What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-02 · 211 added, 166 removed, 319 unchanged (54% of the section changed)

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Words such as “believe,” “anticipate,” “plan,” “expect,” “estimate,” “intend,” “may,” “will,” or the negative of those terms, and similar expressions are intended to identify forward-looking statements.

These forward-looking statements include, but are not limited to, statements regarding the advancement and related timing of AQST-109 and our other product candidates through the regulatory and development pipeline;

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These forward-looking statements include, but are not limited to, statements regarding the advancement and related timing of Anaphylm through the regulatory and development pipeline;

statements regarding the clinical trial timing and plans for Anaphylm, including the ability to address the concerns of the FDA provided in the End-of-Phase 2 (EOP2) meeting with the FDA;

the ability to receive FDA approval of Libervant for U.S.

market access and overcoming the orphan drug market exclusivity granted by the FDA to an FDA approved nasal spray product, which extends to January 2027;

the advancement and related timing of the Company’s NDA for Libervant for the treatment of epilepsy patients between two and five years of age;

statements regarding the potential benefits our products, including Anaphylm and Libervant, could bring to patients;

the potential outlicensing of our product pipeline in the U.S.

and abroad, including with respect to Anaphylm and Libervant;

the focus on continuing to manufacture Suboxone ® , Exservan ® , Sympazan ® , Ondif ® and other licensed products;

the likelihood that we can overcome the seven year orphan drug exclusivity granted by the FDA for the approved nasal spray product of a competitor in the U.S.

in order for Libervant® to be granted U.S.

market access;

clinical trial timing and plans for AQST-109 and our other product candidates;

statements regarding the potential benefits our products could bring to patients;

the ability to fund our business operations;

the potential benefits our products could bring to patients;

the ability to refinance our debt, the ability to fund our business operations;

the 2023 financial outlook;

statements about our growth and future financial and operating results and financial position, regulatory approvals and pathways, clinical trial timing and plans, the achievement of clinical and commercial milestones, product orders and fulfillment, short-term and longer term liquidity and cash requirements, cash funding and cash burn;

our growth and future financial and operating results and financial position, regulatory approvals and pathways, clinical trial timing and plans, the achievement of clinical and commercial milestones, product orders and fulfillment, short-term and longer term liquidity and cash requirements, cash funding and cash burn;

and business strategies, market opportunities, financing and other statements that are not historical facts.

These forward-looking statements are also subject to the uncertain impact of the COVID-19 global pandemic on our business including with respect to our clinical trials including site initiation, patient enrollment and timing and adequacy of clinical trials;

on regulatory submissions and regulatory reviews and approvals of our product candidates;

pharmaceutical ingredients and other raw materials supply chain, manufacture and distribution;

sale of and demand for our products;

our liquidity and availability of capital resources, customer demand for our products and services;

customers' ability to pay for goods and services;

and ongoing availability of an appropriate labor force and skilled professionals.

Given these uncertainties, we are unable to provide assurance that operations can be maintained as planned prior to the COVID-19 pandemic.

These forward-looking statements are based on our current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Such risks and uncertainties include, but are not limited to, risks associated with our development work, including any delays or changes to the timing, cost and success of our product development activities and clinical trials and plans, including those relating to AQST-109;

risk of delays in regulatory advancement through the FDA of AQST-109 and our other drug candidates or failure to receive approval at all;

the risk that we may not overcome the seven year orphan drug exclusivity granted by the FDA for the approved nasal spray product of a competitor in the U.S.

in order for Libervant to be granted U.S.

market access;

risk of delays in regulatory advancement through the FDA of Anaphylm and Libervant and our other drug candidates, including the risk that the FDA may require additional clinical studies for FDA approval, or failure to receive approval at all, and there can be no assurance that the Company will be successful in obtaining such approval;

the risk of our ability to provide sufficient data in the NDA submission for Anaphylm to address the FDA’s concerns following the End-of-Phase 2 meeting with the FDA;

the risk that we may not overcome the seven year orphan drug exclusivity granted by the FDA for an FDA approved nasal spray product in order for Libervant to be granted U.S.

market access prior to the expiration of such exclusivity in January 2027, and there can be no assurance that the Company will be successful in obtaining such approval;

risk in obtaining market access from the FDA for our other product candidates;

risk of our ability to license our proprietary products in the U.S.

and abroad and risks that such product candidates will receive regulatory approval in those licensed territories;;risk that our manufacturing capabilities will be sufficient to support demand for existing and potential future licensed products in the U.S.

and other countries;

risk of our ability to enter into other commercial transactions with third parties that will support growth of the business and execution of key initiatives;

risk inherent in commercializing a new product (including technology risks, financial risks, market risks and implementation risks and regulatory limitations);

risks and uncertainties concerning the revenue stream from the monetization of our royalty rights for the product KYNMOBI®, as well as the achievement of royalty targets worldwide or in any jurisdiction and certain other commercial targets required for contingent payments under the KYNMOBI monetization transaction;

risk of development of a sales and marketing capability for future commercialization of our product candidates;

our ability to refinance our current debt on acceptable terms or at all;

our ability to manage our costs and expenses;

risk of sufficient capital and cash resources, including access to available debt and equity financing, including under the Company's ATM facility and the Lincoln Park Purchase Agreement, and revenues from operations, to satisfy all of our short-term and longer-term cash requirements and other cash needs, at the times and in the amounts needed, including near-term debt amortization schedules;

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risk of loss of significant customers;

risks related to claims and legal proceedings including patent infringement, securities, business torts,

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investigative, product safety or efficacy and antitrust litigation matters;

risks related to claims and legal proceedings including patent infringement, securities, business torts, investigative, product safety or efficacy and antitrust litigation matters;

risk of product recalls and withdrawals;

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risks related to inflation and rising interest rates;

uncertainties related to general economic, political, business, industry, regulatory and market conditions and other unusual items;

risks from the COVID or other pandemics;

uncertainties related to general economic, political, business, industry, regulatory, financial and market conditions and other unusual items;

and other uncertainties affecting us including those described in the "Risk Factors" section and in other sections included in this and our other Quarterly Reports on Form 10-Q and in our Current Reports on Form 8-K and our other filings with the Securities and Exchange Commission ("SEC").

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Readers should not rely on the forward-looking statements included in this Quarterly Report on Form 10-Q as representing our views as of any date after the date of the filing of this Quarterly Report on Form 10-Q.

