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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-08 · 419 added, 288 removed, 895 unchanged (44% of the section changed)

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Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding our required disclosures.

We maintain disclosure controls that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding our required disclosures.

As of December 31, 2022, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

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Other Information.

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.

Directors, Executive Officers, and Corporate Governance

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Number Description

Placement Agency Agreement, dated June 6, 2022, between Aquestive Therapeutics, Inc.

and A.G.P./Alliance Global Partners (filed as Exhibit 1.1.

to the Current Report on Form 8-K of the Company, as filed on June 8, 2022, and incorporated by reference herein).

Amended and Restated Certificate of Incorporation of Aquestive Therapeutics, Inc., dated as of July 27, 2018 (filed as Exhibit 3.1 to the Current Report on Form 8-K of the Company, as filed on July 27, 2018, and incorporated by reference herein).

Amended and Restated Bylaws of Aquestive Therapeutics, Inc.

(filed as Exhibit 3.6 to the Registration Statement on Form S-1 of the Company (File No.

333-225924), as filed on June 27, 2018, and incorporated by reference herein).

(filed as Exhibit 3.2 to the Current Report on Form 8-K of the Company, as filed on February 7, 2023, and incorporated by reference herein).

Form of Common Stock Certificate of Aquestive Therapeutics, Inc.

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Bank National Association, as Trustee and Collateral Agent (filed as Exhibit 4.1 to the Current Report on Form 8-K of the Company, as filed on August 8, 2021, and incorporated by reference herein).

Form of 2019 Warrant (filed as Exhibit 4.2 to the Current Report on Form 8-K filed on July 16, 2019 and incorporated by reference herein).

Form of 2019 Warrant (filed as Exhibit 4.2 to the Current Report on Form 8-K of the Company, filed on July 16, 2019, and incorporated by reference herein).

Form of 2020 Warrant (filed as Exhibit 4.6 to the Annual Report of Form 10-K of the Company, as filed on March 9, 2021, and incorporated by reference herein).

Form of 2022 Pre-Funded Warrant (filed as Exhibit 4.1 to the Current Report on Form 8-K of the Company, as filed on June 8, 2022, and incorporated by reference herein).

Form of 2022 Common Stock Warrant (filed as Exhibit 4.2 to the Current Report on Form 8-K of the Company, as filed on June 8, 2022, and incorporated by reference herein).

Registration Rights Agreement, dated as of June 24, 2018, by and between Aquestive Partners, LLC and certain of the holders of its membership interests (filed as Exhibit 4.3 to the Registration Statement on Form S-1 of the Company (File No.

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Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference herein).

Fifth Supplemental Indenture, dated as of May 13, 2022, among Aquestive Therapeutics, Inc., as Issuer, any Guarantor that becomes party thereto and U.S.

Bank Trust Company, National Association, as Trustee and Collateral Agent (filed as Exhibit 4.1 to the Current Report on Form 8-K of the Company, as filed on May 17, 20222, and incorporated by reference herein).

Form of Indemnification Agreement, by and between Aquestive Therapeutics, Inc and its directors and officers (filed as Exhibit 10.1 to the Registration Statement on Form S-1 of the Company (File No.

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Bank National Association, as Trustee, and U.S.

Bank National Association, as Collateral Agent (filed as Exhibit 10.2 to the Current Report on Form 8-K filed on July 16, 2019, and incorporated by reference herein).

Executive Employment Agreement, dated as of June 30, 2018, by and between Aquestive Therapeutics, Inc.

Kendall (filed as Exhibit 10.5 to the Pre-Effective Amendment No.

1, as filed on July 16, 2018, to the Registration Statement on Form S-1 of the Company (File No.

333-225924), and incorporated by reference herein).

Executive Employment Agreement, dated as of June 26, 2018, by and between Aquestive Therapeutics, Inc.

and Daniel Barber (filed as Exhibit 10.6 to the Registration Statement on Form S-1 of the Company (File No.

333-225924), as filed on June 27, 2018, and incorporated by reference herein).

Executive Employment Agreement, dated as of June 26, 2018, by and between Aquestive Therapeutics, Inc.

Maxwell (filed as Exhibit 10.7 to the Registration Statement on Form S-1 of the Company (File No.

333-225924), as filed on June 27, 2018, and incorporated by reference herein).

Separation Agreement, dated as of December 16, 2020, by and between Aquestive Therapeutics, Inc.

Maxwell (filed as Exhibit 10.8 to the Annual Report of Form 10-K of the Company, as filed on March 9, 2021, and incorporated by reference herein).

Bank National Association, as Collateral Agent (filed as Exhibit 10.2 to the Current Report on Form 8-K of the Company, as filed on July 16, 2019, and incorporated by reference herein).

Executive Employment Agreement, dated as of July 15, 2022, by and between Aquestive Therapeutics, Inc.

and Daniel Barber (filed as Exhibit 10.1 to the Current Report on Form 10-Q of the Company, as filed on August 2, 2022, and incorporated by reference herein).

Executive Employment Agreement, dated as of July 9, 2018, by and between Aquestive Therapeutics, Inc.

Mark Schobel (filed as Exhibit 10.8 to the Pre-Effective Amendment No.

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333-225924), as filed on June 27, 2018, and incorporated by reference herein).

Amendment No.

11 to Commercial Exploitation Agreement, dated as of August 15, 2008 (filed herewith).

Agreement to Terminate CLA, by and between MonoSol Rx, LLC (now Aquestive Therapeutics, Inc.) and KemPharm, Inc., dated as of March 20, 2012 (filed as Exhibit 10.11 to the Registration Statement on Form S-1 of the Company (File No.

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and MAM Pangolin Royalty, LLC (filed as Exhibit 10.23 to the Annual Report on Form 10-K of the Company, as filed on March 9, 2021, and incorporated by reference herein).

Amendment No.1 to Purchase Agreement, dated as of August 6, 2021, by and between Aquestive Therapeutics, Inc.

and the Purchasers signatory thereto (filed herewith).

Amendment No.

2 to Purchase Agreement, dated as of May 13, 2022, by and between Aquestive Therapeutics, Inc.

and the Purchasers signatory thereto (as filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, as filed on May 17, 2022, and incorporated by reference herein).

Consent Fee Letter, dated October 7, 2021, among Aquestive Therapeutics, Inc.

and the Noteholder parties thereto (filed as Exhibit 10.1 to the Current Report of Form 8-K filed on October 8, 2021, and incorporated by reference herein).

and the Noteholder parties thereto (filed as Exhibit 10.1 to the Current Report on Form 8-K filed on October 8, 2021, and incorporated by reference herein).

First Amendment to Executive Employment Agreement, dated as of June 30, 2021, by and between Aquestive Therapeutics, Inc.

and Alexander Mark Schobel (filed herewith).

and Alexander Mark Schobel (as filed as Exhibit 10.25 to the Annual Report on Form 10-K of the Company, as filed on March 8, 2022, and incorporated by reference herein).

First Amendment to Executive Employment Agreement, dated as of June 30, 2021, by and between Aquestive Therapeutics, Inc.

Kendall (filed herewith).

Kendall (as filed as Exhibit 10.26 to the Annual Report on Form 10-K of the Company, as filed on March 8, 2022, and incorporated by reference herein).

License and Supply Agreement, dated as of September 26, 2022, by and between Aquestive Therapeutics, Inc.

and Atnahs Pharma UK Limited (filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, as filed on November 1, 2022, and incorporated by reference herein).

License, Development and Supply Agreement, dated as of March 2022, by and between Aquestive Therapeutics, Inc.

and Haisco Pharmaceutical Group Co., Ltd.

(filed as Exhibit 10.1 to the Quarterly Report on Form 10-Q of the Company, as filed on May 4, 2022, and incorporated by reference herein).

License Agreement, dated as of October 26, 2022, by and between Aquestive Therapeutics, Inc.

and Otter Pharmaceuticals, LLC (filed herewith)

Separation Agreement, dated as of May 17, 2022, by and between Aquestive Therapeutics, Inc.

Kendall (filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company.

as filed on May 17, 2022, and incorporated by reference herein).

Form of Securities Purchase Agreement, dated as of June 6, 2022, by and between Aquestive Therapeutics, Inc.

and the purchasers (filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, as filed on June 8, 2022, and incorporated by reference herein).

Purchase Agreement, dated as of April 12, 2022, by and between the Company and Lincoln Park (filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company, as filed on April 13, 2022, and incorporated by reference herein).

Registration Rights Agreement, dated as of April 12, 2022, by and between the Company and Lincoln Park (filed as Exhibit 10.2 to the Current Report on Form 8-K of the Company, as filed on April 13, 2022, and incorporated by reference herein).

Consent of KPMG LLP, Independent Registered Public Accounting Firm (filed herewith).

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101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment that has been granted by the Securities and Exchange Commission.

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+ Indicates a management contract or compensatory plan.

† Certain portions of this exhibit have been omitted because the omitted information is (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.

Form 10-K Summary

Not applicable.

Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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March 31, 2023 By:

Chief Executive Officer

/s/ Daniel Barber

Daniel Barber

President and Chief Executive Officer

(Principal Executive Officer)

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Signature Title Date

Kendall President, Chief Executive Officer and Member of the Board of Directors March 8, 2022

Kendall (Principal Executive Officer)

/s/ Daniel Barber President, Chief Executive Officer and Member of the Board of Directors March 31, 2023

Daniel Barber (Principal Executive Officer)

Ernest Toth, Jr.

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Julie Krop, M.D

Lurker Member of the Board of Directors March 8, 2022

Scibetta Member of the Board of Directors March 8, 2022

/s/ Marco Taglietti Member of the Board of Directors March 31, 2023

Marco Taglietti, M.D.

/s/ Timothy Morris Member of the Board of Directors March 31, 2023

Timothy Morris

Index to Consolidated Financial Statements

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Balance at January 1, 2021 34,569,254 $ 35 $ 137,725 $ ( 186,257 ) $ ( 48,497 )

Fair value of warrants issued — — 735 — 735

Common Stock issued under public equity offering 6,550,486 6 31,063 — 31,069

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Balance at December 31, 2021 41,228,736 $ 41 $ 174,621 $ ( 256,796 ) $ ( 82,134 )

Fair value of warrants issued — — 5,874 — 5,874

Common Stock issued under private equity offering 6,686,491 7 4,622 — 4,629

Costs of common stock issued under private equity offering — — ( 824 ) — ( 824 )

Common Stock issued upon warrant exercises 4,000,000 4 ( 4 ) — —

Common Stock issued under public equity offering 2,860,538 3 4,193 — 4,196

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Shares issued under employee stock purchase plan 45,304 — 34 — 34

Exercise of stock options 61,000 — 185 — 185

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

Share-based compensation expense — — 4,371 — 4,371

Other — — 3 ( 1 ) 2

Net loss — — — ( 54,410 ) ( 54,410 )

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Deferred revenue 25,043 3,561

Loans Payable 675 —

Net cash used for operating activities ( 9,789 ) ( 32,979 )

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Capital expenditures ( 1,024 ) ( 913 )

Additions to intangible assets ( 1,500 ) —

Net cash used for investing activities ( 2,524 ) ( 913 )

Cash flows from financing activities:

Proceeds from issuance of common stock and warrant exercises, net 29,780 6,215

Proceeds from issuance of common stock under public equity offering, warrants and warrant exercises, net 9,751 29,780

Proceeds from common stock issued under private equity offering, net 3,805 —

Proceeds from shares issued under employee stock purchase plan 34 158

Proceeds from exercise of stock options — 185

Proceeds from sale of future revenue — 50,000

Debt repayment — ( 22,500 )

Payments for financing costs — ( 2,909 )

Premium paid to retire debt ( 2,025 ) —

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Cash payments for interest $ 6,436 $ 6,438

Debt issued in lieu of prepayment penalty — 4,000

See accompanying notes to the consolidated financial statements.

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(together with its subsidiary, “Aquestive” or “the Company”) is a pharmaceutical company advancing medicines to solve patients' problems with current standards of care and provide 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 commercialized 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.

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

The Company has five licensed commercialized products which are marketed by its 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'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.

The Company is advancing a 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 its corporate headquarters and primary research laboratory facilities are based in Warren, New Jersey.

Equity Transactions

On September 11, 2019, the Company established an “at-the-market” (ATM) facility pursuant to which the Company could 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 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.

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 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 year ended December 31, 2022, the Company sold 2,860,538 shares which provided net proceeds of approximately $ 3,907 after deducting commissions and other transaction costs of $ 289 .

This ATM facility has approximately $ 33,416 available at December 31, 2022.

For the year ended December 31, 2021, the Company sold 6,550,486 shares which provided net proceeds of approximately $ 29,778 after deducting commissions and other transaction costs of $ 1,291 .

On April 12, 2022, the Company entered into a purchase agreement (the "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 the Company will not issue, and Lincoln Park will not purchase, shares of Common Stock if it would result in Lincoln Park's beneficial ownership of our outstanding Common Stock 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 year ended December 31, 2022, the Company sold 1,600,000 shares in addition to issuing 236,491 commitment shares, which provided gross proceeds of approximately $ 1,987 in connection with the Lincoln Park Purchase Agreement.

On June 6, 2022, the Company entered into securities purchase agreements (the "Securities Purchase Agreements") with certain purchasers.

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

(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.

The Company intends to use the net proceeds from the offering for general corporate purposes.

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

Refer to Note 13, Warrants for further details.

Nasdaq Stock Market Notification

On December 30, 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 June 28, 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 June 28, 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

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.

Basis of Presentation and Principles of Consolidation

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP, and in accordance with the rules and regulations of the Securities and Exchange Commission, or SEC.

These consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles ("GAAP") in the United States of America, and in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC").

The accounts of wholly owned subsidiaries are included in the consolidated financial statements.

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Cash and cash equivalents are maintained are held by federally insured financial institutions that management believes are of high credit quality.

The Company has not experienced any losses in such accounts and such amounts may exceed federally-insured limits.

Indivior, Sunovion, and three of the largest regional wholesalers represent our most significant customers and details on these relationships are outlined in Note 5.

The Company has not experienced any losses in such accounts and such amounts may exceed federally-insured limits of $250.

Concentration of the Company's significant customers as of December 31, 2022 and 2021 is outlined in Note 5, Revenues and Trade Receivables, Net .

Trade Accounts Receivable

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The Company’s credit terms generally range from 30 to 60 days, depending on the customer and type of invoice.

We perform a regular review of our customers' credit risk and payment histories, including payments made subsequent to year-end.

The Company performs a regular review of our customers' credit risk and payment histories, including payments made subsequent to year-end.

The Company evaluates the collectability of accounts receivable based on a combination of factors.

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To the extent that management determines there are excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products, or use them in production, prior to their expiration, the Company records allowances to adjust the carrying value to estimated net realizable value as necessary.

The Company expenses inventory related to our research and development activities when we purchase or manufacture it.

Before the regulatory approval of our product candidates, we recognize research and development expense for the manufacture of drug products that could potentially be available to support the commercial launch of our drug candidates, if approved.

The Company expenses inventory related to the Company's research and development activities when the Company purchases or manufactures it.

Before the regulatory approval of the Company's product candidates, the Company recognizes research and development expense for the manufacture of drug products that could potentially be available to support the commercial launch of the Company's drug candidates, if approved by regulatory authorities.

Property and Equipment

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Intangible Assets

Intangible assets include the costs of acquired composition and process technologies and the costs of purchased patents used in the manufacture of orally soluble film.

Intangible assets include the costs of acquired composition and process technologies, the costs of purchased patents used in the manufacture of orally soluble film and the costs of acquired New Drug Application (NDA).

The Company amortizes these assets using the straight-line method over the shorter of their legal lives or estimated useful lives.

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An arrangement is determined to contain a lease if the contract conveys the right to control the use of an identified property and equipment for a period of time in exchange for consideration.

If we can benefit from the various underlying assets of a lease on their own or together with other resources that are readably available, or if the various underlying assets are neither highly dependent or highly interrelated with underlying assets in the arrangements, they are considered to be a

separate lease component.

If the Company can benefit from the various underlying assets of a lease on their own or together with other resources that are readably available, or if the various underlying assets are neither highly dependent or highly interrelated with underlying assets in the arrangements, they are considered to be a separate lease component.

In the event multiple underlying assets are identified, the lease consideration is allocated to the various components based on each on the component's relative fair value.

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Operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, in determining the operating lease liability, we use an estimate of our incremental borrowing rate.

As most of the Company's leases do not provide an implicit rate, in determining the operating lease liability, the Company uses an estimate of our incremental borrowing rate.

The calculation of the operating lease assets includes any lease payments made and excludes any lease incentives.

Our lease terms may include options to extend or terminate the lease and are included when it is reasonably certain that we will exercise the option.

We record operating lease assets and lease liabilities in our consolidated balance sheets.

Our lease terms may include options to extend or terminate the lease and are included when it is reasonably certain that the Company will exercise the option.

The Company records operating lease assets and lease liabilities in its consolidated balance sheets.

Lease expenses for lease payments is recognized on a straight-line bases over the lease term.

Short-term leases, or leases that have a lease term of 12 months or less at consummation date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

We have not entered into any material short-term lease or financing leases as of December 31, 2021.

The Company has not entered into any material short-term lease or financing leases as of December 31, 2022.

Liability Related to the Sale of Future Revenue

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The liability related to the sale of future revenue and the related interest expense are based on our current estimates of future royalties expected to be paid over the life of the arrangement.

The Company will periodically assess the expected royalty payments using a combination of internal projections and forecasts from external resources.

The Company will periodically assess the expected royalty payments using a combination of internal projections and forecasts from third-party manufacturers.

To the extent our future estimates of royalty payments are greater or less than previous estimates or the interest timing of such payments is materially different than its previous estimates, the Company will prospectively recognize related interest expense.

