Aquestive(AQST) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Aquestive Therapeutics' unaudited condensed financial statements for Q1 2025 and 2024, including balance sheets, operations, cash flows, and detailed notes Condensed Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' deficit as of March 31, 2025, and December 31, 2024 Condensed Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $68,657 | $71,546 | | Total current assets | $89,169 | $88,220 | | Total assets | $102,234 | $101,424 | | Total current liabilities | $18,298 | $18,865 | | Total liabilities | $163,164 | $161,580 | | Total stockholders' deficit | $(60,930) | $(60,156) | Condensed Statements of Operations and Comprehensive Loss Summarizes the company's financial performance, including revenues, expenses, and net loss for the three months ended March 31, 2025, and 2024 Condensed Statements of Operations and Comprehensive Loss (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $8,720 | $12,053 | | Total costs and expenses | $28,085 | $21,010 | | Loss from operations | $(19,365) | $(8,957) |\ | Net loss | $(22,930) | $(12,828) |\ | Basic and diluted loss per share | $(0.24) | $(0.17) |\ | Weighted average common shares outstanding | 95,497,056 | 73,614,710 | Condensed Statements of Changes in Stockholders' Deficit Details changes in equity components, including common stock, additional paid-in capital, and accumulated deficit, for the three months ended March 31, 2025 Condensed Statements of Changes in Stockholders' Deficit (in thousands) | Metric (in thousands) | Balance at Dec 31, 2024 | Balance at Mar 31, 2025 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock Shares | 91,413,742 | 99,317,153 | | Common Stock Amount | $91 | $99 | | Additional Paid-in Capital | $302,967 | $325,115 | | Accumulated Deficit | $(363,214) | $(386,144) | | Total Stockholders' Deficit | $(60,156) | $(60,930) | Key Changes (Three Months Ended March 31, 2025): * Common Stock issued under public equity offering-ATM: 7,457,627 shares, $22,000 (net of costs) * Share-based compensation expense: $1,587 * Net loss: $(22,930) Condensed Statements of Cash Flows Presents the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 Condensed Statements of Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net cash used for operating activities | $(23,400) | $(10,384) |\ | Net cash used for investing activities | $(135) | $(29) |\ | Net cash provided by financing activities | $20,646 | $81,741 |\ | Net (decrease) increase in cash and cash equivalents | $(2,889) | $71,328 |\ | Cash and cash equivalents at end of period | $68,657 | $95,200 | Notes to Unaudited Condensed Financial Statements Provides detailed explanations and disclosures supporting the unaudited condensed financial statements Note 1. Company Overview and Basis of Presentation Introduces Aquestive Therapeutics, Inc. as a pharmaceutical company focused on innovative delivery technologies and outlines its financial presentation basis - Aquestive Therapeutics, Inc. is a pharmaceutical company focused on developing and commercializing innovative medicines using alternative delivery technologies, particularly for complex molecules. The company is advancing its Anaphylm™ and Adrenaverse™ epinephrine prodrug platforms for severe allergic reactions and manufactures four licensed commercialized products[22] - The company has actively utilized its At-The-Market (ATM) facility, selling 7,457,627 shares for net proceeds of approximately $21,306 thousand during the three months ended March 31, 2025. A public offering in March 2024 also generated $70,500 thousand in net proceeds[23][25] Note 2. Summary of Significant Accounting Policies Details the company's significant accounting policies, including recent ASU adoptions and the evaluation of upcoming pronouncements - The company adopted ASU 2023-07 (Segment Reporting) as of December 31, 2024, requiring enhanced disclosures for segment profit or loss and significant segment expenses. ASU 2020-06 (Convertible Instruments) and ASU 2022-03 (Fair Value Measurement) were adopted on January 1, 2024, without material impact[31][32][33] - Upcoming pronouncements, ASU 2024-03 (Expense Disaggregation) and ASU 2023-09 (Income Tax Disclosures), effective for fiscal years beginning after December 15, 2026, and 2025 respectively, are currently being evaluated for their potential impact on financial statement disclosures[34][36] Note 3. Risks and Uncertainties Highlights Aquestive's history of net losses, accumulated deficits, and its reliance on cash, equity, and debt for funding operations and near-term liquidity - Aquestive has a history of net losses, with accumulated deficits totaling $386,144 thousand as of March 31, 2025. The company