UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~June 30, 2022~~March 31, 2023

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

For the transition period from to

Commission File Number: 001-35068

ACELRX PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware	41-2193603
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

25821 Industrial Boulevard, Suite 400

Hayward, CA 94545

(650) 216-3500

(Address, including zip code, and telephone number, including area code, 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, $0.001 par value

ACRX

The Nasdaq Global Market

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 Exchange Act.:

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 Exchange Act Rule 12b-2) Yes ☐ No ☒

As of ~~August~~May 5, ~~2022,~~2023, the number of outstanding shares of the registrant’s common stock was ~~147,331,963.~~10,924,294.

ACELRX PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED ~~JUNE 30, 2022~~MARCH 31, 2023

TABLE OF CONTENTS

			Page
PARTI. FINANCIAL INFORMATION		54

	Item 1.	Financial Statements	54

		Condensed Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 (unaudited) and December 31, ~~2021~~2022	54

		Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	6 5

		Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and ~~2021~~2022 (unaudited)	7

		~~Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)~~	8

		Notes to Condensed Consolidated Financial Statements (unaudited)	98

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2320

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33 29

	Item 4.	Controls and Procedures	33 29

PARTII. OTHER INFORMATION		30

34Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	31

	~~Item 1.~~	~~Legal Proceedings~~	34

	~~Item 1A.~~	~~Risk Factors~~	35

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6458

	Item 3.	Defaults Upon Senior Securities	64 58

	Item 4.	Mine Safety Disclosures	64 58

	Item 5.	Other Information	64 58

	Item 6.	Exhibits	6559

Unless the context indicates otherwise, the terms “AcelRx,” “AcelRx Pharmaceuticals,” “we,” “us” and “our” refer to AcelRx Pharmaceuticals, Inc., and its consolidated subsidiaries. “Niyad” ~~is a trademark,~~ and ~~“ACELRX,” “DSUVIA”, “DZUVEO”~~“Fedsyra” are trademarks, and “ACELRX” and “Zalviso” are registered trademarks, all owned by AcelRx Pharmaceuticals, Inc. This report also contains trademarks and trade names that are the property of their respective owners.

This Quarterly Report on Form 10-Q, or Form 10-Q, contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by that section. The forward-looking statements in this Form 10-Q are contained principally under “Part I. Financial Information - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Other Information - Item 1A. Risk Factors”. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Many important factors affect our ability to achieve our objectives, including:

In addition, you should refer to “Part II. Other Information - Item 1A. Risk Factors” in this Form 10-Q for a discussion of these and other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Also, forward-looking statements represent our estimates and assumptions only as of the date of this Form 10-Q. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

	June 30, 2022 (unaudited)			December 31, 2021⁽¹⁾			March 31, 2023 (unaudited)			December 31, 2022⁽¹⁾
Assets
Current Assets:
Cash and cash equivalents	$	15,165		$	7,663		$	13,353		$	15,275
Restricted cash		5,000			0			—			5,000
Short-term investments		7,758			38,967			—			495
Accounts receivable, net		364			160
Inventories, net		901			1,111
Prepaid expenses and other current assets		2,809			2,588			525			1,865
Assets of discontinued operations								3,476			1,931
Total current assets		31,997			50,489			17,354			24,566
Operating lease right-of-use assets		3,985			4,302			49			96
Property and equipment, net		11,075			15,928
In-process research and development asset		8,819			0			8,819			8,819
Other assets		257			2,174			70			70
Restricted cash, net of current portion		0			5,000
Total Assets	$	56,133		$	77,893
Liabilities and Stockholders’ Equity (Deficit)
Assets of discontinued operations								—			13,936
Total assets							$	26,292		$	47,487

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	2,400		$	2,121		$	1,398		$	1,256
Accrued and other liabilities		4,260			6,524			1,418			2,431
Long-term debt, current portion		9,887			8,796			3,318			5,363
Operating lease liabilities, current portion		1,142			1,068			51			100
Liabilities of discontinued operations								3,278			4,620
Total current liabilities		17,689			18,509			9,463			13,770
Long-term debt, net of current portion		0			5,007
Deferred revenue, net of current portion		1,093			1,151
Operating lease liabilities, net of current portion		3,359			3,750
Liability related to the sale of future royalties		0			85,288
Warrant liability								1,787			7,098
Other long-term liabilities		849			81			800			810
Liabilities of discontinued operations								—			3,995
Total liabilities		22,990			113,786			12,050			25,673
Commitments and Contingencies (Note 10)
Stockholders’ Equity (Deficit):
Common stock, $0.001 par value—200,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 147,331,963 and 136,819,647 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		147			137

Commitments and Contingencies
Stockholders’ Equity:
Common stock, $0.001 par value—200,000,000 shares authorized as of March 31, 2023 and December 31, 2022; 10,924,294 and 8,243,680 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively								11			8
Additional paid-in capital		444,591			437,554			448,212			447,635
Accumulated deficit		(411,595	)		(473,584	)		(433,981	)		(425,829	)
Total stockholders’ equity (deficit)		33,143			(35,893	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	56,133		$	77,893
Total stockholders’ equity								14,242			21,814
Total Liabilities and Stockholders’ Equity							$	26,292		$	47,487

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Revenue:

Product sales
$ 570 $ 392 $ 1,012 $ 843
Contract and other collaboration
0 51 0 111
Total revenue
570 443 1,012 954

Operating costs and expenses:

Cost of goods sold
876 1,040 1,660 2,080
Research and development
1,544 724 2,859 1,693
Selling, general and administrative
6,822 8,694 14,160 16,338
Impairment of property and equipment
4,901 0 4,901 0
Total operating costs and expenses
14,143 10,458 23,580 20,111
Income (loss) from operations
(13,573
)
(10,015
)
(22,568
)
(19,157
)
Other income:

Interest expense
(327
)
(614
)
(717
)
(1,286
)
Interest income and other (expense) income, net
51 (16
)
89 60
Non-cash interest income on liability related to the sale of future royalties
463 799 1,136 1,581
Gain on extinguishment of liability related to the sale of future royalties
84,052 0 84,052 0
Total other income
84,239 169 84,560 355
Net income (loss) before income taxes
70,666 (9,846
)
61,992 (18,802
)
Provision for income taxes
(3
)
(5
)
(3
)
(5
)
Net income (loss)
$ 70,663 $ (9,851
)
$ 61,989 $ (18,807
)
Net income (loss) per share of common stock, basic
$ 0.48 $ (0.08
)
$ 0.42 $ (0.16
)
Shares used in computing net income (loss) per share of common stock, basic – See Note 13
147,139,032 119,120,040 146,385,577 116,204,492
Net income (loss) per share of common stock, diluted
$ 0.48 $ (0.08
)
$ 0.42 $ (0.16
)
Shares used in computing net income (loss) per share of common stock, diluted – See Note 13
147,209,065 119,120,040 146,420,437 116,204,492

	Three Months Ended March 31,
	2023			2022
Operating costs and expenses:
Research and development	$	1,047		$	836
Selling, general and administrative		4,281			4,100
Total operating costs and expenses		5,328			4,936
Loss from operations		(5,328	)		(4,936	)
Other income:
Interest expense		(119	)		(390	)
Interest income and other income, net		5,511			38
Non-cash interest income on liability related to sale of future royalties		—			673
Total other income		5,392			321
Net income (loss) from continuing operations		64			(4,615	)
Net loss from discontinued operations– See Note 3		(8,216	)		(4,059	)
Net loss	$	(8,152	)	$	(8,674	)
Net income (loss) per share attributable to stockholders:
Basic and diluted, continuing operations	$	0.00		$	(0.63	)
Basic and diluted, discontinued operations	$	(0.75	)	$	(0.56	)
Basic and diluted loss per share	$	(0.75	)	$	(1.19	)
Shares used in computing net loss per share of common stock, basic and diluted – See Note 10		10,893,954			7,281,187

Common Stock
Additional
Paid-in
Capital

Accumulated
Deficit

Total
Stockholders’
Equity
(Deficit)

Shares

Amount

Balance as of December 31, 2021
136,819,647 $ 137 $ 437,554 $ (473,584 ) $ (35,893 )
Stock-based compensation
— 0 783 0 783
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes
515,393 0 (58 ) 0 (58 )
Issuance of common stock in connection with asset acquisition
9,620,532 10 5,501 0 5,511
Issuance of common stock upon ESPP purchase
153,435 0 58 0 58
Net loss
— 0 0 (8,674 ) (8,674 )
Balance as of March 31, 2022
147,109,007 $ 147 $ 443,838 $ (482,258 ) $ (38,273 )
Stock-based compensation
— 0 753 0 753
Issuance of common stock upon vesting of restricted stock units
222,956 0 0 0 0
Net income
— 0 0 70,663 70,663
Balance as of June 30, 2022
147,331,963 $ 147 $ 444,591 $ (411,595 ) $ 33,143

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance as of December 31, 2022		8,243,680	$	8	$	447,635		$	(425,829	)	$	21,814
Stock-based compensation		—		—		569			—			569
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes		21,700		—		(22	)		—			(22	)
Exercise of prefunded warrants		2,632,898		2		—			—			2
Issuance of common stock upon ESPP purchase		26,016		1		30			—			31
Net loss		—		—		—			(8,152	)		(8,152	)
Balance as of March 31, 2023		10,924,294	$	11	$	448,212		$	(433,981	)	$	14,242

Common Stock Additional
Paid-in
Capital Accumulated
Deficit
Total
Stockholders' Equity
(Deficit)

Shares

Amount

Balance as of December 31, 2020
98,812,008 $ 98 $ 382,637 $ (438,485 ) $ (55,750 )
Stock-based compensation
— 0 1,089 0 1,089
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes
404,172 0 (249 ) 0 (249 )
Net proceeds from issuance of common stock in connection with equity financings
19,701,562 20 36,340 0 36,360
Issuance of common stock upon ESPP purchase
183,132 0 192 0 192
Issuance of common stock upon exercise of stock options
2,125 0 2 0 2
Net loss
— 0 0 (8,956 ) (8,956 )
Balance as of March 31, 2021
119,102,999 118 420,011 (447,441 ) (27,312 )
Stock-based compensation
— 0 1,172 0 1,172
Issuance of common stock upon vesting of restricted stock units
74,438 0 0 0 0
Issuance of common stock upon exercise of stock options
2,369 1 1 0 2
Net loss
— 0 0 (9,851 ) (9,851 )
Balance as of June 30, 2021
119,179,806 $ 119 $ 421,184 $ (457,292 ) $ (35,989 )

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Amount
Balance as of December 31, 2021		6,840,967	$	7	$	437,684		$	(473,584	)	$	(35,893	)
Stock-based compensation		—		—		783			—			783
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes		25,769		—		(58	)		—			(58	)
Issuance of common stock in connection with asset acquisition		481,026		—		5,511			—			5,511
Issuance of common stock upon ESPP purchase		7,671		—		58			—			58
Net loss		—		—		—			(8,674	)		(8,674	)
Balance as of March 31, 2022		7,355,433	$	7	$	443,978		$	(482,258	)	$	(38,273	)

Six Months
Ended June 30,

2022

2021

Cash flows from operating activities:

Net income (loss)
$ 61,989 $ (18,807 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:

Non-cash royalty revenue related to royalty monetization
0 (83 )
Non-cash interest income on liability related to royalty monetization
(1,136 ) (1,581 )
Depreciation and amortization
881 1,029
Non-cash interest expense related to debt financing
250 430
Stock-based compensation
1,536 2,261
Non-cash gain on termination of liability related to royalty monetization (84,152 ) 0
Impairment of property and equipment
4,901 0
Other
(7 ) (61 )
Changes in operating assets and liabilities:

Accounts receivable
(204 ) 531
Inventories
201 143
Prepaid expenses and other assets
(212 ) (277 )
Accounts payable
286 (65 )
Accrued liabilities
(1,582 ) (963 )
Operating lease liabilities
(402 ) (563 )
Deferred revenue
(29 ) (49 )
Net cash used in operating activities
(17,680 ) (18,055 )
Cash flows from investing activities:

Purchase of property and equipment
(158 ) (1,615 )
Purchase of investments
(7,369 ) (38,201 )
Cash paid for asset acquisition, net of cash acquired
(1,687 ) 0
Proceeds from maturities of investments
38,562 24,784
Net cash provided by (used in) investing activities
29,348 (15,032 )
Cash flows from financing activities:

Payment of long-term debt
(4,166 ) (4,167 )
Net proceeds from issuance of common stock in connection with equity financings
0 36,360
Net proceeds from issuance of common stock through equity plans
58 196
Payment of employee tax obligations related to vesting of restricted stock units
(58 ) (249 )
Net cash (used in) provided by financing activities
(4,166 ) 32,140
Net increase in cash, cash equivalents and restricted cash
7,502 (947 )
Cash, cash equivalents and restricted cash—Beginning of period (See reconciliation in Note 1)
12,663 27,274
Cash, cash equivalents and restricted cash—End of period (See reconciliation in Note 1)
$ 20,165 $ 26,327

			Three Months Ended March 31,
			2023			2022
Cash flows from operating activities:
Net loss			$	(8,152	)	$	(8,674	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest income on liability related to royalty monetization				—			(673	)
Depreciation and amortization				262			420
Non-cash interest expense related to debt financing				38			134
Stock-based compensation				569			783
Revaluation of warrant liability				(5,311	)		—
Impairment of net assets held for sale				7,007			—
Impairment of fixed assets				1,065			—
Gain on termination of lease liabilities				(1,098	)		—
Gain on extinguishment of debt liability				(400	)		—
Other				(15	)		2
Changes in operating assets and liabilities:
Accounts receivable				33			(24	)
Inventories				61			57
Prepaid expenses and other assets				1,550			360
Accounts payable				100			249
Accrued liabilities				(960	)		(1,512	)
Operating lease liabilities				30			(56	)
Deferred revenue				(29	)		—
Net cash used in operating activities				(5,250	)		(8,934	)
Cash flows from investing activities:
Purchase of property and equipment				(100	)		(89	)
Purchase of investments				—			(6,175	)
Cash paid for asset acquisition, net of cash acquired				—			(1,156	)
Proceeds from maturities of investments				500			27,596
Net cash provided by investing activities				400			20,176
Cash flows from financing activities:
Payment of long-term debt				(2,083	)		(2,083	)
Net proceeds from issuance of common stock in connection with exercise of prefunded warrants				2			—
Net proceeds from issuance of common stock through equity plans				31			58
Payment of employee tax obligations related to vesting of restricted stock units				(22	)		(58	)
Net cash used in financing activities				(2,072	)		(2,083	)
Net change in cash, cash equivalents and restricted cash				(6,922	)		9,159
Cash, cash equivalents and restricted cash—Beginning of period				20,275			12,663
Cash, cash equivalents and restricted cash—End of period			$	13,353		$	21,822

NONCASH INVESTING ACTIVITIES:
Purchases of property and equipment in accounts payable and accrued liabilities	1,464	839		—		$	1,275
Liability for held back shares in connection with asset acquisition in other long-term liabilities	800	0
Asset acquisition costs in accounts payable and accrued liabilities				—		$	531
Liability for hold back shares in connection with asset acquisition in other long-term liabilities				—		$	800
Issuance of common stock in connection with asset acquisition	5,511	0		—		$	5,511
Establishment of right-of-use asset and lease liability	85	0

AcelRx Pharmaceuticals, Inc., or the Company, or AcelRx, was incorporated in Delaware on July 13, 2005 as SuRx, Inc. The Company subsequently changed its name to AcelRx Pharmaceuticals, Inc. The Company’s operations are based in Hayward, California.

AcelRx is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings. ~~DSUVIA®(known~~

On March 12, 2023, the Company entered into an Asset Purchase Agreement, or the Purchase Agreement, with Vertical Pharmaceuticals, LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, pursuant to which Alora agreed to acquire certain assets and assume certain liabilities of AcelRx relating to its sufentanil sublingual tablet product referred to as ~~DZUVEO® in Europe) and Zalviso® areboth focused on the treatment of acute pain, and each utilize sufentanil, delivered via a non-invasive route of sublingual administration, exclusively~~DSUVIA or DZUVEO, or any other single-dose pharmaceutical product for use in medically supervised ~~settings. On~~settings containing a sublingual tablet that includes sufentanil as the sole active ingredient, as a ~~November 2, 2018,~~ 30~~the U.S. Food and Drug Administration,~~ mcg tablet or ~~FDA, approved DSUVIA~~other dosage form or strength as reasonably necessary for ~~use in adults in a certified medically supervised healthcare setting, such as hospitals, surgical centers, and emergency departments, for the~~lifecycle management, ~~of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate. The commercial launch of DSUVIA in the United States occurred in the~~ ~~first~~ ~~quarter of~~ ~~2019.~~ In ~~June 2018,~~ the European Commission, or EC, granted marketing approval of DZUVEO for the management of acute moderate to severe pain in adults in medically monitored settings. AcelRx is further developing a distribution capability and commercial organization to continue to market and sell DSUVIA in the United States. In geographies where AcelRx decides ~~not~~ ~~to commercialize products by itself, the Company~~ ~~may~~ ~~seek to out-license commercialization rights. The Company currently intends to commercialize and promote DSUVIA/DZUVEO outside the United States with~~ ~~one~~ ~~or more strategic partners, and, in~~ ~~July 2021,~~ entered into a License and Commercialization Agreement with Laboratoire Aguettant, or Aguettant, for Aguettant to commercialize DZUVEO in the European Union, Norway, Iceland, Liechtenstein, Andorra, Vatican City, Monaco, Switzerland and the United Kingdom, or the ~~DZUVEO Agreement. Zalviso was approved in Europe and was commercialized by Grünenthal GmbH, or Grünenthal, through~~Product. The closing of the Purchase Agreement occurred on ~~May 12, 2021~~April 3, 2023 (see ~~Termination of Gr~~ü~~nenthal Agreements~~ ~~below). In~~ ~~July 2022,~~ ~~the European Marketing Authorization for Zalviso was withdrawn. In~~ ~~July 2021,~~ the Company also entered into a separate License and Commercialization Agreement with Aguettant pursuant to which the Company obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States (i) an ephedrine pre-filled syringe containing 10 ~~ml of a solution of~~Note 3, ~~mg/ml ephedrine hydrochloride for injection,~~“Discontinued Operations” and ~~(ii) a phenylephrine pre-filled syringe containing~~Note 1011, ~~ml of a solution of~~ 50 ~~mcg/ml phenylephrine hydrochloride for injection.~~ “Subsequent Events” below).

