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Item 7. Management’s Discussion and Analysis

2025-03-05 compared with 2024-03-05 · 177 added, 156 removed, 203 unchanged (62% of the section changed)

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

We have a proprietary commercial product, Libervant® (diazepam) Buccal Film for the acute treatment of intermittent, stereotypic episodes of frequent seizure activity ( i.e.

, seizure clusters, acute repetitive seizures) that are distinct from a patient’s usual seizure pattern in patients with epilepsy between two and five years of age, which was launched in April 2024.

We are advancing a product pipeline for the treatment of severe allergic reactions, including anaphylaxis, under the trade name "Anaphylm™", and our Adrenaverse™ epinephrine prodrug pipeline platform.

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

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Aquestive also collaborates with pharmaceutical companies to bring new molecules to market using proprietary, best-in-class technologies, like PharmFilm, and has proven drug development and commercialization capabilities.

We are advancing a product pipeline for the treatment of severe allergic reactions, including anaphylaxis.

We have also developed a product pipeline focused on treating diseases of the central nervous system, or CNS.

For a summary of our products and product candidates, please refer to Item I.

Business of this Form 10-K.

Our production facilities are located in Portage, Indiana, and our corporate headquarters and primary research laboratory facilities are based in Warren, New Jersey.

Financial Operations Overview

Our revenues to date have been earned from our manufactured products made to order for licensees, as well as revenue from our self-developed, now outlicensed proprietary product, Sympazan.

Revenues are also earned from our product development services provided under contracts with customers, and from the licensing of our intellectual property.

These activities generate revenues in four primary categories:

manufacture and supply revenue, co-development and research fees, license and royalty revenue, and proprietary product sales, net.

We generate revenues in four primary categories:

manufacture and supply revenue, license and royalty revenue, co-development and research fees, and proprietary product revenue, net.

Manufacture and Supply Revenue

We manufacture based on receipt of purchase orders from our licensees, and our licensees have an obligation to accept these orders once quality assurance validates the quality of the manufactured product with agreed upon technical specifications.

With the exception of our license of Exservan, our licensees are responsible for all other aspects of commercialization of these products, and we have no role, either direct or indirect, in our customers’ commercialization activities, including those related to marketing, pricing, sales, payor access and regulatory operations.

With regard to our license of Exservan to MTHA and Haisco, we continue to hold the NDA for that product and, as such, are responsible for certain regulatory obligations relating to the sale of the product so long as we are the holder of the NDA for the product.

In most cases.

our licensees are responsible for all other aspects of commercialization of these products, and we have no role, either direct or indirect, in our customers’ commercialization activities, including those related to marketing, pricing, sales, payor access and regulatory operations.

We expect future manufacture and supply revenue from licensed products to be based on volume demand for existing licensed products, and for manufacturing and supply rights under license and supply agreements for existing or new agreements for successful product development collaborations.

Co-development and Research Fees

We work with our licensees to co-develop pharmaceutical products.

In this regard, we earn fees through performance of specific tasks, activities, or completion of stages of development defined within a contractual arrangement with the relevant licensee.

The nature and extent of these performance obligations, broadly referred to as milestones or deliverables, are usually dependent on the scope and structure of the project as contracted, as well as the complexity of the product and the specific regulatory approval path necessary for that product.

License and Royalty Revenue

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We also earn royalties based on our licensees’ sales of products that use our intellectual property that are marketed and sold in the countries where we have patented technology rights.

Royalty revenue related to the sale of future revenue is described further in this section under Critical Accounting Policies and Use of Estimates .

Proprietary Product Sales, Net

We commercialized our first proprietary CNS product, Sympazan, in December 2018.

Revenues from sales of proprietary product are recorded net of prompt payment discounts, wholesaler service fees, returns allowances, rebates and co-pay support redemptions, each of which are described in more detail below.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales.

These amounts are treated as variable consideration, estimated and recognized as a reduction of the transaction price at the time of the sale.

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

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

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

In October 2022, we entered into the Assertio Agreement with Otter Pharmaceuticals, LLC, a subsidiary of Assertio (NASDAQ:

ASRT), a specialty pharmaceutical company offering differentiated products to patients, pursuant to which we granted an exclusive, worldwide license of its intellectual property for Sympazan to Assertio during the term of that agreement.

We are the exclusive sole manufacturer and supplier of Sympazan for Assertio and began recognizing Manufacture and Supply Revenues and License and Royalty Revenues subsequent to entering into the Assertio Agreement.

Co-development and Research Fees

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

The nature of these performance obligations, broadly referred to as milestones or deliverables, are usually dependent on the scope and structure of the project as contracted, as well as the complexity of the product and the specific regulatory approval path necessary for that product.

Accordingly, the duration of our research and development projects may range from several months to as long as three years.

Although each contractual arrangement is unique, common milestones contained in these arrangements include those for the performance of efficacy and other tests, reports of findings, formulation of initial prototypes, production of stability clinical

and/or scale-up batches, and stability testing of those batches.

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

Proprietary product revenue, net

This net revenue is recognized when product is shipped and title passes to the customer, typically at time of delivery.

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

For sales of Libervant for patients between two to five years of age, returns allowances and prompt pay discounts are estimated based on contract terms and historical return rates, if available, and these estimates are recorded as a reduction of receivables.

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

Once all related variable considerations are resolved and uncertainties as to collectable amounts are eliminated, estimates are adjusted to actual allowance amounts.

Provisions for these estimated amounts are reviewed and adjusted on no less than a quarterly basis.

