What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-02 · 249 added, 236 removed, 625 unchanged (44% of the section changed)

34 unchanged sentences

Authorized 250,000,000 shares;

55,922,361 and 54,827,734 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

61,615,959 and 54,827,734 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 202,218 192,598

3 unchanged sentences

See accompanying notes to the condensed consolidated financial statements.

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AQUESTIVE THERAPEUTICS, INC.

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(In thousands, except share and per share data amounts)

Three Months Ended

Three Months Ended June 30, Six Months Ended

2023 2022 2023 2022

Revenues $ 13,241 $ 13,265 $ 24,375 $ 25,535

21 unchanged sentences

See accompanying notes to the condensed consolidated financial statements.

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AQUESTIVE THERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

Three Months Ended March 31 2023 and June 30, 2023

(In thousands, except share amounts)

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Balance at March 31, 2023 55,922,361 56 193,848 ( 303,139 ) ( 109,235 )

Costs of common stock issued under private equity offering — — — — —

Common Stock issued upon warrant exercises 3,689,452 4 3,538 — 3,542

Common Stock issued under public equity offering 1,981,937 2 4,407 — 4,409

Costs of common stock issued under public equity offering — — ( 235 ) — ( 235 )

Shares issued under employee stock purchase plan 18,699 — 31 — 31

Share-based compensation expense — — 631 — 631

Vested restricted stock units 3,510 — ( 3 ) — ( 3 )

Other — — 1 — 1

Net loss — — — ( 5,792 ) ( 5,792 )

Balance at June 30, 2023 61,615,959 62 202,218 ( 308,931 ) ( 106,651 )

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AQUESTIVE THERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Deficit

Three Months Ended March 31 2022 and June 30, 2022

(In thousands, except share amounts)

Common Stock Additional

Capital Accumulated

Deficit Total

Stockholders’

Equity/Deficit

Shares Amount

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

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

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 1,013,226 1 1,251 — 1,252

Costs of common stock issued under public equity offering — — ( 77 ) — ( 77 )

Shares issued under employee stock purchase plan 23,884 — 15 — 15

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

Other — — ( 1 ) 1 —

Net loss — — — ( 16,302 ) ( 16,302 )

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

See accompanying notes to the condensed consolidated financial statements.

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AQUESTIVE THERAPEUTICS, INC.

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(In thousands)

Three Months Ended

Six Months Ended

Operating activities:

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Deferred revenue 4,182 7,202

Net cash used for operating activities 8,816 ( 14,482 )

Net cash provided by (used for) operating activities

909 ( 21,044 )

Investing activities:

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Proceeds from common stock issued under public equity offering, net 5,090 2,473

Repayment of debt principal ( 9,086 ) —

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

Proceeds from issuance and exercise of warrants 3,542 5,878

Proceeds from shares issued under employee stock purchase plan 31 15

Repayment of debt principal including lease liabilities ( 12,543 ) —

Premium paid to retire debt ( 1,027 ) ( 675 )

Payments for taxes on share-based compensation ( 11 ) —

Net cash provided by financing activities ( 9,205 ) 1,298

Net cash (used for) provided by financing activities

( 4,918 ) 11,496

Net (decrease) increase in cash and cash equivalents ( 4,837 ) ( 10,329 )

Cash and cash equivalents:

Cash and cash equivalents at beginning of period 27,273 28,024

3 unchanged sentences

See accompanying notes to the condensed consolidated financial statements.

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AQUESTIVE THERAPEUTICS, INC.

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

For the three months ended March 31, 2023, the Company sold 1,078,622 shares of Common Stock under the ATM which provided net proceeds of approximately $ 916 after deducting commissions and other transaction costs of $ 77 .

This ATM facility has approximately $ 32,422 worth of shares of Common Stock available at March 31, 2023.

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

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

For the six months ended June 30, 2023, the Company sold 3,060,559 shares of Common Stock under the ATM which provided net proceeds of approximately $ 5,090 after deducting commissions and other transaction costs of $ 312 .

This ATM facility has approximately $ 28,014 worth of shares of Common Stock available at June 30, 2023.

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

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 exceeding 9.99 % of the Company's then outstanding Common Stock.

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.

In 2022, the Company sold 1,611,181 shares, including commitment shares, which provided proceeds of approximately $ 1,987 in connection with the Lincoln Park Purchase Agreement .

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

The Company did not sell shares in connection with the Lincoln Park Purchase Agreement in the first quarter of 2023.

In 2022, the Company sold 1,600,000 shares, in addition to 236,491 commitment shares, which provided proceeds of approximately $ 1,987 in connection with the Lincoln Park Purchase Agreement .

The Company did not sell shares in connection with the Lincoln Park Purchase Agreement in the six months ended June 30, 2023.

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

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The Company used the net proceeds from the offering for general corporate purposes.

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

The pre-funded warrants were fully exercised in 2022 and no Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the three-months ended March 31, 2023.

The pre-funded warrants were fully exercised in 2022 and 3,689,452 Common Stock warrants issued pursuant to the Securities Purchase Agreements with proceeds of approximately $ 3,542 were exercised during the six months ended June 30, 2023.

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On April 13, 2023, the Company received a notice from Nasdaq informing the Company that it had regained compliance with Nasdaq's Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market, as the minimum bid price of the Company’s Common Stock had met or exceeded $1.00 per share for a minimum of ten consecutive business days during this 180-day calendar period.