Royalty revenue related to the sale of future revenue is reflected as royalty revenue, and amortization of debt is reflected as interest expense related to the sale of future revenue in the Consolidated Statement of Operations and Comprehensive Loss.

Royalty revenue related to the sale of future revenue is reflected as royalty revenue, and amortization of debt is reflected as interest expense related to the sale of future

revenue in the Consolidated Statement of Operations and Comprehensive Loss.

For further discussion of the sale of the future revenue, refer to Note 14, Sale of Future Revenue.

Revenue Recognition

The Company’s revenues include (i) sales of manufactured products pursuant to contracts with commercialization licensees, (ii) sales of its proprietary clobazam-based Sympazan oral film product used as a treatment for LGS-related seizures, (iii) license and royalty revenues and (iv) co-development and research fees generally in the form of milestone payments.

See Note 5 for further details.

The Company’s revenues include (i) sales of manufactured products pursuant to contracts with commercialization licensees, (ii) sales of the Company's proprietary clobazam-based Sympazan oral film product used as a treatment for LGS-related seizures prior to its outlicensing to Assertio Holdings, Inc.

("Assertio") in October 2022, (iii) license and royalty revenues and (iv) co-development and research fees generally in the form of milestone payments.

See Note 5, Revenues and Trade Receivables, Net for further details.

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.

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At the time of sale, estimates for various revenue allowances are recorded based on historical trends and judgmental estimates .

For sales of Sympazan, returns allowances and prompt pay discounts are estimated based on contract terms and historical return rates, if available, and these estimates are recorded as a reduction of accounts receivables.

Sale returns allowances and prompt pay discounts are estimated based on contract terms and historical return rates, if available, and these estimates are recorded as a reduction of accounts receivables.

Similarly determined estimates are recorded relating to wholesaler service fees, co-pay support redemptions, Medicare, Medicaid and other rebates, and these estimates are reflected as a component of accrued liabilities as a reduction of revenue.

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Royalty revenue is estimated and recognized when sales under supply agreements with commercial licensees are recorded, absent any contractual constraints or collectability uncertainties.

Royalties based on sales of Suboxone® and Zuplenz® have been recorded in this manner.

Royalties based on sales of licensed products have been recorded in this manner.

Co-development and Research Fees – Co-development and research fees are earned through performance of specific tasks, activities or completion of stages of development defined within a contractual development or feasibility study agreement with a customer.

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Although each contractual arrangement is unique, common milestones included in these arrangements include those for the performance of efficacy and other tests, reports of findings, formulation of initial prototypes, production of stability clinical and/or scale-up batches, and stability testing of those batches.

Additional milestones may be established and linked to clinical results of the product submission and/or approval of the product by the FDA and the commercial launch of the product.

Additional milestones may be established and linked to clinical results of the product submission and/or approval of the product by the Food and Drug Administration ("FDA") and the commercial launch of the product.

Revenue recognition arising from milestone payments is dependent upon the facts and circumstances surrounding the milestone payments.

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

Costs to obtain contracts - in certain situations, the Company may incur incremental costs of obtaining a contract with a customer.

These costs, if expected to be recovered, are recognized as an asset and reflected as other assets within the Consolidated Balance Sheets.

The asset is amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.

Research and Development

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ASC 718 establishes guidance for the recognition of expenses arising from the issuance of stock-based compensation awards at their fair value at the grant date.

The Company’s stock-based compensation includes grants of stock options and restricted stock units to employees, consultants and non-employee directors.

The Company’s stock-based compensation includes grants of stock options and restricted stock units (RSUs) to employees, consultants and non-employee directors.

Beginning in 2019, the Company also offered employees an opportunity to participate in an employee stock purchase plan.

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These assumptions require estimates and judgements and changes in those inputs could impact the amount of expenses that are charged to earnings.

The Company recognizes compensation expense for the fair value of restricted stock unit and stock option awards over the requisite service period of the award.

The Company recognizes compensation expense for the fair value of RSU and stock option awards over the requisite service period of the award.

All excess tax benefits, taxes and tax deficiencies from stock-based compensation are included in the provision for income taxes in the Consolidated Statement of Operations.

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The carrying amounts reported in the balance sheets for trade and other receivables, prepaid and other current assets, accounts payable, accrued expenses and deferred revenue approximate fair value based on the short-term maturity of these assets and liabilities.

The Company granted warrants to certain Note Holders in connection with its debt repayment and debt refinancing during 2020.

Those warrants were valued based on Level 3 inputs and their fair value was based primarily on an independent third-party appraisal prepared as of the grant date consistent with generally-accepted valuation methods of the Uniform Standards of Professional Appraisal Practice, the American Society of Appraisers and the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation.

The Company previously granted warrants to certain holders of the Company's 12.5 % Senior Secured Notes due 2025 (the 12.5 % Notes") in connection with its debt repayment and debt refinancing.

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

The warrants were valued based on the Black-Scholes valuation model performed by an independent third-party appraisal prepared as of the grant date consistent with generally-accepted valuation methods of the Uniform Standards of Professional Appraisal Practice, the American Society of Appraisers and the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation.

See Note 13, 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 receive a specified amount of future royalties up to a capped amount.

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

See Note 12, 12.5 % Senior Notes and Loans Payable for further discussion.

The Company's 12.5 % Notes contain a repurchase offer or put option which gives holders of the option the right, but not the obligation, to receive a specified amount of future royalties up to a capped amount.

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

See Note 12, 12.5 % Senior Secured Notes and Loans Payable for further discussion.

Segment Information

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Recently Adopted Accounting Pronouncements:

As an emerging growth company, the Company has elected to take advantage of the extended transition period afforded by the Jumpstart Our Business Startups Act for the implementation of new or revised accounting standards and, as a result, the Company will comply with new or revised accounting standards no later than the relevant dates on which adoption of such standards is required for emerging growth companies.

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 effective date of this Standard Update is for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Standard Update may be adopted either using the prospective or retrospective transition approach and could also be applied on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption.

The Company adopted the new guidance on January 1, 2021.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Pronouncements Not Adopted as of December 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.

The guidance provides for use of a forward-looking expected loss model for estimating credit losses, replacing the incurred loss model that is based on past events and current conditions.

The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries).

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

The Company is currently evaluating the impact of the adoption of this guidance on its 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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This Accounting Standards Update was issued to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity.

Among other provisions, the amendments in this ASU significantly change the guidance on the

issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment.

Among other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment.

More specifically, the ASU reduces the number of models that may be used to account for convertible instruments from five to three, amends diluted EPS calculations for convertible instruments, modifies the requirements for a contract that may be settled in an entity’s own shares to be classified in equity and requires expanded disclosures intended to increase transparency.

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The Company is currently evaluating the impact from the adoption of ASU 2020-06 on its consolidated financial statements.

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

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions .

This Accounting Standards Update was issued to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, and to introduce new disclosure requirements for such equity securities.

These amendments will be effective for the Company beginning January 1, 2024, with early adoption of the amendments permitted.

The Company is currently evaluating the impact from the adoption of ASU 2020-06 on its consolidated financial statements.

The guidance provides for use of a forward-looking expected loss model for estimating credit losses, replacing the incurred loss model that is based on past events and current conditions.

The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries).

The Company adopted the new guidance on January 1, 2023.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

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

Early adoption is permitted.

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

The Company adopted the new guidance on January 1, 2023.

The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

Risks and Uncertainties

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The Company's accumulated deficits totaled $ 311,207 as of December 31, 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.

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 net losses and accumulated deficits were partially offset by gross margins from sales of commercialized licensed and proprietary products (prior to the licensing agreement of Sympazan with Assertio), 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 12.5 % Notes.

The Company began utilizing its ATM facility in November 2020.

Since inception through December 31, 2020, the Company sold 930,993 shares which provided net proceeds of approximately $ 6,055 after deducting commissions and other transaction costs of $ 473 .

Since inception to December 31, 2022, the Company sold 10,341,957 shares of Common Stock which generated net cash proceeds of approximately $ 39,740 , net of commissions and other transaction

costs of $ 2,053 .

For the year ended December 31, 2022, the Company sold 2,860,538 shares which provided net proceeds of approximately $ 3,907 after deducting commissions and other transaction costs of $ 289 .

This ATM facility has approximately $ 33,416 available at December 31, 2022.

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.

As of the filing of this Annual Report on Form 10-K, the Company will be subject to the SEC general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds the Company can raise through primary public offerings of securities in any 12-month period using its registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of the Company’s Common Stock held by non-affiliates.

Therefore, the Company will be limited in the amount of proceeds it is able to raise by selling shares of its Common Stock using its Form S-3, including under the ATM facility and the Lincoln Park Purchase Agreement, until such time as its public float exceeds $75 million.

While 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, including, but not limited to the ceasing of R&D 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 liquidity for the Company to fund its operating needs for at least the next twelve months as it continues to execute its business strategy.