Costs and Expenses

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These costs can increase, or decrease, based on the amount of direct labor and materials required to produce a product and the allocation of fixed overhead, which is dependent on the levels of production.

We expect to continue to seek to rationalize and manage costs to prepare for a potential decline in Suboxone volumes as the generics in that market continue to take market share, at least partially offset by anticipated manufacturing revenue of our licensed product including Sympazan, subsequent to the Assertio Agreement in October 2022.

In addition to our proprietary products coming online, we may add licensee products which may need additional resources to manufacture.

If such growth should occur for higher volume product opportunities such as Suboxone and Ondansetron, we would incur increased costs associated with hiring additional personnel to support the increased manufacturing and supply costs arising from higher manufactured volumes from proprietary and licensed products.

If such growth should occur for higher volume product opportunities such as Suboxone and Ondif, we would incur increased costs associated with hiring additional personnel to support the increased manufacturing and supply costs arising from higher manufactured volumes from proprietary and licensed products.

Research and Development Expenses

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

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

acquire additional product candidates and technologies.

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

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

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

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

market access, which cannot be assured.

• Continuing the development of Anaphylm and AQST-108;

• Commercializing Libervant for after approval from the FDA on April 26, 2024 for the acute treatment of intermittent, stereotypic episodes of frequent seizure activity that are distinct from a patient’s usual seizure pattern in pediatric patients with epilepsy between two to five years of age.

Interest Expense

Interest expense consists of interest costs on the outstanding balances of our 12.5% Notes and 13.5% Notes at a fixed rate of 12.5% and 13.5%, respectively, payable quarterly, as well as amortization of loan costs and debt discounts.

The redemption of 12.5% Notes and the issuance of 13.5% Notes are discussed in Note 14, Long-Term Debt , to our consolidated financial statements.

The redemption of 12.5% Notes and the issuance of 13.5% Notes are discussed in Note 15, Long-Term Debt , to our financial statements.

In addition, see Liquidity and Capital Resources below for further detail on our 12.5% Notes and 13.5% Notes.

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The excess of future estimated royalty payments of $56,926 over the $13,856 of the allocated fair value is recognized as a discount related to the Royalty Right Agreements and is amortized as interest expense using the effective interest method.

The 13.5% Notes are discussed in Note 14, Long-Term Debt , to our consolidated financial statements.

The 13.5% Notes are discussed in Part II Item 8.

Financial Statements and Supplementary Data, Note 15, Long-Term Debt.

Interest Expense related to Sale of Future Revenue

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and Canadian markets, therefore, we likely will not receive any of the additional contingent payments under the Monetization agreement.

As royalties are remitted to Marathon from Sunovion, the collection of the royalty receivable and balance of the liability related to the sale of future revenue will be effectively repaid over the life of the agreement.

In order to determine the

amortization of the liability related to the sale of future revenue, we are required to estimate the total amount of future royalty and milestone payments to Marathon over the life of the Monetization Agreement and contingent milestone payments from Marathon.

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

Based on the public forecast by Sunovion, we discontinued recording interest expense related to the sale of future revenue.

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

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

See Note 16, Sale of Future Revenue , to our consolidated financial statements for further detail.

Interest Income and other income (expense), net

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

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

We discontinued recording interest expense related to the sale of future revenue under the Monetization agreement in the fourth quarter of 2022.

not transferred.

See Part II Item 8.

Financial Statements and Supplementary Data, Note 17, Sale of Future Revenue , and Note 13, Other-Non-Current Assets for further detail.

Interest Income and other income, net

Interest income and other income, net consists of earnings derived from an interest-bearing account, investments in money market Treasury mutual funds and other miscellaneous income and expense items.

The interest-bearing account and money market Treasury mutual funds have no minimum amounts to be maintained in the accounts nor any fixed length of period for which interest and dividends are earned.

Results of Operations

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

Year Ended December 31, Change

2024 2023 $ %

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Co-development and research fees 1,925 1,402 523 37 %

Proprietary product sales, net

Proprietary product revenue, net

315 — 315 N/M

Revenues $ 50,583 $ 47,680 $ 2,903 6 %

Total revenues

$ 57,561 $ 50,583 $ 6,978 14 %

Revenues increased 14% or $6,978 in 2024 compared to the same period in 2023.

The increase was due to higher manufacture and supply revenues, license and royalty revenue and co-development and research fees offset by the lack of proprietary product sales in 2023 as a result of the outlicensing agreement with Assertio in October 2022.

Manufacture and supply revenue increased 20% or $7,427 for the year ended December 31, 2023 compared to the same period in 2022.

This increase was primarily due to increased revenues of $4,382 for Suboxone primarily related to price increases, increased revenues of $2,141 for Zuplenz and increased revenues of $587 for Sympazan subsequent to the outlicensing agreement with Assertio in October 2022.

The increase was primarily due to certain one-time increases in license and royalty revenue and increases in co-development and research fees, partially offset by decreases in manufacture and supply revenue.

Manufacture and supply revenue decreased 9% or $3,829 for the year ended December 31, 2024 compared to the same period in 2023.

This decrease was primarily due to a $4,069 decrease in Suboxone revenues mainly due to a decrease in volume and retroactive price increases in the prior period that were not present in 2024, and a $702 decrease in Sympazan revenue.

These decreases were partially offset by a $586 increase in Emylif revenues from Zambon and a $368 increase in Ondif revenue which were attributable to an increase in volume.

