What changed in this filing

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Item 1. Financial Statements

2022-11-01 compared with 2022-08-02 · 199 added, 164 removed, 754 unchanged (32% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2022 December 31,

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Authorized 250,000,000 shares;

53,343,989 and 41,228,736 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

53,852,126 and 41,228,736 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 190,982 174,621

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

9 unchanged sentences

Interest expense related to the sale of future revenue, net ( 2,039 ) ( 3,767 ) ( 5,837 ) ( 10,567 )

Interest and other income, net 32 373 29 321

Interest and other income (expense), net 5 ( 33 ) 34 288

Net loss before income taxes ( 12,536 ) ( 14,555 ) ( 42,058 ) ( 41,594 )

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Share-based compensation expense — — 2,219 — 2,219

Vested restricted stock units — — — — —

Other — — ( 1 ) 1 —

1 unchanged sentence

Balance at June 30, 2022 53,343,989 53 189,908 ( 286,318 ) ( 96,357 )

Common Stock issued under public equity offering 501,472 1 641 — 642

Costs of common stock issued under public equity offering — — ( 98 ) — ( 98 )

Share-based compensation expense — — 535 — 535

Vested restricted stock units 6,665 — ( 3 ) — ( 3 )

Other — — ( 1 ) ( 1 ) ( 2 )

Net loss — — — ( 12,536 ) ( 12,536 )

Balance at September 30, 2022 53,852,126 $ 54 $ 190,982 $ ( 298,855 ) $ ( 107,819 )

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Balance at December 31,2020 34,569,254 $ 35 $ 137,725 $ ( 186,257 ) $ ( 48,497 )

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

Common Stock issued under public equity offering 1,509,818 1 6,221 — 6,222

Costs of common stock issued under public equity offering — — ( 135 ) — ( 135 )

Share-based compensation expense — — 1,900 — 1,900

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

Other — — 1 — 1

Net loss — — — ( 14,555 ) ( 14,555 )

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

See accompanying notes to the condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

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Deferred revenue 10,509 3,757

Loans payable 675 —

Net cash used for operating activities ( 18,235 ) ( 24,918 )

1 unchanged sentence

Capital expenditures ( 998 ) ( 380 )

Additions to intangible assets ( 1,500 ) —

Net cash used for investing activities ( 2,498 ) ( 380 )

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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.

(together with its subsidiary, “Aquestive” or “the Company”) is a pharmaceutical company advancing current standards of care to solve patients’ problems through simplifying complex delivery methods.

The Company is developing pharmaceutical products to deliver complex molecules through alternative administrations to invasive and inconvenient standard of care therapies.

Aquestive has five licensed commercialized products which are marketed by our licensees in the U.S.

and around the world.

The Company is the exclusive manufacturer of these licensed products.

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 is advancing an early stage product pipeline for the treatment of severe allergic reactions, including anaphylaxis.

The Company has also developed a product pipeline focused on treating diseases of the central nervous system, or CNS.

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.

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Equity Offering of Common Stock

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 September 11, 2019, the Company established an “At-The-Market” (ATM) facility pursuant to which the Company may offer up to $ 25,000 worth of shares of common stock, par value $ 0.001 per share, of the Company (the "Common Stock").

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 six months ended June 30, 2022, the Company sold 1,404,878 shares which provided net proceeds of approximately $ 2,473 after deducting commissions and other transaction costs of $ 139 .

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

This ATM facility has approximately $ 34,791 available at June 30, 2022.

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.

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

The 2019 Registration Statement expired under its terms on September 17, 2022.

On September 7, 2022, the Company filed a prospectus supplement to register the offer and sale of up to $ 35,000 worth of shares of Common Stock pursuant to the Amended Equity Distribution Agreement under a shelf registration statement on Form S-3 (Registration Statement No.

333-254775), or the 2021 Registration Statement, that was declared effective by the Securities and Exchange Commission (SEC) on April 5, 2021.

The Company discontinued using the 2021 Prospectus upon the filing of the prospectus supplement on September 7, 2022.

For the nine months ended September 30, 2022, the Company sold 1,906,350 shares of Common Stock under the ATM which provided net proceeds of approximately $ 3,017 after deducting commissions and other transaction costs of $ 237 .

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

This ATM facility has approximately $ 34,358 worth of shares of Common Stock available at September 30, 2022.

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 Common Stock from time to time over the 36 -month term of the Lincoln Park Purchase Agreement.

The Lincoln Park Purchase Agreement contains an ownership limitation such that we will not issue, and Lincoln Park will not purchase, shares of Common Stock if it would result in their beneficial ownership exceeding 9.99%.

Lincoln Park has covenanted under the 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.

For the six months ended June 30, 2022, the Company sold 1,611,181 shares including commitment shares, which provided proceeds of approximately $ 1,987 in connection with the Lincoln Park Purchase Agreement .

For the nine months ended September 30, 2022, the Company sold 1,611,181 shares including commitment shares, which provided proceeds of approximately $ 1,987 in connection with the Lincoln Park Purchase Agreement .

