What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-04 compared with 2021-11-02 · 212 added, 214 removed, 610 unchanged (41% of the section changed)

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(In thousands, except share and per share amounts)

September 30,

2022 December 31,

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Authorized 250,000,000 shares;

40,083,245 and 34,569,254 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

41,620,388 and 41,228,736 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital 176,833 174,621

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Revenues $ 12,270 $ 11,122

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Loss from operations ( 9,738 ) ( 8,525 )

Other income/(expenses):

Other expenses:

Interest expense ( 1,618 ) ( 2,761 )

Interest expense related to the sale of future revenue, net ( 1,861 ) ( 3,334 )

Interest and other (expense) income, net ( 33 ) 8 288 128

Interest and other expense, net ( 3 ) ( 52 )

Net loss before income taxes ( 13,220 ) ( 14,672 )

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Balance at March 31, 2022 41,620,388 41 176,833 ( 270,017 ) ( 93,143 )

Common Stock issued under public equity offering 2,304,949 3 9,238 — 9,241

Costs of common stock issued under public equity offering — — ( 627 ) — ( 627 )

Shares issued under employee stock purchase plan 19,270 — 76 — 76

Share-based compensation expense — — 1,710 — 1,710

Vested restricted stock units 2,665 — ( 4 ) — ( 4 )

Net loss — — — ( 12,367 ) ( 12,367 )

Balance at June 30, 2021 38,568,242 $ 39 $ 159,488 $ ( 213,296 ) $ ( 53,769 )

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

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Share-based compensation expense — — 1,507 — 1,507

Vested restricted stock units 5,185 — ( 9 ) — ( 9 )

Other — — ( 27 ) — ( 27 )

Net loss — — — ( 14,672 ) ( 14,672 )

Balance at September 30, 2021 40,083,245 40 167,466 ( 227,851 ) ( 60,345 )

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, 2021 36,241,358 36 149,095 ( 200,929 ) ( 51,798 )

Shares issued under employee stock purchase plan 14,961 — 73 — 73

Share-based compensation expense — — 1,754 — 1,754

Vested restricted stock units 18,944 — ( 52 ) — ( 52 )

Net loss — — — ( 2,334 ) ( 2,334 )

Balance at June 30, 2020 33,616,601 34 127,916 ( 149,338 ) ( 21,388 )

Share-based compensation expense 3,195 — 1,420 — 1,420

Net loss — — — ( 16,551 ) ( 16,551 )

Balance at September 30, 2020 33,619,796 $ 34 $ 129,336 $ ( 165,889 ) $ ( 36,519 )

See accompanying notes to the condensed consolidated financial statements.

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(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities:

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Proceeds from issuance of common stock, net 1,298 9,891

Proceeds from shares issued under employee stock purchase plan 76 62

Payments for taxes on share-based compensation ( 13 ) ( 96 )

Net cash provided by/(used for) financing activities 24,655 ( 34 )

Net cash provided by financing activities 1,298 9,891

Net decrease in cash and cash equivalents ( 13,288 ) ( 4,309 )

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(A) Company Overview

Aquestive Therapeutics, Inc., (together with its subsidiary, “Aquestive” or “the Company”) is a pharmaceutical company focused on identifying, developing and commercializing differentiated products which leverage its 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 severe allergic reactions, including 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.

Aquestive Therapeutics, Inc.

(together with its subsidiary, “Aquestive” or “the Company”) is a pharmaceutical company advancing medicines to solve patients’ problems with current standards of care, providing transformative products to improve their lives.

The Company is developing orally administered products to deliver complex molecules, providing novel alternatives to invasive and inconvenient standard of care therapies.

The Company has five products on the U.S.

market, four licensed products and one stand-alone proprietary product to date, Sympazan® (clobazam) oral film for the treatment of seizures associated with Lennox-Gastaut Syndrome.

Our licensees market their products in the U.S.

and around the world.

The Company also collaborates with pharmaceutical companies to bring new molecules to market using proprietary, best-in-class technologies, like PharmFilm®, and has proven drug development and commercialization capabilities.

The Company is advancing a late-stage proprietary product pipeline focused on treating diseases of the central nervous system, or CNS, and an earlier stage pipeline for the treatment of severe allergic reactions, including anaphylaxis.

The Company's production facilities are located in Portage, Indiana, and our corporate headquarters, sales and commercialization operations and primary research laboratory facilities are based in Warren, New Jersey.

(B) Equity Transactions

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On September 11, 2019, the Company established an “At-The-Market” (ATM) facility pursuant to which the Company may offer up to $ 25,000 of shares of common stock.

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 .

On November 20, 2020, the Company began utilizing the ATM facility.

On March 26, 2021, the Company filed a prospectus supplement to offer up to an additional $ 50,000 of shares of common stock under the ATM facility.

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

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

For the three months ended March 31, 2022, the Company sold 391,652 shares which provided net proceeds of approximately $ 1,298 after deducting commissions and other transaction costs of $ 62 .

For the three months ended March 31, 2021, the Company sold 1,672,104 shares which provided net proceeds of approximately $ 9,891 after deducting commissions and other transaction costs of $ 306 .

This ATM facility has approximately $ 36,043 available at March 31, 2022.

Basis of Presentation

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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 September 30, 2021:

Recent Accounting Pronouncements Not Adopted as of March 31, 2022:

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.

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The Company is currently evaluating the impact of the adoption of this guidance on its 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.

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) :

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In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options .

The accounting standard update was issued to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification

The new accounting guidance is effective for the Company beginning after December 15, 2022.

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Risks and Uncertainties

These consolidated financial statements have been prepared in accordance with U.S.

GAAP assuming the Company will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

However, substantial doubt about the Company’s ability to continue as a going concern exists.

The Company assesses liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities.

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

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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 September 30, 2021, the Company had $ 31,164 of cash and cash equivalents.

The Company’s cash requirements for 2022 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, 2022, the Company had $ 14,736 of cash and cash equivalents.

The Company has experienced a history of net losses.

The Company's 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.

The Company's funding requirements are met by its cash and cash equivalents, as well as its existing equity and debt offerings, including the Senior Secured Notes due 2025 (the " 12.5 % Notes").

The Company's accumulated deficits totaled $ 270,017 as of March 31, 2022.

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

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

The Company's funding requirements have been met by its cash and cash equivalents, as well as its existing equity and debt offerings, including the Senior Secured Notes due 2025 (the " 12.5 % Notes").

However, the Company will require additional liquidity to continue its operations over the next 12 months.

The Company began utilizing its ATM facility in November 2020.

Since inception to September 30, 2021, the Company 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, the Company 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.

While the Company’s ability to execute its business objectives and achieve profitability over the longer term cannot be assured, the Company’s anticipated revenues from licensed and proprietary products, available cash and cash equivalents, expense management initiatives, and access to equity markets, including through its ATM facility, under the shelf registration statement will enable the Company to fund its operating needs for at least the next twelve months as it continues to execute its business strategy.

Since inception to March 31, 2022, the Company sold 7,873,071 shares which generated net cash proceeds of approximately $ 37,131 , net of commissions and other transaction costs of $ 1,826 .

For the three months ended March 31, 2022, the Company sold 391,652 shares which provided net proceeds of approximately $ 1,298 , net of commissions and other transaction costs of $ 62 .

This ATM facility has approximately $ 36,043 available at March 31, 2022.

The Company’s ability to execute its business objectives and achieve profitability over the longer term cannot be assured.

The Company's on-going business, existing cash and equivalents, expense management activities as well as access to the equity capital markets, including through its ATM facility and under the Lincoln Park Purchase Agreement, provide near term funding opportunities for the Company.

However, there can be no assurance that the Company will be able to obtain sufficient additional liquidity when needed or under acceptable terms, if at all.

See Note 20 for details.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Revenues and Trade Receivables, Net

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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

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

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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.

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.

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These contract assets are reflected as a component of other receivables within Trade and other receivables within the Condensed Consolidated Balance Sheet.

As of September 30, 2021, and December 31, 2020, such contract assets were $ 2,637 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.

As of March 31, 2022, and December 31, 2021, such contract assets were $ 1,823 and $ 3,087 , 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.

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As remaining performance obligations are satisfied, an appropriate portion of the deferred revenue balance is credited to earnings.

As of September 30, 2021, and December 31, 2020, such contract liabilities were $ 8,083 and $ 4,326 , respectively.

As of March 31, 2022, and December 31, 2021, such contract liabilities were $ 15,489 and $ 7,887 , respectively.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Manufacture and supply revenue $ 9,171 $ 6,511

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

United States $ 11,081 $ 9,850

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Total revenues $ 12,270 $ 11,122

Ex-United States revenues are derived primarily from Indivior for product manufactured for markets outside of the United States.

Ex-United States revenues are derived primarily from Indivior Inc.

("Indivior") for product manufactured for markets outside of the United States.

Trade and other receivables, net consist of the following:

September 30,

2022 December 31,

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The following table presents the changes in the allowance for doubtful accounts:

September 30,

2022 December 31,

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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 nine months ended September 30, 2021:

The following table provides a summary of activity with respect to sales related allowances and accruals for the three months ended March 31, 2022:

Total Sales Related Allowances

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Payments / credits ( 277 )

Balance at September 30, 2021 $ 2,987

Total reductions of gross product sales from sales-related allowances and accruals were $ 6,769 for the nine months ended September 30, 2021.

Balance at March 31, 2022 $ 506

Total reductions of gross product sales from sales-related allowances and accruals were $ 178 for the three months ended March 31, 2022.

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 $ 454 and $ 2,533 , respectively, as of September 30, 2021 and $ 416 and $ 1,722 , respectively, as of December 31, 2020.