As part of the Indivior Amendment 11 to the Commercial Exploitation Agreement, we received retroactive price increases related to 2022 Suboxone purchases in the amount of $1,682 which was recognized in Manufacture and supply revenue in the year ended December 31, 2023.

There were no retroactive price adjustments included in Manufacture and supply revenue for the year ended December 31, 2024.

License and royalty revenue increased 185% or $9,969 for the year ended December 31, 2024 compared to the same period in 2023.

This increase was primarily due to $1,500 in milestone licensing revenues for Azstarys from Zevra, increased licensing revenue of $576 and royalty revenues of $680 for Sympazan and increased royalty revenue of $253 for Azstarys.

This increase was primarily due to the one-time recognition of deferred revenues of $11,544 due to the terminations of licensing and supply agreements.

These increases were partially offset by a $1,500 decrease in milestone licensing revenue for Azstarys from Zevra Therapeutics recognized in the prior year.

Co-development and research fees increased 37% or $523 for the year ended December 31, 2024 compared to the same period in 2023.

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

Proprietary product sales, net which only includes sales of Sympazan decreased $7,658 for the year ended December 31, 2023 compared to the same period in 2022.

The decrease was due to the outlicensing agreement with Assertio in October 2022.

We began recognizing Sympazan sales in manufacture and supply revenue and license and royalty revenue in the fourth quarter of 2022.

Proprietary product revenue, net increased by $315 for the year ended December 31, 2024 compared to the same period in 2023 due to the launch of Libervant for patients between two to five years of age.

This increase was partially offset by an additional accrual for returns allowances related to the period prior to the outlicensing to Assertio of our proprietary product, Sympazan, which is recorded as an addition to accrued distribution expenses and sales return provision.

Expenses, Interest Income and Other Income:

The following table sets forth our expense data for the periods indicated:

Year Ended December 31, Change

2024 2023 $ %

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Interest expense related to the sale of future revenue 236 220 16 7 %

Interest income and other income, net (16,321) (99) (16,222) N/M

Interest income and other income, net (3,437) (16,321) 12,884 (79) %

Loss on extinguishment of debt — 1,382 (1,382) N/M

Manufacture and supply costs and expenses increased 7% or $1,445 for the year ended December 31, 2023 compared to the same period in 2022.

The increase in manufacture and supply costs was due to higher costs related to raw materials, production and changes in product mix.

Research and development expenses decreased 25% or $4,377 for the year ended December 31, 2023 compared to the same period in 2022.

Manufacture and supply costs and expenses decreased 14%, or $2,959, for the year ended December 31, 2024 compared to the same period in 2023.

The decrease in manufacture and supply costs was due to lower volume of strips sold, changes in product mix, and lower production costs.

Research and development expenses increased 55%, or $7,176, for the year ended December 31, 2024 compared to the same period in 2023.

The increase in research and development expenses is primarily due to clinical trial costs and product research expenses associated with the continued advancement of the Anaphylm and AQST-108 programs, increases in personnel costs, and an increase in share-based compensation.

The tables below provide a breakdown of the major costs included in total Research and development expenses and project costs by type of expense for each of the main clinical development projects in which we are engaged for each period presented:

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2024 2023 2024 2023 2024 2023 2024 2023

Clinical Trials $ 3,597 $ 3,521 2 % $ 4,687 $ 3,494 34 % $ — $ — — % $ (1,090) $ 27 N/M

Development and Manufacturing 664 2,831 (77 %) 676 2,466 (73 %) — 65 N/M (12) 300 N/M

Product Research Expenses 678 1,354 (50 %) 463 921 (50 %) — 211 N/M 215 222 (3 %)

dec Anaphylm %

dec AQST-108 %

dec Libervant %

Clinical Trials $ 8,837 $ 3,597 146% $ 8,231 $ 4,687 76% $ 588 $ — N/M $ 18 $ (1,090) N/M

Development and Manufacturing 303 664 (54%) 310 676 (54%) 10 — N/M (17) (12) 42%

Product Research Expenses 1,119 678 65% 930 463 101% 188 — N/M 1 215 N/M

Total Project Costs $ 10,259 $ 4,939 108% $ 9,471 $ 5,826 63% $ 786 $ — N/M $ 2 $ (887) N/M

Research and development expenses are largely driven by the timing of clinical trials as well as other product development activities associated with Aquestive's pipeline.

For Anaphylm, expenses increased for clinical trials by 34% or $1,193 due to pilot clinical studies activities offset by decreases in development and manufacturing by 73% or $1,790 related to manufacturing scale–up activities in 2022 and 50% or $458 for product research related to PK modelling.

For AQST-108, expenses decreased in total by $276 as the Company shifted priorities to Anaphylm as the lead product candidate in our

For Libervant, expenses were a credit of $1,090 and $12 in clinical trials and development and manufacturing, respectively, from third party contractors upon the post completion audit of the studies and a decrease in product research by 3% or $7 due to the completion of modeling work.

Preclinical expense decreased by 37% or $386 for the year ended December 31, 2023 compared to the same period in 2022 related to activities in evaluating product candidates.

R&D personnel costs decreased by 8% or $493 for the year ended December 31, 2023 compared to the same period in 2022 due to ongoing expense management.

All Other R&D expenses which include rent, utilities, maintenance and other expenses and fees decreased by 16% or $161 for the year ended December 31, 2023 compared to the same period in 2022.

Selling, general and administrative expenses decreased 40% or $21,129 for the year ended December 31, 2023 as compared to the same period in 2022.

