Aquestive(US:AQST)2022-08-01 16:00PART I – FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited financial statements for Q2 2022 present a net loss, changes in assets and liabilities, and detailed notes on operations and legal matters Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2022, shows total assets of $56.3 million, increased liabilities, and a widened stockholders' deficit Condensed Consolidated Balance Sheet Data (in thousands) | Balance Sheet Item | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $17,695 | $28,024 | | Total current assets | $43,505 | $47,259 | | Total assets | $56,310 | $61,993 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $29,636 | $21,964 | | Total liabilities | $152,667 | $144,127 | | Total stockholders' deficit | $(96,357) | $(82,134) | | Total liabilities and stockholders' deficit | $56,310 | $61,993 | Condensed Consolidated Statements of Operations and Comprehensive Loss The statements of operations show revenues of $13.3 million for Q2 2022 and a net loss of $16.3 million, reflecting a decline from the prior year Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $13,265 | $15,345 | $25,535 | $26,467 | | Loss from operations | $(12,762) | $(6,517) | $(22,500) | $(15,042) | | Net loss | $(16,302) | $(12,367) | $(29,522) | $(27,039) | | Net loss per share | $(0.36) | $(0.33) | $(0.68) | $(0.74) | Condensed Consolidated Statements of Cash Flows Cash flow statements indicate a net cash use of $21.0 million from operating activities for the first half of 2022, with cash and equivalents ending at $17.7 million Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used for operating activities | $(21,044) | $(15,853) | | Net cash used for investing activities | $(781) | $(297) | | Net cash provided by financing activities | $11,496 | $18,577 | | Net (decrease) increase in cash | $(10,329) | $2,427 | | Cash and cash equivalents at end of period | $17,695 | $34,234 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, financial condition, and operations, highlighting going concern uncertainty, customer concentration, debt obligations, and ongoing legal proceedings - The company has a history of net losses, with an accumulated deficit of $286.3 million as of June 30, 2022. Management has expressed substantial doubt about the company's ability to continue as a going concern and will require additional liquidity to continue operations over the next 12 months3840 - For the six months ended June 30, 2022, Indivior represented approximately 77% of total revenue, highlighting a significant customer concentration risk64 - The company is involved in multiple legal proceedings, including patent infringement cases related to Suboxone and antitrust litigation where it is alleged to have participated in a conspiracy with Indivior139146 - Subsequent to the quarter end, on July 14, 2022, the company received a non-compliance notice from Nasdaq because its stock's minimum bid price was below $1.00 for 30 consecutive business days156 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, noting a 14% revenue decrease in Q2 2022, increased operating expenses, and the critical need for additional funding to sustain operations and advance its pipeline Overview Aquestive is a pharmaceutical company developing orally administered products for CNS diseases and severe allergic reactions, with key pipeline assets Libervant™ and AQST-109, and revenue from licensed products like Suboxone® - The company's proprietary pipeline is focused on CNS diseases and severe allergic reactions, with key late-stage assets being Libervant™ (diazepam buccal film) and AQST-109 (oral epinephrine film)165167170 - The FDA has accepted the resubmitted NDA for Libervant™ but has not yet acted, with the company believing the delay is related to orphan drug exclusivity issues being reviewed by other FDA offices169 - AQST-109, an oral epinephrine product candidate, has received Fast Track designation from the FDA, and the company plans to request an End-of-Phase 2 meeting in Q4 2022173176 - The company is the sole and exclusive manufacturer of Suboxone® Sublingual Film for Indivior, which accounts for a substantial part of its operating revenues180 Results of Operations Q2 2022 total revenues decreased 14% to $13.3 million due to lower license and royalty revenue, while operating expenses, including SG&A and R&D, increased Revenue Comparison (in thousands) | Revenue Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Manufacture and supply | $9,874 | $10,665 | (7)% | | License and royalty | $552 | $2,311 | (76)% | | Proprietary product sales, net | $2,598 | $1,913 | 36% | | Total revenues | $13,265 | $15,345 | (14)% | Expense Comparison (in thousands) | Expense Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Manufacture and supply | $5,242 | $4,466 | 17% | | Research and development | $5,198 | $4,262 | 22% | | Selling, general and administrative | $15,587 | $13,134 | 19% | - The decrease in license and royalty revenue was primarily due to the recognition of $2.1 million in deferred revenue from a terminated agreement and $2.0 million in milestone revenue from KemPharm in 2021, which did not recur in 2022214 - The increase in Selling, general and administrative expenses was mainly related to $2.3 million in severance costs recorded in Q2 2022218 Liquidity and Capital Resources As of June 30, 2022, the company held $17.7 million in cash, relying on equity markets and contingent debt for liquidity, with management expressing substantial doubt about its going concern ability - The company held $17.7 million in cash and cash equivalents as of June 30, 2022220246 - Key sources of liquidity include an "At-The-Market" (ATM) facility with approximately $34.8 million available, and a purchase agreement with Lincoln Park for up to $40 million in shares225226 - Access to an additional $30 million under its 12.5% Notes facility is contingent on the full FDA approval of Libervant for U.S. market access220224 - Net cash used in operating activities for the first six months of 2022 was $21.0 million, an increase from $15.9 million in the prior-year period228229 Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a "smaller reporting company" - The company is exempt from this disclosure requirement because it qualifies as a "smaller reporting company" under SEC rules240 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level242 - No material changes were identified in the company's internal control over financial reporting during the last fiscal quarter243 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, including patent litigation concerning Suboxone, antitrust lawsuits, and a federal securities class action related to Libervant's FDA approval - The company is engaged in ongoing patent litigation alongside Indivior against generic drug manufacturers regarding the Suboxone product139140141 - Aquestive is a defendant in an antitrust lawsuit brought by 41 states and the District of Columbia, alleging participation in an antitrust conspiracy with Indivior related to the launch of Suboxone Sublingual Film146 - A federal securities class action lawsuit was filed against the company and certain officers, alleging violations of federal securities laws related to public statements about the FDA approval process for Libervant154 Item 1A. Risk Factors Key risks include the substantial need for additional capital, potential non-receipt of payments from the Haisco Agreement, stock dilution from equity financing, and going concern uncertainty - The company requires substantial additional capital to fund operations and may not be able to raise it on acceptable terms, if at all246252 - There is a risk of not receiving a $7 million upfront payment and other future payments from the Haisco Agreement for Exservan in China due to regulatory hurdles with the Chinese NMPA related to the U.S. NDA holder status254255 - The use of the ATM facility and the Lincoln Park Purchase Agreement to sell common stock may cause substantial dilution to existing stockholders and could cause the stock price to decline256 - The company's ability to continue as a going concern is dependent on obtaining additional financing, and the financial statements do not include adjustments that might result from this uncertainty258 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None260 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None260 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable260 Item 5. Other Information The company reported no other information for this item - None260 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including an executive employment agreement, CEO and CFO certifications, and XBRL interactive data files - Exhibits filed include an employment agreement for Daniel Barber, CEO and CFO certifications, and XBRL data files263