On April 13, 2022, the Company filed a prospectus supplement in connection with this offering.

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The Securities Purchase Agreements provided for the sale and issuance by the Company of an aggregate of:

(i) 4,850,000 shares of the Company’s common stock, (ii) pre-funded warrants to purchase up to 4,000,000 shares of common stock and (iii) common stock warrants to purchase up to 8,850,000 shares of common stock.

(i) 4,850,000 shares of Common Stock, (ii) pre-funded warrants to purchase up to 4,000,000 shares of Common Stock and (iii) Common Stock warrants to purchase up to 8,850,000 shares of Common Stock.

The Company received net proceeds of approximately $ 7,796 , after deducting placement agent fees and expenses and estimated offering expenses payable by the Company.

1 unchanged sentence

On June 8, 2022, the Company filed a prospectus supplement in connection with this equity offering.

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GAAP”) and with Article 10 of Regulation S-X for interim financial reporting.

In compliance with those rules, certain information and footnote disclosures normally included in annual consolidated financial

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statements prepared in accordance with U.S.

In compliance with those rules, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

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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 June 30, 2022:

Recent Accounting Pronouncements Not Adopted as of September 30, 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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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 or exchange.

The accounting standard update was issued to clarify and reduce diversity in an issuer’s accounting for

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modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

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

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The Company does not expect the new accounting guidance to have a material impact on the Company's consolidated financial statements.

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In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) :

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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 June 30, 2022, the Company had $ 17,695 of cash and cash equivalents.

As of September 30, 2022, the Company had $ 18,649 of cash and cash equivalents.

The Company has experienced a history of net losses.

The Company's accumulated deficits totaled $ 286,318 as of June 30, 2022.

The Company's accumulated deficits totaled $ 298,855 as of September 30, 2022.

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.

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The Company began utilizing its ATM facility in November 2020.

Since inception to June 30, 2022, the Company sold 8,886,297 shares which generated net cash proceeds of approximately $ 38,306 , net of commissions and other transaction costs of $ 1,903 .

For the six months ended June 30, 2022, the Company sold 1,404,878 shares which provided net proceeds of approximately $ 2,473 , net of commissions and other transaction costs of $ 139 .

This ATM facility has approximately $ 34,791 available at June 30, 2022.

Since inception to September 30, 2022, the Company sold 9,387,769 shares of Common Stock which generated net cash proceeds of approximately $ 38,850 , net of commissions and other transaction costs of $ 2,001 .

For the nine months ended September 30, 2022, the Company sold 1,906,350 shares of Common Stock which provided net proceeds of approximately $ 3,017 , net of commissions and other transaction costs of $ 237 .

This ATM facility has approximately $ 34,358 worth of shares of Common Stock available at September 30, 2022.

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

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The Company recognizes revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

To achieve this core principle, a five-step model is applied that includes (1) identifying the contract with a customer, (2) identifying the performance obligation in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing when, or as, an entity satisfies a performance obligation.

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transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing when, or as, an entity satisfies a performance obligation.

Performance Obligations

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A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

At contract inception, the Company

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assesses the goods promised in its contracts with customers and identify a performance obligation for each promise to transfer to the customer a distinct good.

At contract inception, the Company assesses the goods promised in its contracts with customers and identify a performance obligation for each promise to transfer to the customer a distinct good.

When identifying performance obligations, the Company considers all goods or services promised in a contract regardless of whether explicitly stated in the contract or implied by customary business practice.

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If the milestone payments relate to future development, the timing of recognition depends upon historical experience and the significance a third party has on the outcome.

For milestone payments to be received upon the achievement of a sales threshold, the revenue from the milestone payments is recognized at the later of when the actual sales are incurred or the performance obligation to which the sales relate to has been satisfied.

For milestone payments to be received upon the achievement

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of a sales threshold, the revenue from the milestone payments is recognized at the later of when the actual sales are incurred or the performance obligation to which the sales relate to has been satisfied.

Contract Assets - in certain situations, customer contractual payment terms provide for invoicing in arrears.

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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 June 30, 2022,

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and December 31, 2021, such contract assets were $ 3,474 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.

As of September 30, 2022, and December 31, 2021, such contract assets were $ 2,150 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 June 30, 2022, and December 31, 2021, such contract liabilities were $ 15,089 and $ 7,887 , respectively.

As of September 30, 2022, and December 31, 2021, such contract liabilities were $ 18,396 and $ 7,887 , respectively.

The Company’s revenues were comprised of the following:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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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 six months ended June 30, 2022:

The following table provides a summary of activity with respect to sales related allowances and accruals for the nine months ended September 30, 2022:

Total Sales Related Allowances

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Payments / credits ( 995 )

Balance at June 30, 2022 $ 509

Total reductions of gross product sales from sales-related allowances and accruals were $ 529 for the six months ended June 30, 2022.

Balance at September 30, 2022 $ 731

Total reductions of gross product sales from sales-related allowances and accruals were $ 1,121 for the nine months ended September 30, 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 $ 509 and $ 2,656 , respectively, as of June 30, 2022 and $ 605 and $ 2,224 , respectively, as of December 31, 2021.