On January 7, 2022, the Company ~~closed the definitive merger agreement dated as of~~ ~~November 14, 2021,~~ ~~or the Merger Agreement, to acquire~~acquired Lowell Therapeutics, Inc., or Lowell, a privately held company (see Note 4.4, “Asset Acquisition” below)~~. As~~, and, as a result ~~of the Merger Agreement, the Company~~ acquired Niyad™, a regional anticoagulant for the dialysis circuit during continuous renal replacement therapy for acute kidney injury patients in the hospital, that the Company plans to study under an investigational device exemption, or IDE, and which has received Breakthrough Device Designation status from the FDA. While not approved for commercial use in the ~~U.S.,~~United States, the active drug component of Niyad, nafamostat, has been approved in Japan and South Korea as a regional anticoagulant for the dialysis circuit, disseminated intravascular coagulation, and acute pancreatitis. Niyad is a lyophilized formulation of nafamostat, a broad-spectrum, synthetic serine protease inhibitor, with anticoagulant, anti-inflammatory, and potential anti-viral activities. The second intended indication for Niyad is as a regional anticoagulant for the dialysis circuit for chronic kidney disease patients undergoing intermittent hemodialysis in dialysis centers. In addition, the Company acquired LTX-608, a proprietary nafamostat formulation for direct IV infusion that it intends to develop for the treatment of acute respiratory distress syndrome, or ARDS, and disseminated intravascular coagulation, or DIC.

On ~~December 16, 2013,~~ ~~AcelRx and Grünenthal entered into a Collaboration and License Agreement, or the License Agreement, which was amended effective~~ ~~July 17, 2015~~ ~~and~~ ~~September 20, 2016,~~ ~~or the Amended License Agreement, which granted Grünenthal rights to commercialize the Zalviso PCA system, or the Product, in the~~ 28 European Union, or EU, member states, at the time of the agreement, plus Switzerland, Liechtenstein, Iceland, Norway and Australia (collectively, the Zalviso Territory) for human use in pain treatment within, or dispensed by, hospitals, hospices, nursing homes and other medically supervised settings, (collectively, the Field). In ~~September 2015,~~ the EC granted marketing approval for the marketing authorization application, or MAA, previously submitted to the EMA, for Zalviso for the management of acute moderate-to-severe post-operative pain in adult patients. On ~~December 16, 2013,~~ AcelRx and Grünenthal entered into a Manufacture and Supply Agreement, or the MSA, and together with the License Agreement, the Agreements. Under the MSA, the Company exclusively manufactured and supplied the Product to Grünenthal for the Field in the Zalviso Territory. On July ~~22, 2015,~~ ~~the Company and Grünenthal amended the MSA, or the Amended MSA, effective as of~~ ~~July 17, 2015.~~ ~~The Amended MSA and the Amended License Agreement are referred to as the Grünenthal Agreements.~~

On ~~May 18, 2020,~~ ~~the Company received a notice from Grünenthal that it had exercised its right to terminate the Grünenthal Agreements, effective~~ ~~November 13, 2020.~~ ~~The terms of the Grünenthal Agreements were extended to~~ ~~May 12,~~14, 2021,to enable Grünenthal to sell down its Zalviso inventory, a right it had under the Grünenthal Agreements. The rights to market and sell Zalviso in the Zalviso Territory reverted back to the Company on ~~May 12, 2021.~~ In ~~July 2022,~~ ~~the European Marketing Authorization for Zalviso was withdrawn.~~

On ~~September 18, 2015,~~ the Company sold the majority of the royalty rights and certain commercial sales milestones it was entitled to receive under the Amended License Agreement with Grünenthal to PDL BioPharma, Inc., or PDL, in a transaction referred to as the Royalty Monetization. On ~~August 31, 2020,~~ ~~PDL announced it sold its royalty interest for Zalviso to SWK Funding, LLC, or SWK. On~~ ~~May 31, 2022,~~ the Company entered into a License and Commercialization Agreement, or the ~~Termination~~PFS Agreement, with ~~SWK~~Laboratoire Aguettant, or Aguettant, pursuant to ~~fully terminate the Royalty Monetization for~~ which the Company ~~paid cash consideration of $0.1 million. Neither PDL nor SWK retains any further interest~~obtained the exclusive right to develop and, subject to FDA approval, commercialize in the ~~Royalty Monetization. Accordingly, effective~~United States an ephedrine pre-filled syringe, or PFS, containing ~~May 31, 2022,~~ 10 ml of a solution of 3 mg/ml ephedrine hydrochloride for injection, and (ii) a phenylephrine PFS containing 10 ml of a solution of 50 mcg/ml phenylephrine for injection. Aguettant will supply the ~~Royalty Monetization is~~ no ~~longer reflected on~~Company with the ~~Company’s financial statements or other records as a sale of assets to PDL or SWK~~products for use in commercialization and, all security interests and other liens of every type held by the parties to the Royalty Monetization have been terminated and automatically released without further action by any party. The $84.1 million gain on extinguishment of the liability related to the sale of future royalties is recognizedif they are approved in the ~~Condensed Consolidated Statements of Operations as Other Income.~~U.S.

The ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements for the three ~~and~~ ~~six~~months ended ~~June 30, 2022~~March 31, 2023 were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The ~~termination of the Royalty Monetization resulted in net income for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022;~~ ~~however, before this, the~~ Company ~~had~~has incurred recurring operating losses and negative cash flows from operating activities ~~since inception~~ and expects to continue to incur operating losses and negative cash flows in the future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Considering the Company’s current cash resources and its current and expected levels of operating expenses for the next twelve months, management expects to need additional capital to fund its planned operations ~~for at least~~prior to the ~~one~~12 ~~year from~~month anniversary of the date this Quarterly Report on Form 10-Q is filed with the United States Securities and Exchange Commission, or the SEC. Management may seek to raise such additional capital through public or private equity offerings, including under the Controlled Equity Offering^SM Sales Agreement, or the ATM Agreement, with Cantor Fitzgerald & Co., or Cantor, debt securities, ~~monetize~~a new debt facility, monetizing or ~~securitize~~securitizing certain assets, ~~refinance its loan agreement, enter~~entering into product development, license or distribution agreements with third parties, or ~~divest DSUVIA in the United States, DZUVEO in Europe, or~~divesting any of the Company’s remaining product candidates. While management believes its plans to raise additional funds will alleviate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern, these plans are not entirely within the Company’s control and cannot be assessed as being probable of occurring. Additional funds may not be available when the Company needs them on terms that are acceptable to the Company, or at all. If adequate funds are not available, the Company may be required to further reduce its workforce ~~reduce the scope of,~~ or ~~cease, the commercial launch of DSUVIA, or~~delay the development of its regulatory filing plans for its product candidates in advance of the date on which the Company’s cash resources are exhausted to ensure that the Company has sufficient capital to meet its obligations and continue on a path designed to preserve stockholder value. In addition, if additional funds are raised through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish rights to its technologies, future revenue streams or product candidates, or to grant licenses on terms that may not be favorable to the Company.

On September 23, 2022, at a special meeting of stockholders, the Company's stockholders authorized the Company’s Board of Directors to effect a reverse stock split of all outstanding shares of common stock in a range of 1-for-10 to 1-for-30. The Board of Directors subsequently approved a reverse stock split with a ratio of 1-for-20, or the Reverse Stock Split. On October 25, 2022, following the filing of a certificate of amendment to the Company’s amended and restated certificate of incorporation, every 20 shares of the Company's common stock that were issued and outstanding automatically converted into one outstanding share of common stock. The Reverse Stock Split affected all shares of common stock outstanding immediately prior to the effective time of the Reverse Stock Split, as well as the number of shares of common stock available for issuance under the Company's equity incentive and employee stock purchase plans. Outstanding stock options, restricted stock units and warrants were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased. The Reverse Stock Split affected all holders of common stock uniformly and did not affect any stockholder's percentage of ownership interest. The par value of the Company's common stock remained unchanged at $0.001 per share and the number of authorized shares of common stock remained the same after the Reverse Stock Split.

As the par value per share of the Company's common stock remained unchanged at $0.001 per share, the change in the common stock recorded at par value has been reclassified to additional paid-in-capital on a retroactive basis. All references to shares of common stock, stock options, restricted stock units and warrants and per share data for all periods presented in the accompanying unaudited condensed consolidated financial statements and notes thereto have been adjusted to reflect the Reverse Stock Split on a retroactive basis.

The ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the United ~~States~~States. Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the three ~~and~~ ~~six~~months ended ~~June 30, 2022,~~March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022,~~2023, or any future period. The ~~Condensed Consolidated Balance Sheet~~condensed consolidated balance sheet as of December 31, ~~2021,~~2022, was derived from the Company’s ~~consolidated~~ audited financial statements as of December 31, ~~2021,~~2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~10, 2022.~~31, 2023. These ~~consolidated~~ financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which includes a broader discussion of the Company’s business and the risks inherent therein.

Certain prior year amounts in the Consolidated Financial Statements have been reclassified to conform to the current year's presentation. In particular, the restricted cash classified as “Cash and cash equivalents” has been reclassified to “Restricted cash, net of current portion” in the Condensed Consolidated Balance Sheets as of ~~December 31, 2021~~ ~~and in the Condensed Consolidated Statement of Cash Flows as of~~ ~~December 31, 2021,~~ ~~June 30, 2021~~ ~~and~~ ~~December 31, 2020.~~ ~~See “—Cash, Cash Equivalents and Restricted Cash” below.~~

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management evaluates its estimates on an ongoing basis including critical accounting policies. Estimates are based on historical experience and on various other market-specific and other relevant assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

~~Cash, Cash Equivalents and Restricted Cash~~Recently Adopted Accounting Pronouncements

~~The Company considers all highly liquid investments with an original maturity (at date of purchase) of~~ ~~three~~ ~~months or less to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks.~~

On ~~May 30, 2019,~~ ~~the Company entered into the Loan Agreement with Oxford Finance LLC, or Oxford, as the Lender. The Loan Agreement requires that the Company always maintain unrestricted cash of~~ ~~not~~ ~~less than $5.0 million in accounts subject to control agreements in favor of the Lender, tested monthly as of the last day of the month. As of~~ ~~June 30, 2022,~~ ~~the Company has classified these unrestricted funds as restricted cash on the Condensed Consolidated Balance Sheets.~~

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts in the Condensed Consolidated Statement of Cash Flows:

The Company's restructuring costs consist of employee termination benefit costs. Liabilities for costs associated with the cost reduction plan are recognized when the liability is incurred and are measured at fair value. One-time termination benefits are expensed at the date the Company notifies the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period.