See Note 20, Subsequent Events for details.

(D) Basis of Presentation

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The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption .

Recent Accounting Pronouncements Adopted as of March 31, 2023:

Recent Accounting Pronouncements Adopted as of June 30, 2023:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), amending existing guidance on the accounting for credit losses on financial instruments within its scope.

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

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

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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 March 31, 2023:

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50) Disclosure of Supplier Finance Program Obligations ,” to increase the transparency of supplier finance programs regarding the use of such programs by the buyer party (that is, the disclosing entity) and the programs’ effects on an entity’s working capital,

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liquidity, and cash flows.

ASU 2022-04 is effective for all entities for fiscal years beginning after Dec.

15, 2022, and interim periods within those fiscal years.

The requirement on rollforward information is effective for fiscal years beginning after Dec.

Early adoption is permitted.

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 June 30, 2023:

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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The Company’s cash requirements for 2023 and beyond include expenses related to continuing development and clinical evaluation of its products, manufacture and supply costs, costs of regulatory filings, patent prosecution expenses and litigation expenses, expenses related to commercialization of its products, as well as costs to comply with the requirements of being a public company operating in a highly regulated industry.

As of March 31, 2023, the Company had $ 26,882 of cash and cash equivalents.

As of June 30, 2023, the Company had $ 22,436 of cash and cash equivalents.

The Company has experienced a history of net losses in prior periods.

The Company's accumulated deficits totaled $ 303,139 as of March 31, 2023.

The Company's accumulated deficits totaled $( 308,931 ) as of June 30, 2023.

The net losses and accumulated deficits were partially offset by gross margins from 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 % Senior Secured Notes.

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% Senior Secured Notes (as hereinafter defined).

The Company began utilizing its ATM facility in November 2020.

Since inception to March 31, 2023, the Company sold 11,420,579 shares of Common Stock which generated net cash proceeds of approximately $ 40,656 , net of commissions and other transaction costs of $ 2,130 .

For the three months ended March 31, 2023, the Company sold 1,078,622 shares of Common Stock which provided net proceeds of approximately $ 916 , net of commissions and other transaction costs of $ 77 .

This ATM facility has approximately $ 32,422 worth of shares of Common Stock available at March 31, 2023.

The Company is 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.

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Since inception to June 30, 2023, the Company sold 13,402,516 shares of Common Stock which generated net cash proceeds of approximately $ 44,796 , net of commissions and other transaction costs of $ 2,395 .

For the six months ended June 30, 2023, the Company sold 3,060,559 shares of Common Stock which provided net proceeds of approximately $ 5,090 , net of commissions and other transaction costs of $ 312 .

This ATM facility has approximately $ 28,014 worth of shares of Common Stock available at June 30, 2023.

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, expense management activities, including, but not limited to potentially ceasing nearly all 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, including making the principal and interest payments on the 12.5 % Senior Secured Notes, for at least the next twelve months as it continues to execute its business strategy.

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

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

To achieve this core principle, a five-step model is applied that includes (1) identifying the contract with a customer, (2) identifying the

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performance obligation in the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing when, or as, an entity satisfies a performance obligation.

Performance Obligations

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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.

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

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

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

As of March 31, 2023, and December 31, 2022, such contract assets were $ 3,507 and $ 2,139 , respectively, consisting primarily of products and services provided under specific contracts to customers for which earnings processes have been met prior to shipment of goods or full delivery of completed services.

As of June 30, 2023, and December 31, 2022, such contract assets were $ 2,172 and $ 2,139 , respectively, consisting primarily of products and services provided under specific contracts to customers for which earnings processes have been met prior to shipment of goods or full delivery of completed services, as well as estimated receivables from contracts with 3rd parties.

Contract Liabilities - in certain situations, customer contractual payment terms are structured to permit invoicing in advance of delivery of a good or service.

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

As of March 31, 2023, and December 31, 2022, such contract liabilities were $ 37,804 and $ 32,930 , respectively.

As of June 30, 2023 and December 31, 2022, such contract liabilities were $ 37,112 and $ 32,930 , respectively.

The Company’s revenues were comprised of the following:

Three Months Ended

Three Months Ended June 30, Six Months Ended

2023 2022 2023 2022

Manufacture and supply revenue $ 11,636 $ 9,874 $ 21,398 $ 19,045

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Total revenues $ 13,241 $ 13,265 $ 24,375 $ 25,535

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Disaggregation of Revenue

The following table provides disaggregated net revenue by geographic area:

Three Months Ended

Three Months Ended June 30, Six Months Ended

2023 2022 2023 2022

United States $ 7,313 $ 11,257 $ 15,478 $ 22,338

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Trade and other receivables, net $ 10,101 $ 4,704

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

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The adequacy of these provisions is reviewed on a quarterly basis.

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The following table provides a summary of activity with respect to sales-related allowances and accruals for the three months ended March 31, 2023:

The following table provides a summary of activity with respect to sales-related allowances and accruals for the six months ended June 30, 2023:

Total Sales-Related Allowances

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Reclassifications $ ( 582 )

Balance at March 31, 2023 $ 38

Total reductions of gross product sales from sales-related allowances and accruals were $ 0 for the three months ended March 31, 2023.