The accrued balances relative to these provisions included in Trade and other receivables, net and Accounts payable and accrued expenses were $ 731 and $ 2,229 , respectively, as of September 30, 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 six months ended June 30, 2022, Indivor exceeded the 10% threshold for revenue and represented approximately 77 % of total revenue.

As of June 30, 2022, Indivior and Haisco Pharmaceutical Group Co., Ltd.

("Haisco") exceeded the 10% threshold for outstanding receivables and represented 38 % and 37 %, respectively, of outstanding receivables.

For the six months ended June 30, 2021, Indivior exceeded the 10% threshold for revenue and represented approximately 68 % of total revenue.

For the nine months ended September 30, 2022, Indivor exceeded the 10% threshold for revenue and represented approximately 75 % of total revenue.

As of September 30, 2022, Indivior and Cardinal Health Inc.

exceeded the 10% threshold for outstanding receivables and represented 60 % and 12 %, respectively, of outstanding receivables.

For the nine months ended September 30, 2021, Indivior exceeded the 10% threshold for revenue and represented approximately 73 % 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 5 for details on the Company's licensing and supply agreement with Haisco.

Material Agreements

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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.

Sunovion used this intellectual property to develop its apomorphine product KYNMOBI ® , which was approved by the United States Food and Drug Administration (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.

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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 June 30, 2022 under the Monetization Agreement.

The Company has received an aggregate amount of $ 50,000 through September 30, 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 June 30, 2022, the Company may not receive any of the additional aggregate contingent payments under the Monetization agreement.

Based on the current forecast by Sunovion of estimated KYNMOBI sales as of September 30, 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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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, a Chinese limited company listed on the Shenzhen Stock Exchange 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.

Effective as of July 7, 2022, the Company and Haisco amended the terms of the Haisco Agreement which amendment provides that the due date of the $ 7 upfront payment due from Haisco under the Haisco Agreement will be the first to occur of:

(i) the date that Haisco receives an official written confirmation from the Chinese equivalent of the FDA (the "NMPA") that the NMPA will receive and accept a Regulatory Approval Application with respect to Exservan in China that recognizes the Company as the Marketing Authorization Holder ("MAH"), and (ii) 21 business days after Haisco receives a copy of a written acknowledgement from the FDA that the U.S.

NDA for Exservan was transferred to the Company from a third-party licensee of Exservan in the United States.

The amendment further provides that the Haisco Agreement may be terminated by Haisco upon written notice to the Company if the Company is not the holder of the NDA for Exservan in the United States within six months from the effective date of the amendment and Haisco has not received an official written confirmation from the NMPA that the NMPA accepts a Regulatory Approval Application with respect to Exservan that recognizes the Company as the MAH in China.

We may not receive any payments under the Haisco Agreement.

Refer to Note 20 and Part II, Item 1A.

Risk Factors for details.

The Company entered into a License, Development and Supply Agreement with Haisco, a Chinese limited company listed on the Shenzhen Stock Exchange, 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.

Under the terms of the Haisco Agreement, Aquestive will serve as the exclusive sole manufacturer and supplier for Exservan in China.

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

Compensatory Arrangements of Certain Officers

On May 17, 2022, the Company announced that Keith J.

Kendall, President and Chief Executive Officer of the Company, was leaving the Company and Board of Directors effective May 17, 2022.

Kendall, President and Chief Executive Officer of the Company, was leaving the Company and the Company's Board of Directors, effective May 17, 2022.

In connection with his departure, Mr.

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Kendall’s employment with the Company ceased effective as of May 17, 2022 (the “Termination Date”).

The Separation Agreement provides Mr.

Kendall with the following principal severance benefits, contingent upon Mr.

Kendall execution and delivery of a customary release of claims:

Under the Separation Agreement, Mr.

Kendall received the following principal severance benefits, contingent upon Mr.

Kendall's execution and delivery of a customary release of claims:

(i) a cash payment consisting of the sum of any previously unpaid base salary through the Termination Date and any accrued and unused vacation time for the 2022 calendar year;

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(iii) a cash payment in the amount of $ 150 , representing 90 days of his base pay in lieu of the required notice period under Mr.

Kendall’s employment agreement, (iv) severance payments consisting of (a) a cash payment of $ 262,500 , which represents an acceleration of the first three installments of Mr.

Kendall’s 18 -month severance he is entitled to under his employment agreement, (b) monthly severance payments of $ 52,571.43 per month for the first through the seventh months following the Termination Date, (c) $ 69,500 paid for the eighth month after the Termination Date, and (d) monthly severance payments of $ 87,500 for the ninth through eighteenth months following the Termination Date, (v) accelerated vesting of unvested outstanding equity awards, with options remaining exercisable for the duration of the stated term of each award, and (vi) continuing coverage under the Company’s group health and life insurance plans at the same levels and on the same terms and conditions as are provided to similarly-situated executives, for a period of 18 months.