relies on cash and cash equivalents ($68,657 thousand as of March 31, 2025), equity, and debt offerings to fund operations[37][38] - Near-term liquidity for at least the next twelve months is supported by existing cash, expense management (including ceasing R&D activities), and access to equity capital markets via its ATM facility[39] Note 4. Segment Reporting Describes the company's single operating segment focused on developing products for severe allergic reactions and manufacturing proprietary and licensed products - The company operates as a single operating and reportable segment, with the CEO serving as the Chief Operating Decision Maker (CODM). The segment focuses on developing products for severe allergic reactions (Anaphylm, Adrenaverse platform) and manufacturing proprietary and licensed products[40] - Revenues for the three months ended March 31, 2025, and 2024 were $8,720 thousand and $12,053 thousand, respectively. Management anticipates continued significant expenses and operating losses due to product development and clinical trials[41] Expense Category (in thousands) | Expense Category (in thousands) | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | | :------------------------------ | :-------------------------- | :-------------------------- | | Total Manufacture and Supply Expenses | $3,652 | $4,389 | | Total Research and Development Expenses | $5,361 | $5,932 | | Total Selling expenses | $2,956 | $1,072 | | Total General and Administrative Expenses | $16,116 | $9,617 | | Total costs and expenses | $28,085 | $21,010 | | Loss from operations | $(19,365) | $(8,957) | | Net loss | $(22,930) | $(12,828) | Note 5. Revenues and Trade Receivables, Net Outlines revenue recognition policies across various categories and provides a breakdown of revenues by type and geographic area - Revenues are categorized into manufacture and supply, license and royalty, co-development and research fees, and proprietary product revenue. Revenue recognition follows a five-step model, with recognition occurring when performance obligations are satisfied[43][44] Revenue Type (in thousands) | Revenue Type (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Manufacture and supply revenue | $7,193 | $10,518 | | License and royalty revenue | $790 | $1,132 | | Co-development and research fees | $418 | $403 | | Proprietary product revenue, net | $319 | $— |\ | Total revenues | $8,720 | $12,053 | Geographic Area (in thousands) | Geographic Area (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | United States | $5,201 | $10,427 | | Ex-United States | $3,519 | $1,626 | | Total revenues | $8,720 | $12,053 | - For Q1 2025, Indivior and Hypera accounted for approximately 67% and 17% of total revenue, respectively, and 56% and 14% of total trade and other receivables[64] Note 6. Material Agreements Summarizes key agreements, including license amendments, royalty sales, and terminations, impacting product commercialization and revenue streams - The Indivior License Agreement for Suboxone was amended in March 2023, extending its term until August 16, 2026, with automatic one-year renewals, and adjusting transfer pricing and payment terms[67] - The company sold its rights to KYNMOBI royalties and milestone payments to Marathon in November 2020 for $50,000. Sunovion voluntarily withdrew KYNMOBI from U.S. and Canadian markets in June 2023, making additional contingent payments unlikely[73][74] - The Haisco Agreement for Exservan in China was terminated in June 2024, meaning no further contingent payments will be received. The MTPA license for Exservan in the US was also mutually terminated in June 2024[76][81] - The Pharmanovia Agreement for Libervant was expanded in March 2023 to cover global territories (excluding U.S., Canada, China), with Aquestive receiving a $2,000 thousand non-refundable payment[79] - The Assertio Agreement for Sympazan, effective October 2022, granted Assertio an exclusive worldwide license, with Aquestive receiving an upfront payment of $9,000 thousand and a $6,000 thousand milestone payment. Aquestive remains the exclusive manufacturer[80] Note 7. Financial Instruments – Fair Value Measurements Explains the categorization of fair value measurements and the valuation methodologies for warrants and royalty right agreements using unobservable inputs - Fair value measurements are categorized into Level 1 (observable quoted prices), Level 2 (observable prices corroborated by market data), and Level 3 (unobservable inputs). Warrants and Royalty Right Agreements are valued using Level 3 inputs[82][84] - Royalty Right Agreements, issued with the 13.5% Notes, were initially valued based on significant unobservable inputs including discount rate (15%), probability