Balance at June 30, 2023 $ —

Total reductions of gross product sales from sales-related allowances and accruals were $ 0 for the six months ended June 30, 2023 due to the outlicensing of Sympazan.

Accruals for returns allowances and prompt pay discounts are reflected as a direct reduction of trade receivables and accruals for wholesaler service fees, co-pay support redemptions and rebates as current liabilities.

The accrued balances relative to these provisions included in Trade and other receivables, net and Accounts payable and accrued expenses were $ 38 and $ 793 , respectively, as of March 31, 2023 and $ 669 and $ 1,012 , respectively, as of December 31, 2022.

The accrued balances relative to these provisions included in Trade and other receivables, net and Accounts payable and accrued expenses were $ 0 and $ 636 , respectively, as of June 30, 2023, and $ 669 and $ 1,012 , respectively, as of December 31, 2022.

Concentration of Major Customers

Customers are considered major customers when net revenue exceeds 10% of total revenue for the period or outstanding receivable balances exceed 10% of total receivables.

For the three months ended March 31, 2023, Indivior and Hypera exceeded the 10% threshold for revenue and represented approximately 77 % and 14 % of total revenue, respectively.

As of March 31, 2023, Indivior and Hypera exceeded the 10% threshold for outstanding receivables and represented 68 % and 11 %, respectively, of outstanding receivables.

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

For the six months ended June 30, 2023, Indivior and Hypera exceeded the 10% threshold for revenue and represented approximately 74 % and 14 % of total revenue, respectively.

As of June 30, 2023, Indivior exceeded the 10% threshold for outstanding receivables and represented 75 % respectively, of outstanding receivables.

For the six months ended June 30, 2022, Indivior exceeded the 10% threshold for revenue and represented approximately 77 % of total revenue.

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

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Under the terms of the Indivior License Agreement, the Company is required to manufacture Suboxone in accordance with current Good Manufacturing Practice standards and according to the specifications and processes set forth in the related quality agreements the Company entered into with Indivior.

Additionally, the Company is required to obtain Active Pharmaceutical Ingredients ("API") for the manufacture of Suboxone directly from Indivior.

Additionally, the Company is required to obtain Active

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Pharmaceutical Ingredients ("API") for the manufacture of Suboxone directly from Indivior.

The Indivior License Agreement specifies a minimum annual threshold quantity of Suboxone that the Company is obligated to fill and requires Indivior to provide the Company with a forecast of its requirements at various specified times throughout the year.

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.

The Indivior License Agreement provides for payment by Indivior of an agreed upon purchase price per unit until January 1, 2025 and, thereafter, that is subject to annual adjustment based on changes in an agreed upon price index.

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.

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

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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.

Thereafter, the Indivior License Agreement automatically renewed for successive one year periods.

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

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

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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.

No further payments are due to the Company under the Indivior Supplemental Agreement.

See Note 19, Contingencies for details.

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

(i) including the United Kingdom and any other country currently in the European Union (EU) which later withdraws as a member country in the EU for purpose of determining the satisfaction of the condition triggering the obligation to pay the third milestone due under the Sunovion License Agreement, (ii) extending the date after which Sunovion has the right to terminate the Sunovion License Agreement for convenience from December 31, 2024 to March 31, 2028, (iii) modifying the effective inception date of the first minimum annual royalty due from Sunovion to the Company form January 1, 2020 to April 1, 2020, and (iv) modifying the termination provision to reflect the Company's waiver of the right to terminate the Sunovion License Agreement in the event that KYNMOBI was not commercialized by January 1, 2020.

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2020 to April 1, 2020, and (iv) modifying the termination provision to reflect the Company's waiver of the right to terminate the Sunovion License Agreement in the event that KYNMOBI was not commercialized by January 1, 2020.

This Sunovion License Agreement will continue until terminated by Sunovion in accordance with the termination provisions of the Amendment to the Sunovion License Agreement.

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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.

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In consideration of the rights granted to Sunovion under the Sunovion License Agreement, the Company received aggregate payments totaling $ 22,000 to date.

In addition to the upfront payment of $ 5,000 , the Company has also earned an aggregate of $ 17,000 in connection with specified regulatory and development milestones in the United States and Europe (the “Initial Milestone Payments”), all of which have been received to date.

With the Monetization Agreement entered into on November 3, 2020 relating to KYNMOBI as described in the paragraph below, we are no longer entitled to receive any payments 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 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.

With the Monetization Agreement (defined below) entered into on November 3, 2020 relating to KYNMOBI as described in the paragraph below, the Company is no longer entitled to receive any payments under the Sunovion License Agreement.

Purchase and Sale Agreement with an affiliate of Marathon Asset Management

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

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 March 31, 2023 under the Monetization Agreement.

We have received an aggregate amount of $ 50,000 through June 30, 2023 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 public forecast by Sunovion of estimated KYNMOBI sales as of March 31, 2023, the Company likely will not receive any of the additional contingent payments under the Monetization Agreement.

Based on the current public forecast by Sunovion of estimated KYNMOBI sales as of June 30, 2023, the Company likely will not receive any of the additional contingent payments under the Monetization Agreement.

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

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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 Zevra's 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.

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

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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 in September 2022, 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.