Kendall’s employment agreement;

(iv) severance payments consisting of (a) a cash payment of $ 263 , which represents an acceleration of the first three installments of Mr.

Kendall’s 18 -month severance he is entitled to under his employment agreement;

(b) monthly severance payments of $ 53 per month for the first through the seventh months following the Termination Date;

and (d) monthly severance payments of $ 88 for the ninth through eighteenth months following the Termination Date;

(v) accelerated vesting of unvested outstanding equity awards, with options remaining exercisable for the duration of the stated term of each award;

and (vi) continuing coverage under the Company’s group health and life insurance plans at the same levels and on the same terms and conditions as are provided to similarly-situated executives, for a period of 18 months.

Under the terms of the Separation Agreement, Mr.

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Kendall will receive a consulting fee of $ 10 per month.

Licensing and Supply Agreement with Atnahs Pharma UK Limited

The Company entered into a License and Supply Agreement with Atnahs Pharma UK Limited, a company registered in England and Wales ("Pharmanovia"), effective as of September 26, 2022 (the "Pharmanovia Agreement"), pursuant to which the Company granted Pharmanovia an exclusive license to certain of the Company's intellectual property to develop and commercialize Libervant™ (diazepam) Buccal Film for the treatment of prolonged or acute, convulsive seizures in all ages in certain countries of the European Union, the United Kingdom, Switzerland, Norway and the Middle East and North Africa (the "Territory") during the term of the Pharmanovia Agreement.

Under the Pharmanovia Agreement, Pharmanovia will lead the regulatory and commercialization activities for Libervant in the Territory and the Company will serve as the exclusive sole manufacturer and supplier of Libervant in the Territory.

Pursuant to the Pharmanovia Agreement, the Company received $ 3,500 upon agreement execution and will receive additional milestone payments upon the occurrence of certain conditions set forth in the Pharmanovia Agreement, additional milestone payments and profit shares, as well as manufacturing fees and royalty fees through the expiration of the Pharmanovia Agreement.

Financial Instruments – Fair Value Measurements

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• Level 1 — Observable quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

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• Level 2 — Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

• Level 3 — Unobservable inputs that are supported by little or no market activity, such as pricing models, discounted cash flow methodologies and similar techniques.

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See Note 14 Warrants for further information on these warrants.

The Company's 12.5 % Senior Secured Notes contain a repurchase offer or put option which gives holders of the option the right, but not the obligation, to require the Company to redeem on the Notes up to a capped portion of milestone payments resulting from the Monetization Agreement.

The Company's 12.5 % Senior Secured Notes contain a repurchase offer or put option which gives holders of the option the right, but not the obligation, to require the Company to redeem the Notes up to a capped portion of milestone payments resulting from the Monetization Agreement.

This put option was valued based on Level 3 inputs and its fair value was based primarily on an independent third-party appraisal consistent with generally accepted valuation methods of the Uniform Standards of Professional Appraisal Practice, the American Society of Appraisers and the American Institute of Certified Public Accountants Accounting and Valuation Guide.

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The components of Inventory, net are as follows:

September 30,

2022 December 31,

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Property and Equipment, Net

Lives June 30,

Lives September 30,

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 $ 655 and $ 728 for the three-month periods ended June 30, 2022 and 2021, respectively.

For the respective six-month periods, these expenses totaled $ 1,369 and $ 1,471 .

Total depreciation, amortization, and impairment related to property and equipment was $ 557 and $ 724 for the three-month periods ended September 30, 2022 and 2021, respectively.

For the nine months ended September 30, 2022 and 2021, these expenses totaled $ 1,926 and $ 2,195 , respectively.

Right-of-Use Assets and Lease Obligations

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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 and six-months ended June 30, 2022, total operating lease expenses totaled $ 424 and $ 843 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 127 and $ 223 , respectively.

For the three and six-months ended June 30, 2021, total operating lease expenses totaled $ 430 and $ 863 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 116 and $ 235 , respectively.

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

For the three and nine-months ended September 30, 2022, total operating lease expenses totaled $ 424 and $ 1,267 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 110 and $ 333 , respectively.

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.

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

Remainder of 2022 $ 324

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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,

Purchased technology-based intangible $ 2,358 $ 2,358

Purchased intangible $ 3,858 $ 2,358

Purchased patent 509 509

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Intangible assets, net 1,487 51

Amortization expense was $ 12 and $ 12 for each of the three-month periods ended June 30, 2022 and 2021.

For the corresponding six-month periods, these expenses totaled $ 25 and $ 25 , respectively.

During the remaining life of the purchased patent, estimated remaining amortization expense is $ 25 in 2022.

Amortization expense was $ 39 and $ 13 for each of the three-month periods ended September 30, 2022 and 2021.

For the nine months ended September 30, 2022 and 2021, these expenses totaled $ 64 and $ 38 , respectively.

During the remaining life of the purchased intangible assets, estimated amortization expense is $ 50 in the remainder of 2022 and $ 150 in 2023, respectively.

