What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-05-04 compared with 2021-11-02 · 53 added, 0 removed, 6 unchanged (90% of the section changed)

You should carefully review and consider the information regarding certain risks and uncertainties facing the Company that could have a material adverse effect on the Company’s business prospects, financial condition, results of operations, liquidity and available capital resources set forth in Part I, Item 1A of the Company’s 2021 Annual Report on Form 10-K.

We will need substantial additional capital to fund our operations, which may not be available on acceptable terms, if at all.

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 our 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, we had $14.7 million of cash and cash equivalents.

On November 3, 2020, we entered into a Purchase and Sale Agreement (the "Monetization Agreement") with MAM Pangolin Royalty, LLC, an affiliate of Marathon Asset Management ("Marathon").

Under the terms of the Monetization Agreement, we sold all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion's apomorphine product, KYNMOBI.

KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the U.S.

Food and Drug Administration (FDA) on May 21, 2020.

We have received an aggregate amount of $50.0 million through December 31, 2021 under the Monetization Agreement.

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

Table of Content

total potential proceeds of $125.0 million.

Based on the current forecast of estimated KYNMOBI sales as of December 31, 2021, the Company may not receive any of the additional aggregate contingent payments under the Monetization agreement.

With the upfront proceeds of the monetization, we repaid $22.5 million of the Senior Secured Notes due 2025 (the "12.5% Notes"), and issued $4.0 million of new 12.5% Notes in lieu of paying a prepayment premium on the early repayment of the 12.5% Notes, reducing the aggregate principal balance of 12.5% Notes outstanding to $51.5 million, and such aggregate principal amount remains outstanding as of December 31, 2021.

On August 6, 2021, the holders of the 12.5% Notes agreed to extend to June 30, 2022 our ability to access, at our option, an additional $30.0 million of 12.5% Notes re-openers under the Indenture.

The first $10.0 million senior notes re-opener represents a commitment of such amount by current holders of 12.5% Notes, at our option, contingent upon FDA approval of our product candidate Libervant.

A second $20.0 million senior notes re-opener represents a right, at our option, to market to current holders of our 12.5% Notes, and/or other lenders, additional senior notes up to such amount, contingent upon FDA approval of Libervant for U.S.

market access.

If and to the extent that we access these re-openers, we will grant warrants to purchase up to 714,000 shares of common stock, with the strike price calculated based on the 30-day volume weighted average closing price of our common stock at the warrant grant date.

In addition, as of the closing of this transaction, we issued to the holders of the 12.5% Notes warrants to purchase 143,000 shares of our common stock.

On October 7, 2021, we entered into the Fourth Supplemental Indenture in connection with the 12.5% Notes.

Pursuant to the Fourth Supplemental Indenture, the amortization schedule for the 12.5% 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 June 30, 2025 or the interest payment obligation due under the Notes.

In 2019, we established an “at-the-market” (ATM) facility, under which, from time to time, we may offer and sell shares of our common stock.

In April 2022, we entered into a Purchase Agreement with Lincoln Park, under which, from time to time, we may cause Lincoln Park to purchase shares of our common stock.

We may not be able to raise additional capital or secure other funding on terms acceptable to us, or at all, and any failure to raise additional capital or other funding as and when needed for our cash requirements would have a negative impact on our business, financial condition and prospects and on our ability to execute and achieve our business plan.

If adequate funds are not available for our liquidity needs and cash requirements as and when needed, or at all, 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.

We also may be required to evaluate additional licensing opportunities, if any become available, of our proprietary product candidate programs that we currently plan to self-commercialize or explore other potential liquidity opportunities or other alternatives or options or strategic alternatives, although we cannot assure that any of these actions would be available or available on reasonable terms.

If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing most if not all of their investment in us.

We may not receive any payments under our License Agreement with Haisco.

In March 2022, we announced the grant of an exclusive license (the “Haisco Agreement”) to Haisco Pharmaceutical Group Co., Ltd.

(“Haisco”) for Haisco to develop and commercialize Exservan for the treatment of ALS in China.

Under the Haisco Agreement, Haisco is obligated to pay us an upfront cash payment, regulatory milestone payments, and double-digit royalties on net sales of Exservan in China and we will earn manufacturing revenue on the sale of Exservan in China as the exclusive supplier of Exservan in China if approved for marketing and sale.

Pursuant to the Haisco Agreement, Haisco has been appointed to serve as our 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.

We are collaborating with Haisco to resolve this issue with the NMPA.

As a result of this issue, we have not received the $7 million upfront payment that was due from Haisco under the Haisco Agreement and we expect to agree with Haisco to extend the period of time under which Haisco is obligated to make such upfront payment consistent with the decision of the NMPA on the issue, or as otherwise agreed to by us and Haisco.

There is no assurance that we will come to an agreement with Haisco, or that

Table of Content

there will be any contribution to the Company of cash payment, royalties or manufacturing revenue on launch of the product in China if we are not able to come to an agreement with Haisco or resolve this issue with the NMPA.

The sale of our common stock through our ATM sales agreement or our Lincoln Park Purchase Agreement may cause substantial dilution to our existing stockholders, and such sales, or the anticipation of such sales, may cause the price of our common stock to decline.

In 2019, we established an “at-the-market” (ATM) facility, under which, from time to time, we may offer and sell shares of our common stock.

In April 2022, we entered into a Purchase Agreement with Lincoln Park (the “Purchase Agreement”), under which, from time to time, we may cause Lincoln Park to purchase shares of our common stock.

Although we have the right to control whether we sell any shares, if at all, under these agreements, and we generally have the right to control the timing and amount of any such sales, we are subject to certain restrictions, including those that limit the number of shares we may sell.

In particular, with respect to the Purchase Agreement, we may not sell more than 8,323,114 shares to Lincoln Park, which we refer to as the Exchange Cap, unless we obtain stockholder approval to issue shares in excess of the Exchange Cap or the average price per share of shares issued to Lincoln Park equals or exceeds $2.16, and we may not sell shares to Lincoln Park if it would result in Lincoln Park beneficially owning more than 9.99% of our then outstanding shares of common stock.

Accordingly, we may not be able to utilize the ATM sales agreement or the Purchase Agreement to raise additional capital when, or in the amounts, we desire.

Our historical financial statements have been prepared under the assumption that we will continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to obtain additional financing or other capital, reduce expenditures, and, ultimately, generate revenue.

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

However, if adequate funds are not available to us when we need them, we will be required to curtail our operations, which would, in turn, further raise substantial doubt about our ability to continue as a going concern.

Unregistered Sales of Equity Securities and Use of Proceeds

3 unchanged sentences

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 1A. Risk Factors