Under the Haisco Agreement, as amended, the Company received a $ 7,000 upfront cash payment in September 2022, and will receive regulatory milestone payments and 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

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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;

(i) a cash payment consisting of the sum of any previously unpaid base salary through

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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 ;

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(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;

Kendall’s 18 months severance which 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;

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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

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term of each award;

(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.

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 of time from the Separation Date to December 31, 2022.

For these services, Mr.

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

Effective March 27, 2023, the Company amended the Pharmanovia Agreement (the "Pharmanovia Amendment") to expand the scope of territory to cover the rest of the world, excluding US, Canada and China.

Effective March 27, 2023, the Company amended the Pharmanovia Agreement (the “Pharmanovia Amendment”) to expand the scope of territory for the license of Libervant to cover the rest of the world, excluding the U.S., Canada and China.

Under the Pharmanovia Amendment, 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.

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

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, to license Sympazan ® (clobazam) oral film for the adjunctive treatment of seizures associated with Lennox‐Gastaut syndrome in patients aged two years of age and older (the "Assertio Agreement").

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 .

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

("Assertio"), to license Sympazan ® (clobazam) oral film for the adjunctive treatment of seizures associated with Lennox‐Gastaut syndrome in patients aged two years of age and older (the “Assertio Agreement”).

Under the terms of the Assertio Agreement, the Company granted to Assertio an exclusive, worldwide license of its intellectual property for Sympazan 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.

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

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

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

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

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Property and Equipment, Net

Lives March 31,

Lives June 30,

2023 December 31,

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(a) Leasehold improvements are amortized over the shorter of the lease term or their estimated useful lives .

Total depreciation, amortization, and impairment related to property and equipment was $ 286 and $ 714 for the three-month periods ended March 31, 2023 and 2022, respectively.

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Total depreciation, amortization, and impairment related to property and equipment was $ 250 and $ 655 for the three months ended June 30, 2023 and 2022, respectively.

For the respective six month periods, these expenses totaled $ 536 and $ 1,369 .

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Right-of-Use Assets and Lease Obligations

The Company leases all realty used as its production and warehouse facilities, corporate headquarters, commercialization operations center and research and laboratory facilities.

None of 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.

The Company leases all realty used at its production and warehouse facilities, corporate headquarters, commercialization operations center and research and laboratory facilities.

None of these three leases include the characteristics specified in ASC 842, Leases , which require classification as financing leases and, accordingly, these leases are accounted for as operating leases.

These leases, as amended, provide remaining terms between 4.8 and 10.3 years, including renewal options expected to be exercised to extend the lease periods.

During the six months ended June 30, 2023, the Company recognized a lease supporting its manufacturing facilities as a finance lease.

Commitments under finance leases are not significant, and are included in Property and equipment, net, Loans payable, current and Loans payable, net on the consolidated balance sheet.

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

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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 Income (Loss).

For the three-months ended March 31, 2023, total operating lease expenses totaled $ 418 , including variable lease expenses such as common area maintenance and operating costs of $ 108 .

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

For the three and six months ended June 30, 2023, total operating lease expenses totaled $ 452 and $ 870 , respectively, including variable lease expenses such as common area maintenance and operating costs of $ 121 and $ 229 , respectively.

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

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

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Intangible assets, net 1,357 1,435

Amortization expense was $ 39 and $ 13 for each of the three-month periods ended March 31, 2023 and 2022.

During the remaining life of the purchased intangible assets, estimated amortization expense is $ 117 in the remainder of 2023 and $ 156 in 2024, respectively.

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Amortization expense was $ 39 and $ 13 for each of the three-month periods ended June 30, 2023 and 2022.

For the corresponding six-month periods, these expenses totaled $ 78 and $ 25 , respectively.

During the remaining life of the purchased intangible assets, estimated amortization expense is $ 78 for the remainder of 2023 and $ 156 in 2024, respectively.

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Other Non-current Assets

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Total other non-current assets $ 5,469 $ 6,451

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

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

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12.5% Senior Secured Notes and Loans Payable

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

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

Upon closing of the indenture for the 12.5 % Notes (the “Base Indenture”), the Company issued $ 70,000 of the 12.5 % Notes (the “Initial Notes”) along with the Warrants and rights of first offer (the “First Offer Rights”) to the noteholders participating in this transaction.

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

The result of these two transactions reduced the net balance of the Company's 12.5 % Senior Notes outstanding in the aggregate to $ 51,500 at December 31, 2020.

The result of these two transactions reduced the net balance of the Company's 12.5 % Notes outstanding in the aggregate to $ 51,500 at December 31, 2020.

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

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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

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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 lenders inclusive of (i) a $ 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.

Existing deferred discounts and loan origination fees on the 12.5 % Notes are amortized as an adjustment of interest expense over the remaining term of modified debt using the effective interest method.

The First Supplemental Indenture contains a provision whereby, as the Company receives any cash proceeds from the Monetization Agreement, each noteholder has the right to require the Company to redeem all or any part of such noteholder's outstanding 12.5 % Notes at a repurchase price in cash equal to 112.5 % of the principal amount, plus accrued and unpaid interest.

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This repurchase offer is capped at 30 % of the cash proceeds received by the Company as the contingent milestones are attained, if any, up through June 30, 2025.

A valuation study was performed by an independent third party appraiser and updated as of March 31, 2023.

A valuation study was performed by an independent third party appraiser and updated as of June 30, 2023.