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Aquestive Therapeutics, Inc.

("we", "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.

We are developing pharmaceutical products to deliver complex molecules through alternative administrations to invasive and inconvenient standard of care therapies.

We are developing pharmaceutical products to deliver complex molecules through administrations that are alternatives to invasive and inconvenient standard of care therapies.

We have five licensed commercialized products which are marketed by our licensees in the U.S.

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The active programs in our complex molecule pipeline portfolio are:

• AQST-109 (epinephrine sublingual film, trade name "Anaphylm" conditionally approved by the FDA) – the first and only non-device based, orally delivered epinephrine product candidate that has shown clinical results comparable to autoinjectors (such as EpiPen ® and Auvi-Q ® ) for the emergency treatment of allergic reactions, including anaphylaxis.

• Anaphylm™ (epinephrine sublingual film) – the first and only non-device based, orally delivered epinephrine product candidate that has shown clinical results comparable to auto-injectors (such as EpiPen ® and Auvi-Q ® ) for the emergency treatment of allergic reactions, including anaphylaxis.

Epinephrine is the standard of care in the treatment of anaphylaxis and is currently administered via intramuscular injection (IM) including auto-injectors, such as EpiPen and Auvi-Q, which require patients or caregivers to inject epinephrine into their thighs during an emergency allergic reaction.

As a result of this route of administration, many patients and their caregivers are reluctant to use currently available products.

However, AQST-109 would, if approved by the FDA, allow a patient to simply place a dissolvable strip, approximately the size and weight of a postage stamp, under the tongue, providing an appropriate medication where it is needed, when it is needed and in a form preferred by patients.

We completed a first-in-human Phase 1 clinical trial for AQST-109 in Canada.

This Phase 1 randomized, single-ascending dose study was performed in order to assess the safety, tolerability, and pharmacologic profile of AQST-109.

On February 25, 2022, we reported positive topline data from Part 1 of our crossover study of AQST-109, EPIPHAST, a randomized, open-label, three-part adaptive design, crossover study in healthy adult subjects comparing the pharmacokinetics (PK) and pharmacodynamics (PD) of epinephrine delivered via AQST-109 oral film compared to epinephrine IM.

However, Anaphylm would, if approved by the FDA, allow a patient to simply place a dissolvable strip, approximately the size and weight of a postage stamp, under the tongue, providing an appropriate medication where it is needed, when it is needed and, in a form, preferred by patients.

• In April 2023, the FDA conditionally accepted the proprietary name Anaphylm (pronounced “ana-PHYLM”) as the proposed brand name for Anaphylm.

Final approval of the Anaphylm proprietary name is conditioned on FDA approval of Anaphylm, if any.

We completed a first-in-human Phase 1 clinical trial for Anaphylm in Canada.

This Phase 1 randomized, single-ascending dose study was performed in order to assess the safety, tolerability, and pharmacologic profile of Anaphylm.

On February 25, 2022, we reported positive topline data from Part 1 of our crossover study of Anaphylm, EPIPHAST, a randomized, open-label, three-part adaptive design, crossover study in healthy adult subjects comparing the pharmacokinetics (PK) and pharmacodynamics (PD) of epinephrine delivered via Anaphylm oral film compared to epinephrine IM.

The EPIPHAST study was also conducted in Canada.

In Part 1 of the EPIPHAST study, multiple oral film formulations and dosage strengths of AQST-109 were evaluated.

The lead formulation of AQST-109 has shown clinically meaningful blood concentrations when delivered in two different physical configurations, with a

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median time to maximum concentration (Tmax) of 13.5 minutes and 22.5 minutes, respectively.

In Part 1 of the EPIPHAST study, multiple oral film formulations and dosage strengths of Anaphylm were evaluated.

The lead formulation of Anaphylm has shown clinically meaningful blood concentrations when delivered in two different physical configurations, with a median time to maximum concentration (Tmax) of 13.5 minutes and 22.5 minutes, respectively.

Part 1 also showed arithmetic mean maximum concentrations (Cmax) of 771 pg/mL and 580 pg/mL for the two configurations, or geometric mean Cmax values of 258pg/mL and 268pg/mL for the two configurations, respectively.

These geometric mean Cmax and median Tmax values are consistent with those previously reported for approved injectable epinephrine devices such as EpiPen.

Under the EPIPHAST study, the healthy volunteers were also exposed to a 0.5mg IM of epinephrine, allowing for a comparison with the PK, safety, and tolerability of the higher end of the approved dosage range of epinephrine, consistent with guidance received from the FDA in a written response to our Investigational New Drug Application (IND) for AQST-109.

The findings show that these two configurations of the selected AQST-109 formulation can deliver clinically meaningful blood concentrations of epinephrine sooner than that observed with the higher dose of epinephrine IM injection, and in line with existing epinephrine autoinjectors.

In addition, dosing with AQST-109 resulted in changes in blood pressure and heart rate that were comparable to epinephrine auto-injectors.

The findings show that these two configurations of the selected Anaphylm formulation can deliver clinically meaningful blood concentrations of epinephrine sooner than that observed with the higher dose of epinephrine IM injection, and in line with existing epinephrine auto-injectors.

In addition, dosing with Anaphylm resulted in changes in blood pressure and heart rate that were comparable to epinephrine auto-injectors.

The EPIPHAST trial indicated that treatment was well tolerated, with no serious adverse events, significant medical events, or treatment-related severe adverse events reported.

On February 24, 2022, the FDA cleared our IND, allowing for clinical investigation of AQST-109 in the U.S.

The FDA confirmed that the 505(b)(2) approval pathway is acceptable for the development of AQST-109.

The FDA granted Fast Track designation in March 2022 to AQST-109 for the emergency treatment of allergic reactions, including anaphylaxis.

In April 2022, we reported positive topline results from Part 2 of the EPIPHAST study for AQST-109.

Part 2 is a randomized, crossover design comparing AQST-109 12mg to epinephrine IM 0.3mg.

On February 24, 2022, the FDA cleared our IND, allowing for clinical investigation of Anaphylm in the U.S.

The FDA confirmed that the 505(b)(2) approval pathway is acceptable

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for the development of Anaphylm.

The FDA granted Fast Track designation in March 2022 to Anaphylm for the emergency treatment of allergic reactions, including anaphylaxis.

In April 2022, we reported positive topline results from Part 2 of the EPIPHAST study for Anaphylm.

Part 2 is a randomized, crossover design comparing Anaphylm 12mg to epinephrine IM 0.3mg.

Utilizing a replicate crossover design, Part 2 confirmed in a larger population of 24 healthy subjects the key PK and PD measures observed in Part 1 of the EPIPHAST study and the first-in-human PK study.

The median Tmax was observed to be 15 minutes for AQST-109, compared to 50 minutes for the epinephrine IM 0.3mg.

In July 2022, we reported positive topline results from the final two arms of Part 3 of the EPIPHAST study for AQST-109.

The median Tmax was observed to be 15 minutes for Anaphylm, compared to 50 minutes for the epinephrine IM 0.3mg.

In July 2022, we reported positive topline results from the final two arms of Part 3 of the EPIPHAST study for Anaphylm.

The purpose of Part 3 was to continue to study the administration of the film under a variety of conditions to further characterize its PK, PD and safety.

The final two arms were designed to assess the impact of (1) administering the film sublingually two minutes after consuming a peanut butter sandwich and (2) swallowing the film whole immediately with water.

Part 3 study results demonstrated consistent Tmax of 12 minutes with sublingual administration of AQST-109 epinephrine oral film, after consuming a peanut butter sandwich.

Part 3 study also showed positive results with an unexpectedly high level of gastrointestinal absorption after swallowing AQST-109 whole immediately with water that was distinct from the sublingually absorbed profile.

In September 2022, we reported positive topline results from the EPIPHAST II trial for AQST-109.

The EPIPHAST II trial was designed to compare single doses of AQST-109 to EpiPen 0.3mg and epinephrine IM 0.3mg, as well as repeat doses of AQST-109 to repeat doses of epinephrine IM 0.3mg.

Results from the single dose administration showed AQST-109 achieved a significantly faster Tmax (12 minutes), compared to both EpiPen (22.5 minutes) and epinephrine IM 0.3mg (45 minutes).

AQST-109 repeat dosing provided significantly higher drug plasma concentrations, with a Tmax of 8 minutes after administration, and extensive absorption was observed.

The mean Cmax of AQST-109 was 465 pg/mL after one dose and 2,958 pg/mL after two doses.

Part 3 study results demonstrated consistent Tmax of 12 minutes with sublingual administration of Anaphylm epinephrine oral film, after consuming a peanut butter sandwich.

Part 3 study also showed positive results with an unexpectedly high level of gastrointestinal absorption after swallowing Anaphylm whole immediately with water that was distinct from the sublingually absorbed profile.

In September 2022, we reported positive topline results from the EPIPHAST II trial for Anaphylm.

The EPIPHAST II trial was designed to compare single doses of Anaphylm to EpiPen 0.3mg and epinephrine IM 0.3mg, as well as repeat doses of Anaphylm to repeat doses of epinephrine IM 0.3mg.

Results from the single dose administration showed Anaphylm achieved a significantly faster Tmax (12 minutes), compared to both EpiPen (22.5 minutes) and epinephrine IM 0.3mg (45 minutes).

Anaphylm repeat dosing provided significantly higher drug plasma concentrations, with a Tmax of 8 minutes after administration, and extensive absorption was observed.

The mean Cmax of Anaphylm was 465 pg/mL after one dose and 2,958 pg/mL after two doses.

In comparison, the epinephrine IM 0.3mg Cmax was 489 pg/mL after one dose and 911 pg/mL after two doses.

The single dose of EpiPen resulted in a Cmax of 869 pg/mL.

Changes in systolic blood pressure and heart rate were similar after a single dose of AQST-109 when compared to a single dose of EpiPen.

Changes in systolic blood pressure and heart rate were similar after a single dose of Anaphylm when compared to a single dose of EpiPen.

This data, along with the data from the completed EPIPHAST study, was the basis for our second End-of-Phase 2 (EoP2) meeting with the FDA.

We received a positive written feedback from the FDA after our initial EoP2 meeting request to discuss Chemistry, Manufacturing, and Controls (CMC) for AQST-109, which we believe indicates that our approach to characterizing attributes of AQST-109 appears reasonable in the context of a potential future filing.

We received a positive written feedback from the FDA after our initial EoP2 meeting request to discuss Chemistry, Manufacturing, and Controls (CMC) for Anaphylm, which we believe indicates that our approach to characterizing attributes of Anaphylm appears reasonable in the context of a potential future filing.

In late December 2022, we received the final minutes from the EoP2 meeting with the FDA which provided clarity as to the FDA’s expectations regarding key program areas.

In March 2023, we obtained further clarification from the FDA indicating that the Company should submit its pivotal study protocol for review once it selects its reference listed drugs (RLDs).

We have completed additional studies to identify the appropriate autoinjector RLDs and continue to work on the optimal administration parameters.

We have completed additional studies to identify the appropriate auto-injector RLDs and continue to work on the optimal administration parameters.

We expect to submit a revised pivotal trial protocol to the FDA and commence the pivotal trial immediately following alignment with the FDA.

In April 2023, the FDA conditionally accepted the proprietary name Anaphylm™ (pronounced “ana-PHYLM”) as the proposed brand name for AQST-109.

Final approval of the Anaphylm™ proprietary name is conditioned on FDA approval of AQST-109.

In May 2023, we reported positive results from the latest clinical studies evaluating pharmacokinetic and pharmacodynamic performance of Anaphylm.

The time to maximum blood concentration (median Tmax) for Anaphylm was 10 minutes with a range of 5-20 minutes.

Early drug exposure at 10 minutes for Anaphylm was similar to epinephrine auto-injector and over 4 times higher than epinephrine manual injector.

Pharmacodynamic (PD) effects were observed as early as 2 minutes for both Anaphylm and the auto-injectors.

The company continues to expect to submit the protocol for the pivotal study to the FDA in third quarter 2023.

• AQST-108 (sublingual film) – AQST-108 is composed of the prodrug dipivefrin which is enzymatically cleaved into epinephrine after administration.

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A sublingual film formulation delivering systemic epinephrine has been developed by Aquestive for the treatment of conditions other than anaphylaxis.

Based on topline results of a recent second Phase 1 PK trial in 28 healthy adult volunteers conducted by Aquestive, AQST-108 was generally well-tolerated, with systemic adverse events observed

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that are consistent with the known adverse events profile for epinephrine.

Based on topline results of a recent second Phase 1 PK trial in 28 healthy adult volunteers conducted by Aquestive, AQST-108 was generally well-tolerated, with systemic adverse events observed that are consistent with the known adverse events profile for epinephrine.

Additional indications and delivery methods are currently being explored preclinically.

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We believe there remains a significant opportunity to develop additional products in the CNS market.

Additionally, our know-how and proprietary position have broad application beyond CNS, and we plan to explore the applications of PharmFilm in other disease areas.

Additionally, our know-how

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and proprietary position have broad application beyond CNS, and we plan to explore the applications of PharmFilm in other disease areas.

Our most advanced asset within our proprietary CNS portfolio, focused in epilepsy, is as follows:

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The FDA has concluded that Libervant has met all required quality, safety, and efficacy standards for approval.

Due to an existing FDA regulatory grant of orphan drug market exclusivity for Valtoco®, a diazepam nasal spray product sold by another company, Libervant is not yet eligible for marketing in the United States.

As a result of the FDA determination, the FDA cannot give final approval for Libervant until the expiration or inapplicability of the orphan drug market exclusivity, including, for example, by a reversal of the FDA’s decision and determination that Libervant is “clinically superior” to Valtoco.

We are actively engaging the FDA regarding its determination.

We provided the FDA with additional clinical data in September 2022 and were informed that the FDA was reviewing this data.

Furthermore, in October 2022, we provided the FDA with a draft protocol for a head-to-head comparative PK study of Libervant versus the competing product.

Due to an existing FDA regulatory grant of orphan drug market exclusivity for Valtoco®, a diazepam nasal spray product sold by another company, the FDA has determined that Libervant is not yet eligible for marketing in the United States.

As a result of this determination, the FDA cannot give final approval for Libervant until the expiration or inapplicability of the orphan drug market exclusivity, including, for example, by a reversal of the FDA’s decision and determination that Libervant is “clinically superior” to Valtoco.

We continue to engage with the FDA regarding its determination.

We continue to believe that, particularly in the case of our submitted studies on the effect of food on the absorption of diazepam formulations, Libervant has the distinct advantage of being able to be readily administered when needed without regard to food, providing an important benefit to patients.

However, overcoming the orphan drug marketing exclusivity is difficult to establish, with limited precedent, and there can be no assurance that the FDA will agree with our position seeking to overcome such market exclusivity and approve Libervant for U.S.

However, overcoming the orphan drug marketing exclusivity determination is difficult to establish, with limited precedent, and there can be no assurance that the FDA will agree with our position seeking to overcome such market exclusivity and approve Libervant for U.S.

market access earlier than January 2027, the scheduled date for expiration of orphan drug market exclusivity, if this effort is not successful.

Further, there can be no assurance that a competitor will not obtain other FDA market exclusivity that blocks U.S.

Further, there can be no assurance that another company will not obtain other FDA market exclusivity that blocks U.S.

market access for Libervant.

More details on this product approval are described in the “Competition” section of this Item I.

Business of this Form 10-K.

In September 2022, we announced the grant of an exclusive license to Atnahs Pharma UK Limited ("Pharmanovia") for Pharmanovia to develop and commercialize Libervant 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 licensee.

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.

See “Licensed Commercial Products and Product Candidates – Libervant” for a discussion of the licensing arrangement for this product candidate.

In June 2023, we filed a New Drug Application ("NDA") for Libervant for the acute and intermittent, stereotypic, episodes of frequent seizure activity in patients between two and five years of age.

There is no assurance, that if approved by the FDA, Libervant will overcome the orphan drug exclusivity granted by the FDA for Valtoco for use in patients 12 years of age and older.

Licensed Commercial Products and Product Candidates

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We are the sole and exclusive supplier and manufacturer of Suboxone and have produced over 2.5 billion doses of Suboxone since its launch in 2010.

As of March 31, 2023, Suboxone branded products retain approximately 34% film market share as generic film-based products have penetrated this market.

As of June 30, 2023, Suboxone branded products retain approximately 34% film market share as generic film-based products have penetrated this market.

We have filed patent infringement lawsuits against certain companies relating to generic film-based products for buprenorphine-naloxone.

More details regarding these lawsuits are described in the unaudited financial statements, Note 19, Contingencies , contained herein.

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• Exservan ® – an oral film formulation of riluzole, has been developed by the Company for the treatment of amyotrophic lateral sclerosis (ALS).

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Zambon is responsible for the regulatory approval and marketing of Exservan in the countries where Zambon seeks to market the product, and Aquestive will be responsible for the development and manufacture of the product.

During the fourth quarter of 2022, Aquestive received a $0.5 million milestone payment in connection with the receipt of regulatory approval for Exservan pursuant to the terms of the license agreement with Zambon.

During the second quarter of 2023, Aquestive received a $0.5 million milestone payment in connection with the first commercial sale in the first country in the licensed territory for Exservan pursuant to the terms of the license agreement with Zambon.

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In January 2021, we announced that the Company granted an exclusive license to Mitsubishi Tanabe Pharma Holdings America, Inc.

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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 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

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transactions from which Zevra may realize value from these compounds, including the product Azstarys.

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, including the product Azstarys.

On March 2, 2021, Zevra announced FDA approval of Azstarys for the treatment of ADHD.

• Libervant™ - a buccal film formulation of diazepam tentatively approved by the FDA for the acute treatment of intermittent, stereotypic episodes of frequent seizure activity ( i.e ., seizure clusters, acute repetitive seizures) that are distinct from a patient’s usual seizure pattern in patients with epilepsy 12 years of age and older.

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 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.

• Libervant™ - 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 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.

Effective March 27, 2023, the Company amended the Pharmanovia Agreement to expand the scope of territory to cover the rest of the world, excluding the U.S., Canada and China.

The Company received $3.5 million upon agreement execution.

Effective March 27, 2023, the Company amended the Pharmanovia Agreement to expand the scope of the licensed territory for Libervant to cover the rest of the world, excluding the U.S., Canada and China.

Pharmanovia will be responsible for seeking appropriate regulatory approval in the expanded territories.

Pursuant to the terms of the Pharmanovia Amendment, the Company received a non-refundable payment of $2.0 million from Pharmanovia on execution of the Pharmanovia Amendment.

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• Sympazan ® – an oral soluble film formulation of clobazam used for the treatment of seizures associated with a rare, intractable form of epilepsy known as Lennox-Gastaut syndrome, or LGS, in patients aged two years of age or older, was approved by the FDA on November 1, 2018.

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The Company is the exclusive sole manufacturer and supplier of Sympazan for Assertio and will receive manufacturing fees from Assertio for the product through the expiration of such supply agreement.

Chief Medical Officer Appointment

Aquestive named Carl N.

as Chief Medical Officer effective June 26, 2023.

Kraus joins the Aquestive team from Aceragen, where he served as Chief Medical Officer from October 2021 to April 2023.

Prior to that, Dr.

Kraus founded and served as the Chief Executive Officer of Arrevus from January 2012 until the sale of Arrevus to Aceragen in October 2021.

He previously served as Chief Medical officer of Ology Bioservices (formerly Nanotherapeutics), which was acquired by National Resilience.

Prior to joining the pharmaceutical industry, Dr.

Kraus was a Medical Officer for the Center of Drug and Research (CDER).

Earlier in his career, he held inpatient and outpatient clinical appointments.

Kraus earned his medical degree from Washington School of Medicine in St.

Louis, MO, with post-doctorate training in Internal Medicine (University of Chicago) and Infectious Diseases (National Institutes of Health).

Business Update Regarding COVID-19

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We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act ("JOBS Act"), and a “smaller reporting company”, as defined in Rule 405 under the Securities Act of 1933, as amended.

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auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation.

For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO (which is December 31, 2023), (b) in which we have total annual gross revenues of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

We also qualify as a “smaller reporting company,” meaning we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a "smaller reporting company" which allows us to take advantage of many of the same exemptions from disclosure requirements including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and certain reduced financial disclosures in our periodic reports.

In addition, we are eligible to remain a smaller reporting company, for so long as we have a public float (based on our Common Stock equity) of less than $250 million measured as of the last business day of our most recently completed second fiscal quarter or a public float (based on our Common Stock equity) of less than $700 million as of such date and annual revenues of less than $100 million during the most recently completed fiscal year.

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fiscal quarter or a public float (based on our Common Stock equity) of less than $700 million as of such date and annual revenues of less than $100 million during the most recently completed fiscal year.

We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions.

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As an emerging growth company, we have elected to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards and, as a result, we expect to comply with new or revised accounting standards not later than the relevant dates on which adoption of such standards is required for public emerging growth companies.

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Financial Operations Overview

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We include these estimated amounts in connection with the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized for such transaction will not occur, or when the uncertainty associated with the variable consideration is resolved.

The calculation of some of these items requires management to make estimates based on sales data, historical return data, contracts and other related information that may become known in the future.

The calculation of some of these

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items requires management to make estimates based on sales data, historical return data, contracts and other related information that may become known in the future.

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

In October 2022, we entered into a License Agreement (the “Assertio Agreement”) with Otter Pharmaceuticals, LLC, a subsidiary of Assertio Holdings, Inc.

(“Assertio”), a specialty pharmaceutical company offering differentiated products to patients, pursuant to which the Company granted an exclusive, worldwide license of its intellectual property for Sympazan to Assertio during the term of

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that agreement.

We are the exclusive sole manufacturer and supplier of Sympazan for Assertio and began recognizing Manufacture and Supply Revenue subsequent to the Assertio Agreement.

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• costs associated with preclinical and clinical activities and regulatory operations.

We expect our research and development expenses to continue to be significant over the next several years as we continue to develop existing product candidates such as AQST-109, AQST-108 and others, and we identify and develop or acquire additional product candidates and technologies.

We expect our research and development expenses to continue to be significant over the next several years as we continue to develop existing product candidates such as Anaphylm, AQST-108 and others, and we identify and develop or acquire additional product candidates and technologies.

We may hire or engage additional skilled colleagues or third parties to perform these activities, conduct clinical trials and ultimately seek regulatory approvals for any product candidate that successfully completes those clinical trials.

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Selling, General and Administrative expenses consist primarily of salaries, benefits, share-based compensation, other related costs for executive, finance, and operational personnel.

Other costs include facility and related costs not otherwise

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included in research and development expenses such as:

professional fees for patent-related and other legal expenses, consulting, tax and accounting services;

Other costs include facility and related costs not otherwise included in research and development expenses such as:

professional fees for patent-related and other legal expenses,

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consulting, tax and accounting services;

market research;

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We will continue to manage business costs to prepare for a potential future decline in Suboxone revenue, the manufacturing costs related to Sympazan and other external factors affecting our business, as we continue to focus on our core business:

• Continuing the development of AQST-109 and AQST-108 along the 505(b)(2) pathway;

• Continuing the development of Anaphylm and AQST-108 along the 505(b)(2) pathway;

• Seeking to obtain the approval and subsequent launch of Libervant, subject to approval by the FDA for U.S.

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Interest Expense

Interest expense consists of interest costs on our 12.5% Notes at a fixed rate of 12.5%, payable quarterly, as well as amortization of loan costs and the debt discount.

Interest expense consists of interest costs on our 12.5% Notes at a fixed rate of 12.5%, payable quarterly, amortization of loan costs and the debt discount as well as interest expense related to the finance lease.

The 12.5% Notes are discussed in Note 13 12.5% Senior Secured Notes and Loans Payable , to our condensed consolidated financial statements.

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Royalties and Interest Expense related to the Sale of Future Revenue

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").

On November 3, 2020, we entered into the Monetization Agreement with MAM Pangolin Royalty, LLC, an affiliate of 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.

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 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 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.

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

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See Note 15 Sale of Future Revenue, to our condensed consolidated financial statements for further detail.

Interest Income and other income (expense), net

Interest and other income (expense), net

Interest income and other income (expense), net consists of earnings derived from an interest-bearing account and other miscellaneous income and expense items.

The interest-bearing account has no minimum amount to be maintained in the account nor any fixed length of period for which interest is earned.

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Results of Operations

Comparison of the Three Months Ended March 31, 2023 and 2022

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

The following table sets forth our revenue data for the periods indicated.

Three Months Ended March 31,

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Three Months Ended

Six Months Ended June 30,

(In thousands, except %) 2023 2022 $ % 2023 2022 $ %

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Co-development and research fees 124 241 (117) (49) % 577 644 (67) (10) %

Proprietary product sales, net — 2,190 (2,190) (100) %

Proprietary product sales, net — 2,598 (2,598) N/A — 4,788 (4,788) N/A

Total revenues $ 13,241 $ 13,265 $ (24) — % $ 24,375 $ 25,535 $ (1,160) (5) %

For the three months ended March 31, 2023, total revenues decreased 9% or $1,136 compared to same period in the prior year.