The decrease primarily reflects lower selling costs of $8,028 due to the reduction in our commercial organization subsequent to the outlicensing of Sympazan in October 2022, the absence of severance costs of $2,530 primarily due to the departure of our former CEO, lower stock compensation expense of $1,439, lower insurance costs of $888 and lower outside services of $6,100, including legal, consulting, IT and other expenses.

Interest expense decreased 3% or $215 for the year ended December 31, 2023 compared to the same period in 2022.

The decrease was a result of a lower net carrying value of debt for the first ten months of 2023 compared to 2022 as a result of 12.5% Notes principal payments partially offset by the discount amortization and the interest on the 13.5% Notes.

Interest expense related to amortization of the discount on the royalty obligations was $905 for the year ended December 31, 2023.

This amount is due to the accounting associated with the royalty obligations as part of the 13.5% Notes issuance.

There were no expenses related to the royalty obligations in the same period in 2022.

Interest expense related to the sale of future revenue was $220 for the year ended December 31, 2023.

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

Total project expenses for Anaphylm increased 63%, or $3,645, for the year ended December 31, 2024 compared to the same period in 2023.

Clinical trial expenses and product research expenses for Anaphylm increased $3,544 and $467, respectively, offset by decreases in development and manufacturing of $366 for the year ended December 31, 2024 compared to the same period in 2023.

In 2024, Clinical trial expenses for Anaphylm of $8,231 were primarily due to Clinical trial costs

associated with the continued advancement of the Anaphylm program.

In 2023, Clinical trial expenses for Anaphylm of $4,687 were related to the activities leading up to the Phase 3 PK Study.

Total project expenses for AQST-108 increased $786 for the year ended December 31, 2024 compared to the same period in 2023 and were related to feasibility work for AQST-108.

In 2023, Clinical trial expenses for Libervant of $1,090 were a credit from third party contractors upon the post completion audit of a study.

In 2023, product research expenses for Libervant of $215 were primarily due to data integration and modeling work.

R&D personnel costs increased by 13%, or $734, for the year ended December 31, 2024 compared to the same period in 2023, due to additional headcount.

R&D share-based compensation increased by $759, or 166%, which was primarily related to awards granted to our Chief Medical Officer upon his commencement of employment and the effect of new grants in 2024 to R&D personnel.

All other R&D expenses include rent, utilities, maintenance and other expenses and fees.

Selling, general and administrative expenses increased 58%, or $18,430, for the year ended December 31, 2024 as compared to the same period in 2023.

The increase primarily represents higher commercial spending of approximately $3,750, higher personnel costs of approximately $3,000, severance costs of approximately $2,900, higher share-based compensation expenses of $2,300, higher regulatory and licensing fees of approximately $1,400 related to the regulatory fee for Libervant, higher legal fees of $520, and higher expenses of $4,600 due to a change in the allocation of manufacture and supply costs compared to the prior period, partially offset by lower insurance expenses of $1,150.

Interest expense increased 76%, or $4,785, for the year ended December 31, 2024 compared to the same period in 2023.

The increase was mostly driven by the increased amortization of debt issuance costs and discounts and higher interest expense on the 13.5% Notes refinanced in November 2023.

Interest expense related to amortization of the discount on the royalty obligations was $5,459 and $905 for the years ended December 31, 2024 and 2023, respectively.

These amounts are due to the accounting associated with the royalty obligations as part of the 13.5% Notes issuance in November 2023.

The year ended December 31, 2024 reflects 12 months of activity while the year ended December 31, 2023 reflects 2 months of activity.

Interest expense related to the sale of future revenue was $236 and $220 for the years ended December 31, 2024 and 2023.

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

These amounts represent amortization of issuance costs.

In June 2023, Sunovion announced that it has voluntarily withdrawn KYNMOBI from the U.S.

and Canadian markets, therefore, we likely will not receive any of the additional contingent payments under the Monetization agreement.

As a result, we discontinued recording interest expense related to the sale of future revenue in the fourth quarter of 2022, which led to a decrease in interest expense related to the sale of future revenue by $5,671 in 2023 as compared to 2022.

See Note 16, Sale of Future Reven ue to our Consolidated Financial Statements for details.

Interest income and other income, net increased $16,222 for the year ended December 31, 2023 compared to the same period in 2022.

The increase primarily reflects other income of $6,000 related to the Amendment 11 to the Indivior Commercial Exploitation Agreement, $8,500 patent litigation settlement with BDSI and the receipt of $1,250 ERTC refund recognized in 2023.

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

See Part II Item 8.

Financial Statements and Supplementary Data, Note 17, Sale of Future Revenue for details.

Interest income and other income, net was $3,437 and $16,321 for the years ended December 31, 2024 and 2023, respectively.

The decrease by $12,884 is due to other income of $6,000 related to the Amendment 11 to the Indivior Commercial Exploitation Agreement, $8,500 related to the patent litigation settlement with BioDelivery Sciences International, Inc.

and the receipt of the ERTC, which were recognized in the year ended December 31, 2023 and did not recur in 2024.

During the year ended December 31, 2024, we recognized a gain of $1,500 on the termination of a license and supply agreement, which was partially offset by the adjustment of $1,200 to the remaining balance of the intangible asset due to the termination of the agreement.

We also recognized higher interest income of $2,713 due to higher cash balances invested in interest-bearing and dividend-earning money market accounts.