Based on the valuation study, the put option was valued at $ 0.00 and has been recorded in Other non-current liabilities.

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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.

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").

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 the 12.5 % Notes, at the option of the Company, contingent upon FDA approval of the Company's product candidate Libervant (the "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").

market access (the "Second Additional Securities").

Under the Third Supplemental Indenture, the Company agreed that, if and to the extent that the Company accessed these re-openers, it would grant to the noteholders 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.

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

As of March 31, 2023, the Company completed its $ 2,700 Consent Fee payment to the holders of the 12.5 % Notes.

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, subject to the full approval of Libervant by the FDA for sale in the United States, which full approval included U.S.

As of June 30, 2023, the Company completed its $ 2,700 Consent Fee payment to the holders of the 12.5 % Notes.

market access for Libervant.

Because full FDA approval was not obtained by March 31, 2023, the Company's option to access the re-openers expired on such date.

Because FDA approval for U.S.

market access was not obtained by March 31, 2023, the Company's option to access the re-openers expired on such date.

A debt maturity table is presented below:

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Total $ 38,975

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 March 31, 2023, the Company recorded its principal payments as Loans payable, current and Loans payable, net on its Condensed Consolidated Balance Sheet.

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

As of June 30, 2023, the Company recorded its principal payments as Loans payable, current and Loans payable, net on its Condensed Consolidated Balance Sheet.

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

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The Company also paid $ 353 in prepayment premium as result of the early retirement of debt which was reflected as a loss on extinguishment of debt.

The prepayments along with a scheduled principal repayment in the first quarter of 2023 reduced the net balance of the 12.5 % Notes outstanding in the aggregate to $ 42,413 .

The prepayments along with the scheduled principal repayment in the first half of 2023 reduced the net balance of the 12.5 % Notes outstanding in the aggregate to $ 38,975 as of June 30, 2023.

The Company capitalizes legal and other third-party costs incurred in connection with obtaining debt as deferred debt issuance costs and applies the unamortized portion as a reduction of the outstanding face amount of the related loan.

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

Amortization expense arising from deferred debt issuance costs and debt discounts related to the 12.5 % Notes for the three months ended March 31, 2023 was $ 4 , while comparative amortization expense for the three months ended March 31, 2022 were $ 4 .

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 22 and $ 27 as of March 31, 2023 and December 31, 2022, respectively.

Amortization expense arising from deferred debt issuance costs and debt discounts related to

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the 12.5 % Notes for the three and six months ended June 30, 2023 were $ 4 and $ 8 , respectively, while comparative amortization expense for the three and six months ended June 30, 2022 were $ 4 and $ 8 , respectively.

Unamortized deferred debt issuance costs and deferred debt discounts totaled $ 19 and $ 27 as of June 30, 2023 and December 31, 2022, 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 the holders of the 12.5% Notes with perfected security interests in substantially all of the Company’s assets.

Warrants Issued to 12.5 % Senior Secured Noteholders

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

There were no warrants exercised as it relates to the Initial Warrants and the Additional Warrants during the three months ended March 31, 2023 or 2022, respectively.

There were no warrants exercised as it relates to the Initial Warrants and the Additional Warrants during the six months ended June 30, 2023 or 2022, respectively.

Warrants Issued Under Securities Purchase Agreements

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The fair value of the pre-funded and Common Stock warrants is treated as equity and presented in Additional Paid-in Capital in the Company’s unaudited Condensed Consolidated Balance Sheet.

No Common Stock warrants issued pursuant to the Securities Purchase Agreements were exercised during the three months ended March 31, 2023.

During the six months ended June 30, 2023, 3,689,452 Common Stock warrants issued pursuant to the Securities Purchase Agreements with proceeds of approximately $ 3,542 were exercised.

Sale of Future Revenue

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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.

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

The Company has received an aggregate amount of $ 50,000 through March 31, 2023 under the Monetization Agreement.

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

The Company has received an aggregate amount of $ 50,000 through June 30, 2023 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 .

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

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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.

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In order to determine the amortization of the liability related to the sale of future revenue, the Company is required to estimate the total amount of future royalty and milestone payments to Marathon over the life of the Monetization Agreement and contingent milestone payments from Marathon to the Company.

The sum of future royalty payments less the $ 50,000 in proceeds received and future contingent payments will be recorded as interest expense over the life of the Monetization Agreement.

The sum of future royalty payments less the $ 50,000 in proceeds received and future contingent payments has been recorded as interest expense over the life of the Monetization Agreement.

At execution, the estimate of this total interest expense resulted in an effective annual interest rate of approximately 24.9 %.

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

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

The following table shows the activity of the liability related to the sale of future revenue for the three months ended March 31, 2023 :

The following table shows the activity of the liability related to the sale of future revenue for the six months ended June 30, 2023:

Liability related to the sale of future revenue, net at December 31, 2022

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Liability related to the sale of future revenue, net (includes current portion of $ 1,000 )

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Net Earnings (Loss) Per Share

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

The following table reconciles the basic to diluted weighted average shares outstanding for the three months ended March 31, 2023.

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

Therefore, basic and diluted net loss per share were the same for the three months ended March 31, 2022 as reflected below.

The following table reconciles the basic to diluted weighted average shares outstanding for the six months ended June 30, 2023.