Revenues and Trade Receivables, Net

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Revenues $ 47,680 $ 50,832

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

Trade and other receivable, net consist of the following:

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Trade and other receivables, net $ 4,704 $ 12,120

Contract and other receivables totaled $ 3,087 and $ 3,081 as of December 31, 2021 and 2020, respectively, consisting primarily of contract assets and reimbursable costs incurred on behalf of customers.

Contract and other receivables totaled $ 2,139 and $ 3,087 as of December 31, 2022 and 2021, respectively, consisting primarily of contract assets and other receivables.

Contract assets consist of products and services provided under specific contracts to customers for which earnings processes have been met prior to shipment of goods or full delivery of completed services.

Sales-related allowances for both periods presented are estimated in relation to revenues recognized for sales of Sympazan.

The following table presents the changes in the allowance for bad debt:

Allowance for doubtful accounts at beginning of year $ 40 $ 124

Additions charged to bad debt expense — 198

Write-downs charged against the allowance — ( 282 )

Allowance for doubtful accounts at end of year $ 40 $ 40

Sales-related allowances for both periods presented are estimated in relation to revenues recognized for sales of Sympazan prior to the licensing agreement the Company entered into with Assertio in October 2022.

See details in Note 6, Material Agreements .

There were no additions to or write-downs charged against the allowance for doubtful accounts for the years ended December 31, 2022 and 2021, respectively.

The allowance for doubtful accounts was $ 40 for each of the years ending December 31, 2022 and 2021.

The following table presents the changes in sales-related allowances:

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("Indivor") exceeded the 10% threshold for revenue and represented approximately 76 % of total revenue.

As of December 31, 2022, Indivor exceeded the 10% threshold for outstanding receivables and represented 80 % of total trade and other receivables.

For the year ended December 31, 2021, Indivor 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 of total trade and other receivables.

For the year ended December 31, 2020, two customers exceeded the 10% threshold for revenue which were Indivior and Sunovion Pharmaceuticals Inc.

(“Sunovion”) that represented 57 % and 26 %, respectively.

As of December 31, 2020, four customers exceeded the 10% threshold for outstanding receivables which were Indivior, AmerisourceBergen Corporation, Sunovion, and Cardinal Health Inc.

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

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The Indivior License Agreement provides for payment by Indivior of a purchase price per unit that is subject to adjustment based on the Company’s ability to satisfy minimum product thresholds.

Additionally, in the event Indivior purchases certain large quantities of Suboxone during a specified period, Indivior will be entitled to scaled rebates on its purchases.

In addition to the purchase price for the Suboxone supplied, Indivior is required to make certain single digit percentage royalty payments tied to net sales value (as provided for in the Indivior License Agreement) in each of the United States and in the rest of the world subject to annual maximum amounts and limited to the life of the related United States or international patents.

In 2012, Indivior exercised its right to buy out its future royalty obligations in the United States under the Indivior License Agreement.

Indivior remains obligated to pay royalties for all sales outside the United States.

In addition to the purchase price for the Suboxone supplied, Indivior is required to make certain single digit percentage royalty payments tied to net sales value (as provided for in the Indivior License Agreement) outside of the U.S., subject to annual maximum amounts and limited to the life of the related patents.

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.

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Thereafter, the Indivior License Agreement automatically renews for successive one-year periods, unless either party provides the other with written notice of its intent not to renew at least one year prior to the expiration of the initial or renewal term.

Effective as of March 2, 2023, the Company entered into Amendment No.

11 (the “Indivior Amendment”) to the Indivior License Agreement.

The Indivior Amendment was entered into for the primary purpose of amending the Agreement as follows:

(i) extending the term of the Agreement until August 16, 2026 and thereafter providing for automatic renewal terms of successive one year periods unless Indivior delivers notice to the Company, at least twelve months prior to the expiration of the then current term, of Indivior’s intent not to renew, subject to the earlier termination rights of the parties under the Agreement, and providing that the Agreement will not automatically renew for any renewal term beginning after the expiration of the last to expire of the product patents;

and (ii) agreeing to transfer pricing and payment terms for supplied product.

See Note 21, Subsequent Events for details.

Supplemental Agreement with Indivior

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The Company also conveyed to Indivior the right to sublicense manufacturing and marketing capabilities to enable an Indivior licensed generic buprenorphine product to be produced and sold by parties unrelated to Indivior or Aquestive.

Under the Indivior Supplemental Agreement, the Company is entitled to receive certain payments from Indivior commencing on the date of the agreement through January 1, 2023.

Under the Indivior Supplemental Agreement, the Company was entitled to receive certain payments from Indivior commencing on the date of the agreement through January 1, 2023.

Once paid, all payments made under the Indivior Supplemental Agreement are non-refundable.

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Reddy’s Labs and Alvogen, the Company received an aggregate of $ 40,750 from Indivior under the Indivior Supplemental Agreement.

Further payments under this agreement were suspended until adjudication of related patent infringement litigation is finalized.

If such litigation is successful, in addition to the amounts already received as described in the foregoing, the Company may receive up to an additional $ 34,250 , consisting of (i) up to $ 33,000 in the aggregate from any combination of (a) performance or event-based milestone payments and (b) single digit percentage royalties on net revenue earned by Indivior on sales of Suboxone and (ii) an additional $ 1,250 that was earned through the issuance of additional process patent rights to the Company.

The aggregate payments under this Indivior Supplemental Agreement are capped at $ 75,000 .

All payments made by Indivior to the Company pursuant to the Indivior Supplemental Agreement are in addition to, and not in place of, any amounts owed by Indivior to the Company pursuant to the Indivior License Agreement.

Indivior’s payment obligations under the Indivior Supplemental Agreement are subject to certain factors affecting the market for Suboxone and may terminate prior to January 1, 2023 in the event certain contingencies relating to such market occur.

Further payments under the Indivior Supplemental Agreement were suspended until adjudication of related patent infringement litigation is finalized.

As a result of the settlement and dismissal of all claims under the lawsuit with Dr.

Reddy’s Labs on June 28, 2022, no further payments are due to the Company under the Indivior Supplemental Agreement.

See Note 20, Contingencies for details.

All payments made by Indivior to the Company pursuant to the Indivior Supplemental Agreement were in addition to, and not in place of, any amounts owed by Indivior to the Company pursuant to the Indivior License Agreement.

License Agreement with Sunovion Pharmaceuticals, Inc.

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This approval triggered Sunovion's obligation to remit a payment of $ 4,000 (the "FDA Approval Milestone Payment") due on the earlier of:

(a) the first day

of product availability at a pharmacy in the United States;

(a) the first day of product availability at a pharmacy in the United States;

or (b) with six months of the FDA approval.

This amount was received as of September 30, 2020 and is included in License and royalty revenues for the twelve months ended December 31, 2020.

This amount was received as of September 30, 2020 and was included in License and royalty revenues for the twelve months 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.

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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 Sonovion 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 amended the Sunovion License Agreement to clarify the parties' agreement with respect to certain provisions in the License Agreement, specifically the date after which Sunovion has the right to terminate the License Agreement and the License Agreement and the rights and obligations of the parties regarding the prosecution and maintenance of the Company's patents covered under the License Agreement.

Upon termination of the Sunovion License Agreement, all rights to intellectual property granted to Sunovion to develop and commercialize apomorphine-based products will revert to the Company.

On October 23, 2020, the Company amended the Sunovion License Agreement to clarify the parties' agreement with respect to certain provisions in the Sunovion License Agreement, specifically the date after which Sunovion has the right to terminate the Sunovion License Agreement and the rights and obligations of the parties regarding the prosecution and maintenance of the Company's patents covered under the Sunovion License Agreement.

Purchase and Sale Agreement with an affiliate of Marathon Asset Management ("Marathon")

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

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

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

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

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

Under the terms of the Monetization Agreement, we sold to Marathon all of our contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion's apomorphine product, KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, which received approval from the FDA on May 21, 2020.

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

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

Under the Monetization Agreement, additional 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 December 31, 2022, the Company may likely not receive any of the additional contingent payments under the Monetization agreement.

See Note 14, Sale of Future Revenue for further details on the accounting for the Monetization Agreement.

Agreement to Terminate CLA with KemPharm

In March 2012, the Company entered into an agreement with KemPharm, Inc.

(“KemPharm”), to terminate a Collaboration and License Agreement entered into by the Company and KemPharm in April 2011.

Under this termination arrangement, the Company has the right to participate in any and all value that KemPharm may derive from the commercialization or any other monetization of KP-415 and KP-484 compounds or their derivatives.

Among these monetization transactions are those related to any business combinations involving KemPharm and collaborations, royalty arrangements, or other transactions from which KemPharm may realize value from these compounds.

During September 2019, the Company received $ 1,000 from its 10 % share of milestone payments paid to KemPharm, under its licensing of KP-415 and KP-484 to a third party.

The Company has also $ 500 under this arrangement, which was included in License and royalty revenues for the year ended December 31, 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.

Agreement to Terminate CLA with Zevra Therapeutics, Inc.