In ~~May 2022,~~June 2016, the ~~Company initiated a reorganization that eliminated approximately 40% of its employees, primarily within~~Financial Accounting Standards Board, or FASB, issued Topic 326, or the ~~commercial organization. For the~~ ~~three~~ ~~months ended~~ ~~June 30, 2022,~~ Credit Losses standard, which the Company ~~incurred approximately $0.5 million in employee termination benefits~~adopted using a modified retrospective approach on January 1, 2023. Topic 326 requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value. The adoption of this standard did not have a material impact on the Company’s financial statements or related ~~to this restructuring, all which has been paid at~~ disclosures.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the ~~second~~ ~~quarter~~consolidated financial position, statements of ~~2022.~~No ~~additional expenses are anticipated in connection with this cost reduction plan.~~operations and cash flows.

The Company’s significant accounting policies are detailed in its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no significant changes to the Company’s significant accounting policies during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, from those previously disclosed in its ~~2021~~2022 Annual Report on Form 10-K, except as follows:

~~Acquisitions~~In accordance with ASC 205-20 “Presentation of Financial Statements: Discontinued Operations”, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, non-current assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes, shall be reported as components of net loss separate from the net income (loss) of continuing operations.

The ~~Company evaluates acquisitions of assets and other similar transactions to assess whether or~~ ~~not~~ ~~the transaction should be accounted for as a~~Company’s DSUVIA business ~~combination or asset acquisition by~~ ~~first~~ applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If ~~not,~~ ~~further determination is required as to whether or~~ ~~not~~ ~~the Company has acquired inputs and processes that have the ability to create outputs, which would meet~~met the definition of a ~~business. Significant judgment is required~~discontinued operation as of March 31, 2023. Accordingly, the Company has classified the results of the DSUVIA business as discontinued operations in its unaudited condensed consolidated statements of operations for all periods presented. All assets and liabilities associated with the DSUVIA business were classified as assets and liabilities of discontinued operations in the ~~application of~~unaudited condensed consolidated balance sheets for the ~~screen test to determine whether an acquisition is a business combination or an acquisition of assets.~~

~~Acquisitions meeting~~periods presented. All amounts included in the ~~definition of business combinations are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated~~notes to the ~~net assets acquired at their respective fair values. In a business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.~~

unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted. For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition. Direct transaction costs are recognized as part of the cost of an asset acquisition. The Company also evaluates which elements of a transaction should be accounted for as a part of an asset acquisition and which should be accounted for separately. The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. Goodwill isadditional information, see Note ~~not~~3, recognized in an asset acquisition. Any difference between the cost of an asset acquisition and the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on their relative fair values. When a transaction accounted for as an asset acquisition includes an in-process research and development (“IPR&D”) asset, the IPR&D asset is only capitalized if it has an alternative future use other than in a particular research and development project. For an IPR&D asset to have an alternative future use: (a) the Company must reasonably expect that it will use the asset acquired in the alternative manner and anticipate economic benefit from that alternative use, and (b) the Company’s use of the asset acquired is ~~not~~ contingent on further development of the asset subsequent to the acquisition date (that is, the asset can be used in the alternative manner in the condition in which it existed at the acquisition date)“Discontinued Operations”. ~~Otherwise, amounts allocated to IPR&D that have~~ no ~~alternative use are expensed. Asset acquisitions~~ ~~may~~ ~~include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets. Contingent consideration is~~ ~~not~~ recognized until all contingencies are resolved and the consideration is paid or probable of payment, at which point the consideration is allocated to the assets acquired on a relative fair value basis.

In ~~June 2016,~~ ~~the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU,~~ ~~2016~~-~~13,~~ “~~Financial Instruments~~ – ~~Credit Losses: Measurement of Credit Losses on Financial Instruments,~~~~” or ASU~~ ~~2016~~-~~13.~~ ~~ASU~~ ~~2016~~-13 replaces the incurred loss impairment model in current GAAP with a model that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. ASU ~~2016~~-13 ~~is effective for the Company beginning~~ ~~January 1, 2023,~~ ~~with early adoption allowed beginning~~ ~~January 1, 2020.~~ In ~~May 2019,~~ ~~the FASB issued ASU~~ ~~2019~~-~~05,~~ “~~Financial Instruments~~ – ~~Credit Losses,~~~~” or ASU~~ ~~2019~~-~~05,~~ to allow entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. The new effective dates and transition align with those of ASU ~~2016~~-~~13.~~ ~~Management is currently assessing the date of adoption and the impact ASU~~ ~~2016~~-13 ~~and ASU~~ ~~2019~~-05 ~~will have on the Company, but it does~~ ~~not~~ ~~anticipate adoption of these new standards to have a material impact on the Company’s financial position, results of operations or cash flows.~~

In ~~March 2020,~~ ~~the FASB issued ASU~~ ~~2020~~-~~04,~~ “~~Reference Rate Reform (Topic~~ ~~848~~~~): Facilitation of the Effects of Reference Rate Reform on Financial Reporting,~~” which provides elective amendments for entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. These amendments are effective immediately and ~~may~~ ~~be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before~~ ~~December 31, 2022.~~ In ~~January 2021,~~ ~~the FASB issued ASU~~ ~~2021~~-~~01,~~ “~~Reference Rate Reform (Topic~~ ~~848~~),~~” to expand and clarify the scope of Topic~~ ~~848~~ ~~to include derivative instruments on discounting transactions. The amendments in this ASU are effective in the same timeframe as ASU~~ ~~2020~~-~~04.~~ ~~The Company is currently evaluating the impact this guidance will have on its Consolidated Financial Statements.~~