of success (75%), and projected payment years (2025-2034)[87][109] Note 8. Inventories Details the composition of inventories, including raw materials, packaging, and finished goods, and changes over the reporting period Inventory Component (in thousands) | Inventory Component (in thousands) | March 31, 2025 | December 31, 2024 | | :--------------------------------- | :------------- | :---------------- | | Raw material | $2,964 | $3,266 | | Packaging material | $2,344 | $2,135 | | Finished goods | $1,890 | $643 | | Total inventory | $7,198 | $6,044 | - Total inventory increased by $1,154 thousand from December 31, 2024, to March 31, 2025, primarily driven by an increase in finished goods[88] Note 9. Property and Equipment, Net Presents the net book value of property and equipment by category and reports depreciation, amortization, and impairment expenses Asset Category (in thousands) | Asset Category (in thousands) | March 31, 2025 | December 31, 2024 | | :---------------------------- | :------------- | :---------------- | | Machinery | $20,348 | $20,317 | | Leasehold improvements | $21,419 | $21,419 | | Construction in progress | $2,069 | $2,110 | | Total property and equipment, net | $3,801 | $3,799 | - Total depreciation, amortization, and impairment related to property and equipment was $139 thousand for the three months ended March 31, 2025, a decrease from $168 thousand in the prior year period[90] Note 10. Right-of-Use Assets and Lease Obligations Describes the company's operating leases for facilities, detailing lease terms, liabilities, and associated expenses - The company leases its production, warehouse, corporate, and research facilities under operating leases with remaining terms of 3.0 to 8.5 years. Lease liabilities are measured at the present value of lease payments using an incremental borrowing rate of 14.8% to 15.6%[92][94] - Total operating lease expenses for the three months ended March 31, 2025, were $427 thousand, including $93 thousand in variable lease expenses[95] Total Future Lease Payments (in thousands) | Period | Total Future Lease Payments (in thousands) | | :--------------- | :--------------------------------------- | | Remainder of 2025 | $966 | | 2026 | $1,318 | | 2027 | $1,346 | | 2028 | $1,180 | | 2029 and thereafter | $3,915 | | Total | $8,725 | | Less: imputed interest | $(3,363) | | Total operating lease liabilities | $5,362 | Note 11. Intangible Assets, Net Provides a breakdown of intangible assets, including purchased intangibles and patents, and reports amortization expenses Intangible Asset (in thousands) | Intangible Asset (in thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------ | :------------- | :---------------- | | Purchased intangible | $3,858 | $3,858 | | Purchased patent | $509 | $509 | | Less: accumulated amortization | $(4,367) | $(4,367) | | Intangible assets, net | $— | $— | - No amortization expense was incurred for intangible assets during the three months ended March 31, 2025, compared to $39 thousand in the prior year period. An adjustment of $1,200 thousand was recorded in June 2024 due to an agreement termination[97] Note 12. Other Non-current Assets Lists other non-current assets, primarily royalty receivables from the Monetization Agreement, and their changes Other Non-current Assets (in thousands) | Other Non-current Assets (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------------- | :------------- | :---------------- | | Royalty receivable | $3,000 | $3,000 | | Other | $1,215 | $1,223 | | Total other non-current assets | $4,215 | $4,223 | - Royalty receivable of $3,000 thousand as of March 31, 2025, consists of four annual minimum payments due from Sunovion, with the last payment due in March 2028. This receivable is related to the Monetization Agreement[98] Note 13. Accrued Expenses Details the components of accrued expenses, including compensation, taxes, and distribution costs, and explains period-over-period changes Accrued Expense (in thousands) | Accrued Expense (in thousands) | March 31, 2025 | December 31, 2024 | | :----------------------------- | :------------- | :---------------- | | Accrued compensation | $2,189 | $4,732 | | Real estate and personal property taxes | $417 | $365 | | Accrued distribution expenses and sales returns provision | $609 | $665 | | Interest payable | $17 | $17 | | Other | $82 | $128 | | Total accrued expenses | $3,314 | $5,907 | - The reduction in accrued compensation is primarily due to payments of accrued bonuses during the three months ended March 31, 2025[100] Note 14. Long-Term Debt Outlines the terms of the 13.5% Senior Secured Notes, associated royalty right agreements, and scheduled principal payments - On November 1, 2023, Aquestive issued $45,000 thousand aggregate principal amount of 13.5% Senior Secured Notes due 2028, receiving net proceeds of approximately $4,326 thousand after debt repayment and costs[102] - The 13.5% Notes bear interest at 13.5% annually, payable quarterly, with principal amortization beginning June 30, 2026. An Exit Fee of $2,000 thousand is also applicable[103] - In connection with the 13.5% Notes, Royalty Right Agreements were granted, entitling noteholders to tiered royalties (1.0%-2.0%) on worldwide net sales of Anaphylm and Libervant. The fair value of these agreements was allocated $13,856 thousand from the proceeds[106][110] Debt Component (in thousands) | Debt Component (in thousands) | March 31, 2025 | December 31, 2024 | | :---------------------------- | :------------- | :---------------- | | Total outstanding notes | $45,000 | $45,000 | | Unamortized discount, including Exit Fee | $(11,392) | $(12,646) | | Notes payable, long-term | $33,608 | $32,354 | | Royalty obligations | $56,917 | $56,922 | | Unamortized discount (Royalty) | $(35,269) | $(36,706) | | Royalty obligations, net | $21,559 | $20,129 | Scheduled Principal Payments (in thousands) | Year | Scheduled Principal Payments (in thousands) | | :--- | :---------------------------------------- | | 2025 | $— | | 2026 | $9,540 | | 2027 | $14,535 | | 2028 | $20,925 | | Total | $45,000 | Note 15. Warrants Describes outstanding warrants, their exercise prices, expiration dates, and the number of shares they entitle holders to purchase - Warrants issued with 12.5% Senior Secured Notes (Initial and Additional Warrants) expire on June 30, 2025, entitling holders to purchase up to 2,143,000 shares of Common Stock. No exercises occurred in Q1 2025 or Q1 2024[118] - In June 2022, pre-funded warrants (fully exercised in 2022) and Common Stock warrants (up to 8,850,000 shares at $0.96 exercise price, expiring June 8, 2027) were issued. In August 2023, 5,000,000 existing warrants were exercised, and new warrants for 2,750,000 shares at $2.60 exercise price were issued, exercisable after February 2, 2024[120][121] - As of March 31, 2025, outstanding warrants include 1,683,784 shares from the 12.5% Notes (exercise prices $4.25 and $5.38), 160,548 shares at $0.96, and 2,750,000 new warrants at $2.60[119][123] Note 16. Sale of Future Revenue Explains the sale of KYNMOBI royalty rights to Marathon and the impact of product withdrawal on future contingent payments and interest expense - In November 2020, Aquestive sold its contractual rights to KYNMOBI royalties and milestone payments to Marathon for an aggregate of $50,000 thousand through March 31, 2025. This was recorded as a liability related to the sale of future revenue[124][125][126] - Due to Sunovion's voluntary withdrawal of KYNMOBI from U.S. and Canadian markets in June 2023, the company is unlikely to receive additional contingent payments, and recording of interest expense related to this sale was discontinued in Q4 2022[129] Liability Related to the Sale of Future Revenue (in thousands) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Liability related to the sale of future revenue, net at beginning of the period | $63,718 | $64,490 | | Royalties related to the sale of future revenue | $— | $(1,008) | | Amortization of issuance costs | $59 | $236 | | Liability related to the sale of future revenue, net at end of the period | $63,777 | $63,718 | Note 17. Net Loss Per Share Calculates basic and diluted net loss per share, noting that potentially dilutive instruments are anti-dilutive due to net loss - Basic and diluted net loss per share are the same due to the company's net loss, which renders all potentially dilutive instruments anti-dilutive[131] Net Loss Per Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net loss | $(22,930) | $(12,828) | | Weighted-average common shares outstanding (basic and diluted) | 95,497,056 | 73,614,710 | | Loss per common share (basic and diluted) | $(0.24) | $(0.17) | Note 18. Share-Based Compensation Reports share-based compensation expenses by category and details unrecognized compensation for restricted stock units and stock options Share-Based Compensation Expense (in thousands) | Expense Category (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Manufacture and supply | $100 | $70 |\ | Research and development | $330 | $170 |\ | Selling, general and administrative | $1,157 | $1,340 |\ | Total share-based compensation expenses | $1,587 | $1,580 |\ | From Restricted stock units | $1,102 | $933 |\ | From Stock options | $485 | $647 | - As of March 31, 2025, total unrecognized compensation expenses for unvested service-based restricted stock units were $8,369 thousand (weighted average period of 2.14 years) and for market