(formerly KemPharm)

In March 2012, the Company entered into an agreement with Zevra Therapeutics, Inc.

(formerly KemPharm, Inc.) (“Zevra”), to terminate a Collaboration and License Agreement entered into by the Company and Zevra in April 2011.

Under this termination arrangement, the Company has the right to participate in any and all value that Zevra may derive from the commercialization or any other monetization of KP-415 and KP-484 compounds or their derivatives.

Among these monetization transactions are those related to any business combinations involving Zevra and collaborations, royalty arrangements, or other transactions from which Zevra may realize value from these compounds.

For the year ended December 31, 2021, the Company received payment of $ 2,000 under this arrangement, which was included in License and royalty revenues.

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 (the "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, former 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.

Kendall and the Company entered into a Separation Agreement, including a Consulting Agreement (collectively, the “Separation Agreement”) dated as of May 17, 2022.

Pursuant to the Separation Agreement, Mr.

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

Under the Separation Agreement, Mr.

Kendall received the following principal severance benefits, the outstanding portions of which are contingent upon Mr.

Kendall's compliance with a customary release of claims entered into at the time:

(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;

(ii) a cash payment consisting of his pro-rata portion of his target bonus in the amount of $ 280 ;

(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 $ 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.

Kendall served as a consultant to the Company, on an as-needed basis providing transition services, strategic planning, financial planning, merger and acquisition advice and consultation, for a period from the Separation Date to December 31, 2022.

For these services, Mr.

Kendall received 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.

The Company expanded its exclusive license and supply agreement with Pharmanovia in March 2023.

See Note 21, Subsequent Events for details.

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, 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

Under the terms of the Assertio 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 .

In addition, Aquestive received a $ 6,000 milestone payment subsequent to 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.

Further, 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.

Inventory consists of the following:

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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 1.25 years and 4.75 years, including renewal options expected to be exercised to extend the lease periods.

The Company does not recognize a right-of-use asses and lease liability for short-term leases, which have terms of 12 months or less, on its consolidated balance sheet.

These leases, as amended, provide remaining terms between 0.25 years and 10.80 years, including renewal options expected to be exercised to extend the lease periods.

See Part II Properties for details.

The Company does not recognize a right-to use asset and lease liability for short-term leases, which have terms of 12 months or less on its consolidated balance sheet.

For longer-term lease arrangements that are recognized on the Company's consolidated balance sheet, the right-of-use asset and lease liability is initially measured at the commencement date based upon the present value of the lease payments due under the lease.

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The implicit interest rates of the Company's lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement.

Measurement of the operating lease liability reflects an estimated discount rate of 16.9 % applied to minimum lease payments, including expected renewals, based on the incremental borrowing rate experienced in the Company’s collateralized debt refinancing.

Right-of-use assets recorded upon adoption of ASC 842 totaled $ 4,048 .

The Company's lease costs recorded in manufacture and supply, research and development and selling, general and administrative expenses in its consolidated statements of income for the years ended December 31, 2021 and 2020 were $ 1,725 and $ 1,671 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 469 and $ 379 , respectively, under the new lease accounting standard.

Measurement of the operating lease liability reflects a range of an

estimated discount rate of 14.8 % to 16.9 % applied to minimum lease payments, including expected renewals, based on the incremental borrowing rate experienced in the Company’s collateralized debt refinancing.

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 Operations and Comprehensive Loss.

For the years ended December 31, 2022 and 2021, total operating lease expenses totaled $ 1,753 and $ 1,725 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 449 and $ 469 , respectively.

Cash payments arising from the Company's lease arrangements are reflected on its consolidated statement of cash flows as outflows for operating activities.

The Company's payments due under its operating leases are as follow:

The Company's payments due under its operating leases are as follows:

2028-2033 4,927

Total lease payments 10,156

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The following table provides the components of identifiable intangible assets, all of which are finite lived and other non-current assets:

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

Purchased intangible $ 3,858 $ 2,358

Purchased patent 509 509

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Amortization expense was $ 116 and $ 51 for each of the years ended December 31, 2022 and 2021, respectively.

During the remaining life of the purchased patent, estimated annual amortization expense is $ 51 for the year ended 2022.

During the remaining life of the purchased intangible, estimated annual amortization expense is $ 156 for the year ending 2023.

Other non-current assets consisted of royalty receivable related to the five $ 1,000 annual minimum guaranteed royalty that is due in the remaining term of the Monetization Agreement, value-added tax receivable, non-current security deposits, and capitalized cost to obtain revenue contracts.

Refer to Note 14, Sale of Future Revenue for detail on the Monetization Agreement royalty receivable.

Accrued Expenses

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12.5% Senior Secured Notes and Loans Payable

12.5 % Senior Secured Notes

On July 15, 2019, the Company completed the private placement of up to $ 100,000 aggregate principal of its 12.5 % 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 the private placement of up to $ 100,000 aggregate principal of its 12.5 % Notes due 2025 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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Bank National Association, as Trustee (the "Trustee") and Collateral Agent thereunder to the Base Indenture, by and between the Company and the Trustee.

On November 20, 2020, the Company entered into the Second Supplemental Indenture (the "Second Supplemental Indenture" and, together with all other subsequent supplemental indentures and the Base Indenture, collectively, the "Indenture") by and among the Company and U.S.

Bank National Association, as Trustee (the "Trustee") and Collateral Agent thereunder to the Base Indenture, by and between the Company and the Trustee.

Under the Second Supplemental Indenture, the Company repaid $ 22,500 of its $ 70,000 outstanding 12.5 % Notes from the upfront proceeds received under the Monetization Agreement.

Further, the Company entered into an additional Purchase Agreement with its lenders whereby the Company issued in aggregate $ 4,000 of additional 12.5 % Notes (the "Additional Notes") in lieu of paying a prepayment premium to two lenders on the early repayment of the 12.5 % Notes discussed above.

Under the Second Supplemental Indenture, dated November 20, 2020, the Company repaid $ 22,500 of its $ 70,000 outstanding 12.5 % Notes from the upfront proceeds received under the Monetization Agreement.

Further, the Company entered into an additional Purchase Agreement with its noteholders 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 noteholders 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 December 31, 2022.

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

The Company also paid to one of its lenders a $ 2,250 premium as result of the early retirement of debt.

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

The Company also paid to one of its noteholders a $ 2,250 premium as result of the early retirement of debt.

The Company accounted for the $ 22,500 debt repayment as a debt modification of the 12.5 % Notes.

The fees paid to lenders inclusive of (i) $ 2,250 early premium prepayment and (ii) $ 4,000 issuance of Additional Notes in lieu of paying a prepayment penalty were recorded as additional debt discount, amortized over the remaining life of the 12.5 % Notes using the effective interest method.

The fees paid to the noteholders inclusive of (i) $ 2,250 early premium prepayment and (ii) $ 4,000 issuance of Additional Notes in lieu of paying a prepayment penalty were recorded as additional debt discount, amortized over the remaining life of the 12.5 % Notes using the effective interest method.

Loan origination costs of $ 220 associated with the Additional Notes were expensed as incurred.

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

Based on the valuation study, the put option was valued at $ 127 , of which $ 29 has been recorded in Accrued expenses and $ 98 has been recorded in Other non-current liabilities.

Based on the valuation study, the put option was valued at $ 45 and has been recorded in Other non-current liabilities.

The embedded put option is deemed to be a derivative under ASC 815 Derivatives and Hedging, which requires the recording of the embedded put option at fair value and subject to remeasurement at each reporting period.

The fair value adjustment as a result of periodic remeasurement has been recorded in Interest income and other income.

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

On August 6, 2021, pursuant to the Third Supplemental Indenture, the holders of the 12.5 % Notes extended to June 30, 2022 from December 31, 2021, the Company's ability to access, at the Company's option, $ 30,000 of 12.5 % Notes re-openers under the Indenture.

The first $ 10,000 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.

market access.

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.

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.

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 December 31, 2021, the Company recorded its principal payments as Loans payable, net on its Consolidated Balance Sheet.

A debt maturity table is presented below:

Total $ 51,500

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

In the event that redemption occurs within the two years after the issuance of the 12.5 % Notes, a

make-whole fee is required, based on the present value of remaining interest payments using an agreed-upon discount rate linked to the then-current U.S.

Treasury rate.

The Indenture also includes change of control provisions under which the Company may be required to repurchase the 12.5 % Notes at 101 % of the remaining principal plus accrued interest at the election of the Lenders.

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”).

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 (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.

In addition, as of the closing of this transaction, the Company issued to the holders of the 12.5 % Notes warrants to purchase 143,000 shares of our Common Stock.

On August 6, 2021, pursuant to the Third Supplemental Indenture, the holders of the 12.5 % extended to June 30, 2022 from December 31, 2021, the Company's ability to access, at the Company's option, $ 30,000 of 12.5 % Notes re-openers under the Indenture.

Under the Third Supplemental Indenture, the first $ 10,000 of 12.5 % Notes re-openers represented 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 ("First Additional Securities").

