development parties.

Our funding requirements are met by our cash and cash equivalents, as well as our existing equity and debt offerings, including the Senior Secured Notes due 2025 (the "12.5% Notes").We had $34,234 in cash and cash equivalents as of June 30, 2021.

Our accumulated deficits totaled $227,851 as of September 30, 2021.

The net losses and accumulated deficits were partially offset by gross margins from sales of commercialized licensed and proprietary products, license fees, milestone and royalty payments from commercial licensees and co-development parties.

Our funding requirements are met by our cash and cash equivalents, as well as our existing equity and debt offerings, including the Senior Secured Notes due 2025 (the "12.5% Notes").We had $31,164 in cash and cash equivalents as of September 30, 2021.

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

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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 June 30, 2021 under the Monetization Agreement.

We have received an aggregate amount of $50,000 through September 30, 2021 under the Monetization Agreement.

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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.

On September 30, 2021, the Company entered into a waiver agreement (the “Waiver”) with the holders of the 12.5% Notes pursuant to which the principal payment due under the 12.5% Notes on September 30, 2021 was deferred in order to provide sufficient time for the execution of the Fourth Supplemental Indenture (the “Fourth Supplemental Indenture”).

On October 7, 2021, the Company entered into the Fourth Supplemental Indenture, by and among the Company and the Trustee and collateral agent thereunder, to the Indenture in connection with the 12.5% Notes.

Pursuant to the Fourth Supplemental Indenture, the amortization schedule for the 12.5% Notes was amended to provide for the date of the first amortization payment to be extended to March 30, 2023.

The Fourth Supplemental Indenture did not change the maturity date of the Notes or the interest payment obligation due under the Notes.

In connection with the Fourth Supplemental Indenture, the Company entered into a Consent Fee Letter with the holders of the 12.5% Notes, pursuant to which the Company agreed to pay the holders of the 12.5% Notes an additional cash payment of $2.7 million in the aggregate, payable in four quarterly payments beginning May 15, 2022.

See Note 20 for discussion.

In 2019, we established an “At-The-Market” (ATM) facility pursuant to which we may offer up to $25,000,000 of shares of common stock.

In the first quarter of 2021, we filed a prospectus supplement to offer up to an additional $50,000 of shares of common stock under the ATM facility.

Since inception to June 30, 2021, we sold 4,907,986 shares which generated net cash proceeds of approximately $24,560, net of commissions and other transaction costs of $1,406.

For the six months ended June 30, 2021, we sold 3,977,053 shares which provided net proceeds of approximately $18,505, net of commissions and other transaction costs of $933.

This ATM facility has approximately $49,038 available at June 30, 2021.

Six Months Ended June 30, 2021 and 2020

Since inception to September 30, 2021, we sold 6,417,804 shares which generated net cash proceeds of approximately $30,647, net of commissions and other transaction costs of $1,541.

For the nine months ended September 30, 2021, we sold 5,486,871 shares which provided net proceeds of approximately $24,592, net of commissions and other transaction costs of $1,068.

This ATM facility has approximately $42,812 available at September 30, 2021.

Nine Months Ended September 30, 2021 and 2020

(in thousands) 2021 2020

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Net Cash (Used for) Operating Activities

Net cash used for operating activities for the six months ended June 30, 2021 decreased by $7,781 compared to the same period in the prior year.

The decrease was related to changes in operating assets and liabilities of $8,576, higher non-cash operating expenses of $7,380, partially offset by a higher net loss of $8,175.

The change in operating assets and liabilities was primarily due to the $8,000 of royalty revenue and corresponding royalty receivable recognized in second quarter of 2020 related to the $1,000 annual minimum guaranteed royalty due in each of the next eight years.

The higher non-cash operating expenses were primarily due to increases in interest expense related to sale of future revenue ($6,729) and amortization of debt issuance costs ($1,221), partially offset by decreases in share-based compensation expense ($397) and depreciation, amortization and impairment ($187).

Net cash used for operating activities for the nine months ended September 30, 2021 decreased by $7,029 compared to the same period in the prior year.

The decrease was related to higher non-cash operating expenses of $11,993, changes in operating assets and liabilities of $1,215, partially offset by a higher net loss of $6,179.

The higher non-cash operating expenses were primarily due to increases in interest expense related to sale of future revenue ($10,457) and amortization of debt issuance costs

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The change in operating assets and liabilities was primarily due to timing of payments, increased deferred revenue related to a $1,250 net milestone payment received in connection with a license and supply agreement to commercialize AQST-119 Tadalafil Oral Film, offset by higher trade and other receivables due to increased revenue.

Net Cash (Used for) Investing Activities

Net cash used for investing activities for the six months ended June 30, 2021 increased by $54 compared to the same period in the prior year.