Diluted EPS is adjusted by the effect of dilutive securities, including options and awards under the Company's equity compensation plans, warrants and the Employee Stock Purchase Plan ("ESPP").

The treasury method was used to calculate the dilutive shares.

The anti-dilutive options, awards and warrants for the six months ended June 30, 2023 are included in the footnotes below.

As a result of the Company’s net loss incurred for the three months ended June 30, 2023 and the three and six months ended June 30, 2022, all potentially dilutive instruments outstanding would have anti-dilutive effects on per-

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share calculations.

Therefore, basic and diluted net loss per share were the same for the three months ended June 30, 2023 and the three and six months ended June 30, 2022 as reflected below.

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net income (loss) $ ( 5,792 ) $ ( 16,302 ) $ 2,276 $ ( 29,522 )

Weighted-average number of common shares – basic 57,350,902 45,462,516 56,494,805 43,475,198

Effect of dilutive stock options and warrants 18,160,939 —

Effect of dilutive stock options (a)

Effect of restricted stock units (b)

— — 468,036 —

Effect of warrants (c)

— — 1,910,742 —

Effect of Employee Stock Purchase Plan — — 18,596 —

Weighted-average number of common shares – diluted 57,350,902 45,462,516 58,938,222 43,475,198

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Earnings (Loss) per common share – diluted $ ( 0.10 ) $ ( 0.36 ) $ 0.04 $ ( 0.68 )

As of March 31, 2023, the Company’s dilutive instruments included 5,774,772 options, 1,821,738 unvested restricted stock units, and 10,564,429 warrants to purchase common shares.

As of March 31, 2022, the Company’s potentially dilutive instruments included 5,259,847 options, 166,700 unvested restricted stock units and 1,714,429 warrants to purchase common shares that were excluded from the computation of diluted weighted average shares outstanding because these securities had an antidilutive impact due to the loss reported.

(a) For the three months ended June 30, 2023 and 2022 and the six months ended June 30, 2023 and 2022, outstanding stock options of 5,919,522 , 5,284,447 , 5,794,522 and 5,284,447 shares of Common Stock, respectively, were anti-dilutive and excluded from the computation of diluted EPS.

(b) For the three months ended June 30, 2023 and 2022 and the six months ended June 30, 2023 and 2022, outstanding restricted stock units of 2,477,738 , 169,950 , 743,438 and 169,950 shares of Common Stock, respectively were anti-dilutive and excluded from the computation of diluted EPS.

(c) For the three months ended June 30, 2023 and 2022 and the six months ended June 30, 2023 and 2022, outstanding warrants of 6,874,977 , 10,564,429 , 1,714,429 and 10,564,429 shares of Common Stock, respectively, were anti-dilutive and excluded from the computation of diluted EPS.

Share-Based Compensation

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Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Manufacture and supply $ 55 $ 45 $ 96 $ 93

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Stock options 436 2,180 755 3,093

Employee stock purchase plan (ESPP) 17 2 17 2

Total share-based compensation expenses $ 648 $ 2,221 $ 992 $ 3,134

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Share-Based Compensation Equity Awards

The following tables provide information about the Company’s restricted stock unit and stock option activity during the three-month period ended March 31, 2023:

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Restricted Stock Unit Awards (RSUs):

The following tables provide information about the Company’s restricted stock unit and stock option activity during the six month period ended June 30, 2023:

Restricted Stock Unit Awards (RSUs) - Time based:

Units Weighted

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Forfeited ( 43 ) $ 2.35

Unvested as of March 31, 2023 1,821 $ 0.89

Vested and expected to vest as of March 31, 2023 1,632 $ 0.89

Unvested as of June 30, 2023 1,812 $ 0.89

Vested and expected to vest as of June 30, 2023 1,644 $ 0.89

Restricted Stock Unit Awards (RSUs) - Performance based:

Units Weighted

Grant Date Fair

(in thousands)

Unvested as of December 31, 2022 — $ —

Granted 666 2.04

Forfeited — —

Unvested as of June 30, 2023 666 $ 2.04

Vested and expected to vest as of June 30, 2023 583 $ 2.04

As of June 30, 2023, $ 1,185 and $ 1,225 of unrecognized compensation expense related to unvested time-based restricted stock units and performance based unvested restricted stock units, respectively, are expected to be recognized over a weighted average period of 2.64 years and 2.85 years, respectively, from the date of grant.

Stock Option Awards:

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Exercised, Forfeited, Expired ( 258 ) 2.30

Outstanding as of March 31, 2023 5,775 $ 5.62

Vested and expected to vest as of March 31, 2023 5,666 $ 5.69

Exercisable as of March 31, 2023 4,089 $ 6.92

As of March 31, 2023, $ 1,413 of unrecognized compensation expense related to unvested restricted stock units is expected to be recognized over a weighted average period of 2.89 years from the date of grant.

As of March 31, 2023, $ 2,672 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 1.72 years from the date of grant.

Outstanding as of June 30, 2023 5,920 5.54

Vested and expected to vest as of June 30, 2023 5,824 $ 5.59

Exercisable as of June 30, 2023 4,322 $ 6.69

The fair values of stock options granted during the six months ended June 30, 2023 were estimated using the Black-Scholes pricing model based on the following assumptions:

Expected dividend yield — %

Expected volatility 100 %

Expected term (years) 5.5

Risk-free interest rate 4.0 %

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2023 was $ 0.7981 .