In addition, under the Third Supplemental Indenture, a second $ 20,000 12.5 % Notes re-opener represented a right, at the Company's option, to market to current holders of the Company's 12.5 % Notes, and or other noteholders, additional 12.5 % Notes up to such amount, contingent upon FDA approval of Libervant for U.S.

market access ("Second Additional Securities").

If and to the extent that the Company accesses these re-openers (pursuant to the terms currently in effect, as amended by the Fifth Supplemental Indenture described below), 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 October 7, 2021, the Company entered into the Fourth Supplemental Indenture, pursuant to which the amortization schedule for the 12.5 % Notes was amended to provide for the date of the first amortization payment to be extended from September 30, 2021 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, 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.

The Company capitalizes legal and other third-party costs incurred in connection with obtaining debt as deferred debt issuance costs and applies the unamortized portion as a reduction of the outstanding face amount of the related loan in accordance with ASU 2015-3, Interest – Imputation of Interest:

Simplifying the Presentation of Debt Issuance Costs .

Similarly, the Company amortizes debt discounts, such as those represented by warrants issued to its lenders, and offsets those as a direct reduction of its outstanding debt.

Amortization expense arising from deferred debt issuance costs and debt discounts related to the 12.5 % Notes and the Perceptive loan for the years ended December 31, 2021 and 2020 were $ 3,572 and $ 2,587 , respectively.

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 43 and $ 14,596 as of December 31, 2021 and 2020, respectively.

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.

For the year ending December 31, 2021, the Company recognized a loss on the extinguishment of debt of $ 13,822 for fees and expenses related to the Fourth Supplemental Indenture.

As of December 31, 2022, the Company recorded the remaining Consent Fee to be paid of $ 675 as Loans payable, current, on its Consolidated Balance Sheet.

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 FDA for sale in the United States, which full approval includes U.S.

market access for Libervant prior to March 31, 2023.

In addition, the Fifth Supplemental Indenture provides that the holders of 12.5 % Notes have the right, but not the obligation, to purchase the First Additional Securities and Second Additional Securities upon the exercise by the Company of the option to access the re-openers.

A debt maturity table as of December 31, 2022 is presented below:

2023 $ 18,025

Total $ 51,500

The 12.5 % Notes provide a stated fixed interest rate of 12.5 %, payable quarterly in arrears, with the final quarterly principal repayment of 12.5 % Notes due at maturity on June 30, 2025.

As of December 31, 2022, the Company recorded its principal payments as Loans payable, current and Loans payable, net on its 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 November 4, 2022 and December 16, 2022, the Company issued two separate notices of partial redemption pursuant to the Indenture, dated as of July 15, 2021, between the Company and the Trustee and collateral agent governing the 12.5 % Notes.

Pursuant to each of the notice of partial redemption, the Company gave holders of the 12.5 % Notes notice that the Company intended to redeem $ 3,765 and $ 1,882 , respectively, of its outstanding 12.5 % Notes at a redemption price pursuant to the formula set forth in the Indenture governing the 12.5 % Notes, plus accrued and unpaid interest.

See Note 21, Subsequent Events for details.

Similarly, the Company amortizes debt discounts, such as those represented by warrants issued to its noteholders, 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 years ended December 31, 2022 and 2021 were $ 16 and $ 3,572 , respectively.

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 27 and $ 43 as of December 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.

This secured obligation provides payment rights that are senior to all existing and future subordinated indebtedness of the Company and provides noteholders with perfected security interests in substantially all of the Company’s assets.

Warrants Issued to 12.5 % Senior Secured Noteholders

Warrants were issued in conjunction with the First Supplemental Indenture to Noteholders as part of the 2020 Additional Notes described above, expire on June 30, 2025.

These warrants entitle the Lenders to purchase 143,000 shares of the Company's common stock at $ 0.001 per share and include specified registration rights.

Management estimated the fair value of the Warrants to be $ 735 , assisted by the an independent third-party appraiser.

Warrants were issued in conjunction with the Initial Notes described above, expire on June 30, 2025.

These warrants entitle the Lenders to purchase 2,000,000 shares of the Company’s common stock at $ 0.001 per share and include specified registration rights.

Management estimated the fair value of the Warrants to be $ 6,800 , assisted by an independent third-party appraiser.

The fair value of these respective Warrants is treated as a debt discount, amortizable over the term of the Warrants, with the unamortized loan portion applied to reduce the face amount of the loan in the Company’s 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 accompanying Consolidated Balance Sheets.

There were no Warrants exercised by either the holders of the 2020 Additional Notes nor the Initial Noteholders during the year ended December 31, 2021 and December 31, 2020.

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 was 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 Consolidated Balance Sheet.

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 Consolidated Balance Sheet.

There were no warrants exercised as it relates to the Initial Warrants and the Additional Warrants during the year ended December 31, 2022 and December 31, 2021, respectively.

Warrants Issued Under Securities Purchase Agreements

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 entitled purchasers to purchase up to 4,000,000 shares of Common Stock and were exercised in full during the year ended December 31, 2022.

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 Consolidated Balance Sheet.

No Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the year ended December 31, 2022.

Sale of Future Revenue

On November 3, 2020, the Company entered into the Monetization Agreement with Marathon.

KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the FDA on May 21, 2020.

Under the terms of the Monetization Agreement, the Company sold all of its contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion's apomorphine product, KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, which received approval from the FDA on May 21, 2020.

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.

We have received an aggregate amount of $ 50,000 through December 31, 2021 under the Monetization Agreement.

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

Under the Monetization Agreement, additional 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 .

The Company recorded the upfront proceeds of $ 40,000 and subsequent first milestone of $ 10,000 , reduced by $ 2,909 of transaction costs, as a liability related to the sale of future revenue that will be amortized using the effective interest method over the life of the Monetization Agreement.

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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.

During the second quarter of 2020, under the Sunovion License Agreement, the Company recognized $ 8,000 of royalty revenue and corresponding royalty receivable, related to the $ 1,000 annual minimum guaranteed royalty that is due in each of the next eight years .

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

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To the extent the amount or timing of such payments is materially different from the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense.

There are a number of factors that could materially affect the amount and timing of royalty and milestone payments to Marathon from Sunovion, and correspondingly, the amount of interest expense recorded by the Company, most of which are not under the Company's control.

Such factors include, but are not limited to, changing standards of care, the initiation of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in government health authority imposed restrictions on the use of products, significant changes in foreign exchange rates as the royalties

remitted to Marathon are made in U.S.

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.

dollars (USD) while a portion of the underlying sales of KYNMOBI will be made in currencies other than USD, and other events or circumstances that are not currently foreseen.

Changes to any of these factors could result in increases or decreases to both royalty revenue and interest expense related to the sale of future revenue.

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.

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

As a result, the Company discontinued recording interest expense related to the sale of future revenue during the fourth quarter of 2022.

The following table shows the activity of the liability related to the sale of future revenue for the year ended December 31, 2022:

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Other Non-Current Liabilities

The Company’s other non-current liabilities at December 31, 2021 consist of asset retirement obligations ("AROs") of $ 1,712 , the long term portion of the Consent Fee related to the 12.5 % Senior Secured Note of $ 675 and the long-term portion of fair value of the put option on the 12.5 % Notes of $ 98 .

The Company’s other non-current liabilities at December 31, 2022 consisted of asset retirement obligations ("AROs") of $ 1,989 , and the fair value of the put option on the 12.5 % Notes of $ 45 .

AROs consists of estimated future spending related to removing certain leasehold improvements at its Portage, Indiana, laboratory, the Ameriplex production facility and the Warren, New Jersey, laboratory and returning all facilities to their original condition.

The Company’s other non-current liabilities at December 31, 2021 consisted of AROs of $ 1,712 , the long term portion of the Consent Fee related to the 12.5 % Senior Secured Note of $ 675 and the long-term portion of fair value of the put option on the 12.5 % Notes of $ 98 .

AROs consists of estimated future spending related to removing certain leasehold improvements at the Company's facilities in Portage, Indiana and Warren, New Jersey, and returning all facilities to their original condition.

Depreciation expense related to the ARO assets included in overall depreciation expense for the periods ended December 31, 2022 and 2021 were $ 25 and $ 23 , respectively.

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Balance at December 31, 2021 1,712

Additions 110

Accretion 167

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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 year ended December 31, 2021 and 2020, all potentially dilutive instruments outstanding would have anti-dilutive effects on per-share calculations for this period.

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

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

As a result of the Company’s net loss incurred for the year ended December 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 below.

Year Ended December 31, 2022 Year Ended December 31, 2021

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Loss per common share – basic and diluted $ ( 1.12 ) $ ( 1.85 )

As of December 31, 2021 and 2020, respectively, the Company’s potentially dilutive instruments included 4,146 thousand and 3,259 thousand of options to purchase common shares, as well as no outstanding and 14 thousand unvested RSUs that were excluded from the computation of diluted weighted average shares outstanding because these securities had an antidilutive impact due to the losses reported.