The accrued balances relative to these provisions included in Trade and other receivables, net and Accounts payable and accrued expenses were $ 506 and $ 2,563 , respectively, as of March 31, 2022 and $ 605 and $ 2,224 , respectively, as of December 31, 2021.

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 nine months ended September 30, 2021, Indivior Inc.

("Indivor") exceeded the 10% threshold for revenue and represented approximately 73 % of total revenue.

As of September 30, 2021, Indivior exceeded the 10% threshold for outstanding receivables and represented 68 % of outstanding receivables.

For the nine months ended September 30, 2020, Indivior and Sunovion Pharmaceuticals, Inc.

(“Sunovion”) represented approximately 48 % and 39 %, respectively of total revenue.

As of December 31, 2020, Indivior, AmerisourceBergen Corporation, Sunovion, and Cardinal Health Inc.

represented 53 %, 14 %, 13 %, and 10 %, respectively of outstanding receivables.

For the three months ended March 31, 2022, Indivor exceeded the 10% threshold for revenue and represented approximately 78 % of total revenue.

As of March 31, 2022, Indivior and Haisco Pharmaceutical Group Co., Ltd.

("Haisco") exceeded the 10% threshold for outstanding receivables and represented 43 % and 34 %, respectively, of outstanding receivables.

For the three months ended March 31, 2021, Indivior exceeded the 10% threshold for revenue and represented approximately 64 % of total revenue.

As of December 31, 2021, two customers exceeded the 10% threshold for outstanding receivables which were Indivior and Cardinal Health Inc.

which represented 51 % and 12 %, respectively, of total trade and other receivables.

See Note 20 for details on the Company's licensing and supply agreement with Haisco.

Material Agreements

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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

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safety reasons.

commission of a material breach of the Indivior License Agreement by either party.

The initial term of the Indivior License Agreement was seven years from the commencement date.

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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.

(the "Sunovion License Agreement").

Cynapsus Therapeutics was later succeeded to in interest by Sunovion Pharmaceuticals, Inc.

("Sunovion").

Pursuant to the Sunovion License Agreement, 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 consideration of the rights granted to Sunovion under the Sunovion License Agreement, the Company has 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”).

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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.

Upon termination of the Sunovion

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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 Sunovion and the Company 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.

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In exchange for the sale of these rights, the Company received an upfront payment of $ 40,000 and an additional payment of $ 10,000 through the achievement of the first milestone.

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

The Company has received an aggregate amount of $ 50,000 through March 31, 2022 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 .

Based on the current forecast by Sunovion of estimated KYNMOBI sales as of March 31, 2022, the Company may not receive any of the additional aggregate contingent payments under the Monetization agreement.

See Note 15 Sale of Future Revenue for further details on the accounting for the Monetization Agreement.

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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.

The Company 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.

During the second quarter of 2021, the Company received $ 2,000 of milestone payments in connection with the FDA approval and other regulatory activities.

Licensing and Supply Agreement with Haisco for Exservan ™ (Riluzole Oral Film) for ALS Treatment in China

The Company entered into a License, Development and Supply Agreement with Haisco Pharmaceutical Group Co., Ltd., a Chinese limited company listed on the Shenzhen Stock Exchange ("Haisco") effective as of March 3, 2022 ("Haisco Agreement"), pursuant to which Aquestive granted Haisco an exclusive license to develop and commercialize Exservan™ (riluzole oral film) for the treatment of amyotrophic lateral sclerosis, or ALS (“Exservan), in China and Aquestive will serve as the exclusive sole manufacturer and supplier for Exservan in China.

Under the Haisco Agreement, Haisco is obligated to pay the Company a $ 7,000 upfront cash payment, regulatory milestone payments, and double-digit royalties on net sales of Exservan in China and the Company will earn manufacturing revenue upon the sale of Exservan in China, as the exclusive supplier of Exservan.

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Financial Instruments – Fair Value Measurements

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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.

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The Company granted warrants to certain note holders in connection with its debt repayment and debt refinancing during 2020 and 2019, respectively.

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The components of Inventory, net are as follows:

September 30,

2022 December 31,

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Total inventory, net $ 4,629 $ 4,038

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Property and Equipment, Net

Lives September 30,

Lives March 31,

2022 December 31,

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(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 $ 724 and $ 714 for the three-month periods ended September 30, 2021 and 2020, respectively.

For the respective nine-month periods, these expenses totaled $ 2,195 and $ 2,127 .

Total depreciation, amortization, and impairment related to property and equipment was $ 714 and $ 743 for the three-month periods ended March 31, 2022 and 2021, respectively.

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.

None of these 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 1.0 and 4.5 years, including renewal options expected to be exercised to extend the lease periods.

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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.

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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 and nine-months ended September 30, 2021, total operating lease expenses totaled $ 431 and $ 1,294 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 117 and $ 352 , respectively.

For the three and nine-months ended September 30, 2020, total operating lease expenses totaled $ 377 and $ 819 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 60 and $ 166 , respectively.

The Company's lease costs are recorded in manufacture and supply, research and development and selling, general and administrative expenses in its consolidated statements of income.

For the three-months ended March 31, 2022, total operating lease expenses totaled $ 419 , including variable lease expenses such as common area maintenance and operating costs of $ 96 .

For the three-months ended March 31, 2021, total operating lease expenses totaled $ 433 , including variable lease expenses such as common area maintenance and operating costs of $ 119 .

Maturities of the Company’s operating lease liabilities are as follows:

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Remainder of 2022 $ 972

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The following table provides the components of identifiable intangible assets, all of which are finite lived:

September 30,

2022 December 31,

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Intangible assets, net 38 51

Amortization expense was $ 13 and $ 13 for each of the three-month periods ended September 30, 2021 and 2020.

For the corresponding nine-month periods, these expenses totaled $ 38 and $ 38 , respectively.

During the remaining life of the purchased patent, estimated annual amortization expense is $ 50 for each of the years from 2021 to 2022.

Amortization expense was $ 13 and $ 13 for each of the three-month periods ended March 31, 2022 and 2021.

During the remaining life of the purchased patent, estimated annual amortization expense is $ 50 in 2022.

Other non-current Assets

The following table provides the components of other non-current assets:

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September 30,

2022 December 31,

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Total other non-current assets $ 6,886 $ 6,903

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 .

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 eight $ 1,000 annual minimum guaranteed royalty that is due.

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.

Royalty receivable consists of six 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.

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Accrued expenses consisted of the following:

September 30,

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2022 December 31,

Accrued compensation $ 1,600 $ 5,965

Real estate and personal property taxes 469 349

Accrued distribution expenses 2,563 2,224

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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 % Senior Secured Notes due 2025 (the “ 12.5 % Notes”) and issued warrants for 2,000,000 shares of common stock (the “Warrants”), at $ 0.001 par value per share.

On July 15, 2019, the Company completed a private placement of up to $ 100,000 aggregate principal of its 12.5 % Senior Secured Notes due 2025 (the “ 12.5 % Notes”) and issued warrants for 2,000,000 shares of common stock (the “Warrants”), at $ 0.001 par 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.

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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 "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 September 30, 2021.

The $ 4,000 principal issuance will be repaid proportionally over the same maturities as the other 12.5 % Notes.

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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.

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The First Supplemental Indenture 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 September 30, 2021.

A valuation study was performed by an independent third party appraiser and updated as of March 31, 2022.

Based on the valuation study, the put option was valued at $ 133 , of which $ 33 has been recorded in Accrued expenses and $ 100 has been recorded in Other non-current liabilities.

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The first $ 10,000 of 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.

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

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to such amount, contingent upon FDA approval of Libervant for U.S.

market access.

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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 $ 7,725 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.

As of March 31, 2022, the Company recorded its principal payments as Loans payable, net on its Condensed Consolidated Balance Sheet.

A debt maturity table is presented below:

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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.

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 finalization and execution of the Fourth Supplemental Indenture (the “Fourth Supplemental Indenture”) discussed in Note 20 Subsequent Events.

The Fourth Supplemental Indenture was executed by the parties on October 7, 2021.

On October 7, 2021, the Company entered into the Fourth Supplemental Indenture by and among the Company and U.S.

Bank National Association, as Trustee (the “Trustee”) and collateral agent thereunder, to the Indenture, dated as of July 15, 2019 (the “Base Indenture” and, as supplemented by the First Supplemental Indenture, the Second Supplemental Indenture, and the Third Supplemental Indenture, the “Indenture”), by and between the Company and the Trustee in connection with the 12.5 % Senior Secured Notes due 2025 of the Company (the “Notes”).

Pursuant to the Fourth Supplemental Indenture, the amortization schedule for the Notes has been 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 Notes (the “Consent Fee Letter”), pursuant to which the Company has agreed to pay the holders of the Notes an additional cash payment ("Consent Fee") of $ 2,700 in the aggregate, payable in four quarterly payments beginning May 15, 2022.

The Company has recorded the current portion of the Consent Fee as Loans payable, current, and the long-term portion of the Consent Fee as Other non-current liabilities on its Consolidated Balance Sheet.

Additionally, the Company recognized a loss on the extinguishment of debt of $ 13,822 for fees and expenses related to the Fourth Supplemental Indenture during the fourth quarter of 2021.

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.

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 and nine months ended September 30, 2021 were $ 1,171 and $ 3,488 , respectively, while comparative amortization expenses for the three and nine months ended September 30, 2020 were $ 590 and $ 1,758 ,

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respectively.

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 11,110 and $ 14,596 as of September 30, 2021 and December 31, 2020, respectively.

Amortization expense arising from deferred debt issuance costs and debt discounts related to the 12.5 % Notes for the three months ended March 31, 2022 were $ 4 , while comparative amortization expenses for the three months ended March 31, 2021 were $ 1,152 .

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 39 and $ 43 as of March 31, 2022 and December 31, 2021, respectively.

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.

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Warrants that 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.

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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 nine-months ended September 30, 2021 or 2020, respectively.

There were no warrants exercised during the three-months ended March 31, 2022 or 2021, respectively.

Sale of Future Revenue

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In exchange for the sale of these rights, the Company received an upfront payment of $ 40,000 and an additional payment of $ 10,000 through the achievement of the first milestone.

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

The Company has received an aggregate amount of $ 50,000 through March 31, 2022 under the Monetization Agreement.

Under the Monetization Agreement, additional aggregate contingent payments of up to $ 75,000 may be due to the Company 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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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, the Company is 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

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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.

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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.

To the extent the amount or timing of such payments is materially different from the original estimates, an adjustment will be recorded

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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 the Company's control.

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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 nine months ended September 30, 2021 :

The following table shows the activity of the liability related to the sale of future for the three months ended March 31, 2022 :

Liability related to the sale of future revenue, net at December 31, 2021

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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 and nine months ended September 30, 2021 and 2020, all potentially dilutive instruments outstanding would have anti-dilutive effects on per-share calculations for the periods.

As a result of the Company’s net loss incurred for the three months ended March 31, 2022 and 2021, all potentially dilutive instruments outstanding would have anti-dilutive effects on per-share calculations for the periods.

Therefore, basic and diluted net loss per share were the same for all periods presented as reflected below.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 13,220 ) $ ( 14,672 )

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Loss per common share – basic and diluted $ ( 0.32 ) $ ( 0.41 )

As of September 30, 2021 and 2020, respectively, the Company’s potentially dilutive instruments included 4,341,967 and 3,167,192 options to purchase common shares and 0 and 14,233 unvested restricted stock units 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 September 30, 2021 and 2020, were potentially dilutive warrants for the purchase of 1,571,429 for both periods.

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As of March 31, 2022 and 2021, respectively, the Company’s potentially dilutive instruments included 5,259,847 and 3,905,192 options to purchase common shares and 166,700 and 13,491 unvested restricted stock units 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, 2022 and 2021, were potentially dilutive warrants for the purchase of 1,714,429 for both periods.

Share-Based Compensation

The Company recognized share-based compensation in its Condensed Consolidated Statements of Operations and Comprehensive Loss during 2022 and 2021 as follows:

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Manufacture and supply $ 48 $ 82

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Share-Based Compensation Equity Awards

The following tables provide information about the Company’s restricted stock unit and stock option activity during the nine-month period ended September 30, 2021:

The following tables provide information about the Company’s restricted stock unit and stock option activity during the three-month period ended March 31, 2022:

Restricted Stock Unit Awards (RSUs):

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Unvested as of December 31, 2021 — $ —

Vested ( 12 ) $ 11.14

Granted 166 $ 2.55

Forfeited — $ —

Unvested as of September 30, 2021 — $ —

Unvested as of March 31, 2022 166 $ —

Grant date fair value of shares vested during the period $ —

Unrecognized compensation costs as of September 30, 2021 $ —

Unrecognized compensation costs as of March 31, 2022 $ 377

Stock Option Awards:

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Exercised, Forfeited, Expired ( 11 ) $ 4.98

Outstanding as of September 30, 2021 4,342 $ 7.28

Vested and expected to vest as of September 30, 2021 4,194 $ 7.37

Exercisable as of September 30, 2021 2,018 $ 10.18

The fair values of stock options granted during the nine months ended September 30, 2021 were estimated using the Black-Scholes pricing model based on the following assumptions:

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Outstanding as of March 31, 2022 5,260 $ 6.27

Vested and expected to vest as of March 31, 2022 5,047 $ 6.39

Exercisable as of March 31, 2022 2,496 $ 9.25

The fair values of stock options granted during the three months ended March 31, 2022 were estimated using the Black-Scholes pricing model based on the following assumptions:

Expected dividend yield — %

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Risk-free interest rate 2.0 %

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2021 was $ 3.61 .

During the nine-month period ended September 30, 2021, stock options were granted with an exercise price ranging from $ 3.76 to $ 5.30 and accordingly, given the Company’s share price of $ 4.36 at September 30, 2021, certain shares granted during this period provided intrinsic value at that date totaling $ 159 .

As of September 30, 2021, $ 4,691 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 1.8 years from the date of grant.

The Company did no t grant restricted stock units during the nine months ended September 30, 2021.

There were no unvested restricted stock units and no unrecognized compensation expense related to restricted stock units at September 30, 2021.

Employee Stock Purchase Plan

The Company's Employee Stock Purchase Plan ("ESPP"), as amended and restated effective as of January 1, 2019, features two six-month offering periods per year, running from January 1 to June 30 and July 1 to December 31.

Under the ESPP, employees may elect to purchase the Company’s common stock at the lower of 85 % of the fair value of shares on either the first or last day of the offering period.