For the year ended December 31, 2023, we recognized a loss on extinguishment of debt of $1,382 for prepayment penalties resulting from 12.5% Notes principal payments made in the first quarter of 2023 and fees related to the repayment of the 12.5% Notes in the fourth quarter of 2023.

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We had $71,546 in cash and cash equivalents as of December 31, 2024.

While our ability to execute our business objectives and achieve profitability over the longer term cannot be assured, Aquestive's on-going business, existing cash and equivalents, expense management activities, including, but not limited to the ceasing of R&D activities, as well as access to the equity capital markets, including through its ATM facility and under the Lincoln Park Purchase Agreement, provide near term liquidity for us to fund our operating needs for at least the next twelve months as it continues to execute its business strategy.

Our on-going business, existing cash and equivalents, expense management activities as well as access to the equity capital markets, including through our ATM facility and under the Lincoln Park Purchase Agreement, potentially provide near term sources of funds.

On November 1, 2023, we issued $45,000 in aggregate principal amount of 13.5% Notes due November 1, 2028.

A portion of the net proceeds from the Offering were used to redeem all of the outstanding 12.5% Notes and to pay expenses relating to the Offering, with the balance of the proceeds to be used for general corporate purposes.

While our ability to execute our business objectives and achieve profitability over the longer term cannot be assured, our on-going business, existing cash and cash equivalents, expense management activities, potential asset sales or product outlicensing as well as access to the equity capital markets, including through our ATM facility, provide near term liquidity for us to fund our operating needs for at least the next twelve months as we continue to execute our business strategy.

On October 7, 2021, we entered into a supplemental indenture for the 12.5% Notes, pursuant to which the amortization schedule for the 12.5% Notes was amended to provide for the date of the first principal payment to be extended to March 30, 2023.

The Fourth Supplemental Indenture did not change the maturity date of the Notes or the interest payment obligation due under the Notes.

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

The indenture did not change the maturity date of the 12.5% Notes or the interest payment obligation due under the 12.5% Notes.

In connection with the indenture, we entered into a Consent Fee Letter with the holders of the 12.5% Notes,

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

These payments were made by December 31, 2023.

In 2019, we established the ATM facility and currently have a prospectus supplement registering the offer and sale of up to $35,000 of shares of Common Stock pursuant to the ATM facility.

For the year ended December 31, 2023, we sold

4,958,341 shares which provided net proceeds of approximately $8,962 after deducting commissions and other transaction costs of $502.

This ATM facility has approximately $23,952 available at December 31, 2023.

In 2023, we redeemed $5,647 of our outstanding 12.5% Notes.

We also made three scheduled principal payments totaling $11,463 prior to the refinancing of the 12.5% Notes on November 1, 2023.

We also paid $353 in prepayment premium as result of the early retirement of debt which was reflected as a loss on extinguishment of debt in our Statements of Operations and Comprehensive Loss for the year ended December 31, 2023.

We established our first ATM facility in September 2019, and since inception to December 31, 2024, we have sold 19,857,518 shares of Common Stock which has generated net cash proceeds of approximately $60,524, net of commissions and other transactions costs of $3,119.

On April 3, 2024, we filed a new shelf registration statement on Form S-3 to register the offer and sale of up to $250,000 worth of shares of Common Stock ("Registration Statement No.

333-278498" or the "2024 Registration Statement"), that was declared effective by the SEC on April 23, 2024.

Included as part of the 2024 Registration Statement was a $100,000 ATM facility pursuant to the Amended Equity Distribution Agreement with Piper Sandler & Co.

For the year ended December 31, 2024, we sold 4,557,220 shares which provided net proceeds of approximately $11,821 after deducting commissions and other transaction costs of $564.

For the year ended December 31, 2023, we sold 4,958,341 shares under the ATM facility which provided net proceeds of approximately $8,962 after deducting commissions and other transaction costs of $502.

In the period subsequent to December 31, 2024 through March 5, 2025, we sold 7,457,627 shares under our ATM facility, which generated net proceeds of approximately $21,400 net of commissions of $605000.

The remaining authorized balance of the ATM facility was $78,000,000 as of March 5, 2025.

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

The Lincoln Park Purchase Agreement contains an ownership limitation such that we will not issue, and Lincoln Park will not purchase, shares of Common Stock if it would result in Lincoln Park’s beneficial ownership of our outstanding Common Stock exceeding 9.99%, which is equivalent to 6,486,623 shares at December 31, 2023.

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

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

For the year ended December 31, 2022, we sold 1,600,000 shares in addition to issuing 236,491 commitment shares, which provided proceeds of approximately $1,987 in connection with the Lincoln Park Purchase Agreement.

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 June 6, 2022, we entered into the Securities Purchase Agreements with certain purchasers.

The Securities Purchase Agreements provide for the sale and issuance by us of an aggregate of:

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

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

We received net proceeds of approximately $7,796,000, after deducting placement agent fees and offering expenses payable by Aquestive.

We used the net proceeds from the offering for general corporate purposes.

The pre-funded warrants were fully exercised in 2022.

On June 14, 2023, warrants to purchase 3,689,452 shares of Common Stock issued pursuant to the Securities Purchase Agreements were exercised with proceeds paid to Aquestive thereon of approximately $3,542.

On August 1, 2023, we entered into the Letter Agreement with one of purchasers under the Securities Purchase Agreement (the “Exercising Holder”) to sell 5,000,000 of the remaining Common Stock Warrants.