Other non-current Assets

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

September 30,

2022 December 31,

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Accrued expenses consisted of the following:

September 30,

2022 December 31,

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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 June 30, 2022.

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

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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 June 30, 2022.

A valuation study was performed by an independent third party appraiser and updated as of September 30, 2022.

Based on the valuation study, the put option was valued at $ 108 and has been recorded in Other non-current liabilities.

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market access ("Second Additional Securities").

If and to the extent that the Company accesses these re-openers, it 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 the Company's common stock at the warrant grant date.

If and to the extent that the Company accesses these re-openers, it 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 the Common Stock at the warrant grant date.

On May 13, 2022, pursuant to the Fifth Supplemental Indenture, the holders of the 12.5 % Notes further extended to March 31, 2023 from June 30, 2022, the Company's ability to access, at the Company's option, $ 30,000 of 12.5 % Notes re-openers under the Indenture.

The Fifth Supplemental Indenture also provided that the Company's access to the First Additional Securities and Second Additional Securities is subject to the full approval of Libervant by the U.S Food and Drug Administration for sale in the United States, which full approval includes U.S.

The Fifth Supplemental Indenture also provided that the Company's access to the First Additional Securities and Second Additional Securities is subject to the full approval of Libervant by the FDA for sale in the United States, which full approval includes U.S.

market access for Libervant.

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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 June 30, 2022, the Company recorded its principal payments as Loans payable, net on its Condensed Consolidated Balance Sheet.

As of September 30, 2022, the Company recorded its principal payments as Loans payable, net on its Condensed Consolidated Balance Sheet.

The Company may elect, at its option, to redeem the 12.5 % Notes at any time at premiums that range from 101.56 % of outstanding principal if prepayment occurs on or after the fifth anniversary of the issue date of the Initial Notes to 112.50 % if payment occurs during the third year after the issuance of the Notes.

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”).

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.

On October 7, 2021, the Company entered into the Fourth Supplemental Indenture, pursuant to which 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 the 12.5% Notes or the interest payment obligation due under the 12.5% 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, on its Consolidated Balance Sheet.

In connection with the Fourth Supplemental Indenture, the Company entered into a Consent Fee Letter with the holders of the 12.5% Notes (the “Consent Fee Letter”), pursuant to which the Company agreed to pay the holders of the 12.5% Notes an additional cash payment ("Consent Fee") of $ 2,700 in the aggregate, payable in four quarterly payments beginning May 15, 2022.

As of September 30, 2022, the Company recorded the Consent Fee as Loans payable, current, 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.

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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 six months ended June 30, 2022 were $ 4 and $ 8 , respectively, while comparative amortization expenses for the three and six months ended June 30, 2021 were $ 1,165 and $ 2,317 , respectively.

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 35 and $ 43 as of June 30, 2022 and December 31, 2021, respectively.

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, 2022 were $ 4 and $ 12 , respectively, while comparative amortization expenses for the three and nine months ended September 30, 2021 were $ 1,171 and $ 3,488 , respectively.

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 31 and $ 43 as of September 30, 2022 and December 31, 2021, respectively.

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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.

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.

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 Common Stock and included specified registration rights.

Management estimated the fair value of the Initial Warrants to be $ 6,800 and the Additional Warrants to be $ 735 , each based on an assessment by an independent third-party appraiser.

The fair value of the respective warrants is treated as a debt discount, amortizable over the term of the respective warrants, with the unamortized 12.5 % Notes portion applied to reduce the aggregate principal amount of the 12.5 % Notes in the Company’s unaudited condensed balance sheet.

Additionally, since the warrants issued do not provide warrant redemption or put rights within the control of the holders that could require the Company to make a payment of cash or other assets to satisfy the obligations under the warrants, except in the case of a “cash change in control”, the fair value attributed to the warrants is presented in Additional Paid-in Capital in the Company’s unaudited condensed balance sheet.

There were no warrants exercised during the six-months ended June 30, 2022 or 2021, respectively.

Additionally, since the Initial Warrants and Additional 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 the Company’s unaudited condensed balance sheet.

There were no warrants exercised as it relates to the Initial Warrants and the Additional Warrants during the nine-months ended September 30, 2022 or 2021, respectively.

In June 2022, the Company issued pre-funded warrants and Common Stock warrants to certain purchasers in connection with the Securities Purchase Agreements.

The pre-funded warrants will expire when exercised in full and entitle purchasers to purchase up to 4,000,000 shares of the Company's common stock at $ 0.0001 per share.

The common stock warrants expire on June 8, 2027 and entitle the purchasers to purchase up to 8,850,000 shares of the Company's common stock at a price ranging from $ 0.96 to $ 1.09 per share.

The pre-funded warrants will expire when exercised in full and entitle purchasers to purchase up to 4,000,000 shares of Common Stock.

The Common Stock warrants expire on June 8, 2027 and entitle the purchasers to purchase up to 8,850,000 shares of Common Stock at a price ranging from $ 0.96 to $ 1.09 per share.