During the nine-month periods ended September 30, 2021 and 2020, respectively, 19,270 and 14,961 shares were purchased and issued through the ESPP at total discounts of $ 11 and $ 11 .

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2022 was $ 2.03 .

During the three-month period ended March 31, 2022, stock options were granted with an exercise price of $ 2.55 and

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accordingly, given the Company’s share price of $ 2.61 at March 31, 2022, the intrinsic value provided by certain shares granted during this period was de minimus.

As of March 31, 2022, $ 5,098 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 2.07 years from the date of grant.

As of March 31, 2022, $ 377 of unrecognized compensation expense related to unvested restricted stock units is expected to be recognized over a weighted average period of 2.94 years from the date of grant.

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 September 30, 2021 and 2020, the Company recorded no income tax benefit from its pretax losses of $ 14,555 and $ 16,551 .

Similarly for the nine months ended September 30, 2021 and 2020, the Company recorded no income tax benefit from its pretax loss of $ 41,594 and $ 35,415 , respectively, due to realization uncertainties.

The primary factor impacting the effective tax rate for the three and nine months ended September 30, 2021 is the anticipated full year operating loss which will require full valuation allowances against any associated net deferred tax assets.

For the three months ended March 31, 2022 and 2021, the Company recorded no income tax benefit from its pretax losses of $ 13,220 and $ 14,672 .

The primary factor impacting the effective tax rate for the three and three months ended March 31, 2022 is the anticipated full year operating loss which will require full valuation allowances against any associated net deferred tax assets.

Contingencies

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(collectively, “Dr.

Reddy’s”) asserting infringement

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Reddy’s”) asserting infringement of U.S.

9,855,221 (the "221 patent”).

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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.

The Company and Indivior preserved the rights to appeal the claim construction ruling.

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 the Company and Indivior preserved the right to appeal the claim construction ruling.

The Company is 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 .

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Alvogen Pine Brook LLC ,

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On September 14, 2017, Indivior initiated a lawsuit against Alvogen Pine Brook LLC (“Alvogen”) asserting infringement of the ’454 patent.

On February 7, 2018, the Company and Indivior filed an Amended Complaint, adding us as a plaintiff and asserting infringement of the ’221 patent.

On February 7, 2018, the Company and Indivior filed an Amended Complaint, adding the Company as a plaintiff and asserting infringement of U.S.

9,855,221 (the "’221 patent”).

On April 3, 2018, the Company and Indivior initiated a separate lawsuit against Alvogen asserting infringement of the ’305 patent.

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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.

The Company and Indivior preserved the rights to appeal the claim construction ruling.

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 the Company and Indivior preserved the right 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.

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and Quintiles Commercials US, Inc.

(BDSI 2014 Lawsuit)

On September 22, 2014, the Company and RB initiated a lawsuit against BioDelivery Sciences International, Inc.

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3:14-cv-5892).

On July 22, 2015, the case was transferred to the Eastern District of North Carolina (Civil Action No.

5:15-cv-00350).

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.

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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.

On April 15, 2021, the court lifted the stay.

On April 15, 2021, the Court lifted the stay of the litigation in the Eastern District of North Carolina.

On April 29, 2021, BDSI filed a renewed motion to dismiss the complaint.

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On July 7, 2021, the Court entered a scheduling order in the case.

Under the current scheduling order, the parties have completed their exchange of preliminary infringement and validity contentions, and are proceeding with fact discovery and claim construction.

The parties are engaged in briefing claim construction issues.

The court may schedule a claim construction hearing after the briefing

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is complete, and the remainder of the schedule is dependent on the timing of the court’s ruling on claim construction.

Under the current scheduling order, the parties have completed their exchange of preliminary infringement and validity contentions, have completed claim construction briefing, and are proceeding with fact discovery.

The Court may schedule a claim construction hearing, and the remainder of the schedule is dependent on the timing of the Court’s ruling on claim construction.

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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, the Company 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 the Company's Motion to Dismiss and Strike on July 16, 2020, and the Company filed its Reply on July 30, 2020.

On June 25, 2020, the Company filed a Motion to Dismiss BDSI’s Amended Counterclaim for unenforceability and a Motion to Strike BDSI’s corresponding affirmative defense of unenforceability, which BDSI opposed.

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.

BDSI also filed on April 6, 2021 a renewed motion to dismiss Aquestive’s complaint.

Aquestive filed its opposition to BDSI’s renewed motion to dismiss on April 27, 2021, and BDSI filed its reply on May 11, 2021.

BDSI also filed on April 6, 2021 a renewed motion to dismiss Aquestive’s complaint, which Aquestive opposed.

On August 10, 2021, the Court entered an order denying BDSI’s motion to dismiss.

On July 7, 2021, the court entered a scheduling order in the case, including the same operative dates as the court included in the scheduling order for Civil Action No.

