10-Q 1 brhc10023862_10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-38599

Aquestive Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	30 Technology Drive, Warren, NJ 07059	82-3827296
(State or other jurisdiction of Incorporation or organization)	(908) 941-1900	(I.R.S. Employer Identification Number)

(Address, Zip Code and Telephone Number of Registrant’s Principal Executive Offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	AQST	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of outstanding shares of the registrant’s common stock, par value of $0.001 per share, as of the close of business on April 30, 2021 was 36,592,144.

AQUESTIVE THERAPEUTICS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three-month periods ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three-month periods ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2021 and 2020	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41

SIGNATURES		42

	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	27,498		$	31,807
Trade and other receivables, net		10,209			6,955
Inventories, net		2,799			2,461
Prepaid expenses and other current assets		3,937			3,402
Total current assets		44,443			44,625
Property and equipment, net		6,279			6,873
Right-of-use assets, net		3,277			3,448
Intangible assets, net		89			102
Other non-current assets		7,835			7,836
Total assets	$	61,923		$	62,884

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	6,687		$	7,089
Accrued expenses		6,371			8,569
Lease liabilities, current		787			728
Deferred revenue, current		437			693
Liability related to the sale of future revenue, current		1,905			1,450
Loans payable, current		3,863			2,575
Total current liabilities		20,050			21,104
Loans payable, net		34,193			34,329
Liability related to the sale of future revenue, net		50,383			47,524
Lease liabilities		2,635			2,846
Deferred revenue		4,699			3,633
Other non-current liabilities		1,761			1,945
Total liabilities		113,721			111,381
Contingencies (note 19)

Stockholders’ deficit:
Common stock, $.001 par value. Authorized 250,000,000 shares; 36,241,358 and 34,569,254 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		36			35
Additional paid-in capital		149,095			137,725
Accumulated deficit		(200,929	)		(186,257	)
Total stockholders’ deficit		(51,798	)		(48,497	)
Total liabilities and stockholders’ deficit	$	61,923		$	62,884

	Three Months Ended March 31,
	2021			2020
Revenues	$	11,122		$	8,765
Costs and expenses:
Manufacture and supply		2,757			3,659
Research and development		3,659			4,354
Selling, general and administrative		13,231			14,613
Total costs and expenses		19,647			22,626
Loss from operations		(8,525	)		(13,861	)
Other income/(expenses):
Interest expense		(2,761	)		(2,771	)
Interest expense related to the sale of future revenue, net		(3,334	)		—
Interest income and other income (expense), net		(52	)		102
Net loss before income taxes		(14,672	)		(16,530	)
Income taxes		—			—
Net loss	$	(14,672	)	$	(16,530	)
Comprehensive loss	$	(14,672	)	$	(16,530	)

Net loss per share - basic and diluted	$	(0.41	)	$	(0.49	)
Weighted-average number of common shares outstanding - basic and diluted		35,563,275			33,569,694

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity/Deficit
	Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity/Deficit
For the period ended March 31, 2021:
Balance at December 31, 2020		34,569,254	$	35	$	137,725		$	(186,257	)	$	(48,497	)
Common stock issued under public equity offering		1,672,104		1		10,196			—			10,197
Costs of common stock issued under public equity offering		—		—		(306	)		—			(306	)
Share-based compensation expense		—		—		1,507			—			1,507
Other		—		—		(27	)		—			(27	)
Net loss		—		—		—			(14,672	)		(14,672	)
Balance at March 31, 2021		36,241,358	$	36	$	149,095		$	(200,929	)	$	(51,798	)

For the period ended March 31, 2020:
Balance at December 31, 2019	33,562,885	$	34	$	124,318		$	(130,474	)	$	(6,122	)
Share-based compensation expense	—		—		1,860			—			1,860
Vested restricted stock units	19,811		—		(37	)		—			(37	)
Net loss	—		—		—			(16,530	)		(16,530	)
Balance at March 31, 2020	33,582,696	$	34	$	126,141		$	(147,004	)	$	(20,829	)

	March 31, 2021			December 31, 2020
Trade receivables	$	8,128		$	4,330
Contract and other receivables		2,657			3,081
Less: allowance for doubtful accounts		(40	)		(40	)
Less: sales-related allowances		(536	)		(416	)
Trade and other receivables, net	$	10,209		$	6,955