Management estimated the fair value of the pre-funded warrants and Common Stock warrants to be $ 5,874 based on an assessment by an independent third-party appraiser.

The fair value of the pre-funded and Common Stock warrants is treated as equity and presented in Additional Paid-in Capital in the Company’s unaudited condensed balance sheet.

The pre-funded warrants were fully exercised and no common stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the six-months ended June 30, 2022.

The pre-funded warrants were fully exercised and no Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the nine-months ended September 30, 2022.

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 June 30, 2022 under the Monetization Agreement.

The Company has received an aggregate amount of $ 50,000 through September 30, 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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Although the Company sold all of its rights to receive royalties and milestones, as a result of ongoing obligations related to the generation of these royalties, the Company will account for these royalties as revenue.

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Agreement in one or more jurisdictions of the licensed territory under the Sunovion License Agreement.

Its ongoing obligations include the maintenance and defense of the intellectual property and to provide assistance to Marathon in executing a new license agreement for KYNMOBI in the event Sunovion terminates the Sunovion License Agreement in one or more jurisdictions of the licensed territory under the Sunovion License Agreement.

The accounting liabilities, as adjusted over time, resulting from this transaction and any non-cash interest expenses associated to those liabilities do not and will not represent any obligation to pay or any potential future use of cash.

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In connection with the Monetization Agreement, the Company performed an assessment under ASC 860, Transfer and Servicing to determine whether the existing receivable was transferred to Marathon and concluded that the receivable was not transferred.

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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.

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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 revenue for the six months ended June 30, 2022 :

The following table shows the activity of the liability related to the sale of future revenue for the nine months ended September 30, 2022 :

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

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Liability related to the sale of future revenue, net (includes current portion of $ 1,910 )

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Net Loss Per Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares.

As a result of the Company’s net loss incurred for the three and six months ended June 30, 2022 and 2021, 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 and nine months ended September 30, 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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Loss per common share – basic and diluted $ ( 0.23 ) $ ( 0.37 ) $ ( 0.90 ) $ ( 1.12 )

As of June 30, 2022 and 2021, respectively, the Company’s potentially dilutive instruments included 5,284,447 and 4,431,267 options to purchase common shares and 169,950 and 7,757 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 June 30, 2022 and 2021, were potentially dilutive warrants for the purchase of 10,564,429 and 1,571,429 shares of common stock for the respective periods.

As of September 30, 2022 and 2021, respectively, the Company’s potentially dilutive instruments included 5,967,492 and 4,341,967 options to purchase common shares and 168,050 and no 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

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losses reported.

Similarly excluded as of September 30, 2022 and 2021, were potentially dilutive warrants for the purchase of 10,564,429 and 1,571,429 shares of common stock for the respective periods.

Share-Based Compensation

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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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 six-month period ended June 30, 2022:

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The following tables provide information about the Company’s restricted stock unit and stock option activity during the nine-month period ended September 30, 2022:

Restricted Stock Unit Awards (RSUs):

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Granted 192 $ 2.38

Vested ( 10 ) $ 2.55

Forfeited ( 14 ) $ 2.06

Unvested as of June 30, 2022 170 $ 2.39

Vested and expected to vest as of June 30, 2022 154 $ 2.39

Unvested as of September 30, 2022 168 $ 2.39

Vested and expected to vest as of September 30, 2022 154 $ 2.39

Stock Option Awards:

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Exercised, Forfeited, Expired ( 9 ) $ 10.76

Outstanding as of June 30, 2022 5,284 $ 6.14

Vested and expected to vest as of June 30, 2022 5,155 $ 6.22

Exercisable as of June 30, 2022 3,461 $ 7.65

As of June 30, 2022, $ 334 of unrecognized compensation expense related to unvested restricted stock units is expected to be recognized over a weighted average period of 2.71 years from the date of grant.

The fair values of stock options granted during the six months ended June 30, 2022 were estimated using the Black-Scholes pricing model based on the following assumptions:

Outstanding as of September 30, 2022 5,967 $ 5.70

Vested and expected to vest as of September 30, 2022 5,800 $ 5.80

Exercisable as of September 30, 2022 3,651 $ 7.62

As of September 30, 2022, $ 301 of unrecognized compensation expense related to unvested restricted stock units is expected to be recognized over a weighted average period of 2.46 years from the date of grant.

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The fair values of stock options granted during the nine months ended September 30, 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 % - 3.4 %

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2022 was $ 1.88 .

During the six-month period ended June 30, 2022, stock options were granted with an exercise price ranging from $ 0.71 to $ 2.55 and accordingly, given the Company’s share price of $ 0.64 at June 30, 2022, the intrinsic value provided by certain shares granted during this period was de minimus.

As of June 30, 2022, $ 2,866 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 1.88 years from the date of grant.

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2022 was $ 1.54 .

During the nine-month period ended September 30, 2022, stock options were granted with an exercise price ranging from $ 0.71 to $ 2.55 and accordingly, given the Company’s share price of $ 1.17 at September 30, 2022, the intrinsic value provided by certain shares granted during this period was de minimus.