5:15-cv-00350 described above, and the parties are proceeding under that same schedule.

On July 7, 2021, the Court entered a scheduling order in the case, including the same operative dates as the Court included in the scheduling order for the BDSI 2014 Lawsuit described above, and the parties are proceeding under that same schedule.

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Indivior Inc., Reckitt Benckiser Healthcare (UK) Ltd., Indivior PLC, and MonoSol Rx, LLC ,

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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.

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On February 19, 2021, the Court issued an order denying all Daubert motions.

On March 8, 2021, Aquestive filed a motion for summary judgment.

Briefing on summary judgment motions was completed on May 28, 2021.

There is no date set for a hearing on the motions for summary judgment and no trial date has yet been set.

On March 8, 2021, Aquestive filed a motion for summary judgment, and briefing on summary judgment motions was completed on May 28, 2021.

The hearing on Aquestive’s motion for summary judgment will be held on May 18, 2022.

No trial date has yet been set.

The Company is 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.

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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.

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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, the Company filed a motion to dismiss the Centene and Humana complaints.

The court held an in-person oral argument on the motions to dismiss on June 9, 2021.

The court dismissed all complaints against the defendants in these matters on July 22, 2021.

The Court in the Eastern District of Pennsylvania dismissed all complaints against the defendants in these matters on July 22, 2021.

On August 20, 2021, Centene and Humana appealed the decision to the U.S.

Appeals Court for the Third Circuit (“Third Circuit”).

Also, on August 20, 2021, Humana filed a complaint in state court in Kentucky, alleging the same causes of action previously filed in the federal case in the Eastern District of Pennsylvania.

That state court action is stayed pending resolution of the federal appeal in the Third Circuit.

The Third Circuit appeal is fully briefed and oral argument was held on March 31, 2022.

The parties are awaiting a ruling from the Third Circuit on the appeal.

The Company is 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

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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;

On December 5, 2019, Neurelis Inc.

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 (“UCL”);

(2) Defamation;

and (3) Malicious Prosecution.

Neurelis filed a First Amended Complaint on December 9, 2019, alleging the same three causes of action.

The Company 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.

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The Company 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.

The Company filed its opening appeal brief on January 27, 2021, and Neurelis filed its combined opening and responsive appeal brief on March 30, 2021.

Aquestive filed its combined response and reply brief on June 1, 2021 and Neurelis filed its final reply brief on July 6, 2021.

Oral argument on the appeal was heard on October 14, 2021, and a ruling on the appeal is expected within 90 days of the oral argument.

The trial court proceedings remain stayed while the appeal is pending.

The Company filed its opening appeal brief on January 27, 2021, and briefing on the appeal ended on July 6, 2021.

The Appeals Court held oral argument on the appeal on October 14, 2021, and issued its ruling on November 17, 2021.

Under the ruling, the Court struck the entirety of the malicious prosecution claim and struck portions of the UCL and defamation claims.

Aquestive filed a motion for attorney fees related to the anti-SLAPP motion on February 11, 2022.

On April 12, 2022, Neurelis filed a Second Amended Complaint in response to the Court of Appeal's decision.

The Second Amended Complaint also added a cause of action for Trade Libel.

On May 3, 2022, Aquestive filed a "demurer" challenge to the sufficiency of the

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allegations of the Second Amended Complaint.

Oral argument on Aquestive's motion for attorney fees related to the anti-SLAPP motion and on the Second Amended Complaint and demurer challenge will be held on June 17, 2022.

The Company is 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.

Neurelis IPR Infringement Litigation

Neurelis IPR Litigation

In the first quarter of 2019, Aquestive requested institution of three Inter Partes Reviews (“IPRs”) against Neurelis’ Orange Book method of treatment patent, US Patent No.

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On October 7, 2021, the Federal Circuit Court issued a per curium decision affirming the PTAB's final decision that the '876 Patent was unpatentable.

If no appeal of the Federal Circuit Court ruling is filed by November 7, 2021, the Federal Circuit Court will issue a mandate closing the appeal period and an IPR Certificate will subsequently be issued by the United States Patent and Trademark Office.

The Company is 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

The Federal Circuit Court issued a mandate closing the appeal period and an IPR Certificate was subsequently issued by the United States Patent and Trademark Office on January 21, 2022.

No further appeals are available on this matter.

Federal Securities Class Action

Deanna Lewakowski v.

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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 regarding the FDA approval of Libervant.

Following the court’s appointment of a lead plaintiff, an amended complaint was filed by the plaintiffs on July 25, 2021.

All dispositive motions were filed with the court on or before November 1, 2021.

There is no date set for a hearing on the motions to dismiss and no trial date has yet been set.

Following the court’s appointment of a lead plaintiff, an amended complaint was filed by the plaintiffs on June 25, 2021.

Defendants filed a motion to dismiss on August 16, 2021, which became fully briefed as of November 1, 2021.

There is no date set for a hearing on the motion to dismiss and no trial date has yet been set.