The Company classifies its marketable securities as ~~available-for-sale~~available for sale and records its investments at fair value. Available-for-sale securities are carried at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income (loss). ~~Marketable securities which have maturities beyond~~ ~~one~~ ~~year as of the end of the reporting period are classified as non-current.~~

~~The table below summarizes the Company’s cash, cash equivalents, restricted cash and short-term investments (in thousands):~~

~~There were 0 other-than-temporary impairments for these securities at~~ ~~June 30, 2022~~ or ~~December~~ ~~31,~~~~2021.~~ ~~NaN gross realized gains or losses were recognized on the available-for-sale securities and, accordingly, there were~~ no ~~amounts reclassified out of accumulated other comprehensive income (loss) to earnings during the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021.~~

As of ~~June 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, the contractual maturity of all investments held was less than one year.

The tables below summarize the Company’s cash, cash equivalents and short-term investments (in thousands):

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, any significant deterioration in economic conditions. There were no material realized or unrealized gains or losses on marketable securities for the three months ended March 31, 2023 or the twelve months ended December 31, 2022. As such, we did not record a credit allowance for the three months ended March 31, 2023.

The Company’s financial instruments consist of Level I and II ~~assets and Level III liabilities.~~assets. Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. For Level II instruments, the Company estimates fair value by utilizing third ~~party~~-party pricing services in developing fair value measurements where fair value is based on valuation methodologies such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. Such Level II instruments typically include U.S. ~~treasury,~~Treasury, U.S. government agency securities and commercial paper. As of ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021,~~2022, the Company held, in addition to Level II assets, a ~~contingent put option~~warrant liability ~~associated with~~related to the ~~Loan Agreement with Oxford, determined to be a Levell III instrument.~~2022 Warrants (see Note 12, “Warrants” in the Company’s 2022 Annual Report on Form 10-K for further description). The ~~Company’s estimate of~~ fair value of the ~~contingent put option~~warrant liability was ~~determined by~~estimated using ~~a risk-neutral valuation model, wherein~~ the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate (see Note 8, “Warrants” below). The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value ~~of the underlying debt facility is estimated both with and without the presence of the default provisions, holding all other assumptions constant.~~at each reporting period. The ~~resulting difference between the~~ ~~two~~ ~~estimated fair values is the~~ estimated fair value of the ~~default provisions, or the contingent put option, which is included under other long-term liabilities on the Condensed Consolidated Balance Sheets.~~warrant liability represents a Level III measurement. Changes to the estimated fair value of ~~this liability is~~these liabilities are recorded in interest income and other income, net in the ~~Condensed Consolidated Statements~~consolidated statements of Operations. The fair value of the underlying debt facility is estimated by calculating the expected cash flows in consideration of an estimated probability of default and expected recovery rate in default and discounting such cash flows back to the reporting date using a risk-free rate.operations.

The following ~~table sets~~tables set forth the fair value of the Company’s financial assets ~~and liabilities~~ by level within the fair value hierarchy (in thousands):

The following tables set forth a summary of the changes in the fair value of the Company’s Level III ~~financial liabilities~~warrant liability for the three ~~and~~ ~~six~~months ended ~~June 30, 2022~~ March 31, 2023 (~~and~~ ~~2021~~ ~~(in~~in thousands):

There were 0no transfers between Level I, Level II or Level III of the fair value hierarchy during the three ~~and~~ ~~six~~months ended ~~June 30, 2022~~March 31, 2023 and the year ended ~~2021.~~December 31, 2022.

~~Inventories consist of raw materials, work in process and finished goods and are stated at the lower of cost or net realizable value and consist of the following (in thousands):~~

~~The Company did~~ ~~not~~ ~~record any inventory impairment charges for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022.~~ ~~The Company recorded inventory impairment charges of $0 and $0.1 million for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2021,~~ ~~respectively, primarily related to Zalviso component parts inventory.~~

On ~~January 7, 2022,~~March 12, 2023, the Company ~~closed~~entered into the ~~Merger~~Purchase Agreement with ~~Lowell. Under the terms~~Alora for Alora’s acquisition of ~~the agreement, the Company acquired the product nafamostat,~~all assets related to DSUVIA, including inventories, equipment and the associated patents and historical know-how. The acquisition was valued at approximately $32.5 million plus cash acquired of $3.5 million and certain other adjustments. Pursuant to the terms of the Merger Agreement, all options to purchase capital stock and all shares of Lowell capital stock issued and outstanding immediately before the effective time of the merger were cancelledintellectual property in exchange for consideration at closing of $1.1 million, a 15% royalty on commercial sales of DSUVIA, 75% royalty on sales of DSUVIA to the ~~right to receive (i) 9,009,538 shares~~Department of ~~AcelRx common stock issued at a~~ ~~five~~ ~~day daily volume weighted average price of $0.57284 per share as of~~ ~~January 7, 2022,~~ or the Acquisition Date, valued at $5.2 million on closing, (ii) cash in the amount of $3.5 million, (iii) 1,396,526 shares of AcelRx common stock to be held back to satisfy any potential indemnificationDefense and ~~other obligations of Lowell and its securityholders valued at $0.8 million, (iv) $0.5 million cash and stock paid for sellers’ transaction costs and (v)~~ up to ~~$26.0~~$116.5 million ~~of contingent consideration payable~~ in ~~cash or stock at AcelRx's option, upon the achievement of regulatory and~~ sales-based milestones.