As of September 30, 2022, $ 2,778 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 2.00 years from the date of grant.

2022 Inducement Equity Incentive Plan

In accordance with Nasdaq Listing Rule 5635(c)(4), the Company adopted the 2022 Equity Inducement Plan approved by the Compensation Committee of the Board of Directors of the Company effective as of July 29, 2022.

Under the 2022 Equity Inducement Plan, the Company granted an inducement equity of 100,000 shares of non-qualified Common Stock options award to an officer in September 2022.

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 six months ended June 30, 2022 and 2021, respectively, 23,884 and 19,270 shares were purchased and issued through the ESPP at total discounts of $ 2 and $ 11 .

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Under the ESPP, employees may elect to purchase 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 months ended September 30, 2022 and 2021, respectively, 23,884 and 19,270 shares were purchased and issued through the ESPP at total discounts of $ 2 and $ 11 .

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.

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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 June 30, 2022 and 2021, the Company recorded no income tax benefit from its pretax losses of $ 16,302 and $ 12,367 .

Similarly for the six months ended June 30, 2022 and 2021, the Company recorded no income tax benefit from its pretax losses of $ 29,522 and $ 27,039 .

The primary factor impacting the effective tax rate for the three and six months ended June 30, 2022 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 September 30, 2022 and 2021, the Company recorded no income tax benefit from its pretax losses of $ 12,536 and $ 14,555 .

Similarly for the nine months ended September 30, 2022 and 2021, the Company recorded no income tax benefit from its pretax losses of $ 42,058 and $ 41,594 .

The primary factor impacting the effective tax rate for the three and nine months ended September 30, 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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From time to time, the Company has been and may again become involved in legal proceedings arising in the course of its business, including product liability, intellectual property, commercial litigation, or environmental or other regulatory matters.

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Patent-Related Litigation

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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.

On June 28, 2022, pursuant to a settlement agreement between the parties, the Court entered a Stipulation and Order of Dismissal, dismissing all claims and counterclaims with prejudice.

On June 28, 2022, pursuant to a settlement agreement between the parties, the Court entered a Stipulation and Order of Dismissal, dismissing all claims and counterclaims with prejudice in the lawsuit.

Indivior Inc., Indivior UK Ltd., and Aquestive Therapeutics, Inc.

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Reddy’s (described above).

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.

Indivior Inc., Indivior UK Ltd., and Aquestive Therapeutics, Inc.

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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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denied the Company's motion to dismiss Alvogen’s counterclaims on August 24, 2020.

The Court denied the Company's motion to dismiss Alvogen’s counterclaims on August 24, 2020.

On November 2, 2020, Alvogen filed a second amended answer and counterclaims, removing its allegations of monopolization and attempted monopolization against us and asserting only conspiracy to monopolize against us.

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Expert discovery concluded on October 8, 2021, and dispositive motions were filed on October 26, 2021.

The Court heard oral argument on the dispositive motions on August 29, 2022, and the parties are awaiting a ruling from the Court.

There is no trial date set.

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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, have completed claim construction briefing, and are proceeding with fact discovery.

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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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While the Company was not named as a defendant in the original Suboxone MDL cases, the action brought by the States alleges that the Company participated in an antitrust conspiracy with Indivior in connection with Indivior’s launch of Suboxone Sublingual Film and engaged in related conduct in violation of federal and state antitrust law.

The Company moved to dismiss the States’ conspiracy claims, but by order dated October 30, 2017, the Court

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denied the Company's motion to dismiss.

The Company moved to dismiss the States’ conspiracy claims, but by order dated October 30, 2017, the Court denied the Company's motion to dismiss.

The Company filed an answer denying the States’ claims on November 20, 2017.

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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 was held on May 18, 2022, and the parties are awaiting the Court’s ruling on the motion.

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.

The hearing on Aquestive’s motion for summary judgment was held on May 18, 2022 and, on October 19, 2022, the Court entered an order dismissing all claims against the Company in the lawsuit.

The order dismissing all claims against the Company could be appealed by the plaintiffs in this case.

The Company is not able to determine or predict whether the plaintiffs will appeal the order or the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.

Humana and Centene Action s

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On September 18, 2020, Humana, Inc.

(“Humana”), a health insurance payor, filed a lawsuit against us and Indivior in the Eastern District of Pennsylvania alleging facts similar to those at issue in the Antitrust Case and the Suboxone MDL described above, which lawsuit was assigned to the same judge that is presiding over Antitrust Case and Suboxone MDL.

Humana’s Complaint alleges five causes of action against us, including conspiracy to violate the RICO Act, fraud under state law, unfair and deceptive trade practices under state law, insurance fraud, and unjust enrichment.

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.

(“Humana”), a health insurance payor, filed a lawsuit against the Company and Indivior in the Eastern District of Pennsylvania alleging facts similar to those at issue in the Antitrust Case and the Suboxone MDL described above, which lawsuit was assigned to the same judge that is presiding over Antitrust Case and Suboxone MDL.