Pursuant to the Letter Agreement, the Exercising Holder and Aquestive agreed that the Exercising Holder would exercise all of its Common Stock Warrants for shares of Common Stock underlying the Common Stock Warrants at $0.96 per share of Common Stock, the exercise price of the Common Stock Warrants under the Securities Purchase Agreements.

Pursuant to the Letter Agreement, in consideration of the Exercising Holder exercising 5,000,000 of the Existing Warrants, Aquestive issued New Warrants to the Exercising Holder to purchase up to an aggregate of 2,750,000 shares of Common Stock.

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

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

On August 2023, we entered into the Letter Agreement with the Exercising Holder of 5,000,000 of the remaining Common Stock Warrants.

Pursuant to the Letter Agreement, the Exercising Holder and Aquestive agreed that the Exercising Holder would exercise all of its Existing Warrants at the then current exercise price of the Existing Warrants.

The Exercising Holder subsequently exercised the Existing Warrants, with Aquestive receiving gross proceeds of $4,800.

We also issued to the Exercising Holder New Warrants to purchase up to an aggregate of 2,750,000 shares of Common Stock.

The New Warrants are exercisable after February 2, 2024, expire on February 2, 2029 and are exercisable only for cash, unless the shares of Common Stock underlying the New Warrants are not registered in accordance with the terms of the Letter Agreement, in which case the New Warrants may also be exercised by means of a "cashless exercise".

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

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

The Company incurred $35 in expenses relating to this transaction.

In total, 8,689,452 Common Stock Warrants were issued pursuant to the Securities Purchase Agreements with proceeds of approximately $8,342 being received during the year ended December 31, 2023 on exercise of such Common Stock Warrants.

The Company incurred $35 in expenses relating to this transaction.

On November 1, 2023, we issued (the “Offering”) $45,000 aggregate principal amount of its 13.5% Notes due November 1, 2028.

A portion of the net proceeds from the Offering was used to redeem all of the outstanding 12.5% Notes and to pay expenses relating to the Offering, with the balance of the proceeds to be used for general corporate purposes.

Interest on the 13.5% Notes accrues at a rate of 13.5% per annum and is payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (each, a “Payment Date”) commencing on December 30, 2023.

On November 1, 2023, we issued $45,000 aggregate principal amount of its 13.5% Notes due November 1, 2028.

A portion of the net proceeds from that Offering was used to redeem all of the remaining outstanding 12.5% Notes and to pay expenses relating to that Offering, with the balance of the proceeds to be used for general corporate purposes.

Interest on the 13.5% Notes accrues at a rate of 13.5% per annum and is payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year commencing on December 30, 2023.

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 accounted for this transaction as an extinguishment of debt and recognized a debt extinguishment charge of $1,029 for the year ended December 31, 2023.

The debt extinguishment charge is included in Loss on the extinguishment of debt in the Company’s Statements of Operations and Comprehensive Loss.

On March 22, 2024, we completed the underwritten public offering of 16,666,667 shares of our common stock at the public offering price of $4.50 per share.

In addition, pursuant to the partial exercise of the underwriters' option, on April 22, 2024, we sold an additional 559,801 shares of Common Stock.

Net proceeds from the underwritten public offering, including the exercise of underwriters' option were $72,868, after deducting underwriting discounts of $4,651.

In addition to the underwriting discounts related to this offering, we incurred professional fees and other costs totaling $894 as of December 31, 2024.

The following table provides information regarding our cash flows for the years ended December 31, 2024 and 2023:

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Net cash provided by financing activities 83,592 3,974

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

$ 47,674 $ (3,401)

Net Cash Used for Operating Activities

Net cash used for operating activities for the year ended December 31, 2023 decreased by $3,439 compared to the same period in 2022.

The decrease was primarily related to a lower net loss by $46,540 offset by the decrease in 2023 in payments received from license and supply agreements and changes in operating assets and liabilities, mainly in Trade receivables and other receivables driven mostly by Indivior activity and changes due to outlicensing of Sympazan to Assertio.

Other changes were due to a decrease in interest expense related to the sale of future revenue, lower share-based compensation and depreciation and amortization and impairment expenses offset by a one-time loss on extinguishment of debt in 2023 that did not occur in 2022 and higher amortization of debt issuance costs and discounts.

Net cash used for operating activities for the year ended December 31, 2024 increased by $29,379 compared to the same period in 2023.

The increase in cash used for operating activities was primarily related to the change in net loss of $36,267 and deferred revenue of $13,809, which was mostly attributed to the recognition of deferred revenues due to the termination of license and supply agreements during the year ended December 31, 2024, and increases in trade and other receivables of $4,167.

Other changes were mainly due to higher amortization of debt issuance costs and discounts of $8,742 on the 13.5% Notes refinancing in November 2023 and an increase in share-based compensation of $4,410 as compared to the year ended December 31, 2023.

Net Cash Used for Investing Activities

Net cash used for investing activities for the year ended December 31, 2024 decreased by $836 compared to the same period in 2023.

The decrease was due to the absence of investments in intangible assets in 2023.

The use of cash was related to capital expenditures.

Net Cash Provided by Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 decreased by $7,618 compared to the same period in 2022.

The decrease was primarily due to the $51,500 repayment of the 12.5% Notes and $4,643 in issuance discount and financing costs related to the 13.5% Notes offset by $45,000 in proceeds from the issuance of the 13.5% Notes in 2023.

Additionally, the net decrease in proceeds from issuance of Common Stock and warrants under private equity offerings was partially offset by higher Common Stock purchase proceeds under the ATM facility in 2023 as compared to 2022.