The Company is 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.

Shareholder Derivative Litigation

Loreen Niewenhuis v.

Keith Kendall, et al .

On December 15, 2021, a purported Aquestive shareholder instituted a derivative action captioned Loreen Niewenhuis v.

Keith Kendall, et al.

in the United States District Court for the District of New Jersey, purportedly on behalf of the Company, against certain current and former officers and directors of the Company.

The case was designated as related to the pending federal securities class action Deanna Lewakowski v.

Aquestive Therapeutics, Inc., referenced above, and accepted by the same judge presiding over the class action.

The complaint in this matter alleges claims for breach of fiduciary duty and contribution.

The factual allegations that form the basis of these claims are similar to the disclosure-related allegations asserted in the class action.

On April 4, 2022, the Plaintiff filed an amended complaint asserting the same claims against the same defendants.

The Company filed a motion to dismiss the amended complaint on April 25, 2022.

Plaintiff’s opposition brief is due May 25, 2022, and the Company’s reply brief is due June 27, 2022.

The Company is 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.

Subsequent Events

Continued Utilization of the At-The-Market Facility

The Company continued utilization of its At-The-Market facility from October 1 through October 31, 2021 and sold 80,783 shares which generated net proceeds of approximately $ 313 .

12.5 % Senior Secured Notes Fourth Supplemental Indenture

The Company continued utilization of its At-The-Market facility from April 1 through April 30, 2022 and sold 318,156 shares which generated net proceeds of approximately $ 505 .

Lincoln Park Purchase Agreement

On April 12, 2022, the Company entered into a purchase agreement ("Lincoln Park Purchase Agreement") with Lincoln Park Capital Fund, LLC ("Lincoln Park"), which provides that, upon the terms and subject to the conditions and limitations set forth in the Lincoln Park Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park up to $ 40,000 worth of shares of its common stock from time to time over the 36-month term of the Lincoln Park Purchase Agreement.

Concurrently with entering into the Lincoln Park Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which the Company agreed to register the sale of the shares of its common stock that have been and may be issued to Lincoln Park under the Lincoln Park Purchase Agreement pursuant to its existing shelf registration statement on Form S-3 or a new registration statement.

Lincoln Park has covenanted under the

Table of Content

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 noteholders, pursuant to which the Company agreed to pay the noteholders an additional cash payment of $ 2.7 million in the aggregate, payable in four quarterly payments beginning May 15, 2022, in exchange to defer $ 10.3 million of principal payments.

The Company is currently evaluating the impact of the Fourth Supplemental Indenture on its consolidated financial statements.

The amendment may result in a gain or loss on extinguishment of debt that would be reported in the statement of operations in a subsequent period.

Lincoln Park Purchase Agreement not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company's common stock.

Since inception through April 30, 2022, the Company issued 403,982 shares which generated sale proceeds of approximately $ 707 in connection with the Lincoln Park Purchase Agreement .

Haisco Receivable

The Company entered into a License, Development and Supply Agreement with Haisco Pharmaceutical Group Co., Ltd., a Chinese limited company listed on the Shenzhen Stock Exchange ("Haisco") effective as of March 3, 2022 ("Haisco Agreement") pursuant to which Aquestive granted Haisco an exclusive license to develop and commercialize Exservan™ (riluzole oral film) for the treatment of amyotrophic lateral sclerosis, or ALS (“Exservan) in China and Aquestive will serve as the exclusive sole manufacturer and supplier for Exservan in China.

Pursuant to the Haisco License Agreement, Haisco has been appointed to serve as Aquestive’s agent for matters relating to the commercialization of Exservan in China, including obtaining approval to market and sell ("Marketing Authorization") Exservan in China .

Subsequent to the execution of the Haisco Agreement in March 2022, the Chinese equivalent of the FDA (the "NMPA") raised an issue regarding the named holder of the U.S.

New Drug Application (NDA) for Exservan in relation to the application for Marketing Authorization of Exservan in China.

It is not clear whether the NMPA will require that Aquestive be the holder of the NDA in order to approve the Marketing Authorization for Exservan in China, or whether the NMPA will find that Aquestive's qualifications as the exclusive licensor, manufacturer and innovator of Exservan will be sufficient for the NMPA to approve Aquestive as the drug sponsor for Exservan in China and grant the Marketing Authorization for Exservan in China.

Prior to entering into the Haisco Agreement, the Company had assigned the NDA for Exservan to another third-party in connection with a license agreement in the U.S.

for Exservan and is not currently the named holder of the NDA.

The Company is collaborating with Haisco to resolve this issue with the NMPA.

As a result of this issue, the Company has not received the $ 7,000 upfront payment due from Haisco under the Haisco Agreement and expects to agree with Haisco to extend the period of time under which Haisco is obligated to make said upfront payment consistent with the decision of the NMPA on this issue, or as otherwise agreed to by the Company and Haisco.

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 1. Financial Statements