	March 31, 2021		December 31, 2020
Allowance for doubtful accounts at beginning of the period	$	40	$	124
Additions charged to expense		—		198
Write-downs charged against the allowance		—		(282	)
Allowance for doubtful accounts at end of the period	$	40	$	40

	Total Sales Related Allowances

Balance at December 31, 2020	$	2,138
Provision		2,164
Payments / credits		(1,959	)
Balance at March 31, 2021	$	2,343

	March 31, 2021		December 31, 2020
Raw material	$	833	$	789
Packaging material		965		1,128
Finished goods		1,001		544
Total inventory, net	$	2,799	$	2,461

	Useful Lives	March 31, 2021			December 31, 2020
Machinery	3-15 yrs	$	18,719		$	21,333
Furniture and fixtures	3-15 yrs		769			1,209
Leasehold improvements	(a)		21,265			21,333
Computer, network equipment and software	3-7 yrs		2,388			2,999
Construction in progress			970			877
			44,111			47,751
Less: accumulated depreciation and amortization			(37,832	)		(40,878	)
Total property and equipment, net		$	6,279		$	6,873

Remainder of 2021	$	967
2022		1,295
2023		944
2024		565
2025		565
2026		424
Total lease payments		4,760
Less: imputed interest		(1,338	)
Total operating lease liabilities	$	3,422

	March 31, 2021			December 31, 2020
Purchased technology-based intangible	$	2,358		$	2,358
Purchased patent		509			509
		2,867			2,867
Less: accumulated amortization		(2,778	)		(2,765	)
Intangible assets, net		89			102

Royalty receivable		7,000			7,000
Other		835			836
Total other non-current assets	$	7,835		$	7,836

	March 31, 2021		December 31, 2020
Accrued compensation	$	3,659	$	6,330
Accrued distribution expenses		1,807		1,722
Other		905		517
Total accrued expenses	$	6,371	$	8,569


Liability related to the sale of future revenue, net at December 31, 2020	$	48,974
Royalties related to the sale of future revenue		(20	)
Amortization of issuance costs		32
Interest expense related to the sale of future revenue		3,302
Liability related to the sale of future revenue, net (includes current portion of $1,905)	$	52,288

Restricted Stock Unit Awards (RSUs):	Number of Units		Weighted Average Grant Date Fair Value
	(in thousands)
Unvested as of December 31, 2020		14	$	11.38
Granted		—		—
Vested		—		—
Forfeited		—		—
Unvested as of March 31, 2021		14	$	11.38
Grant date fair value of shares vested during the period	$	—
Unrecognized compensation costs as of March 31, 2021	$	67

Stock Option Awards:	Number of Options			Weighted Average Exercise Price
	(in thousands)
Outstanding as of December 31, 2020		3,259		$	8.14
Granted		656			5.30
Exercised, Forfeited, Expired		(10	)		(3.55	)

Outstanding as of March 31, 2021		3,905		$	7.67
Vested and expected to vest as of March 31, 2021		3,742		$	7.78
Exercisable as of March 31, 2021		1,592		$	10.22

Expected dividend yield	0	%
Expected volatility	100	%
Expected term (years)	6.1
Risk-free interest rate	1.0

	Three Months Ended March 31,				Change
(In thousands, except %)	2021		2020		$			%
Manufacture and supply revenue	$	6,511	$	6,916	$	(405	)	(6	)%
License and royalty revenue		2,361		426		1,935		454	%
Co-development and research fees		438		263		175		67	%
Proprietary product sales, net		1,812		1,160		652		56	%
Total revenues	$	11,122	$	8,765	$	2,357		27	%

Number		Description

31.1		Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a), as amended, under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2		Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a), as amended, under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

		Aquestive Therapeutics, Inc. (REGISTRANT)

Date:	May 4, 2021	/s/ Keith J. Kendall
		Keith J. Kendall
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	May 4, 2021	/s/ A. Ernest Toth, Jr.
		A. Ernest Toth, Jr.
		Interim Chief Financial Officer
		(Principal Financial Officer)

SEC Form 10-Q filed by Aquestive Therapeutics, Inc.