Similarly excluded as of December 31, 2021 and 2020 were potentially dilutive warrants for the purchase of 1,714 thousand common shares for both periods.

As of December 31, 2022 and 2021, respectively, the Company’s potentially dilutive instruments included 6,028 thousand and 4,146 thousand of options to purchase shares of Common Stock, as well as 162 thousand and zero 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 December 31, 2022 and 2021 were potentially dilutive warrants for the purchase of 10,564 thousand and 1,714 thousand common shares for the respective periods.

Share-Based Compensation

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Under this Plan, the Company may grant restricted stock units, stock options, or other stock-based awards in order to align the long-term financial interests of selected participants with those of its stockholders, strengthen the commitment of such persons to the Company, and attract and retain competent and dedicated persons whose efforts will enhance long-term growth, profitability and share value.

Restricted stock units and options that have been awarded are subject to graded vesting over a service period, which is typically three years .

Restricted stock units and stock options that have been awarded are subject to graded vesting over a service period, which is typically three years .

Compensation cost is recognized for these awards on a pro-rata basis over the requisite service period for each award granted.

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Unvested, December 31, 2020 14 $ 11.38

Granted 4 7.54

Forfeited ( 2 ) 13.00

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Unvested, December 31, 2021 —

Granted 192 2.37

Forfeited ( 20 ) 2.21

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Unvested, December 31, 2022 162 $ 2.38

The Company granted 192 thousand restricted stock units during 2022.

The Company did not grant restricted stock units during 2021.

During 2022, the total grant date fair market value of shares vested was $ 26 .

As of December 31, 2021, there was no unrecognized compensation costs related to restricted stock units awarded.

As of December 31, 2022, $ 261 of total unrecognized compensation expenses related to restricted stock units awards is expected to be recognized over a weighted average period of 2.21 years from the date of grant.

The restricted stock units previously granted to employees were subject to a three-year graduated vesting schedule and were not subject to performance-based criteria other than continued employment.

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Granted 1,212 $ 4.73

Forfeited ( 140 ) $ 4.36

Forfeited and Expired ( 264 ) $ 7.52

Exercised ( 61 )

Outstanding at December 31, 2021 4,146 $ 7.28 7.88 $ 1,423

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These stock options are not subject to performance-based criteria other than continued employment.

2022 Inducement Equity Incentive Plan

In accordance with Nasdaq Listing Rule 5635(c)(4), the Company adopted the Aquestive Therapeutics, Inc.

2022 Equity Inducement Plan approved by the Compensation Committee of the Board of Directors of the Company effective as of July 29, 2022.

In September 2022, the Company granted a nonqualified option to purchase 100,000 shares of Common Stock to an officer of the Company.

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.

The Company's Employee Stock Purchase Plan (the "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 of the Company 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.

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Intangible assets 1,731 2,547

Section 174 R&D Capitalization 3,770 —

84,312 73,351

Deferred tax liabilities:

Intangible assets — ( 551 )

481(a) adjustment — ( 14 )

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Valuation allowances of $ 83,788 , and $ 72,530 have been established at December 31, 2022 and 2021, respectively.

The Company may also be subject to the net operating loss

utilization provisions of Section 382 of the Internal Revenue Code due to ownership changes.

The Company may also be subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code due to ownership changes.

As a result, the use of NOL carry forwards from the current and prior periods are subject to annual limitations.

The Tax Cuts and Jobs Act (TCJA) requires taxpayers to capitalize and amortize research and experimental (R&D) expenditures under section 174 for tax years beginning after December 31, 2021.

This rule became effective for the Company during the year and resulted in the capitalization of R&D costs of $ 16,560 .

The Company will amortize these costs for tax purposes over five years if the R&D was performed in the U.S.

and over 15 years if the R&D was performed outside the U.S.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns.

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The Company’s U.S.

federal and state net operating losses have occurred since its election to treat as a C Corporation in 2017 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.

federal and state net operating losses have occurred since its election to be treated as a C Corporation in 2017 and.

as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.

In early 2020, the U.S.

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Valuation allowance ( 20.69 ) ( 22.37 )

State rate change ( 4.67 ) ( 2.63 )

Other — ( 0.74 )

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In addition, the state is changing its filing requirements from separate entity reporting to combined reporting on a water’s edge basis.

In 2023, the Pennsylvania corporate rate will be decreasing by one percentage point to 8.99%, followed by an annual 0.5% reduction through 2031, ending with a corporate tax rate of 4.99%.

Further, there are changes to the state’s computation of its dividend received deduction and application of IRC section 163(j).

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Litigation and Contingencies

From time to time, we have been and may again become involved in legal proceedings arising in the course of our business, including product liability, intellectual property, commercial litigation, or environmental or other regulatory matters.

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.

Patent-Related Litigation

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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, and we and Indivior preserved our rights to appeal the claim construction ruling.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter.

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 our rights 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 in the lawsuit.

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

Teva Pharmaceuticals USA, Inc.

On February 7, 2018, we and Indivior initiated a lawsuit against Teva Pharmaceuticals USA, Inc.

On February 7, 2018, the Company and Indivior initiated a lawsuit against Teva Pharmaceuticals USA, Inc.

(“Teva”) asserting infringement of the ’221 patent.

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

May 29, 2018, the lawsuits regarding the ’221 and ’305 patents were consolidated which was originally initiated by Indivior against Teva asserting infringement of the ’454 patent.

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

On May 29, 2018, the lawsuits regarding the ’221 and ’305 patents were consolidated with a suit originally initiated by Indivior against Teva asserting infringement of the ’454 patent.

The parties agreed that the case would be governed by the final judgment against Dr.

Reddy’s (described above).

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter.

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

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

9,855,221 (the "’221 patent”).

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

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

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

On May 29, 2018, the cases were consolidated.

On February 26, 2019, the Court granted the parties’ agreed stipulation to drop the ’221 patent from the case.

On January 9, 2020, the Court entered a stipulated order of non-infringement of the ’305 patent based on the Court’s claim construction ruling, and we and Indivior preserved our rights to appeal the claim construction ruling.

On November 21, 2019, Alvogen filed an amended answer and counterclaims asserting monopolization, attempted monopolization, and conspiracy to monopolize against us and Indivior under federal and New Jersey antitrust laws.

The court denied our motion to dismiss Alvogen’s counterclaims on August 24, 2020.

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

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 the Company and Indivior under federal and New Jersey antitrust laws.

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 the Company and asserting only conspiracy to monopolize against the Company.

Fact discovery on Alvogen’s antitrust counterclaims concluded on January 29, 2021.

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.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter.

Reckitt Benckiser Pharmaceuticals, Inc.

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(BDSI 2014 Lawsuit)

On September 22, 2014, we and RB initiated a lawsuit against BDSI and Quintiles Commercial US, Inc.

On September 22, 2014, the Company and Indivior initiated a lawsuit against BDSI and Quintiles Commercial US, Inc.

(“Quintiles”) asserting infringement of U.S.

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Following the PTAB’s February 7, 2019 decision on remand denying institution, BDSI appealed that decision to the Federal Circuit.

The Federal Circuit granted our motion to dismiss the appeal, and denied BDSI’s request for rehearing en banc.

The Federal Circuit granted the Company’s motion to dismiss the appeal, and denied BDSI’s request for rehearing en banc.

BDSI filed a petition for writ of certiorari to the Supreme Court of the United States (“Supreme Court”), which the Supreme Court denied on October 5, 2020.

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

In response, the Company and RB filed an amended complaint on May 18, 2021, which, among other things, removed Quintiles as a defendant.

In response, the Company and Indivior filed an amended complaint on May 18, 2021, which, among other things, removed Quintiles as a defendant.

On June 3, 2021, BDSI filed a notice withdrawing its motion to dismiss the original complaint.

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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.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter.

Aquestive Therapeutics, Inc.

BioDelivery Sciences International, Inc.

On November 11, 2019, we initiated a lawsuit against BDSI asserting infringement of the ’167 patent in the Eastern District of North Carolina.

On November 11, 2019, the Company initiated a lawsuit against BDSI asserting infringement of the ’167 patent in the Eastern District of North Carolina.

On April 1, 2020, the Court denied BDSI’s motion to stay and its motion to dismiss the complaint.

On April 16, 2020, BDSI filed its Answer and Counterclaims to the complaint, including counterclaims for non-infringement, invalidity, and unenforceability of the ’167 patent.

On May 7, 2020, we filed a Motion to Dismiss BDSI’s unenforceability counterclaim and a Motion to Strike BDSI’s corresponding affirmative defenses.

On May 7, 2020, the Company filed a Motion to Dismiss BDSI’s unenforceability counterclaim and a Motion to Strike BDSI’s corresponding affirmative defenses.

On May 28, 2020, BDSI amended its counterclaims and filed an Answer and Amended Counterclaims, which included additional allegations in support of BDSI’s unenforceability counterclaim.

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

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 the Company’s motion to dismiss BDSI’s counterclaims asserting unenforceability of the ’167 patent.