Net cash used for investing activities for the nine months ended September 30, 2021 increased by $99 compared to the same period in the prior year.

The use of cash was related to capital expenditures.

Net Cash Provided by/(Used for) Financing Activities

Net cash provided for financing activities for the six months ended June 30, 2021 increased by $18,604 compared to the same period in the prior year.

The increase was primarily related to net proceeds from the sale of shares under the ATM facility.

Net cash provided for financing activities for the nine months ended September 30, 2021 increased by $24,689 compared to the same period in the prior year.

The increase was primarily related to net proceeds from the sale of shares under the ATM facility in 2021.

Funding Requirements

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• the effects of the COVID-19 pandemic on our operations, operations of our key suppliers and third-party clinical and other service providers, our colleagues and contractors and debt equity and other capital markets;

• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for our manufactured goods, Suboxone and Sympazan, including effects of generics and other competitive pressures as currently envisioned;

• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for our manufactured goods, Suboxone, Sympazan and Exservan, including effects of generics and other competitive pressures as currently envisioned;

• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for provided co-development and feasibility services, as well as regulatory support services for recently licensed products, such as Exservan;

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• infrastructure and administrative costs at expected levels to support operations as an FDA and highly regulated public company;

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• a manageable level of costs for ongoing efforts to protect our intellectual property rights, including litigation costs in connection with seeking to enforce our rights concerning third parties' "at-risk" launch of generic products;

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• absence of significant unforeseen cash requirements.

We expect to continue to manage business costs to appropriately reflect the potential declining state of Suboxone revenue, the marketing and sales costs related to Sympazan, the proceeds from the KYNMOBI Monetization Agreement, and other external resources or factors affecting our business including, if available, any future potential issuances of additional 12.5% Notes under the Indenture, net proceeds or future equity financing, other future access to the capital markets or other potential available sources of liquidity, as well as the uncertainties associated with the coronavirus pandemic.

We expect to continue to manage business costs to appropriately reflect the anticipated general decline in Suboxone revenue, the marketing and sales costs related to Sympazan, the proceeds from the KYNMOBI Monetization Agreement, and other external resources or factors affecting our business including, if available, any future potential issuances of additional 12.5% Notes under the Indenture, net proceeds or future equity financing, other future access to the capital markets or other potential available sources of liquidity, as well as the uncertainties associated with the coronavirus pandemic.

In doing so, we plan to continue to focus on the core drivers of value for our stockholders, including, more importantly, continued investments in our ongoing product development and planned commercialization activities in support of Libervant, AQST-109 and AQST-108.

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market access, and to meet our other cash requirements, including debt service.

We plan to conservatively manage our pre-launch spending as both timing and level relating to Libervant, including cost rationalization associated with marketing and selling Sympazan.

We plan to conservatively manage our pre-launch spending as to both timing and level relating to Libervant, including cost rationalization associated with marketing and selling Sympazan.

In this regard, absent spending on launch activities for Libervant, we expect to continue to spend less on commercialization in 2021 compared to 2020.

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Our operating revenues have fluctuated in the past and can be expected to fluctuate in the future.

We expect to incur significant operating losses and negative operating cash flows for the foreseeable future, and we have a significant level of debt on which we have substantial ongoing debt repayment and debt service obligations and have principal repayments aggregating $2,575 related to our 12.5% Notes due in the second half of 2021.

We expect to incur significant operating losses and negative operating cash flows for the foreseeable future, and we have a significant level of debt on which we have substantial ongoing debt repayment and debt service obligations and have principal repayments related to our 12.5% Notes due through the debt maturity date, which is further discussed in Note 13.

A substantial portion of our current and past revenues has been dependent upon our licensing, manufacturing and sales with one customer, Indivior, which is expected to continue while we commercialize our own proprietary products and it could take significantly longer than planned to achieve anticipated levels of cash flows to help fund our operations and cash needs from sales of our proprietary products.

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Additionally, while the potential economic impact brought on by and the duration of the coronavirus pandemic is difficult to assess or predict, the significant impact of the coronavirus pandemic on the global financial markets, and on our own stock trading price, may reduce our ability to access additional capital, which would negatively impact our short-term and longer-term liquidity.

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If adequate funds are not available for our short-term or longer-term liquidity needs and cash requirements as and when needed, we would be required to engage in expense management activities such as reducing staff, delaying, significantly scaling back, or even discontinuing some or all of our current or planned research and development programs and clinical and other product development activities, or reducing our planned commercialization efforts and otherwise significantly reducing our other spending and adjusting our operating plan, and we would need to seek to take other steps intended to improve our liquidity.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis