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Item 1A. Risk Factors

2025-03-05 compared with 2024-03-05 · 209 added, 224 removed, 894 unchanged (33% of the section changed)

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You should refer to the explanation of the qualifications and limitations on forward-looking statements at the beginning of this Annual Report on Form 10-K.

The dollar amounts presented in this section are depicted in thousands.

Summary of Risk Factors

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• we may fail to obtain regulatory approvals to market our products in the United States or in other countries;

• the failure to overcome a present stay on Libervant entering the U.S.

• Libervant for ARS patients aged between two and five years being blocked from remaining in the U.S.

market due to a competitor’s orphan drug market exclusivity status;

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• failure to generate sufficient data in our PK and PD comparability submission for FDA approval of Anaphylm;

• data in our PK and PD comparability as submitted to the FDA for approval of Libervant two to five years is insufficient:

• we have entered into, and may enter into collaborations, licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues;

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• cybersecurity continues to affect businesses and could cause business interruption;

• our business and operations may be adversely affected by the COVID-19 pandemic;

• adverse developments affecting the financial services industry which could adversely affect our current and projected business operations and our financial condition and results of operations.

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• acquiring or in-licensing new technologies or development-stage or approved products;

• activities related to pre-commercialization of products;

• activities related to pre-commercialization and commercialization of products;

• adding clinical, scientific, operational, financial, and management information systems personnel, including personnel to support our product development and to support our operations as a public company;

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We expect our expenses will continue to be substantial in 2025 and future periods as we continue to:

• continue to clinically develop Anaphylm and provide supporting data needed for market approval from the FDA;

• continue to seek licensing and other transactions of our product candidates;

• continue to engage with the FDA to overcome the present stay on Libervant entering the U.S.

• clinically develop Anaphylm and provide supporting data needed for market approval from the FDA, anticipated NDA submission, pre-commercialization preparations including manufacturing and regulatory inspections and commercialization activities;

• seek licensing and other transactions of our product candidates;

• engage with the FDA to overcome the present stay on Libervant entering the U.S.

market due to a competitor’s orphan drug market exclusivity status:

• commercialize Libervant for ARS patients between two and five years of age;

• clinical development of our product candidate AQST-108.

We expect to continue to manage the timing and level of expenses in light of the declining Suboxone revenues, while focusing on the development and commercialization of Anaphylm.

Until we become profitable, if ever, we expect to need to raise significant additional capital in the future through equity or debt issuances, or both, to continue to manage our expenses to extend our capital runway, in order to further the development, and regulatory approval of our products and product candidates, and to conduct our business.

We have no committed sources of additional capital, and there can be no assurance that such needed capital or debt financing will be available on favorable terms, or at all.

We may seek to obtain additional capital in the future through the issuance of our Common Stock, through other public or private equity or debt financings, through potential non-dilutive capital raising events that may result from royalty streams that may be realizable from our licensed products or licensed intellectual property, through collaborations or licensing arrangements with other companie s, and through the sale of assets, including product, product candidates, plants or other tangible assets, or by other means, if available.

We may not be able to raise additional capital or other funding on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan and cause us to delay or curtail our operations until such funding is received.

To the extent that we raise additional funds by issuance of equity securities, our stockholders would experience dilution, and debt financings, if available (and subject to all of the existing restrictions and conditions under our debt instruments) may involve increased restrictive covenants and increased fixed payments or may otherwise further constrain our financial flexibility.

To the extent that we raise additional funds through collaborative or licensing arrangements, it may be necessary to relinquish some rights to our intellectual property or grant licenses on terms that are not favorable to us.

In addition, payments made by potential collaborators or licensees generally will depend upon our achievement of negotiated development and regulatory milestones.

Failure to achieve these milestones may harm our future capital position.

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

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As of December 31, 2024, we had $71.5 million of cash and cash equivalents.

Capital may be available under our ATM facility, which we initially established in 2019, under which, from time to time, we may offer and sell shares of our Common Stock.

The ATM facility has approximately $24.0 million worth of shares of Common Stock available at December 31, 2023.

Capital may be available under our ATM facility, which we initially established in 2019, and under which, from time to time, we may offer and sell shares of our Common Stock pursuant to the Amended Equity Distribution Agreement with Piper Sandler & Co..

On April 3, 2024, we filed a new shelf registration statement on Form S-3 (the "2024 Registration Statement"), which was declared effective by the SEC on April 23, 2024.

Included in the 2024 Registration Statement are:

(i) a base prospectus registering the offer, issuance and sale of up to $250,000 worth of Common Stock, preferred stock, debt securities, warrants, rights and units and (ii) the $100,000 ATM facility prospectus.

The remaining authorized balance of the ATM facility was $100,000 as of December 31, 2024.

For additional information regarding shares sold under the ATM facility subsequent to December 31, 2024, see Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources and Part II Item 8.

Financial Statements and Supplementary Data, Note 24, Subsequent Events.

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

The Purchase Agreement with Lincoln Park has approximately an equivalent to 6,486,623 shares to purchase at December 31, 2023.

The Purchase Agreement with Lincoln Park has approximately an equivalent to 6,486,623 shares available for purchase at December 31, 2024.

For the years ended December 31, 2024 and 2023, we did not sell shares in connection with the Lincoln Park Purchase Agreement.

We have no current intent to use the Lincoln Park facility and the Lincoln Park Purchase agreement will expire on April 12, 2025.

On November 1, 2023, we reduced our debt payment obligations when we issued (the “Offering”) $45,000 aggregate principal amount of our 13.5% Notes.

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The 13.5% Notes are interest only until June 30, 2026, whereupon on such date and each Payment Date thereafter, we will also pay an installment of principal of the 13.5% Notes pursuant to a fixed amortization schedule, along with a portion of an Exit Fee determined as of the applicable date of prepayment, payment, acceleration, repurchase or redemption, as the case may be.

We have no committed sources of additional capital, and there can be no assurance that such needed capital or debt financing will be available or available on favorable terms, or at all.

We may seek to obtain additional capital in the future through the issuance of our Common Stock, through other public or private equity or debt financings, through potential non-dilutive capital raising events that may result from royalty streams that may be realizable from our licensed products or licensed intellectual property, through collaborations or licensing arrangements with other companies, and through the sale of assets, including product, product candidates, plants or other tangible assets, or by other means, if available.

We also may seek outlicensing opportunities for our proprietary products and product candidate programs that we currently plan to self-commercialize, including for Libervant and Anaphylm, or explore other potential liquidity options or strategic opportunities.

Such strategic opportunities could include asset sales, outlicensing or other monetization opportunities of our proprietary products and product candidates, including Libervant and Anaphylm, although we cannot assure that any of these actions or opportunities would be available or available on available on terms acceptable to us.

While an outlicensing of our proprietary products and product candidates, if approved by the FDA, could limit our exposure to the costs of commercialization of the product and provide a potential source of royalty and milestone revenues, the benefit from the potential of additional future value that could result from our independent commercialization of these products and product candidates, assuming a successful launch of our proprietary products and product candidates, if approved by the FDA, would likely be limited.

In addition, payments made by potential collaborators or licensees generally will depend upon our achievement of negotiated

development, regulatory and sales milestones.

Failure to achieve these milestones may harm our future capital position.

In addition, in the event of any such asset sales or outlicensing transactions, the future growth of the Company would be dependent on continued successful development of our early stage product candidates and/or asset acquisitions or other strategic transactions for the Company.

If adequate funds are not available for our liquidity needs and cash requirements, as and when needed, from the sources referred to above or otherwise, or at all, we would be required to engage in expense management activities such as reducing staff, delaying, significantly scaling back, or even discontinuing some or all of our current or planned research and development programs and clinical and other product development activities, or reducing our future commercialization efforts and otherwise significantly reducing our other spending and adjusting our operating plan, and we would need to seek to take other steps intended to improve our liquidity.

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Aquestive has experienced a history of net losses and our accumulated deficits totaled $363.2 million as of December 31, 2024.

The net losses and accumulated deficits were partially offset by gross margins from sales of

commercialized licensed and proprietary products, license fees, milestone and royalty payments from commercial licensees and co-development parties.

The net losses and accumulated deficits were partially offset by gross margins from sales of commercialized licensed and proprietary products, license fees, milestone and royalty payments from commercial licensees and co-development parties.

In November 2020, we began utilizing the ATM facility.

For the year ended December 31, 2024, we sold 4,557,220 shares which provided net proceeds of approximately $11.8 million, after deducting commissions and other transaction costs of $0.6 million.

This ATM facility has approximately $24.0 million available at December 31, 2023.

On April 3, 2024, we filed the "2024 Registration Statement", which was declared effective by the SEC on April 23, 2024.

Included as part of the 2024 Registration Statement are:

The remaining authorized balance of the ATM facility was $100,000 as of December 31, 2024.

Financial Statements and Supplementary Data, Note 24, Subsequent Events .

Until such time, if ever, that we can generate sufficient revenue to fully fund our operations, we would need to seek additional capital and cash resources through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

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If we raise additional funds through collaborations, or strategic alliance, marketing, distribution or licensing arrangements with third parties, we may need to relinquish valuable rights to our technologies, product candidates or future revenue streams or grant licenses on terms that are not favorable to us.

Even if we can generate revenues from our operations in the future, our revenues and operating income is likely to fluctuate significantly from year-to-year or quarter-to-quarter and create volatility in our stock price.

Even if we can generate revenues from our operations in the future, our revenues and operating income are likely to fluctuate significantly from year-to-year or quarter-to-quarter and create volatility in our stock price.

Even if we are able to generate future revenues, our results of operations would likely continue to vary significantly from year-to-year and quarter-to-quarter.

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• the timing of FDA or any other regulatory approval, delay in any FDA or other regulatory approvals, or failure to obtain any such FDA or other regulatory approvals;

• competitor’s product candidates obtaining FDA or other regulatory approval, which may include orphan drug market exclusivity for seven years in the U.S., before our product has received any such regulatory approval and/or orphan drug exclusivity, or obtaining other FDA marketing exclusivity that blocks U.S.

or orphan drug exclusivity, or obtaining other FDA marketing exclusivity that blocks U.S.

market access for our product candidates;

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• our ability to maintain selling prices and gross margins on our products;

• changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid

and similar government healthcare programs;

• changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar government healthcare programs;

• our ability to comply with complex governmental regulations applicable to many aspects of our business;

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• timing of revenue recognition related to our collaboration agreements;

• our ability to fund the commercialization of, commence a commercial operation, and actually commercialize our proprietary products and product candidates, if approved by the FDA;

• our ability and the significant cost to protect our intellectual property and avoid infringing the intellectual property of others and any adverse developments in any related legal proceeding or in other legal proceedings of any nature;

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Failure to make required debt service payments or comply with other covenants under our existing debt facilities or such other debt instruments would result in an event of default and acceleration of amounts due, which would have a material adverse effect on our business, financial condition and results of operations.

We are dependent upon the commercial success of our licensed products and other licensing activities to generate revenue for the near future.

Although we are in the process of testing and developing proprietary product candidates and may seek to acquire rights in other approved drugs, we anticipate that our ability to generate revenue and to become profitable in the near future will depend upon the continued commercial success of Sympazan, Suboxone, Exservan, and Azstarys in the U.S., the continued commercial success of Ondif in Brazil, and our ability to commercialize our product candidate Libervant subject to FDA approval for U.S.

market access, including our ability to overcome the current orphan drug market exclusivity of another approved drug, which is difficult to establish and with limited precedent.

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.

We are dependent upon the commercial success of our licensed and proprietary products and other licensing activities to generate revenue for the near future.

Although we are in the process of testing and developing proprietary product candidates and may seek to acquire rights in other approved drugs, we anticipate that our ability to generate revenue and to become profitable in the near future will depend upon the continued commercial success of Sympazan, Suboxone and Azstarys in the U.S., the continued commercial success of Ondif in Brazil and Emylif in the EU, and our ability to commercialize our product Libervant for pediatric patients between two and five years of age.

Further, there is no assurance that we will become commercially successful to the extent necessary to become profitable.

If our current products are not commercially successful, our ability to generate manufacturing and sale margins and licensing or royalty revenues will be impaired.

Without those revenues, our ability to continue planned development initiatives and commercialization efforts

would be limited.

Without those revenues, our ability to continue planned development initiatives and commercialization efforts would be limited.

Due to our dependence on the commercial success of our products, delays or setbacks in the commercial success of any of these products would likely materially adversely affect our business, prospects, results and operations and financial consideration.

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We cannot assess whether this settlement and disposition will have a material adverse financial impact on our business, prospects, liquidity, financial condition and operating results.

We have been involved in antitrust litigation in connection with the launch of Suboxone and any adverse decisions in such litigation could impair our ability to raise addition capital and significantly harm our business.

We were named as a defendant in antitrust litigation brought against us and Indivior.

The litigation involves allegations that we have engaged in conduct intended to interfere with the introduction of generic drug products that would compete with Suboxone in the marketplace.

On October 19, 2022, the court in that lawsuit entered an order dismissing all claims against Aquestive in the lawsuit.

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

We are 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.

For more information, please see Part II Item 8.

Financial Statements and Supplementary Data, Note 22, Contingencies .

Risks Related to Development and Commercialization of Our Products and Product Candidates

Our business was significantly adversely affected by the determination by FDA that Libervant is approvable, but not approved for U.S.

market access.

On September 25, 2020, we received a CRL from the FDA for Libervant.

The FDA issues a CRL to indicate that the review cycle for an application is complete, but the application cannot be approved in its current form.

In the CRL, the FDA cited that, in a study submitted by Aquestive with the NDA, certain weight groups showed a lower drug exposure level than desired.

In a Type A meeting with the FDA in November 2021, the FDA confirmed that these issues may be addressed by utilizing modeling and simulations for an updated dosing regimen.

We resubmitted a revised weight-based dosing regimen with modeling and simulations in December 2020.

In February 2021, the FDA provided feedback on the December 2020 submission which provided clarity regarding the information that the FDA expected to see in our population pharmacokinetic (PK) model and safety data as it relates specifically to the patient population included in the studies.

In June 2021, we resubmitted our NDA to the FDA.

In July 2021, the FDA accepted our resubmission filing of the NDA and assigned a PDUFA target goal date of December 23, 2021.

In addition to responding to a number of information requests, the FDA concluded an audit of our post marketing adverse event reporting capabilities, requested and received additional information about the patent coverage for the product, approved for use the trade name for Libervant, and made recommendations for changes in language related to our packaging.

Concurrently, we spoke with the FDA Office of Orphan Products Development and provided additional information supplementing our original correspondence to the group.

On December 20, 2021, we received notification from the FDA that it

was not ready to act by the PDUFA target goal date of December 23, 2021 for our NDA for Libervant Buccal Film and was unable to provide an estimate of the timing of an expected action.

On February 15, 2022, the FDA notified us that it was continuing to consider whether the orphan-drug exclusivity granted for another approved product affects the approvability of Libervant and could not provide a specific update regarding timeliness or an anticipated action date for approval of Libervant.

Our business could be adversely affected if Libervant market access for ARS patients between two and five years of age is blocked.

On August 30, 2022, the FDA provided an approvable letter for Libervant that stated that Libervant was not cleared for U.S.

market access until the orphan drug market exclusivity for Valtoco, a competing product, ends in January 2027.

A company that obtains FDA approval for a designated orphan drug receives market exclusivity for that drug for the designated indication for a period of seven years from the grant date in the United States.

This orphan drug exclusivity approval may prevent a subsequent product seeking FDA approval from being marketed in the United States during the exclusivity period for the same active moiety for the same orphan drug indication except in the case where the drug candidate sponsor is able to demonstrate, and the FDA concludes, that the later drug is “clinically superior” to the approved products ( e.g.

, safer, more effective, or providing a major contribution to patient care) within the meaning of FDA regulations and guidance.

In assessing whether a drug candidate sponsor has demonstrated that its drug candidate provides a “major contribution to patient care” over and above the currently approved drugs, which is evaluated by the FDA on a case by case basis, there is no one objective standard and the FDA has determined that Libervant is not "clinically superior" to Valtoco.

There is no assurance that the FDA will determine that Libervant is "clinically superior" to Valtoco prior to January 2027, and therefore we would not earn any revenues, if any, until then in the United States.

market access until the orphan drug market exclusivity for Valtoco, a competing nasal spray product, ends in January 2027.

On April 29, 2024, we announced that the FDA approved U.S.

market access for Libervant in ARS patients between two to five years of age.

In May 2024, Neurelis, Inc., the maker of Valtoco, filed a complaint in the U.S.

District Court for the District of Columbia against the FDA, HHS, and certain government officials.

The complaint in this matter alleges that the defendants violated the Administrative Procedure Act by approving Aquestive’s NDA for Libervant® for ARS patients aged between two and five years, and asked the court to vacate that approval and enjoin the defendants from approving Libervant for this pediatric patient population until January 10, 2027, the scheduled date for the expiration of the ODE granted for Valtoco by the FDA.

Aquestive intervened in the litigation to defend the approval of Libervant for this pediatric patient population.

The Company's motion for a stay of the District Court's order granting Neurelis' motion for summary Judgment is pending.

The Company also filed an appeal of the District Court's order with the U.S.

District Court of Appeals for the District of Columbia.

The Company has also submitted a request to the FDA that the FDA determines that Libervant for ARS patients between the ages of two and five years is clinically superior to the existing FDA approved products.

For greater detail, s ee Part II Item 8.

Financial Statements and Supplementary Data, Note 23, Contingencies to our financial statement s and in Part I Item 1.

If Neurelis prevails on the appeal or the FDA does not make a determination of clinical superiority in favor of Libervant, we may be required to withdraw Libervant from the U.S.

market until such time as the ODE expires for Valtoco in January 2027.

This would result in significant changes to our business and delay in future revenues to the Company from Libervant.

We cannot be certain that we will be able to successfully develop our product candidates or obtain regulatory approval for our product candidates.

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Even after successful completion of clinical testing, there is a risk that the FDA may request further information from us, disagree with our findings or otherwise undertake a lengthy review of our submission.

We may be asked to provide further justification and evidence to support the application for approval at an FDA Advisory Committee meeting, which requires significant time and resources to prepare.

FDA staff, and the public, may also present their own analyses of the clinical trial data, and discuss other issues at an Advisory Committee meeting.

FDA Advisory Committees are typically asked to comment on whether they believe there is adequate safety and effectiveness data to support approval.

Advisory Committees may also recommend that FDA request additional studies before approval or suggest changes to a product’s proposed labeling.

Advisory Committees make nonbinding recommendations to FDA.

FDA generally follows the recommendations, but is not legally bound to do so.

We also face hurdles and setbacks by reason of competitors’ drug candidates obtaining FDA or other regulatory approvals, including orphan drug market exclusivity, prior to our obtaining FDA or other regulatory approval of our similar drug candidate.

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This process from development to commercialization can take many years and will likely require the expenditure of substantial resources beyond the proceeds we currently have on hand, without any guarantee or assurance that we will be successful with regulatory approval, or commercial success, of such product candidate.

warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements.

If we are unable to obtain regulatory approval, or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of that product candidate or any other product candidate that we may in-license, develop or acquire in the future.

If we do not obtain market exclusivity for our certain of our products, including orphan drug exclusivity, our business may be harmed .

We have sought orphan drug market exclusivity for our drug candidate Libervant and may in the future seek market exclusivity for other product candidates, including orphan drug market exclusivity.

Even if we obtain approval from the FDA and comparable foreign regulatory authorities for our current and future product candidates, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements.

If we are unable to obtain regulatory approval, or any approval contains significant limitations, we may not be

able to obtain sufficient funding or generate sufficient revenue to continue the development of that product candidate or any other product candidate that we may in-license, develop or acquire in the future.

If we do not obtain market exclusivity for certain of our products, including orphan drug exclusivity, our business may be harmed .

We have received orphan drug market exclusivity for our drug candidate Libervant for ARS patients aged between two and five years, and may in the future seek market exclusivity for other product candidates, including orphan drug market exclusivity.

Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as orphan drugs.

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This orphan drug exclusivity prevents the FDA from approving another application to market a drug containing the same active moiety for the same orphan indication, except in very limited circumstances, including when the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care within the meaning of FDA regulations and guidance.

In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

In addition, a designated orphan drug may not receive orphan drug market exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

Even if we receive orphan drug designation for one or more of our drug candidates, we may not be the first to obtain marketing approval for the orphan-designated indication due to the uncertainties associated with developing product candidates.

If any of these other pharmaceutical companies obtains approval of an NDA before we are able to receive approval for one or more of our drug candidates with the same active moiety for the same indication, we would be barred from marketing that product in the United States during the seven-year orphan drug exclusivity period, unless we could demonstrate that such drug candidate is clinically superior to the approved products or satisfies one of the other limited exceptions to such orphan drug exclusivity.

Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition or a drug with the same active moiety can be approved for a different indication.

Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

In addition, even if we intend to seek orphan drug designation for any of our product candidates or indications, we may never receive such designations or obtain orphan drug exclusivity.

Also, overcoming the orphan drug 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.

market access with orphan drug exclusivity.

If we fail to receive such exclusive rights, our ability to prevent competitors from manufacturing, marketing and selling competing products will be materially impaired, and our results of operations and financial condition may be significantly adversely affected.

See Part II, Item 8.

Financial Statements and Supplementary Data, Note 23, Contingencies.

Also, overcoming a grant of orphan drug market exclusivity is difficult to establish, with limited precedent.

In April 2024 the FDA approved Libervant® (diazepam) Buccal Film, 5 mg, 7.5 mg, 10 mg, 12.5 mg, and 15 mg, for ARS patients between the ages of two and five years.

This FDA approval was recently determined to be granted in error by the U.S.

District Court for the District of Columbia in a lawsuit brought by Neurelis, Inc., and there can be no assurance that the Company will be successful in its appeal of this court ruling or that the FDA will grant our current request seeking an FDA determination that Libervant for this young patient population is clinically superior to other FDA approved ARS drugs in order to maintain the exclusive approval of Libervant in this age and indication.

Even if we maintain our market access approval of Libervant for this age group in this indication, if we fail to receive U.S.

orphan drug market exclusivity for Libervant for this age group in this indication, our ability to prevent competitors from manufacturing, marketing and selling competing products will be materially impaired, and our results of operations and financial condition may be significantly adversely affected.

C linical trials may be delayed, suspended or terminated for many reasons, which will increase our expenses and delay the time it takes to develop our product candidates.

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Significant preclinical study or clinical trial delays also could shorten the period during which we have exclusive rights to commercialize a product candidate or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize a product candidate.

We have directly marketed just a single product, Sympazan.

With this limited experience, we may lack the necessary expertise, personnel and resources to successfully commercialize our other product candidates that must first receive regulatory approval, either on our own or together with collaborators.

We have limited commercialization experience and may lack the necessary expertise, personnel and resources to successfully commercialize our other product candidates that must first receive regulatory approval, either on our own or together with collaborators.

We rely on our third-party licensees to commercialize our multiple licensed products and to date have only marketed, through our own efforts and with the services of third-party outsourcing vendors, including contract sales personnel, our first self-developed product, Sympazan, launched in December 2018.

With the license of Sympazan to Assertio in October 2022, we scaled back many of our commercial operations, including elimination of our sales and marketing force.

However, in April 2024, we launched Libervant for ARS patients between two and five years of age.

Given our limited history of direct experience in commercializing product candidates, and current limited commercial operations, we have no long-term experience upon which to measure our ability or success in commercializing future product candidates, if approved, or our ability to make predictions about financial results or prospects of any future launches of product candidates, if approved.

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If we are unable to effectively coordinate such activities or comply with such laws and regulations, our ability to commercialize our product candidates in the United States and other jurisdictions in which they are or may be available will be materially adversely affected.

We also intend to enter into strategic licenses with third parties to commercialize our product candidates outside of the United States.

We also intend to enter into strategic licenses with third parties to commercialize our product candidates.

We may have difficulty establishing relationships with third parties on terms that are acceptable to us, or in all of the regions where we wish to commercialize our products, or at all.

If we are unable to build our own distribution and marketing capabilities or to find suitable licensees for the commercialization of our products and product candidates, if approved, we may have difficulties generating revenue from them and our business, results of operations, financial condition and prospects and the trading price of our stock may be materially adversely affected.

Our success depends upon attaining significant market acceptance of our licensed products and product candidates, if approved, among patients, physicians, pharmacists and the medical community.

Our success depends upon attaining significant market acceptance of our licensed products and proprietary products and product candidates, if approved, among patients, physicians, pharmacists and the medical community.

It is possible that we may not complete development of our product candidates or obtain regulatory approval for those product candidates.

Even if we do complete development and obtain regulatory approval for our product candidates, our product candidates may not gain market acceptance among patients, physicians, nurses, pharmacists, the medical community or

third-party payors, which is critical to commercial success.

Market acceptance of our products and any product candidate for which we receive approval depends on a number of factors, including:

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To date we have been subject to a number of claims of this nature.

In defending such lawsuits, whether or not they are with or without merit or are ultimately determined in our favor, we would continue to face costly litigation and diversion of technical and management personnel.

In defending such lawsuits, whether or not they are with or without merit or are ultimately determined in our favor, we would continue to face costly litigation and diversion of

technical and management personnel.

These lawsuits could hinder our ability to enter the market early with our product candidates and thereby hinder our ability to influence usage patterns when fewer, if any, of our potential competitors have entered the market, which could adversely impact our potential revenue from such product candidates.

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• the price of our products relative to pricing of branded or generic competitors;

• whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans,

including Medicare and Medicaid;

• whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare and Medicaid;

• our ability to protect intellectual property rights related to our products and product candidates;

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In addition, the biopharmaceutical industry is characterized by rapid technological change.

Because we have limited research and development capabilities, it may be difficult for us to stay abreast of the rapid changes in each technology.

Because we have limited research and development capabilities, it may be difficult for us to stay abreast of the rapid changes in

each technology.

If we fail to stay at the forefront of technological change, we may be unable to compete effectively.

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Therefore, coverage and reimbursement for products can differ significantly from payor to payor.

As a result, the coverage determination process is generally a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our products to each payor

separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

As a result, the coverage determination process is generally a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

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This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other.

The Patient Protection and Affordable Care Act, as amended, or the PPACA, amended the intent requirement of the federal Anti-Kickback Statute.

A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it;

Under the PPACA a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it and action that may be customary in other industries ma unintentionally violate the Anti-Kickback Statute;

• federal civil and criminal false claims laws, including, without limitation, the False Claims Act, and civil monetary penalty laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid or other government payors that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.

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• HIPAA created federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor ( e.g., public or private);

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization on entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates who provide services involving the creation, use or disclosure of HIPAA protected health information;

• federal transparency laws, including the federal Physician Payments Sunshine Act, which is part of the PPACA, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to:

• HIPAA, as amended by HITECH, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization on entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates who provide services involving the creation, use or disclosure of HIPAA protected health information;

(i) payments or other “transfers of value” made to physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives and teaching hospitals;

and (ii) ownership and investment

interests held by physicians and their immediate family members, with such information being made publicly available through a searchable website;

and (ii) certain ownership and investment interests held by physicians and their immediate family members, with such information being made publicly available through a searchable website;

• state and foreign law equivalents of each of the above federal laws;

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• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans;

• expansion of manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans;

• addition of more entity types eligible for participation in the Public Health Service 340B drug pricing program, or the 340B program;

• establishment of the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

• the BBA, that among other things, increased the manufacturer’s subsidy under this program from 50% to 70% of the negotiated price, beginning in 2019;

• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

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Sequestration may result in additional reductions in Medicare and other healthcare funding and, if we obtain regulatory approvals, may otherwise affect the prices we may obtain for our product candidates or the frequency with which our product candidates may be prescribed or used if approved.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which was fully implemented in 2022.

At this time, it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement and their choice of medications to use.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for

physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

The introduction of the Medicare quality payment program has shifted the focus of physician reimbursement from volume to value, encouraging higher quality and more cost-effective care.

Further, legislative changes to or regulatory changes under the PPACA remain possible in the U.S.

Congress and under the Biden administration.

Congress and under the second-term Trump administration.

The nature and extent of any legislative or regulatory changes to the PPACA, including repeal and replacement initiatives, are uncertain at this time.

It is possible that the PPACA repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits, including limited coverage for drugs.

While Congress has not passed repeal legislation, the Tax Cuts and Jobs Act of 2017, or the TCJA, which was signed into law by President Trump, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In addition, the BBA, amended the PPACA to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” The scope of potential future legislation to modify or repeal and replace the PPACA provisions is highly uncertain in many respects.

We continue to evaluate the potential impact of the PPACA and its possible repeal or replacement on our business.

While Congress has not passed repeal legislation, the Tax Cuts and Jobs Act of 2017 (“TCJA”), which was signed into law by President Trump during his first administration, effectively eliminated the federal “individual mandate” penalty imposed by the PPACA on individuals who failed to maintain qualifying health coverage for all or part of a year.

Shortly thereafter, the BBA amended the PPACA to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” The Inflation Reduction Act of 2022, which was signed into law by President Biden, has since eliminated the coverage gap and replaced it with a $2,000 annual cap on out-of-pocket spending for covered drugs.

As the second Trump presidency has commenced, we will continue to evaluate the impact of the PPACA on our business, and the potential for its further repeal or replacement.

The costs of prescription pharmaceuticals in the United States have also been the subject of considerable discussion in the United States, and members of Congress and the administration have stated that they will address such costs through new legislative and administrative measures.

This focus has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

The Biden administration has begun taking executive actions to address drug pricing and other healthcare policy changes.

On July 9, 2021, President Biden signed an Executive Order to promote competition in the US economy that included several initiatives addressing prescription drugs.

Among other provisions, the Executive Order directed the Secretary of HHS to issue a report to the White House within 45 days that includes a plan to, among other things, reduce prices for prescription drugs, including prices paid by the federal government for such drugs.

In response to the Executive Order, on September 9, 2021, HHS issued a Comprehensive Plan for Addressing High Drug Prices that identified potential legislative policies and administrative tools that Congress and the agency can pursue in order to make drug prices more affordable and equitable, improve and promote competition throughout the prescription drug industry, and foster scientific innovation.

In 2022, the Biden administration signed into law the Inflation Reduction Act, which included a number of significant drug pricing reforms, including the establishment of a drug price negotiation program within the HHS that, starting in 2026, will require manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance;

the establishment, beginning in 2023, of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation;

and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs, beginning in 2025.

Additionally, President Biden issued a subsequent Executive Order directing the Secretary of the HHS consider whether new payment and delivery models would lower drug costs, though, on the first day of his second term, President Trump repealed that Executive Order.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

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We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Most recently, the Inflation Reduction Act of 2022, or IRA, included a number of significant drug pricing reforms, which include the establishment of a drug price negotiation program within the U.S.

Department of Health and Human Services, or HHS (beginning in 2026) that requires manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation (first due in 2023), and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs (beginning in 2025).

Additionally, policy changes resulting from the new presidential administration may create sudden and unexpected shifts in the operations of HHS that might impact both existing and planned operations.

The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States.

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Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with FDA laws and regulations regarding current good clinical practice, or GCP, which are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Conference on Harmonization, or ICH, guidelines for all of our products in clinical development.

ICH, guidelines for all of our products in clinical development.

Regulatory authorities enforce GCP through periodic inspections of trial sponsors, principal investigators and trial sites.

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Furthermore, if our suppliers fail to deliver the required commercial quantities of components and active pharmaceutical ingredient on a timely basis and at commercially reasonable prices, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, we would likely be in default in our supply obligations, which could result in the termination of our supply agreements, our incurring potential default damages and our loss of significant revenues.

We rely on third parties to manufacture active pharmaceutical ingredients, or API, for our licensed products and product candidates, and we intend to rely on third parties to manufacture the API for other approved products.

We rely on third parties to manufacture API for our licensed products and product candidates, and we intend to rely on third parties to manufacture the API for other approved products.

The commercialization of any of our licensed products and product candidates, if approved, could be stopped, delayed or made less profitable if those third parties fail to provide us with sufficient quantities of API or fail to do so at acceptable quality levels or prices or fail to maintain or achieve satisfactory regulatory compliance.

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In addition, we have no control over the ability of third-party API manufacturers to maintain adequate quality control, quality assurance and qualified personnel.

Further, as we scale up manufacturing of our product

candidates and conduct required stability testing, product, packaging, equipment and process-related issues may require refinement or resolution in order for us to proceed with our planned clinical trials and obtain regulatory approval for commercialization of our product candidates.

Further, as we scale up manufacturing of our product candidates and conduct required stability testing, product, packaging, equipment and process-related issues may require refinement or resolution in order for us to proceed with our planned clinical trials and obtain regulatory approval for commercialization of our product candidates.

In the future, for example, we may identify impurities in the product manufactured by us or for us for commercial supply, which could result in increased scrutiny by the regulatory agencies, delays in our clinical program and regulatory approval, increases in our operating expenses, or failure to obtain or maintain approval for our licensed products and product candidates.

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Whether we reach an agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Those factors may include the likelihood of approval by the FDA or foreign regulatory authorities, the potential market for the product or product candidate, the costs and complexities of delivering such product or product candidate to patients, competing products, and industry and market conditions generally.

product candidate to patients, competing products, and industry and market conditions generally.

Collaborations are complex and time-consuming to negotiate and document.

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In some cases, we may be responsible for continuing development of a product or product candidate or research program under a collaboration, and the payment we receive from our licensee may be insufficient to cover the cost of this development.

Moreover, collaborations and sales and marketing

arrangements are complex and time consuming to negotiate, document and implement, and they may require substantial resources to maintain.

Moreover, collaborations and sales and marketing arrangements are complex and time consuming to negotiate, document and implement, and they may require substantial resources to maintain.

We are subject to a number of additional risks associated with our dependence on collaborations with third parties, the occurrence of which could cause our collaborative arrangements to fail, including that:

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All of the risks relating to product development, regulatory approval and commercialization apply to the activities of our existing and future collaborators.

Additionally, conflicts may arise between us and our third-party collaborators, such as conflicts concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial provisions or the ownership of intellectual property developed during the collaboration.

intellectual property developed during the collaboration.

For example, our existing revenue streams are largely dependent on Indivior, which holds the global commercialization rights to our approved product, Suboxone.

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We may experience difficulties in managing growth if our business expands to meet future needs, which could disrupt our operations.

Although it is not expected to be imminent, if we need to expand to meet demands in growth of our manufacturing operations, commercialization of Libervant, if granted U.S.

market access, or additions to our product pipeline in the future, we would expect to expand our employee base to increase our managerial, scientific and engineering, operational, sales, marketing, financial and other resources and to hire more consultants and contractors.

Although it is not expected to be imminent, if we need to expand our business to meet demands in growth of our manufacturing operations in connection with the continued commercialization of Libervant for ARS patients aged between two and five years, and, if granted full U.S.

market access, for commercialization of Libervant for older patients, and to accommodate the potential commercialization of Anaphylm in the first quarter 2026, if approved by the FDA, or other additions to our product pipeline in the future, we would expect to expand our employee base to increase our managerial, regulatory, compliance, scientific and engineering, operational, sales, marketing, financial and other resources and to hire more consultants and contractors.

Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants, contractors and contract employees.

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In addition, any growth in our management team could add increased expense which we must absorb, without necessarily having commensurate growth in our revenues.

Also, to date, we have only directly marketed one product in the market.

If we commercialize and directly market Libervant, if approved for U.S.

Also, to date, we have only directly marketed two products in the market.

If we commercialize and directly market Anaphylm, if approved for U.S.

market access, this could require a significant upfront expense and create a rapid growth in our workforce.

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There can be no assurance that we will not become the target of claims relating to opioid addiction as have companies that market opioids.

We have been named as a defendant with Indivior in product liability claims related to dental injuries for use of Suboxone.

For more detailed information regarding these claims, s ee Part II Item 8.

Financial Statements and Supplementary Data, Note 23, Contingencies to our financial statement s.

Any product liability claims, or false marketing claims, could have a material adverse effect on our business, financial position, results of operations and future growth prospects.

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We have procured product liability insurance with respect to the sale of our licensed products and all clinical trials performed to date for which we were responsible ( i.e., in respect of our internal product pipeline).

Further, we may seek to expand our insurance coverage for our

licensed products and our marketing and commercialization of any future approved product candidates as well as other risks related to our business.

Further, we may seek to expand our insurance coverage for our licensed products and our marketing and commercialization of any future approved product candidates as well as other risks related to our business.

Our current product liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer.

Insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at an acceptable cost to us or in sufficient amounts to protect us against losses due to liability.

The product liability claim against us with respect to Suboxone may make obtaining product liability insurance coverage at an acceptable cost more problematic.

On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects.

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We cannot eliminate the risk of accidental contamination or injury from these materials, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products.

We cannot guarantee that that the safety procedures utilized by third-party manufacturers and suppliers with whom we may contract will comply with the standards prescribed by laws and regulations or

will eliminate the risk of accidental contamination or injury from these materials.

We cannot guarantee that the safety procedures utilized by third-party manufacturers and suppliers with whom we may contract will comply with the standards prescribed by laws and regulations or will eliminate the risk of accidental contamination or injury from these materials.

In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and U.S.

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These could be attributed to the active ingredient or class of drug or to our unique formulation of such products or product candidates, or other potentially harmful characteristics.

Such characteristics could cause us, our IRBs, clinical trial sites, the FDA or other regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay, denial or withdrawal of regulatory approval, which may harm our business, financial condition and prospects significantly.

Such characteristics could cause us, our IRBs, clinical trial sites, the FDA or other regulatory authorities to interrupt, delay or halt clinical trials and could result in a more

restrictive label or the delay, denial or withdrawal of regulatory approval, which may harm our business, financial condition and prospects significantly.

Further, if any of our products cause serious or unexpected side effects after receiving market approval, a number of potentially significant negative consequences could result, including:

• regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution;

• the FDA may require implementation of a Risk Evaluation and Mitigation Strategy, or REMS;

• the FDA may require implementation of a REMS;

• regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;

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We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from pending or future legislation or administrative action, either in the United States or abroad.

If we are not able to achieve and maintain regulatory compliance, we may not be permitted to market or license our products and/or product candidates, which would materially adversely affect our ability to generate revenue and achieve or maintain profitability.

If we are not able to achieve and maintain regulatory compliance, we may not be permitted to market or

license our products and/or product candidates, which would materially adversely affect our ability to generate revenue and achieve or maintain profitability.

Regulatory approval is required for each of our products in each jurisdiction in which we intend to market or license such products, and the inability to obtain such approvals would limit our ability to realize their full market potential.

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If the FDA requires us to provide additional clinical or preclinical data for any of our approved drug products, the indications for which that product candidate was approved may be limited or there may be specific warnings or limitations on dosing, and our efforts to commercialize any approved product may be otherwise adversely impacted.

Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations.

T here is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state and local levels.

Recent events, including the 2024 U.S.

presidential election, have created a climate of heightened uncertainty and introduced new and difficult-to-quantify macroeconomic and political risks with potentially far-reaching implications.

The presidential administration’s changes to U.S.

policy may impact, among other things, the U.S.

and global economy, international trade and relations, unemployment, immigration, taxes, healthcare, the U.S.

environment, inflation and other areas.

Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our business, financial condition, operating results and cash flows.

Until we know what policy changes are made and how those changes impact our business and the business of our competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.

Risks Related to Our Intellectual Property

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The patent applications that we own, or in-license, may fail to result in issued patents with claims that cover the products or product candidates, if approved, in the United States or in foreign countries or territories.

If this were to occur,

early generic competition could be expected against our products and product candidates, if approved.

If this were to occur, early generic competition could be expected against our products and product candidates, if approved.

There may be relevant prior art relating to our patents and patent applications which could invalidate a patent or prevent a patent from issuing based on a pending patent application.

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The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

interpreted narrowly and our patent applications at risk of not issuing as patents, and could provoke third parties to assert claims against us.

Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing as patents, and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.

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Our ability to obtain patents is highly uncertain because, to date, some legal principles remain unresolved, there has not been a consistent policy regarding the breadth or interpretation of claims allowed in patents in the United States and the specific content of patents and patent applications that are necessary to support and interpret patent claims is highly uncertain due to the complex nature of the relevant legal, scientific and factual issues.

For example, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law.

The Leahy-Smith Act includes a number of significant changes to United States patent law.

These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation.

The United States Patent and Trademark Office, or USPTO, has developed new and untested regulations and procedures to govern the full implementation of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in March 2013.

The Leahy-Smith Act has also introduced procedures making it easier for third parties to challenge issued patents, as well as to intervene in the prosecution of patent applications.

Finally, the Leahy-Smith Act contains new statutory provisions that still require the USPTO to issue new regulations for their implementation and it may take the courts years to interpret the provisions of the new statute.

Changes in either patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection and could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations.

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Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce existing patents or patents that we may obtain in the future.

Accordingly, it is too early to tell what, if any, impact the Leahy-Smith Act will have on the operation of our business and the protection and enforcement of our intellectual property.

However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

An inability to obtain, enforce and defend patents covering our proprietary technologies would materially and adversely affect our business prospects and financial condition.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States.

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Changes in either patent laws or in interpretations of patent laws in the United States and other countries may materially diminish the value of our intellectual property or narrow the scope of our patent protection.

We are currently, and in the future will likely continue to be, involved in lawsuits to protect or enforce our patents.

We have in the past and are likely in the future to be, involved in lawsuits to protect or enforce our patents.

These lawsuits are expensive and require us to expend substantial financial resources, are time consuming, may continue for many years for one or more claims and may be unsuccessful.

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To counter infringement or unauthorized use, we have been, and in the future may be, required to file infringement claims, which are expensive and time-consuming.

For example, beginning in August 2013, we filed patent infringement lawsuits against six generic companies in the U.S.

District Court for the District of Delaware for the approval by the FDA of generic versions of Suboxone in the United States.

Of these, cases against all but one of the six generic companies have been resolved.

We are also seeking to enforce our patent rights as further described in Part II Item 8.

Financial Statements and Supplementary Data, Note 22, Contingencies .

In an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

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We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

As described in Part II Item 8.

Financial Statements and Supplementary Data, Note 22, Contingencies to our consolidated financial statements, a number of our issued patents are involved in litigation.

In addition to the challenges we face in those litigation matters, a number of our issued patents are or have been involved in administrative proceedings, such as reexamination and inter partes review at the USPTO and opposition at the EPO.

There can be no assurance that all claims of the challenged patents will be upheld or that the patents challenged by us will be found infringed.

A number of our issued patents have been involved in administrative proceedings, such as reexamination and inter partes review at the USPTO and opposition at the EPO.

The matters are resolved, but in possible future proceedings, there can be no assurance that all claims of the challenged patents will be upheld or that the patents challenged by us will be found infringed.

We may lose any of the challenged patents entirely, or we may have to amend the scope of claims to an extent which may be considered insufficient to cover our products or product candidates.

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If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

For more information, please s ee Part II Item 8.

Financial Statements and Supplementary Data, Note 22, Contingencies to our consolidated financial statement s.

Third parties may commence legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a negative impact on the success of our business.

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There is a risk that additional third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us.

Even if we believe any of those claims are without merit, a court of competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to block our ability to commercialize such product or product candidates unless we obtain a license under the applicable patents, or until such patents expire or are finally

determined to be invalid or unenforceable.

Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our technology, holders of any such patents may be able to block our ability to develop and commercialize the applicable product or product candidate unless we obtained a license or until such patent expires or is finally determined to be invalid, unenforceable or not infringed by our product or technology.

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We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all.

In such event, we may be unable to further practice our technologies or develop and commercialize any of our product candidates at issue, which could significantly harm our business.

In such event, we may be unable to

further practice our technologies or develop and commercialize any of our product candidates at issue, which could significantly harm our business.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates, if approved.

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The commercial opportunity for our products or product candidates could be significantly harmed if competitors are able to develop and commercialize alternative formulations of our products or product candidates that are different from ours and do not infringe our issued patents covering our products or use of our products.

Suboxone, Zuplenz, Sympazan and Exservan have been approved by the FDA, and other product candidates may be approved by the FDA in the future.

Suboxone, Zuplenz, Sympazan, Libervant and Emylif have been approved by the FDA, and other product candidates may be approved by the FDA in the future.

As additional products of ours are on the market, one or more third parties may also challenge the patents that we control covering our products, which could result in the invalidation or unenforceability of some or all of the relevant patent claims of our issued patents covering our products.

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Such a loss of patent protection could have a material adverse impact on our business.

For more information, please see Part IV, Note 22, Contingencies to our consolidated financial statements.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

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In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules.

There are situations, however, in which non-compliance can result in abandonment or lapse of the patents or patent applications, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

There are situations, however,

in which non-compliance can result in abandonment or lapse of the patents or patent applications, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

In such an event, potential competitors might be able to enter the market which could harm our business.

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We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all.

In that event, we would be unable to further develop and commercialize one or more of our products or product candidates, which could harm our business significantly.

event, we would be unable to further develop and commercialize one or more of our products or product candidates, which could harm our business significantly.

We cannot provide any assurances that third-party patents do not exist which might be enforced against our products or product candidates, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.

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We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property.

We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates and companion diagnostic.

We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates.

Litigation may be necessary to defend against these and other claims challenging inventorship or ownership.

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• other regulatory developments affecting any of our other current and future product candidates, or the product candidates of our competitors;

• the costs of pre-commercialization and commercialization of any of our approved products that we market ourselves;

• if any of our current or future product candidates receive regulatory approval, the level of underlying demand for such product candidate and wholesaler buying patterns.

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This may prevent or discourage unsolicited acquisition proposals or offers for our Common Stock that you may believe are in your best interest as one of our stockholders.

We may incur substantial costs relating to “excess parachute payments” under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended.

We entered into an employment agreement with A.

Mark Schobel, our Chief Innovation and Technology Officer, pursuant to which he is entitled to receive an additional tax indemnification payment, or a “gross-up” payment, if the payments and benefits under his employment agreement or any other benefits plans and programs trigger excise tax liability under Section 4999 of the Internal Revenue Code of 1986, as amended, or the Code, for “excess parachute payments.” Under Sections 280G and 4999 of the Code, the excise tax is triggered by change in control-related payments that, in general, equal or exceed three times Mr.

Schobel’s average annual taxable compensation over the five calendar years preceding the change in control.

The excise tax equals 20% of the amount of the payment in excess of Mr.

Schobel’s average taxable compensation over the preceding five calendar year period ( i.e., the excess parachute payments).

In addition to providing Mr.

Schobel with a tax gross-up payment, we may not take a federal tax deduction for Mr.

Schobel’s excess parachute payments.

If an “excess parachute payment” is made to Mr.

Schobel, we may incur substantial costs related to a change in control of Aquestive due to the gross-up payment and the lost federal tax deduction for Mr.

Schobel’s excess parachute payments.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.

In addition, we are subject to Section 203 of the Delaware General Corporation

Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors.

This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.

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General Risk Factors

Our business may be adversely affected by the ongoing coronavirus pandemic.

Beginning in late 2019, the outbreak of COVID-19 has evolved into a global pandemic.

Depending upon the length and severity of the pandemic or any resurgence, which cannot be predicted, we may experience disruptions that could materially and adversely impact our business including:

• Various aspects of our clinical trials, including delays or difficulties in enrolling patients in our clinical trials, in clinical trial site initiation, and in recruiting clinical site investigators and clinical site staff;

increased rates of patients withdrawing from clinical trials;

diversion of healthcare resources away from the conduct of clinical trials;

interruption of key clinical trial activities such as clinical trials site data monitoring due to limitations on travel imposed or recommended by federal or state governments;

impact on employees and others or interruption of clinical trial visits or study procedures which may impact the integrity of subject data and clinical study endpoints;

and interruption or delays in the operations of the FDA, and comparable foreign regulatory agencies, which may impact regulatory review and approval timelines.

• If any third-party in our supply chain for any materials, including active pharmaceutical ingredients and other raw materials supply, which we need for our product candidates for our clinical trials and for the approved products we manufacture and distribute, are adversely impacted by restrictions resulting from the coronavirus pandemic, including staffing shortages, production slowdowns, or disruptions in freight and other transportation services and delivery distribution systems, our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials, conduct our research, development and clinical operations, and manufacture, distribute and sell our approved products.

• Although we have reopened our business office after several months of closure during the coronavirus pandemic, if there is a resurgence of COVID-19 exposures, we may be forced to close our business office again.

However, we would expect that our colleagues in our research and development laboratory and manufacturing facilities would continue to work on site, with appropriate safety and health measures reimplemented in order to reduce risk of transmission, as they did throughout the pandemic.

Should such a resurgence occur, our increased reliance on colleagues and other third parties on whom we rely on working from home or having health issues may negatively impact productivity and could limit commercial launch activities for any new approved product, or disrupt, delay, or otherwise adversely impact our business.

In addition, this could increase our cybersecurity risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations.

Our colleagues conducting research and development activities might not be able to access our laboratory or manufacturing facilities for an extended period of time as a result of any further closure of our facilities as well as the possibility of further governmental restrictions.

As a result, this could delay timely completion

of preclinical activities, including completing Investigational New Drug (IND)/Clinical Trial Application (CTA) enabling studies or our ability to select future development candidates, and initiation of clinical or other of our development programs and production and delivery of our products.

• The FDA and comparable foreign regulatory agencies may experience disruptions, have slower response times or be under-resourced to continue to monitor our clinical trials or to conduct required activities and review of our product candidates seeking regulatory review and such disruptions could materially affect the development, timing and approval of our product candidates.

• The coronavirus pandemic may impact the requirements of our customers and growth of our approved products.

For example, Indivior, our significant customer for Suboxone, had announced that it anticipated coronavirus impact on its product sales.

Although we currently do not anticipate any significant interruption in supply, we continue to monitor this situation closely and there is no assurance that disruptions or delay will not occur as a result of a resurgence of COVID-19 and we cannot accurately predict the adverse impact the coronavirus pandemic will have on orders of our approved product, including Suboxone.

We also have experienced in one instance, and could in the future experience, extended customer payment cycles.

• As a result of concerns caused by the continuing effects of the coronavirus, we may face issues and investor concerns in raising capital through sales of our Common Stock or other securities, or in seeking to monetize any of our licensed royalty and milestone rights.

In addition, a recession, depression or other sustained adverse market event could materially and adversely affect the financial markets, our business, the value of our Common Stock and our ability to obtain on favorable terms, or at all, equity or debt financing or any potential monetization of our royalty streams.

The coronavirus pandemic continues to evolve.

The ultimate impact of the coronavirus pandemic on us is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, the manufacturing, marketing, distribution and sale of our approved products, the healthcare system or the global economy.

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

Public health threats such as a global pandemic, or widespread outbreak of infectious disease, similar to the COVID-19 pandemic, may create uncertainties about our future operating results and financial conditions.

Public health threats, such as the COVID-19 or any other pandemic, may have an impact on our business, financial condition, results of operations and cash flows.

Prolonged volatility or significant disruption of global financial markets due in part to a public health threat could have a negative impact on our business and overall financial position.

Other factors and uncertainties include, but are not limited to, increased operational costs associated with operating during and after a pandemic;

evolving macroeconomic factors, including general economic uncertainty, increased labor costs, and recessionary pressures;

capital and other resources needed to respond to a pandemic;

along with the severity and duration of a pandemic.

These risks and their impacts are difficult to predict and could continue to otherwise disrupt and adversely affect our operations and our financial performance.

In addition, to the extent a global health crisis, epidemic or pandemic, such as theCOVID-19 pandemic, adversely affects our business, financial condition and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

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If we cannot demonstrate that our interests would be harmed by such competitive behavior, we may be unable to prevent our competitors from benefiting from the expertise of our former executives and our competitiveness may be diminished.

Any failure to comply with applicable data protection and privacy laws and regulations could lead to significant penalties against us, and adversely impact our operating results.

We are subject to U.S.

data protection laws and regulations, including laws and regulations that address privacy and data security.

Numerous federal and state laws, including state data breach notification laws and state health information privacy laws, govern the collection, use, and disclosure and protection of health-related and other personal information.

Failure to comply with data protection laws and regulations could result in government enforcement actions and create liability for us, which could include civil and/or criminal penalties, private litigation and/or adverse publicity that could negatively affect our operating results and business.

Compliance with ever evolving federal, state, and foreign laws relating to handling of information about individuals involves significant expenditure and resources, and any failure by us or our vendors to comply may result in significant liability, negative publicity, and/or an erosion of trust, and could materially adversely affect our business, results of operations, and financial condition.

We receive, store, handle, transmit, use and otherwise process information related to individuals.

We also depend on a number of third-party vendors in relation to the operation of our business, a number of which process data on our behalf.

We and our vendors are subject to a variety of federal, state and foreign data privacy laws, rules, regulations, industry standards and other requirements, including those that apply generally to the handling of information about individuals, and those that are specific to certain industries, sectors, contexts, or locations.

These requirements, and their application, interpretation and amendment are constantly evolving and developing.

In the United States, numerous federal and state laws, including state data breach notification laws and state health information privacy laws, govern the collection, use, and disclosure and protection of health-related and other personal information.

The Federal Trade Commission and state regulators enforce a variety of data privacy issues, such as promises made in privacy policies or failures to appropriately protect information about individuals, as unfair or deceptive acts or practices in or affecting commerce in violation of the Federal Trade Commission Act or similar state laws.

We are subject to HIPAA.

HIPAA imposes privacy, security and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information (“protected health information,” or “PHP”) for or on behalf of such covered entities, and their covered subcontractors.

HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI.

Additionally, under HIPAA, covered entities must report breaches of unsecured PHI to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach by a covered entity or its agents.

Notification also must be made to the U.S.

Department of Health and Human Services Office for Civil Rights, or OCR, and, in certain circumstances involving large breaches, to the media.

Business associates must report breaches of unsecured PHI to covered entities within 60 days of discovery of the breach by the business associate or its agents.

A non-permitted use or disclosure of PHI is presumed to be a breach under HIPAA unless the covered entity or business associate establishes that there is a low probability the information has been compromised consistent with requirements enumerated in HIPAA.

Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by HHS may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance.

HIPAA also authorizes state Attorneys General to file suit on behalf of their residents.

Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its

standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

Member states in the European Union and other countries have also adopted data protection laws and regulations which impose significant compliance obligations.

In the European Union, the collection and use of personal health data has been governed by the provisions of the EU Data Protection Directive.

The EU General Data Protection Regulation (GDPR) replaced the Data Protection Directive (with an enforcement date of May 25, 2018) and is designed to harmonize data privacy laws across Europe and to protect all EU citizens’ data privacy and will have a significant impact on

how certain data is processed and handled.

The European Union data protection laws and regulations impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data clinical trials.

Any failure to comply with these laws and regulations or the manner in which they are interpreted or implemented could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

For example, in the European Union, on May 25, 2018 the EU general Data Protection Regulation (GDPR) became applicable throughout the EU and, as a regulation, has direct effect in all member states.

The GDR was designed to harmonize data privacy laws across the EU and change the way organizations approach data privacy.

The GDPR introduced new obligations and expanded the extraterritorial reach of the EU data protection regime.

It applies to (i) organizations that process personal data in the context of an establishment in the EU (regardless of whether the processing takes place in the EU) and (ii) organizations outside the EY that offer goods or services to data subjects in the EU, or that monitor the behavior of EU data subjects.

Compliance with the GDPR involves significant obligations, including requirements around accountability and transparency, contracting with service providers that process personal data, responding to data subjects' rights requests within prescribed timelines, reporting of data breaches to data subjects and.

or data protection or supervisory authorities, taking account of data protection as any new services are developed, and limiting the amount of personal data collected, stores or otherwise processed.

These obligations and restrictions have a significant impact on the ability to collect, analyze and transfer personal data, including in the context of health data from clinical trials.

Even though we believe we and our vendors are generally in compliance with applicable laws, rules and regulations relating to privacy and data security, these laws are in some cases relatively new and the interpretation and application of these laws are uncertain.

Any failure or perceived failure by us to comply with data privacy and security laws, rules, regulations, industry standards and other requirements could result in proceedings or actions against us by individuals, consumer rights groups, government agencies, or others.

We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business.

Further, these proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust.

If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.

Our colleagues, principal investigators, consultants and agents may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our colleagues, principal investigators, consultants and agents.

We are exposed to the risk of fraud or other misconduct by our colleagues, principal investigators, contract sales force, consultants and agents.

Misconduct by these parties could include failure to:

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If any analysts then covering our business cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

As of December 31, 2023, we are no longer an “emerging growth company,” but still remain a “smaller reporting company”, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.

As of December 31, 2023, we were no longer an “emerging growth company,” as defined in the JOBS Act.

While we were an emerging growth company, we were able to 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(b) 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.

Even though we are no longer an emerging growth company, we remain exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act pursuant to rules of the SEC.

We remain a “smaller reporting company”, as defined in Rule 405 under the Securities Act which means that 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, including this Annual Report on Form 10-K.

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.

We are a “smaller reporting company”, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.

We are a “smaller reporting company”, as defined in Rule 405 under the Securities Act which allows us to take advantage of many of the exemptions from disclosure requirements available to “emerging growth companies,” as defined in the JOBS Act, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and certain reduced financial disclosures in our periodic reports, including this Annual Report on Form 10-K.

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.

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

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Any failure to implement new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.

In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement.

In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our Common Stock.

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Certain holders of our securities are entitled to rights with respect to the registration of their shares under the Securities Act.

Registration of these shares under the Securities Act have resulted in a substantial amount of these shares becoming freely

Registration of these shares under the Securities Act has resulted in a substantial amount of these shares becoming freely

tradable without restriction under the Securities Act.

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Adverse developments that affect financial institutions, such as events involving liquidity that are rumored or actual, have in the past and may in the future lead to bank failures and market-wide liquidity problems.

For example, on March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp.

were each sent into receivership.

Although the Department of the Treasury, the Federal Reserve and the FDIC in that situation took action to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program, there is no guarantee, however, that the U.S.

Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

Although the Department of the Treasury, the Federal Reserve and the FDIC may take action to mitigate the risk of potential losses, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program.

Although we assess our banking relationships as we believe necessary or appropriate, our access to cash in amounts adequate to finance or capitalization our current projected future business operations could be significantly impaired by factors that affect the financial institutions with which we have banking relationships, and in turn, us.

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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-K

Item 1A. Risk Factors