The Company 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 the Company’s complaint, which the Company 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 the BDSI 2014 Lawsuit described above, and the parties are proceeding under that same schedule.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or losses, if any, in this matter.

Antitrust Litigation

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

On September 22, 2016, forty-one states and the District of Columbia, or the States, brought a lawsuit against Indivior and us in the U.S.

District Court for the Eastern District of Pennsylvania alleging violations of federal and state antitrust statutes and state unfair trade and

consumer protection laws relating to Indivior’s launch of Suboxone Sublingual Film in 2010 and seeking an injunction, civil penalties, and disgorgement.

On September 22, 2016, forty-one states and the District of Columbia, or the States, brought a lawsuit against Indivior and the Company in the U.S.

District Court for the Eastern District of Pennsylvania alleging violations of federal and state antitrust statutes and state unfair trade and consumer protection laws relating to Indivior’s launch of Suboxone Sublingual Film in 2010 and seeking an injunction, civil penalties, and disgorgement.

After filing the lawsuit, the case was consolidated for pre-trial purposes with the In re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litigation, MDL No.

2445, or the Suboxone MDL, a multidistrict litigation relating to putative class actions on behalf of various private plaintiffs against Indivior relating to its launch of Suboxone Sublingual Film.

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

We moved to dismiss the States’ conspiracy claims, but by order dated October 30, 2017, the Court denied our motion to dismiss.

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

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 denied its motion to dismiss.

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

Daubert motions were filed on September 28, 2020, and oppositions were filed on October 19, 2020.

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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.

There is no date set for a hearing on Aquestive’s motion for summary judgment and no trial date has yet been set.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.

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 Actions

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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.

(“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 Centene.

On September 21, 2020, the Centene action was provisionally transferred to the Eastern District of Pennsylvania by the United States Judicial Panel on Multidistrict Litigation.

On January 15, 2021, we filed a motion to dismiss the Centene and Humana complaints.

On January 15, 2021, the Company filed a motion to dismiss the Centene and Humana complaints.

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

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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 the parties are awaiting a date for oral argument.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.

That state court action remains stayed pending further action from the court following resolution of the federal appeal in the Third Circuit.

On December 15, 2022, the Third Circuit issued an opinion and order affirming the district court’s dismissal of the Centene and Humana actions.

The Company is not able to determine or predict the ultimate outcome of the state court action in Kentucky by Humana, 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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Neurelis filed a First Amended Complaint on December 9, 2019, alleging the same three causes of action.

We filed a Motion to Strike Neurelis’s Complaint under California’s anti-SLAPP (“strategic lawsuit against public participation”) statute on January 31, 2020, which Neurelis opposed.

On August 6, 2020, the Court issued an order granting in part and denying in part our anti-SLAPP motion.

We filed a notice of appeal to the California Court of Appeal on September 1, 2020, and Neurelis filed a notice of cross-appeal on October 5, 2020.

We filed our opening appeal brief on January 27, 2021, and briefing on the appeal ended on July 6, 2021.

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.

On August 6, 2020, the Court issued an order granting in part and denying in part the Company’s anti-SLAPP motion.

The parties cross-appealed the ruling to the California Court of Appeal.

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.

The parties are awaiting issuance of the remittitur from the court of appeal, which will return the case to the superior court for further proceedings.

We are not able to determine or predict the ultimate outcome of this proceeding or provide a reasonable estimate or range of estimates of the possible outcome or loss, if any, in this matter.

Neurelis IPR Infringement 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.

9,763,876 (‘876 Patent) for nasal administration of benzodiazepines (diazepam).

The PTAB denied two of the requests and instituted the third request, which challenged all claims of the Neurelis ‘876 Patent.

On August 6, 2020, the PTAB issued its final written decision finding all challenged claims of the ’876 Patent to be unpatentable.

Neurelis appealed the decision to the U.S.

Court of the Federal Circuit.

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.

The Federal Circuit Court issued a mandate closing the appeal period and an IPR Certificate will subsequently be issued by the United States Patent and Trademark Office.

No further appeals are available on this matter.

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, the Company filed a "demurrer" challenge to the sufficiency of the allegations of the Second Amended Complaint.

Oral argument on the Company’s motion for attorney fees related to the anti-SLAPP motion and on the Second Amended Complaint and demurer challenge was held on June 17, 2022.

The Court entered an order granting the Company’s motion for attorney fees, awarding $ 155,907.50 and ordering Neurelis to pay the fees within 60 days of June 17, 2022.

The Court denied the Company’s demurrer and the parties are proceeding with discovery on the claims in the Second Amended Complaint.

No trial date has 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.

Federal Securities Class Action

Deanna Lewakowski v.

Aquestive Therapeutics, Inc., et al.

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

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

Kendall, et al.

in the United States District Court for the District of New Jersey.

The case was marked 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 against certain of the Company's officers and directors.

The allegations that form the basis of these claims are essentially the same as the disclosure-related allegations asserted in the class action, The Company's response to the complaint is due by March 14, 2022.

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 securities 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, 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.

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The Company continued utilization of its "at-the-market" (ATM) facility from January 1 through March 7, 2023 and sold 1,078,622 shares which generated net proceeds of approximately $ 964 .

Licensing and Supply Agreement with Haisco for Riluzole Oral Film for ALS Treatment in China

The Company has entered into a License, Development and Supply Agreement with Haisco Pharmaceutical Group Co., Ltd.

("Haisco") for Haisco to develop and exclusively commercialize Exservan™ (riluzole oral film) for the treatment of amyotrophic lateral sclerosis (“ALS”) in China.

Haisco will lead the regulatory and commercialization activities for Exservan in China.

Aquestive will serve as the exclusive sole manufacturer and supplier for the product.

Aquestive will receive a $ 7,000 upfront cash payment, regulatory milestone payments, and double-digit royalties on net sales of Exservan in China and will earn manufacturing revenue as the exclusive supplier of Exservan.

Partial Redemption of 12.5 % Senior Secured Notes due 2025

On November 4, 2022 and December 16, 2022, the Company issued two separate notices of partial redemption pursuant to the indenture, dated as of July 15, 2021 (the “Indenture”), between the Company and U.S.

Bank Trust Company, National Association (as successor in interest to U.S.

Bank National Association) as trustee and collateral agent governing its 12.5 % Senior Secured Notes due 2025 (the “12.5% Notes”).

On January 3, 2023 and February 14, 2023, the Company redeemed $ 3,765 and $ 1,882 of its outstanding 12.5% Notes, respectively.

In addition to the two principal repayments along with accrued and unpaid interest, the Company also paid $ 352 in prepayment premium as result of the early retirement of debt, which will be reflected on the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss in the first quarter of 2023.

The result of these two prepayments reduced the net balance of the 12.5 % Notes outstanding in the aggregate to $ 45,853 .

Amendment to the Indivior Commercial Exploitation Agreement

Effective as of March 2, 2023, the Company entered into Amendment No.

11 (the “Indivior Amendment”) to the Commercial Exploitation Agreement (the “Indivior Agreement"), dated as of August 15, 2008, with Indivior Inc.

(formerly, Reckitt Benckiser Pharmaceuticals Inc., and referred to herein as “Indivior”).

The Indivior Amendment was entered into for the primary purpose of amending the Agreement as follows:

and (ii) agreeing to transfer pricing and payment terms for supplied product.

In addition, Indivior agreed to pay the Company reimbursable amounts due to the Company under the Agreement.

In consideration of the agreements between the parties, the Company received a payment of $ 11,482 from Indivior, of which amount $ 5,482 represents:

(a) payment of the portion of a 2022 price increase that had not been previously paid and (b) an estimated payment in 2023 for certain price increases.

The payments will be reflected on the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss in 2023.

Patent Litigation Settlement with BioDelivery Sciences International, Inc.

The Company reached a settlement effective March 3, 2023 in the patent infringement lawsuits related to the sale of BDSI’s Bunavail and Belbuca drug film products in the United States.

Under the terms of the settlement agreement, all pending patent claims have been resolved between BDSI and Aquestive, as well as Indivior Inc., co-plaintiff in the Belbuca lawsuit, in exchange for a one-time, lump-sum payment of $ 8,500 to the Company.

This settlement continues the Company's focus on resolving outstanding litigation matters, where possible and appropriate.

The payment will be reflected on the Company's Condensed Consolidated Statements of Operations and Comprehensive Loss in 2023.

Expansion of Licensing and Supply Agreement with Pharmanovia

Effective March 27, 2023, the Company amended its exclusive license and supply agreement with Pharmanovia ("Pharmanovia Amendment") for its patented diazepam buccal film formulation.

The Pharmanovia Amendment expanded the scope of territory to cover the rest of the world, excluding US, Canada and China.

Pharmanovia will be responsible for seeking appropriate regulatory approval in the expanded territories, which includes Latin America, Africa and Asia Pacific.

Pursuant to the terms of the Pharmanovia Amendment, the Company received a non-refundable payment of $ 2,000 from Pharmanovia in connection with the Pharmanovia Amendment execution.

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-K

Item 9A. Controls and Procedures