See Note 1, Company Overview and Equity Transactions and Note 14, Long-Term Debt to our Consolidated Financial Statements for details.

Net cash provided by financing activities for the year ended December 31, 2024 increased by $79,618 compared to the same period in 2023.

The increase was primarily related to the underwritten public offering which provided net proceeds of $71,974, and higher ATM proceeds by $2,871 due to higher volumes and Common Stock prices as compared to the prior year.

These increases during the year ended December 31, 2024 were also due to the absence of 12.5% Notes principal payments and premium paid to retire debt and the absence of the financing costs associated with the issuance of the 13.5% Notes, partially offset by no proceeds received from the issuance of the 13.5% Notes and the issuance of the Royalty Rights Agreements as compared to the prior year, and lower proceeds by $8,142 from the exercise of warrants.

Funding Requirements

Our on-going business, existing cash and equivalents, expense management activities as well as access to the equity capital markets, including through our ATM facility, and potential asset sales or product outlicensing potentially provide near term funding opportunities for Aquestive, see “Liquidity and Capital Resources”.

On November 1, 2023, we issued $45,000 in aggregate principal amount of the 13.5% Notes due November 1, 2028.

We need to raise additional capital to continue to advance its clinical programs.

On March 22, 2024, we completed the Underwritten Public Offering of 16,666,667 shares of our common stock at the public offering price of $4.50 per share.

In addition, pursuant to the partial exercise of the underwriters' option, on April 22, 2024, we sold an additional 559,801 shares of Common Stock.

Net proceeds from the Underwritten Public Offering, including the exercise of underwriters' option were $72,868 after deducting underwriting discounts of $4,651.

In addition to the underwriting discounts related to this offering, we incurred professional fees and other costs totaling $894 as of December 31, 2024.

We have used and intend to continue to use the net proceeds received from these transactions, together with the Company’s existing cash and cash equivalents, primarily to advance the development and commercialization of our product pipeline, including Anaphylm™ (epinephrine) Sublingual Film for the treatment of severe life-threatening allergic reactions, including anaphylaxis, and the continued commercial expansion of Libervant® (diazepam) Buccal Film for the treatment of ARS patients aged between two and five years, and for working capital, capital expenditures and general corporate purposes.

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

In addition, we may be required to utilize available financial resources sooner than expected.

We have based our expectation on assumptions that could change or prove to be inaccurate, due to unrelated factors including factors arising in the capital markets, asset monetization markets, regulatory approval process, including the approval of Anaphylm, full approval of Libervant by the FDA for U.S.

market access, and regulatory oversight and other factors.

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

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

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

• access to debt or equity markets if, and at the time, needed for any necessary future funding, including our ability to access funding through our ATM facility and under the Lincoln Park Purchase Agreement;

• access to debt or equity markets if, and at the time, needed for any necessary future funding, including our ability to access funding through our ATM facility, should we choose to access this facility;

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

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

• effective commercialization within anticipated cost levels and expected ramp-up timeframes of our product candidate Libervant, if approved for U.S.

market access by the FDA;

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

• effective commercialization within anticipated cost levels and expected ramp-up timeframes of our product Libervant for pediatric patients between two and five years of age;

• infrastructure and administrative costs at expected levels to support operations as an FDA and highly regulated public company;

• a manageable level of costs for ongoing efforts to protect our intellectual property rights, including litigation costs in connection with seeking to enforce our rights concerning third parties’ "at-risk" launch of generic products, and other litigation matters in which we are involved;

• a manageable level of costs for ongoing efforts to protect our intellectual property rights and litigation matters in which we are involved;

• continued compliance with all covenants under our 13.5% Notes, including our ability to comply with our debt service obligations as required thereunder;

• absence of significant unforeseen cash requirements.

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

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

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

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

market access, and to meet our other cash requirements, including debt service, specifically our 13.5% Notes.

We plan to conservatively manage our pre-launch spending as to both timing and level relating to Libervant in light of the tentative approval of Libervant by the FDA.

In this regard and in light of our out-license of Sympazan, we have significantly reduced our cost on commercialization in 2023 compared to 2022.

Until profitability is achieved, if at all, additional capital and/or other financing or funding will be required, which could be material, to further advance the commercialization of Libervant for pediatric patients between two and five years of age and development and commercialization of Anaphylm and AQST-108, if approved by the FDA, and to meet our other cash requirements, including debt service, specifically our 13.5% Notes.

We plan to conservatively manage our launch spending as to both timing and level relating to Libervant in light of the approval of Libervant by the FDA for patients between two and five years of age.

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

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

We expect to incur significant operating losses and negative operating cash flows for the foreseeable future, and we have a significant level of debt on which we have substantial ongoing interest payments have principal repayments related to our 13.5% Notes starting in June 2026 through the debt maturity date, which is further discussed in Note 14, Long-Term Debt to our Consolidated Financial Statements.

We expect to incur significant operating losses and negative operating cash flows for the foreseeable future, and we have a significant level of debt on which we have substantial ongoing interest payments have principal repayments related to our 13.5% Notes starting in June 2026 through the debt maturity date and royalty obligation payments projected to be made from the fourth quarter of 2024 to 2034, which are further discussed in Part II Item 8.

Financial Statements and Supplementary Data, Note 15, Long-Term Debt .

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

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

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

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

scaling back, or even discontinuing some or all of our current or planned research and development programs and clinical and other product development activities, 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.