condition vesting-based restricted stock units were $2,798 thousand (weighted average period of 1.87 years)[135][136] - Unrecognized compensation expense for non-vested stock options was $3,849 thousand as of March 31, 2025, expected to be recognized over a remaining weighted average period of 1.97 years[143] Note 19. Income Taxes Explains the company's income tax accounting, including deferred tax assets and liabilities, and the application of a full valuation allowance - The company uses the asset and liability method for income taxes, recognizing deferred tax assets and liabilities. A full valuation allowance is provided against net deferred tax assets due to the likelihood of non-realization[144][145] - For the three months ended March 31, 2025, and 2024, the effective income tax rate was 0%, with no income tax expense recorded on pretax losses of $22,930 thousand and $12,828 thousand, respectively[146] Note 20. Contingencies Summarizes ongoing legal proceedings, including product liability and regulatory challenges, and their potential impact on the company - Kentucky Litigation (Humana v. Indivior et al.): A settlement was reached in November 2024, with Aquestive having no obligation or liability as all were assumed by Indivior[149] - California Litigation (Neurelis, Inc. v. Aquestive Therapeutics, Inc.): The trial is scheduled for July 18, 2025. The company cannot predict the ultimate outcome or estimate potential loss[150] - Neurelis FDA Lawsuit (Neurelis v. Califf, et al.): The U.S. District Court ruled in favor of Neurelis on February 14, 2025, vacating FDA approval of Libervant for ARS patients aged two to five years, converting it to 'tentative approval'. Aquestive has ceased marketing activities in the U.S. and is appealing the decision[151][152] - Suboxone Product Liability Litigation: Aquestive is a defendant in MDL and Canadian class action lawsuits alleging dental injuries from Suboxone. Indivior has agreed to defend Aquestive in the MDL. The company cannot predict the outcome or estimate potential loss[153][154] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes Aquestive Therapeutics' financial condition and results for Q1 2025 vs. 2024, covering business overview, product pipeline, revenues, expenses, and liquidity Overview Provides a general business overview of Aquestive Therapeutics, highlighting its focus on innovative delivery technologies and manufacturing capabilities - Aquestive is a pharmaceutical company focused on innovative science and delivery technologies, developing products for severe allergic reactions (Anaphylm™, Adrenaverse™ platform) and manufacturing four licensed commercialized products globally[161] - The company's manufacturing facilities in Portage, Indiana, are deemed sufficient for current and developing products and are subject to inspections by regulatory bodies like the FDA, TGA, DEA, ANVISA, and EMA[162] Complex Molecule Portfolio Details the development progress of Anaphylm™ and AQST-108, including NDA submission, clinical trial results, and future development plans - Anaphylm™ (epinephrine) Sublingual Film: The company completed its NDA submission to the FDA in Q1 2025. Positive topline data from a pediatric study (ages 7-17) was reported on April 1, 2025, showing PK results consistent with adult studies and a favorable safety profile. A product launch is planned for Q1 2026, pending FDA acceptance of the NDA in Q2 2025[173] - AQST-108 (epinephrine) Topical Gel: The company completed its first human clinical trial, demonstrating safety and local tolerability. Pre-IND FDA feedback was received in Q4 2024, and an IND is planned for Q4 2025, with a Phase 2a clinical trial initiation in H1 2026 for alopecia areata[174][175] Proprietary CNS Product Discusses the regulatory status of Libervant®, including the vacating of FDA approval for certain age groups and ongoing appeal efforts - Libervant® (diazepam) Buccal Film: FDA approval for U.S. market access for ARS patients aged two to five years was vacated by a U.S. District Court ruling on February 14, 2025, converting it to 'tentative approval'. Aquestive has ceased marketing activities and is appealing the decision, while also requesting FDA confirmation of approval based on clinical superiority[177][178] - The District Court's ruling was not based on safety or efficacy but on the interpretation of orphan drug exclusivity for a competing nasal spray product (Valtoco). Final approval for any age group is restricted until the expiration of Valtoco's ODE or a reversal of the court's ruling[177][179][180] Licensed Commercial Products, Product Candidates and Other Products Summarizes revenue generation from licensed products and provides updates on agreements for