During the six months ended June 30, 2023, stock options were granted with an exercise price of $ 2.02 and

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accordingly, given the Company’s share price of $ 1.65 at June 30, 2023, the intrinsic value provided by certain shares granted during this period was de minimus.

As of June 30, 2023, $ 2,350 of unrecognized compensation expense related to non-vested stock options is expected to be recognized over a weighted average period of 1.60 years from the date of grant.

2022 Inducement Equity Incentive Plan

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

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

There were no awards outstanding under this Plan as of June 30, 2023.

The Company has accounted for income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the estimated future tax consequences attributable to differences between financial statement carrying amounts and respective tax bases of existing assets and liabilities, as well as net operating loss carryforwards and research and development credits.

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The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items.

For the three months ended March 31, 2023, the effective income tax rate was 0 % and the Company recorded $ 0 from its pretax gain of $ 8,068 .

For the three months ended March 31, 2022, the Company recorded no income tax benefit from its pretax loss of $ 13,220 .

The primary factors impacting the effective tax rate for three months ended March 31, 2023, is the anticipated full year pre-tax book loss, the expected utilization of net operating losses and research and development credits to offset any current year tax liabilities, and a full valuation allowance against any associated net deferred tax assets.

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For the three and six months ended June 30, 2023, the effective income tax rate was ( 5.2 )% and 11.1 %, respectively, and the Company recorded $ 284 and $ 284 from its pretax (loss) income of $( 5,508 ) and $ 2,560 , respectively.

For the three and six months ended June 30, 2022, the Company recorded no income tax benefit from its pretax (loss) income of $( 16,302 ) and $( 29,522 ), respectively.

The primary factors impacting the effective tax rate for six months ended June 30, 2023 is the anticipated full year pre-tax book loss, the expected utilization of net operating losses and research and development credits to offset current year tax liabilities, and a full valuation allowance against any associated net deferred tax assets.

Contingencies

Litigation and Contingencies

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, securities, civil tort, and commercial litigation, and environmental or other regulatory matters.

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

Reddy’s Labs.

Reddy’s Labs., Inc.

On February 7, 2018, the Company and Indivior Inc.

and Indivior UK Ltd.

(collectively, “Indivior”) initiated a lawsuit against Dr.

Reddy’s Laboratories S.A.

Reddy’s Laboratories, Inc.

(collectively, “Dr.

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

9,855,221 (the "221 patent”).

On April 3, 2018, the Company and Indivior initiated a separate lawsuit against Dr.

Reddy’s asserting infringement of U.S.

9,931,305 (the "’305 patent”).

On May 29, 2018, the lawsuits regarding the ’221 and ’305 patents were consolidated which was originally initiated by Indivior against Dr.

Reddy’s asserting infringement of U.S.

9,687,454 (the "’454 patent”).

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, the Company and Indivior initiated a lawsuit against Teva Pharmaceuticals USA, Inc.

(“Teva”) asserting infringement of the ’221 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 Laboratories S.A., which was settled pursuant to a settlement agreement whereby the court entered a Stipulation and Order of Dismissal, dismissing all claims and counterclaims with prejudice in the lawsuit on June 28, 2022.

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

Alvogen Pine Brook LLC

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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.

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

On June 26 2023, the court granted in part and denied in part plaintiff's' joint motion and denied all other parties' motions.

There is no trial date 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 losses, if any, in this matter.

Reckitt Benckiser Pharmaceuticals, Inc.

and MonoSol Rx, LLC v.

BioDelivery Sciences International, Inc.

and Quintiles Commercials US, Inc.

(BDSI 2014 Lawsuit)

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

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

8,765,167 (the "’167 patent”) in the District of New Jersey (Civil Action No.

3:14-cv-5892).

On July 22, 2015, the case was transferred to the United States District Court for the Eastern District of North Carolina.

BDSI filed requests for inter partes review (“IPR”) of the ’167 patent before the Patent Trial and Appeal Board (“PTAB”), and on May 6, 2016, the Court stayed the case pending the outcome and final determination of the IPR proceedings.

On March 24, 2016, the PTAB issued final written decisions finding the ’167 patent was not unpatentable, and the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) remanded those decisions for further proceedings

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before the PTAB.

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

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.

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

On March 8, 2023, pursuant to a settlement agreement between the parties, the parties filed a Joint Stipulation of Dismissal, dismissing all claims and counterclaims asserted in the lawsuit.

Aquestive Therapeutics, Inc.

BioDelivery Sciences International, Inc.

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, 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, 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.

On March 8, 2023, pursuant to a settlement agreement between the parties, the parties filed a Joint Stipulation of Dismissal, dismissing all claims and counterclaims asserted in the lawsuit.

Antitrust Litigation

State of Wisconsin, et al.

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 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 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.

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

The hearing on Aquestive’s motion for summary judgment was held on May 18, 2022 and, 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

Centene Corporation, Wellcare Health Plans, Inc., New York Quality Healthcare Corporation d/b/a Fidelis Care, and Health Net, LLC v.

Indivior Inc, Indivior Solutions Inc., Indivior PLC, Reckitt Benckiser Healthcare (UK) Ltd., and Aquestive Therapeutics, Inc.

On September 18, 2020, Humana, Inc.