We also may be required to evaluate additional licensing and monetization opportunities, if any become available, of our proprietary product candidate programs that we currently plan to self-commercialize or explore other potential liquidity opportunities or other alternatives or options or strategic alternatives, such asset sales, although we cannot assure that any of these actions would be available or available on reasonable terms.

See also Part I, Item II, Risk Factors concerning the significant risks and uncertainties concerning our business, operations, financial results and capital resources associated with the impact of the global coronavirus pandemic.

Our ability to secure additional equity financing could be significantly impacted by numerous factors including our operating performance and prospects, positive or negative developments in the regulatory approval process for our product candidates, our existing level of debt which is secured by substantially all of our assets under the Indenture, and general financial market conditions, and there can be no assurance that we will continue to be successful in raising capital or that any such needed financing will be available, available on favorable or acceptable terms, if at all.

If adequate funds are not available for our short-term or longer-term liquidity needs and cash requirements as and when needed, 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 launch activities and research and development programs and clinical and other product development activities, 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.

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 acceptable terms.

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

There is no assurance that any such outlicensing or other strategic opportunities will be available or available on reasonable terms.

Contractual Obligations and Commitments

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Critical Accounting Policies and Use of Estimates

We have based our Management’s Discussion and Analysis of our financial condition and results of operations on our Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP, in the U.S.

The preparation of the Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements as well as the revenues and expenses during the reporting periods.

We have based our Management’s Discussion and Analysis of our financial condition and results of operations on our Financial Statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP, in the U.S.

The preparation of the Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities at the date of the financial statements as well as the revenues and expenses during the reporting periods.

On an ongoing basis, we evaluate our estimates and judgments.

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Actual results may differ from these estimates under different assumptions or conditions.

While significant accounting policies are more fully described in Note 3, Summary of Significant Accounting Policies , of the Notes to our Consolidated Financial Statements included in this filing, we believe that the following accounting policies are those that are most critical to the significant judgements and estimates used in the preparation of our Consolidated Financial Statements.

While significant accounting policies are more fully described in Part II Item 8.

Financial Statements and Supplementary Data, Note 3, Summary of Significant Accounting Policies , included in this filing, we believe that the following accounting policies are those that are most critical to the significant judgements and estimates used in the preparation of our Financial Statements.

Revenue Recognition

Proprietary product sales, net - this net revenue is recognized when product is shipped and title passes to the customer, typically at time of delivery.

Proprietary product revenue, net - this net revenue is recognized when product is shipped and title passes to the customer, typically at time of delivery.

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

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

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

Once all related variable considerations are resolved and uncertainties as to collectable amounts are eliminated, estimates are adjusted to actual allowance amounts.

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License and Royalty Revenue – license revenues are determined based on an assessment of whether the license is distinct from any other performance obligations that may be included in the underlying licensing arrangement.

If the customer is able to benefit from the license without provision of any other performance obligations by Aquestive and the license is thereby viewed as a distinct or functional license, Aquestive then determines whether the customer has acquired a right to use the license or a right to access the license.

If the customer is able to benefit from the license without provision of any other performance obligations by Aquestive and the license is

thereby viewed as a distinct or functional license, Aquestive then determines whether the customer has acquired a right to use the license or a right to access the license.

For functional licenses that do not require further development or other ongoing activities by Aquestive, the customer is viewed as acquiring the right to use the license as, and when, transferred and revenues are generally recorded at a point in time, subject to contingencies or constraints.

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Such other obligations provided by Aquestive generally include manufactured products, additional development services or other deliverables that are contracted to be provided during the license term.

received in excess of amounts ratably or otherwise earned are deferred and recognized over the term of the license or as contingencies or other performance obligations are met.

Payments received in excess of amounts ratably or otherwise earned are deferred and recognized over the term of the license or as contingencies or other performance obligations are met.

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

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

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

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The excess of future estimated royalty payments of $56,926 over the $13,856 of allocated fair value is recognized as a discount related to the Royalty Right Agreements and is amortized over the life of the Royalty Rights Agreements.

Such amortization is reflected as interest expense related to royalty obligations in the Consolidated Statements of Operations and Comprehensive Loss.

The 13.5% Notes are discussed in Note 14, Long-Term Debt , to our consolidated financial statements.

Such amortization is reflected as interest expense related to royalty obligations in the Statements of Operations and Comprehensive Loss.

The 13.5% Notes are discussed in Part II Item 8.

Financial Statements and Supplementary Data, Note 15, Long-Term Debt.

Liability and interest expense related to sale of future revenue

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

Amortization of debt is reflected as interest expense related to the sale of future revenue in the Consolidated Statements of Operations and Comprehensive Loss.

For further discussion of the sale of the future revenue, see Note 16, Sale of Future Revenue .

Amortization of debt is reflected as interest expense related to the sale of future revenue in the Statements of Operations and Comprehensive Loss.

For further discussion of the sale of the future revenue, see Part II Item 8.

Financial Statements and Supplementary Data, Note 17, Sale of Future Revenue .

Recent Accounting Pronouncements

Refer to Part II Item 8.

Financial Statements and Supplementary Data, Note 3, Summary of Significant Accounting Policies in the accompanying Notes to our Consolidated Financial Statements for a discussion of recent accounting pronouncements.

Financial Statements and Supplementary Data, Note 3, Summary of Significant Accounting Policies in the accompanying Notes to our Financial Statements for a discussion of recent accounting pronouncements.

Quantitative and Qualitative Disclosures about Market Risk

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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 7. Management’s Discussion and Analysis