Exservan, Suboxone, Sympazan, KYNMOBI, and Azstarys - Licensed products generated $8,720 thousand and $12,053 thousand in revenue for the three months ended March 31, 2025, and 2024, respectively[181] - Exservan (Riluzole Oral Film): The MTPA license for U.S. commercialization and the Haisco license for China were mutually terminated in June 2024. Zambon continues to market Emylif in the EU, with Aquestive receiving a $0.5 million milestone payment in Q2 2023[181][182][183] - Suboxone®: Aquestive is the sole manufacturer. Branded products hold approximately 27% film market share as of March 31, 2025, facing generic competition. The company is involved in patent infringement lawsuits[183] - Sympazan®: Aquestive licensed its intellectual property to Assertio in October 2022, receiving $9.0 million upfront and a $6.0 million milestone payment. Aquestive remains the exclusive manufacturer[187] - KYNMOBI®: Sunovion voluntarily withdrew the product from U.S. and Canadian markets in June 2023, impacting potential contingent payments from the Monetization Agreement[187] - Azstarys®: Aquestive receives milestone and royalty revenues from Zevra (formerly KemPharm, Inc.) for this ADHD treatment, based on a 2012 termination agreement[187] Critical Accounting Policies and Use of Estimates Confirms no material changes to critical accounting policies and estimates since the 2024 Annual Report on Form 10-K - There have been no material changes to the company's critical accounting policies and use of estimates as previously disclosed in its 2024 Annual Report on Form 10-K[185] JOBS Act and Smaller Reporting Company Explains the company's status as a 'smaller reporting company' and the associated exemptions from certain disclosure requirements - Aquestive remains a 'smaller reporting company,' allowing it to leverage exemptions from certain disclosure requirements, including reduced executive compensation and financial disclosures in periodic reports[186] - The company's status as a smaller reporting company is maintained if its public float is less than $250 million or if its public float is less than $700 million with annual revenues under $100 million[186] Financial Operations Overview Describes the company's revenue recognition methods, expense categories, and interest expense components, outlining key operational drivers - Revenues are generated from manufacture and supply, license and royalty, co-development and research fees, and proprietary product sales. Manufacture and supply revenue is based on purchase orders from licensees, with Aquestive as the exclusive manufacturer[189][190] - License and royalty revenue is recognized based on the transfer of intellectual property rights or over the license term if ongoing obligations exist. Royalty revenue is estimated and recognized when sales occur[192] - Co-development and research fees are earned through specific tasks or development stages, with project durations ranging from several months to three years[193] - Proprietary product revenue is recognized upon shipment, with allowances for discounts and returns estimated based on historical trends and contract terms[194] - Costs and expenses include manufacture and supply, research and development, and selling, general and administrative expenses. R&D expenses are expected to remain significant due to ongoing product development[195][196][199] - Interest expense includes costs on 13.5% Notes, amortization of debt discounts, and interest related to royalty obligations and the sale of future revenue (discontinued in Q4 2022 for KYNMOBI)[203][205][207] Results of Operations Compares revenues, expenses, and other income for Q1 2025 and Q1 2024, highlighting significant changes and their underlying causes Revenue Comparison (in thousands) | Revenue Type | March 31, 2025 | March 31, 2024 | Change ($) | Change (%) | | :------------- | :------------- | :------------- | :--------- | :--------- | | Manufacture and supply revenue | $7,193 | $10,518 | $(3,325) | (32%) | | License and royalty revenue | $790 | $1,132 | $(342) | (30%) | | Co-development and research fees | $418 | $403 | $15 | 4% | | Proprietary product revenue, net | $319 | $— | $319 | N/M | | Total revenues | $8,720 | $12,053 | $(3,333) | (28%) | - Total revenues decreased by 28% ($3,333 thousand) primarily due to a $4,463 thousand decrease in Suboxone revenues, partially offset by a $1,471 thousand increase in Ondif revenues and $319 thousand from proprietary product revenue[212][213][215] Expenses and Other Income Comparison (in thousands) | Category | March 31, 2025 | March 31, 2024 | Change ($) | Change (%) | | :------------- | :------------- | :------------- | :--------- | :--------- | | Manufacture and supply | $3,652 | $4,389 | $(737) | (17%) | | Research and development | $5,361 | $5,932 | $(571) | (10%) | | Selling, general and administrative | $19,072 | $10,689 | $8,383 | 78% | | Interest expense | $2,782 | $2,784 | $(2) | —% | | Interest expense related to royalty obligations | $1,437 | $1,358 | $79 | 6% | | Interest expense related to the sale of future revenue | $59 | $58 | $1 | 2% | | Interest income and other income, net | $(713) | $(329) | $(384) | 117% | - Selling, general and administrative expenses increased significantly by 78% ($8,383 thousand), driven by a $4,310 thousand Anaphylm PDUFA fee, $2,250 thousand higher legal fees, and $2,130 thousand higher commercial spending[221] - Research and development expenses decreased by 10% ($571 thousand) due to lower clinical trial costs for Anaphylm, partially offset by increases in product research, preclinical expenses, personnel costs, and share-based compensation[218][219][220] - Interest income and other income, net, increased by 117% ($384 thousand) due to higher cash balances invested in interest-bearing accounts[225] Liquidity and Capital Resources Assesses the company's cash position, funding sources, and cash flow activities, emphasizing the need for additional capital for future development - As of March 31, 2025, cash and cash equivalents totaled $68,657 thousand. The company relies on existing cash, expense management, potential asset sales/outlicensing, and equity capital markets (ATM facility) for near-term liquidity[226] - Net cash used for operating activities increased by $13,016 thousand in Q1 2025 compared to Q1 2024, primarily due to a higher net loss and increases in trade and other receivables[237] - Net cash provided by financing activities decreased by $61,095 thousand in Q1 2025 compared to Q1 2024, mainly because there were no proceeds from a public offering in Q1 2025, unlike the $70,126 thousand received in Q1 2024. This was partially offset by higher ATM proceeds[239] - The company expects to incur significant operating losses and negative cash flows, requiring additional capital and/or financing to develop and commercialize Anaphylm and AQST-108, and to meet debt service obligations for its 13.5% Notes[244][245] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a 'smaller reporting company,' Aquestive Therapeutics is exempt from providing quantitative and qualitative market risk disclosures - The company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a 'smaller reporting company' under SEC regulations[251] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - As of March 31, 2025, management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[253] - No material changes in internal control over financial reporting were identified during the last fiscal quarter[254] PART II – OTHER INFORMATION Item 1. Legal Proceedings Refers to Note 20, Contingencies, for detailed information on legal proceedings, including product liability, intellectual property, and regulatory matters - For detailed information on legal proceedings, refer to Note 20, Contingencies, in the Financial Statements section[255] Item 1A. Risk Factors Highlights significant risks, including tariffs, trade restrictions, and potential disruptions at regulatory agencies, which could impact business and product approvals - The company faces significant risks from existing and potential new tariffs and trade restrictions, including a 10% baseline reciprocal tariff on imports and potential tariffs on pharmaceutical imports, which could adversely affect operating costs and financial condition[257][258][259] - Disruptions at the FDA and other government agencies (e.g., due to funding shortages, staffing limitations, or global health concerns) could hinder timely review and approval of new or modified products, negatively impacting the business[260][261] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities or use of proceeds during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[262] Item 3. Defaults Upon Senior Securities Reports no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred during the reporting period[263] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company's operations[264] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the fiscal quarter ended March 31, 2025[265] Item 6. Exhibits Lists exhibits filed with the report, including consulting agreements, officer certifications, and XBRL documents - Exhibits include a Consulting Agreement for Mark Schobel, certifications of the Principal Executive Officer and Principal Financial Officer (pursuant to Rules 13a-14(a) and 15d-14(a), and 18 U.S.C. Section 1350), and various XBRL taxonomy documents[266] SIGNATURES Contains the required signatures for the financial report