Humana’s Complaint alleges five causes of action against the Company, including conspiracy to violate the RICO Act, fraud under state law, unfair and deceptive trade practices under state law, insurance fraud, and unjust enrichment.

On September 21, 2020, Centene Corporation (“Centene”) and other related insurance payors filed a similar lawsuit against the Company and Indivior in the Eastern District of Missouri.

The counsel representing Humana is also representing

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Centene in this matter.

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.

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Neurelis IPR Litigation

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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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Keith Kendall, et al .

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

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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.

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

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

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The Company filed a motion to dismiss the amended complaint on April 25, 2022, which became fully briefed as of June 27, 2022.

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.

Subsequent Events

Nasdaq Stock Market Notification

On July 14, 2022, the Company received a notice from the Nasdaq Stock Market (“Nasdaq”) that the Company is not in compliance with Nasdaq’s Listing Rule 5450(a)(1), as the minimum bid price of the Company’s common stock has been below $1.00 per share for 30 consecutive business days (the “Minimum Bid Price Requirement”).

The notification of noncompliance has no immediate effect on the listing or trading of the Company’s common stock on The Nasdaq Global Market.

The Company has 180 calendar days, or until January 10, 2023, to regain compliance with the Minimum Bid Price Requirement.

To regain compliance, the minimum bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-calendar day grace period.

In the event the Company does not regain compliance with the Minimum Bid Price Requirement by January 10, 2023, the Company may be eligible for an additional 180-calendar day compliance period if it elects to transfer to The Nasdaq Capital Market to take advantage of the additional compliance period offered on that market.

If the Company does not regain compliance with the Minimum Bid Price Requirement by the end of the compliance period (or the second compliance period, if applicable), the Company’s common stock will become subject to delisting.

In the event that the Company receives notice that its common stock is being delisted, the Nasdaq listing rules permit the Company to appeal a delisting determination by the Staff to a hearings panel.

The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement, including initiating a reverse stock split.

However, there can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with other Nasdaq Listing Rules.

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Haisco Receivable

Effective as of July 7, 2022, the Company and Haisco amended the terms of the Haisco Agreement, pursuant to which Haisco Agreement Aquestive granted Haisco an exclusive license to develop and commercialize Exservan™ (riluzole oral film) for the treatment of amyotrophic lateral sclerosis, or ALS, in China and Aquestive will serve as the exclusive sole manufacturer and supplier for Exservan in China.

The amendment provides that the due date of the $ 7,000 upfront payment due from Haisco under the Haisco Agreement will be the first to occur of:

(i) the date that Haisco receives an official written confirmation from the NMPA that the NMPA will receive and accept a Regulatory Approval Application with respect to Exservan in China that recognizes the Company as the MAH, and (ii) 21 business days after Haisco receives a copy of a written acknowledgement from the FDA that the U.S.

NDA for Exservan was transferred to the Company from a third-party licensee of Exservan in the United States.

Continued Utilization of the At-The-Market Facility

The Company continued utilization of its At-The-Market facility from October 1 through October 31, 2022 and sold 351,150 shares of Common Stock which generated net proceeds of approximately $ 355 .

Positive Decision in States’ Suboxone Antitrust Lawsuit on All Claims

The Company announced that the United States District Court for the Eastern District of Pennsylvania entered an order on October 19, 2022 dismissing all claims against the Company in the Suboxone antitrust lawsuit brought by a group of States’ Attorneys General against Indivior Inc.

(f/k/a Reckitt Benckiser Pharmaceuticals, Inc.) and Aquestive, Case No.

Licensing Agreement with Assertio Holdings, Inc.

Effective October 26, 2022, the Company entered into a License Agreement with Otter Pharmaceuticals, LLC, a subsidiary of Assertio Holdings, Inc.

ASRT) (“Assertio”), a specialty pharmaceutical company offering differentiated products to patients, to license Sympazan® (clobazam) oral film for the adjunctive treatment of seizures associated with Lennox‐Gastaut syndrome in patients aged two years of age or older (the "Assertio License Agreement").

Under the terms of the Assertio License Agreement, the Company granted an exclusive, worldwide license of its intellectual property for Sympazan to Assertio during the term of the Assertio License Agreement for an upfront payment of $ 9,000 .

Under the terms of the Assertio License Agreement, Aquestive will receive a $ 6,000 milestone payment within thirty (30) days after Aquestive's receipt of a notice of allowance from the United States Patent and Trademark Office (PTO) of the Company's patent application U.S.

16/561,573, and payment by the Company of the related allowance fee.

The Company received the notice of allowance from the PTO and paid the related allowance fee on October 27, 2022.

In addition, under the Assertio License Agreement, the Company will receive royalties from Assertio for the sale of the product through the expiration of the Assertio License Agreement.

The Company also entered into a long-term supply agreement with Assertio for Sympazan pursuant to which the Company is the exclusive sole worldwide manufacturer and supplier of the product and will receive manufacturing fees from Assertio for the product through the expiration of such supply agreement.

Table of Content

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What changed 10-Q

Item 1. Financial Statements