(“Humana”), a health insurance payor, filed a lawsuit against the Company and Indivior in the United States District Court for 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 United States District Court for the Eastern District of Missouri.

The counsel representing Humana is also representing Centene.

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

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

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

On August 20, 2021, Centene and Humana appealed the decision to the United States Appeals Court for the Third Circuit (“Third Circuit”).

Also, on August 20, 2021,

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Humana filed a complaint against the Company and Indivior 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 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 Centene and Humana actions or 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 these matters.

California Litigation

7 unchanged sentences

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

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

The Company filed a Motion to Strike Neurelis’s Complaint under California’s anti-

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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.

8 unchanged sentences

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

The plaintiff filed a motion to file a third amended complaint.

The hearing on this motion is currently scheduled for November 14, 2023.

No trial date has been set.

23 unchanged sentences

On April 21, 2023, the Court so-ordered the stipulation and terminated the lawsuit.

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Subsequent Events

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Positive Decision in Litigation Matters

On April 10, 2023, the presiding judge in the federal securities class action, Neurelis, Inc.

Aquestive Therapeutics, Inc., filed in the United States Court for the District of New Jersey, ordered the dismissal of the class action with prejudice pursuant to a Stipulation of Voluntary Dismissal filed by the parties in that action.

On April 21, 2023, the same presiding judge ordered the dismissal with prejudice of a related shareholder derivative lawsuit, Loreen Niewenhuis v.

Keith Kendall, et al , pursuant to a Stipulation of Voluntary Dismissal filed by the parties in that action.

Refer to Note 19, Contingencies for details.

Nasdaq's Listing Rule 5450(a)(1) Compliance

On April 13, 2023, the Company received a notice from Nasdaq” informing the Company that it has regained compliance with Nasdaq's Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market, as the minimum bid price of the Company’s Common Stock had met or exceeded $1.00 per share for a minimum of ten consecutive business days during the applicable 180-day review period.

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Anaphylm topline data

On July 27, 2023 the Company released topline data from its latest clinical crossover pilot trial, Study AQ109103 (the “103 study”), for Anaphylm™ (epinephrine) Sublingual Film.

This crossover clinical trial in healthy human subjects was designed with the finalized dosing instructions expected for use in the Company’s upcoming pivotal clinical trial.

The 103 study demonstrated that Anaphylm, using the finalized dosing administration instructions, delivers epinephrine systemically as effectively as either commercially available autoinjectors or the manual intramuscular (IM) injection.

Administration of Anaphylm 12mg resulted in a geometric mean maximum epinephrine concentration (Cmax) of 457 pg/mL and a median time to maximum concentration (Tmax) of 15 minutes after administration.

The partial Area Under the Curve measurement, or pAUC, was bracketed between previously generated manual 0.3mg IM injection and epinephrine 0.3mg autoinjector data at all timepoints between 10 and 60 minutes, post-dosing.

Importantly, Anaphylm 12mg met the standards of bracketing in the 103 study for all the critical parameters that the Company anticipates measuring in the pivotal PK study including Cmax and pAUC during the critical early time periods, while remaining similar to autoinjectors for Tmax.

The product was safe and well-tolerated with no serious adverse events.

Chart 1 below highlights Anaphylm 12mg pAUC from the103 study when compared to autoinjector and manual IM injection pAUC from a previous study conducted by the Company.

The 103 study also included crossover arms of Anaphylm 12mg with alternate dosing instructions as well as Anaphylm 14mg with the finalized dosing instructions.

In both cases, the product was considered safe and well-tolerated.

Table 1 below provides a comparison of the two arms that utilized final dosing instructions from the 103 study to autoinjector and manual IM injection data from a previous study conducted by the Company.

Equity Transactions

On August 1, 2023, the Company entered into an Inducement Offer to Exercise Common Stock Purchase Warrants letter agreement (the “Letter Agreement”) with the holder (the “Exercising Holder”) of 5,000,000 of the remaining Common Stock Warrants (the "Existing Warrants").

Pursuant to the Letter Agreement, the Exercising Holder and the Company agreed that the Exercising Holder would exercise all of its Existing Warrants for shares of Common Stock underlying the Existing Warrants at $ 0.96 per share of Common Stock, the current exercise price of the Existing Warrants.

Under the Letter Agreement, in consideration of the Exercising Holder exercising the Existing Warrants, the Company issued to the Exercising Holder new warrants to purchase up to an aggregate of 2,750,000 shares of Common Stock (the “New Warrants”).

The New Warrants are exercisable after February 2, 2024, expire on February 2, 2029 and are issuance only for cash, subject to exception if the shares of Common Stock underlying the New Warrants are not registered in accordance with the terms of the Letter Agreement, in which case the New Warrants may be may also be exercised, in whole or in part, at such time by means of a "cashless exercise".

The New Warrants have an exercise price of $ 2.60 per share.

On August 2, 2023, 5,000,000 of the Existing Warrants were exercised pursuant to the Securities Purchase Agreement with the Exercising Holder, with the Company receiving gross proceeds therefrom of $ 4,800 .

Through August 8, 2023, the Company sold 110,709 shares of Common Stock under the ATM which provided net proceeds of approximately $ 233 after deducting commissions and other transaction costs of $ 7 .

This ATM facility has approximately $ 27,773 worth of shares of Common Stock available at August 8, 2023.

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

What changed 10-Q

Item 1. Financial Statements