0001628280-22-020244 | 10-Q | XBRL Viewer | Aquestive Therapeutics INC

aqst_InterestExpenseSaleOfFutureRevenues

$ 1,937,000

aqst_InterestExpenseSaleOfFutureRevenues

3,466,000

aqst_InterestExpenseSaleOfFutureRevenues

3,798,000

Net Proceeds from Issuance of Initial Notes, Warrants and First Offer Rights

aqst_InterestExpenseSaleOfFutureRevenues

6,800,000

aqst_NetProceedsFromIssuanceOfInitialNotesWarrantsAndFirstOfferRights

66,082,000

Liabilities, Sale of Future Royalties, Current

aqst_LiabilitiesSaleOfFutureRoyaltiesCurrent

$ 1,445,000

Percent of Fair Value of Shares, Employees Purchase

aqst_PercentOfFairValueOfSharesEmployeesPurchase

0.85

aqst_ContingentPaymentsReceivableInTheFuture

$ 34,250,000

aqst_ContingentPaymentsReceivableInTheFuture

33,000,000

aqst_ContingentPaymentsReceivableInTheFuture

1,250,000

Debt Instrument, Additional Borrowing Capacity

aqst_ContingentPaymentsReceivableInTheFuture

75,000,000

aqst_DebtInstrumentAdditionalBorrowingCapacity

30,000,000

Debt Instrument, Additional Borrowing Capacity

aqst_DebtInstrumentAdditionalBorrowingCapacity

10,000,000

Debt Instrument, Additional Borrowing Capacity

aqst_DebtInstrumentAdditionalBorrowingCapacity

$ 20,000,000

Principal Payments, Percentage of Face Amount

aqst_PrincipalPaymentsPercentageOfFaceAmount

10.00%

Principal Payments, Percentage of Face Amount

aqst_PrincipalPaymentsPercentageOfFaceAmount

40.00%

Sale of Future Revenue [Text Block]

aqst_SaleOfFutureRevenueTextBlock

Sale of Future Revenue

On November 3, 2020, the Company entered into the Monetization Agreement with Marathon. Under the terms of the Monetization Agreement, the Company sold all of its contractual rights to receive royalties and milestone payments due under the Sunovion License Agreement related to Sunovion's apomorphine product, KYNMOBI®. KYNMOBI, an apomorphine film therapy for the treatment of off episodes in Parkinson’s disease patients, received approval from the FDA on May 21, 2020. In exchange for the sale of these rights, the Company received an upfront payment of $40,000 and an additional payment of $10,000 through the achievement of the first milestone. The Company has received an aggregate amount of $50,000 through June 30, 2022 under the Monetization Agreement.

Under the Monetization Agreement, additional aggregate contingent payments of up to $75,000 may be due to the Company upon the achievement of worldwide royalty and other commercial targets within a specified timeframe, which could result in total potential proceeds of $125,000.

The Company recorded the upfront proceeds of $40,000 and subsequent first milestone of $10,000, reduced by $2,909 of transaction costs, as a liability related to the sale of future revenue that will be amortized using the effective interest method over the life of the Monetization Agreement. As future contingent payments are received, they will increase the balance of the liability related to the sale of future revenue. Although the Company sold all of its rights to receive royalties and milestones, as a result of ongoing obligations related to the generation of these royalties, the Company will account for these royalties as revenue. Its ongoing obligations include the maintenance and defense of the intellectual property and to provide assistance to Marathon in executing a new license agreement for KYNMOBI in the event Sunovion terminates the Sunovion License

Agreement in one or more jurisdictions of the licensed territory under the Sunovion License Agreement. The accounting liabilities, as adjusted over time, resulting from this transaction and any non-cash interest expenses associated to those liabilities do not and will not represent any obligation to pay or any potential future use of cash.

During the second quarter of 2020, under the Sunovion License Agreement, the Company recognized $8,000 of royalty revenue and corresponding royalty receivable, related to the $1,000 annual minimum guaranteed royalty that is due. In connection with the Monetization Agreement, the Company 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.

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, the Company is 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 to the Company. The sum of future royalty payments less the $50,000 in proceeds received and future contingent payments will be recorded as interest expense over the life of the Monetization Agreement. At execution, the estimate of this total interest expense resulted in an effective annual interest rate of approximately 24.9%. This estimate contains significant assumptions that impact both the amount recorded at execution and the interest expense that will be recognized over the life of the Monetization Agreement. The Company will periodically assess the estimated royalty and milestone payments to Marathon from Sunovion and contingent milestone payments from Marathon to the Company. To the extent the amount or timing of such payments is materially different from the original estimates, an adjustment will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of royalty and milestone payments to Marathon from Sunovion, and correspondingly, the amount of interest expense recorded by the Company, most of which are not under the Company's control. Such factors include, but are not limited to, changing standards of care, the initiation of competing products, manufacturing or other delays, generic competition, intellectual property matters, adverse events that result in government health authority imposed restrictions on the use of products, significant changes in foreign exchange rates as the royalties remitted to Marathon are made in U.S. dollars (USD) while a portion of the underlying sales of KYNMOBI will be made in currencies other than USD, and other events or circumstances that are not currently foreseen. Changes to any of these factors could result in increases or decreases to both royalty revenue and interest expense related to the sale of future revenue. Based on the current forecast by Sunovion of estimated KYNMOBI sales as of June 30, 2022, the Company may not receive any of the additional aggregate contingent payments under the Monetization Agreement.

The following table shows the activity of the liability related to the sale of future revenue for the six months ended June 30, 2022:



Liability related to the sale of future revenue, net at December 31, 2021	$	60,284
Royalties related to the sale of future revenue	(823)
Amortization of issuance costs	101
Interest expense related to the sale of future revenue	3,722
Liability related to the sale of future revenue, net (includes current portion of $1,445)	$	63,284

Sale Of Stock, Remaining Amount Available For Offering

aqst_SaleOfStockRemainingAmountAvailableForOffering

$ 34,791,000

Share Based Compensation Arrangement By Share Based Payment Award Options Exercised Forfeitures And Expirations In Period WeightedAverageExercisePrice

aqst_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisedForfeituresAndExpirationsInPeriodWeightedAverageExercisePrice

$ 5.96

Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercised,Forfeitures and Expirations in Period

aqst_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExercisedForfeituresAndExpirationsInPeriod

112,000

Time Frame within the Effective Date of the Amendment

aqst_TimeFrameWithinTheEffectiveDateOfTheAmendment

6 months

Agreement Term

aqst_AgreementTerm

36 months

Right to Sell Common Stock, Value

aqst_RightToSellCommonStockValue

$ 40,000,000

Transfer Of Financial Assets, Accounted For As Sales, Amount Derecognized, Noncurrent

aqst_TransferOfFinancialAssetsAccountedForAsSalesAmountDerecognizedNoncurrent

61,839,000

Transfer Of Financial Assets, Accounted For As Sales, Amount Derecognized, Noncurrent

aqst_TransferOfFinancialAssetsAccountedForAsSalesAmountDerecognizedNoncurrent

$ 59,059,000

Elective redemption percentage of debt

aqst_ElectiveRedemptionPercentageOfDebt

101.56%

Elective redemption percentage of debt

aqst_ElectiveRedemptionPercentageOfDebt

112.50%

aqst_ProceedsFromSaleOfFutureRevenuesNet

$ 40,000,000

aqst_ProceedsFromSaleOfFutureRevenuesNet

10,000,000

aqst_ProceedsFromSaleOfFutureRevenuesNet

50,000,000