The decrease was primarily due to the absence of proprietary product sales subsequent to the outlicensing agreement with Assertio in October 2022, offset by an increase in manufacturing supply revenue, and increases in license and royalty revenue as well as co-development and research fees.

Manufacture and supply revenue increased approximately 6% or $591 for the three months ended March 31, 2023 compared to the same period in the prior year.

This increase was due to increased Zuplenz manufacturing revenue (marketed as Ondif), Sympazan manufacturing revenue, partially offset by a decline in Suboxone manufacturing revenue.

License and royalty revenue increased 82% or $413 for the three months ended March 31, 2023 compared to the same period in the prior year.

This increase was primarily due to royalty revenue from Sympazan, Azstarys, and Exservan.

Co-development and research fees increased 12% or $50 for the three months ended March 31, 2023 compared to the same period in the prior year.

The increase was driven by the timing of the achievement of research and development performance obligations and are expected to fluctuate from one reporting period to the next.

Proprietary product sales, net was not recognized for the three months ended March 31, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

For the three months ended June 30, 2023, total revenues were consistent with the same period in the prior year.

Increases in manufacturing supply revenue and increases in license and royalty revenue essentially offset the absence of proprietary product sales subsequent to the outlicensing agreement with Assertio in October 2022.

Manufacture and supply revenue increased approximately 18% or $1,762 for the three months ended June 30, 2023 compared to the same period in the prior year.

This increase was due to increased Zuplenz (marketed as Ondif) and Sympazan manufacturing revenue, partially offset by a decline in Suboxone manufacturing revenue.

License and royalty revenue increased 168% or $929 for the three months ended June 30, 2023 compared to the same period in the prior year.

This increase was primarily due to higher milestone license revenue for Azstarys and higher royalty and license revenues from Suboxone and Sympazan.

Co-development and research fees decreased 49% or $117 for the three months ended June 30, 2023 compared to the same period in the prior year.

The decrease was driven by the timing of the achievement of research and development performance obligations and are expected to fluctuate from one reporting period to the next.

There were no proprietary product sales, net for the three months ended June 30, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

The Company recognized $2,598 of proprietary product sales for the same period in the prior year.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

For the six months ended June 30, 2023, total revenues decreased 5% or $1,160 compared with the same period in the prior year.

The decrease was primarily due to the absence of proprietary product sales subsequent to the outlicensing agreement with Assertio in October 2022, offset by increases in manufacturing supply revenue and increases in license and royalty revenue.

Manufacture and supply revenue increased approximately 12% or $2,353 for the six months ended June 30, 2023 compared to the same period in the prior year.

This increase was due to increased Zuplenz (marketed as Ondif) and Sympazan manufacturing revenue, partially offset by a decline in Suboxone manufacturing revenue.

License and royalty revenue increased 127% or $1,342 for the six months ended June 30, 2023 compared to the same period in the prior year.

This increase was due to higher milestone license revenue for Azstarys and higher royalty and license revenues from Suboxone and Sympazan.

Co-development and research fees decreased 10% or $67 for the six months ended June 30, 2023 compared to the same period in the prior year.

The decrease was driven by the timing of the achievement of research and development performance obligations and are expected to fluctuate from one reporting period to the next.

Proprietary product sales, net was not recognized for the six months ended June 30, 2023 subsequent to the outlicensing agreement with Assertio in October 2022.

The Company recognized $4,788 of proprietary product sales, for the same period in the prior year.

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Expenses and Other:

Three Months Ended March 31, Change

June 30, Change Six Months

June 30, Change

(In thousands, except %) 2023 2022 $ % 2023 2022 $ %

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Interest expense related to the sale of future revenue, net 55 1,937 (1,882) (97) % 107 3,798 (3,691) 97 %

Interest and other (income) expense, net (14,513) 3 (14,516) (100) %

Loss on extinguishment of debt (353) — (353) (100) %

Manufacture and supply costs and expenses increased 12% or $523 for the three months ended March 31, 2023 compared to the same period in the prior year.

Interest and other (income) expense, net (129) (32) (97) (303) % (14,642) (29) (14,613) N/A

Loss on extinguishment of debt — — — N/A (353) — (353) — %

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Manufacture and supply costs and expenses increased 26% or $1,375 for the three months ended June 30, 2023 compared to the same period in the prior year.

The increase was due to higher costs related to raw material and production.

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Research and development expenses decreased 26% or $1,226 for the three months ended March 31, 2023 compared to the same period in the prior year.

Research and development expenses decreased 33% or $1,725 for the three months ended June 30, 2023 compared to the same period in the prior year.

Research and development expenses are driven primarily by the timing of clinical trial and other product development activities associated with our pipeline.

Selling, general and administrative expenses decreased 43% or $5,566 for the three months ended March 31, 2023 as compared to the same period in the prior year.

The decrease reflects lower administrative costs in our commercial organization subsequent to the outlicensing of Sympazan in October 2022.

Interest expense decreased 11% or $183 for the three months ended March 31, 2023 compared to the same period in the prior year.

The decrease was driven by a lower principal amount of debt outstanding in 2023 subsequent to $9,086 of principal repayment in the first quarter of 2023.

Interest expense related to the sale of future revenue, net was $52 and $1,861 for the three months ended March 31, 2023 and March 31, 2022.

Selling, general and administrative expenses decreased 53% or $8,227 for the three months ended June 30, 2023 as compared with the same period in the prior year.

The decrease primarily reflects lower selling costs of $2,458 related due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, the absence of severance costs of $2,336 due to the departure of our former CEO, lower stock compensation expense of $1,521, lower legal costs and other administrative costs in the three months ended June 30, 2023 as compared with the three months ended June 30, 2022.

Interest expense decreased 16% or $262 for the three months ended June 30, 2023 compared to the same period in the prior year.

The decrease was driven mostly by a lower principal amount of debt outstanding in 2023 subsequent to the cumulative principal payments of $12,543 made in the first and second quarters of 2023.

Interest expense related to the sale of future revenue, net was $55 and $1,937 for the three months ended June 30, 2023 and June 30, 2022.

This amount is due to the accounting associated with the sale of future revenue related to KYNMOBI royalties sold to Marathon on November 3, 2020 and does not represent or imply a monetary obligation or cash output at any time during the life of the transaction.

Based on the current 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 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.

As a result, the Company discontinued recording interest expense related to the sale of future revenue in the fourth quarter of 2022, which led to a decrease in 2023.

See Note 15 Sale of Future Revenue for details.

Interest and other income, net was $14,513 for the three months ended March 31, 2023, as compared to interest and other expense, net of $3 for the three months ended March 31, 2022.

The change reflects other income of $6,000 related to the Amendment 11 to the Indivior Commercial Exploitation Agreement, and $8,500 patent litigation settlement from BioDelivery Sciences International, Inc.

Interest and other (income) expense, net was $(129) for the three months ended June 30, 2023, as compared to interest and other (income) expense, net of $(32) for the three months ended June 30, 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Manufacture and supply costs and expenses increased 20% or $1,898 for the six months ended June 30, 2023 compared to the same period in the prior year.

The increase was due to higher costs related to raw material and production.

Research and development expenses decreased 30% or $2,951 for the six months ended June 30, 2023 compared to the same period in the prior year.

Research and development expenses are driven primarily by the timing of clinical trial and other product development activities associated with our pipeline.

Selling, general and administrative expenses decreased 48% or $13,793 for the six months ended June 30, 2023 as compared with the same period in the prior year.

The decrease primarily reflects lower selling costs of $4,861 related due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, the absence of severance costs of $2,336 due to the departure of our former CEO, lower stock compensation expense of $1,986, lower legal costs and other administrative costs in the six months ended June 30, 2023 as compared with the six months ended June 30, 2022.

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Interest expense decreased 14% or $445 for the six months ended June 30, 2023 compared to the same period in the prior year.

The decrease was driven mostly by a lower principal amount of debt outstanding in 2023 subsequent to the $12,543 of principal repayment in the first half of 2023.

Interest expense related to the sale of future revenue, net was $107 and $3,798 for the six months ended June 30, 2023 and June 30, 2022.

As a result, the Company discontinued recording interest expense related to the sale of future revenue in the fourth quarter of 2022, which led to a decrease in 2023.

See Note 15 Sale of Future Revenue for details.

Interest and other (income) expense, net was $(14,642) for the six months ended June 30, 2023, as compared to interest and other (income) expense, net of $(29) for the six months ended June 30, 2022.

The change primarily reflects other income of $6,000 related to the Amendment 11 to the Indivior Commercial Exploitation Agreement, and $8,500 patent litigation settlement from BioDelivery Sciences International, Inc.

recognized in the first quarter of 2023.

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Sources of Liquidity

We had $26,882 in cash and cash equivalents as of March 31, 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 and equivalents, 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 the 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% Notes, for at least the next twelve months as the Company continues to execute its business strategy.

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").

We had $22,436 in cash and cash equivalents as of 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 and equivalents, 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 the ATM facility and under the Lincoln Park Purchase Agreement, and potentially refinancing the 12.5% Notes, provide near term liquidity for the Company to fund its operating needs, including making the principal and interest payments on the 12.5% Notes, for at least the next twelve months as the Company continues to execute its business strategy.

On November 3, 2020, we entered into the Monetization Agreement with MAM Pangolin Royalty, LLC, an affiliate of 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®.

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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.

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 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 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 aggregate 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 aggregate contingent payments under the Monetization agreement.

With the upfront proceeds of the Marathon monetization, we repaid $22,500 of the 12.5% Notes, and issued $4,000 of new 12.5% Notes in lieu of paying a prepayment premium on the early repayment of the 12.5% Notes, reducing the aggregate principal balance of 12.5% Notes outstanding to $51,500.

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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

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with the holders of the 12.5% Notes, pursuant to which the Company agreed to pay the holders of the 12.5% Notes an additional cash payment of $2,700 in the aggregate, payable in four quarterly payments beginning May 15, 2022.

In 2019, we established an “At-The-Market” (ATM) facility and currently have a prospectus supplement registering the offer and sale of up to $35,000 of shares of Common Stock pursuant under the ATM facility.

Since inception to March 31, 2023, we sold 11,420,579 shares 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, we sold 1,078,622 shares which provided net proceeds of approximately $916, net of commissions and other transaction costs of $77.

This ATM facility has approximately $32,422 available at March 31, 2023.

On April 12, 2022, we entered into the Lincoln Park Purchase Agreement, which provides that, upon the terms and subject to the conditions and limitations under the Lincoln Park Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park up to $40,000 worth of shares of our Common Stock from time to time over the 36-month term of the Lincoln Park Purchase Agreement.

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

In 2019, we established an “At-The-Market” ("ATM") facility and currently have a prospectus supplement registering the offer and sale of up to $35,000 of shares of Common Stock pursuant under the ATM facility (net of what has been sold pursuant thereto).

Since inception to June 30, 2023, we sold 13,402,516 shares 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, we sold 3,060,559 shares which provided net proceeds of approximately $5,090, net of commissions and other transaction costs of $312.

This ATM facility has approximately $28,014 available at June 30, 2023.

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Lincoln Park Purchase Agreement.

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

Lincoln Park has covenanted under the Lincoln Park Purchase Agreement not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of our Common Stock.

In 2022, the Company sold 1,611,181 shares including commitment shares of Common Stock, 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, we entered into securities purchase agreements ("Securities Purchase Agreements") with certain purchasers.

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

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.

As of the filing of the Annual Report on Form 10-K on March 31, 2023, we are subject to the SEC general instructions of Form S-3 known as the "baby shelf rules." Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our Common Stock held by non-affiliates.

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

Three Months Ended March 31, 2023 and 2022

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

Six Months Ended June 30, 2023 and 2022

Six Months Ended

(in thousands) 2023 2022

Net cash provided by (used for) operating activities

$ 909 $ (21,044)

Net cash (used for) investing activities (828) (781)

Net cash (used for) provided by financing activities

(4,918) 11,496

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

Net Cash Provided by (Used for) Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2023 increased by $23,298 compared to the same period in the prior year.

The increase was related to a higher net income of $21,288 and a higher trade and other receivables of $5,461, partially offset by a decrease in interest expense related to the sale of future revenue of $1,836.

Net cash provided by operating activities for the six months ended June 30, 2023 increased by $21,953 compared to the same period in the prior year.

The increase was primarily related to the net income increase of $31,798 and lower trade and other receivables of $2,221, partially offset by decreases in interest expense related to the sale of future revenue of $3,722, lower deferred revenue of $3,020 and lower stock compensation expense of $2,157 as compared with the six months ended June 30, 2022.

Net Cash (Used for) Investing Activities

Net cash used for investing activities for the three months ended March 31, 2023 decreased by $102 compared to the same period in the prior year.

Net cash used for investing activities for the six months ended June 30, 2023 increased by $47 compared to the same period in the prior year.

The use of cash was related to capital expenditures.

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Net Cash (Used for) Provided by Financing Activities

Net cash used for financing activities for the three months ended March 31, 2023 increased by $10,503 compared to the same period in the prior year.

The decrease was primarily due to partial debt redemption and premium paid to retire debt, offset by ATM proceeds.

Net cash used for financing activities for the six months ended June 30, 2023 increased by $16,414 compared to the same period in the prior year.

The increase was primarily due to partial debt redemption and premium paid to retire debt, scheduled principal repayments, and lower proceeds from issuance of common stocks and warrants, partially offset by higher ATM proceeds as compared with the six months ended June 30, 2022.

Funding Requirements

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

We can provide no assurance that any of these sources of funding, either individually or in combination, will be available on reasonable terms, if at all, or sufficient to fund our business objectives.

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Key factors and assumptions inherent in our planned continued operations and anticipated growth include, without limitation, those related to the following:

• the effects of the COVID-19 pandemic on our operations, operations of our key suppliers and third-party clinical and other service providers, our colleagues and contractors and debt equity and other capital markets;

• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for our manufactured products, including effects of generics and other competitive pressures as currently envisioned;

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• continued ability of our customers to pay, in a timely manner, for presently contracted and future anticipated orders for provided co-development and feasibility services, as well as regulatory support services for recently licensed products, such as Exservan;

• access to debt or equity markets if, and at the time, needed for any necessary future funding;

• access to debt or equity markets if, and at the time, needed for any necessary future funding or to refinancing our 12.5% Notes;

• continuing review and appropriate adjustment of our cost structure consistent with our anticipated revenues and funding;

• continued ability to successfully develop Anaphylm and other product candidates in development;

• continued growth and market penetration of Sympazan, including anticipated patient and physician acceptance and our licensee's ability to obtain adequate price and payment support from government agencies and other private medical insurers;

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• our ability to access funding through the Company's ATM facility and under the Lincoln Park Purchase Agreement;

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We expect to continue to manage business costs to appropriately reflect the anticipated general decline in Suboxone revenue, the unlikelihood of any proceeds from the KYNMOBI Monetization Agreement, and other external resources or factors affecting our business including, if available, net proceeds or future equity financing, other future access to the capital markets or other potential available sources of liquidity, as well as the uncertainties associated with the coronavirus pandemic.

In doing so, we plan to continue to focus on the core drivers of value for our stockholders, including, more importantly, continued investments in our ongoing product development activities in support AQST-109 and AQST-108.

Until profitability is achieved, if at all, additional capital and/or other financing or funding will be required, which could be material, to further advance the development and commercialization of Libervant, AQST-109 and AQST-108, if approved by the FDA for U.S.

Until profitability is achieved, if at all, additional capital and/or other financing or funding will be required, which could be material, to further advance the development and commercialization of Libervant, Anaphylm and AQST-108, if approved by the FDA for U.S.

market access, and to meet our other cash requirements, including debt service, specifically our 12.5% Notes.

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Even as such, we expect to incur losses and negative cash flows for the foreseeable future and, therefore, we expect to be dependent upon external financing and funding to achieve our operating plan.

The sufficiency of our short-term and longer-term liquidity is directly impacted by our level of operating revenues and our ability to achieve our operating plan for revenues, regulatory approval in the time period planned for our product candidates and our ability to monetize other royalty streams or other licensed rights within planned timeframes, and there can be no assurance that we will be successful in any monetization transaction.

The sufficiency of our short-term and longer-term liquidity is directly impacted by our level of operating revenues and our ability to achieve our operating plan for revenues, costs of development of our product candidates, regulatory approval in the time period planned for our product candidates and our ability to monetize other royalty streams or other licensed rights within planned timeframes, and there can be no assurance that we will be successful in any monetization transaction.

Our operating revenues have fluctuated in the past and can be expected to fluctuate in the future.

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A substantial portion of our current and past revenues has been dependent upon our licensing, manufacturing and sales with one customer, Indivior, which is expected to continue, and it could take significantly longer than planned to achieve anticipated levels of cash flows to help fund our operations and cash needs.

To the extent that we raise additional funds by issuance of equity securities, our stockholders would experience further dilution and the terms of these securities could include liquidation or other preferences (if and to the extent permitted under the Indenture) that would adversely affect our stockholders’ rights.

Our ability to secure additional equity financing could be significantly impacted by numerous factors including our operating performance and prospects, positive or negative developments in the regulatory approval process for our proprietary products, timely achievement of regulatory approval by the FDA for Libervant for U.S.

market access, and there can be no assurance that we will receive such approval prior to the expiration in January 2027 of the orphan drug market exclusivity of the FDA approved nasal spray of a competitor, our existing level of debt which is secured by substantially all of our assets and associated debt repayment schedule, restriction under the Indenture, and general financial market conditions, and there can be no assurance that we will continue to be successful in raising capital or that any such needed financing will be available on favorable or acceptable terms, if at all.

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Indenture) that would adversely affect our stockholders’ rights.

Our ability to secure additional equity financing is and could be significantly impacted by numerous factors including our operating performance and prospects, positive or negative developments in the regulatory approval process for our proprietary products, timely achievement of regulatory approval by the FDA for Libervant for U.S.

market access, and there can be no assurance that we will receive such approval prior to the expiration in January 2027 of the orphan drug market exclusivity granted by the FDA to an FDA approved nasal spray, our existing level of debt which is secured by substantially all of our assets and associated debt repayment schedule, restriction under the Indenture, and general financial market conditions, and there can be no assurance that we will continue to be successful in raising capital or that any such needed financing will be available on favorable or acceptable terms, if at all.

Additionally, while the potential economic impact brought on by and the duration of the coronavirus pandemic is difficult to assess or predict, the significant impact of the coronavirus pandemic on the global financial markets, and on our own stock trading price, may reduce our ability to access additional capital, which would negatively impact our short-term and longer-term liquidity.

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Quantitative and Qualitative Disclosures about Market Risk

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As a “smaller reporting company” as defined by Item 10 of Regulation S-K promulgated by the SEC under the U.S.

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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 2. Management’s Discussion and Analysis