The ~~shares issued pursuant to~~Company’s DSUVIA business met the ~~Merger Agreement were issued in private placements pursuant to the exemption from registration under Section~~ 4~~(a)(~~2~~) of the Securities Act of~~ ~~1933,~~ ~~as amended, or the Securities Act, including Rule~~ ~~506~~ ~~of Regulation D promulgated under the Securities Act, or Regulation D, without general solicitation as a transaction~~ ~~not~~ ~~involving any public offering.~~

~~The Merger Agreement has been accounted for as an asset acquisition~~definition of a ~~single IPR&D asset that has an alternative future use. The initial measurement~~discontinued operation as of March 31, 2023. Accordingly, the ~~asset purchased~~assets and liabilities associated with these operations have been classified as assets and liabilities of $8.8 million was based on the purchase cost of $12.4 million including (i) $6.0 million common stock fair value on the closing date (issued and held back on the acquisition date), (ii) $0.5 million seller’s costs paid by the Company, (iii) $3.5 million cash and (iv) approximately $2.5 million of transaction costs less purchase price allocated to cash acquired of $3.5 million. Due to the nature of regulatory and sales-based milestones, the contingent consideration of up to $26.0 million was ~~not~~ ~~included~~discontinued operations in the ~~initial cost of the assets purchased as they are contingent upon events that are outside the Company’s control, such as regulatory approvals~~ accompanying condensed consolidated balance sheets at March 31, 2023 and ~~issuance of patents, and are~~ ~~not~~December 31, 2022. considered probable until notification is received. However, upon achievement or anticipated achievement of each milestone, the Company shall recognize the related, appropriate payment as an additional cost of the acquired IPR&D asset. As of ~~June 30, 2022,~~ ~~none~~ ~~of the contingent events has occurred.~~

The ~~following table summarizes the total consideration for the acquisition and the~~carrying value of the ~~IPR&D asset acquired (in thousands):~~

⁽¹⁾ ~~Recorded as Other long-term liabilities in the Condensed Consolidated Balance Sheets.~~

⁽²⁾~~Recorded as In-process research~~disposal group was higher than its fair value, less costs to sell, and ~~development asset in the Condensed Consolidated Balance Sheets.~~

accordingly, an impairment loss was required at March 31, 2023. The ~~IPR&D asset will be treated initially as an indefinite-lived asset,~~operations and ~~as a long-lived asset, it will be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount~~cash flows of the ~~asset~~DSUVIA business are presented as discontinued for all periods presented. The transaction closed on ~~may~~ April 3, 2023 (see Note ~~not~~11, be recoverable. If the IPR&D asset achieves regulatory approval and the asset life is determined to be finite, the asset’s useful life will be estimated, and the asset will be amortized over its remaining useful life. NaN impairment losses were recorded on the IPR&D asset during the ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022.~~

~~As of~~ ~~June 30, 2022,~~ the Company decided to realign its cost structure from a focus on commercialization to a focus on advancing our recently acquired late-stage development pipeline, namely the pre-filled syringes and Niyad product candidates. As a result, the Company also decided to ~~not~~ ~~focus any development resources on Zalviso in the United States and does~~ ~~not~~ expect to resubmit the Zalviso NDA in the foreseeable future. In addition, due to the termination of the agreements with Grünenthal for Zalviso in Europe and the related withdrawal of the Marketing Authorization in Europe in ~~July 2022,~~ ~~the Company does~~ ~~not~~ ~~expect any revenues from Zalviso in Europe in the foreseeable future. Accordingly, the Company determined that it is~~ no longer probable that it will realize the future economic benefit associated with the costs of the Zalviso-related purchased equipment and manufacturing-related facility improvements the Company has made at its contract manufacturer and, therefore, recorded a non-cash impairment charge of $4.9 million to the Zalviso-related assets for the ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022.~~ ~~The impairment charge was recorded as operating expense in the Condensed Consolidated Statement of Operations. Depreciation and amortization expense was $0.2 million and $0.5 million for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022,~~ ~~respectively, and $0.3 million and $0.5 million for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022,~~ ~~respectively.~~“Subsequent Events” below).

~~The following table summarizes revenue from contracts with customers for the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021~~ ~~into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (in thousands):~~

¹ ~~Represents sales to our partner in Europe for their expected product launch in the~~ ~~third~~ ~~quarter of~~ ~~2022.~~

~~For additional details on the Company’s accounting policy regarding revenue recognition, refer to Note~~ 1 ~~“Organization and Summary of Significant Accounting Policies - Revenue from Contracts with Customers” in the Company’s Annual Report on Form~~ 10~~-K for the year ended~~ ~~December 31, 2021.~~

~~The Company’s commercial launch of DSUVIA in the United States occurred in the~~ ~~first~~ ~~quarter of~~ ~~2019.~~ ~~Zalviso was sold in Europe by the Company’s collaboration partner, Grünenthal, through~~ ~~May~~ 12 ~~2021,~~ ~~at which time, due to the termination of the Grünenthal Agreements, the rights to market and sell Zalviso in Europe reverted back to the Company. In~~ ~~July 2022,~~ ~~the European Marketing Authorization for Zalviso was withdrawn. DZUVEO sales in Europe by the Company’s collaboration partner, Aguettant, have~~ ~~not~~ ~~commenced as of~~ ~~June 30, 2022.~~

Contract and other collaboration revenue includes revenue under the Grünenthal Agreements related to research and development services, non-cash royalty revenue related to the Royalty Monetization and royalty revenue for sales of Zalviso in Europe and license revenue recognized under the DZUVEO Agreement. For the ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022,~~ ~~the Company did~~ ~~not~~ ~~record any contract and other collaboration revenue.~~

~~A contract liability of $1.2 million was recorded on the Condensed Consolidated Balance Sheets as deferred revenue as of~~ ~~June 30, 2022,~~ $0.1 million of which represented the current portion, for the portion of the upfront fee received under the DZUVEO Agreement allocated to the material right for discounted price on future optional product supply which has ~~not~~ ~~yet been satisfied. The material right contract liability will be recognized over the period the discount on future product supply is made available.~~

The following table presents ~~changes~~the results of the discontinued operations for the three-month period ended March 31, 2023 and March 31, 2022 (in thousands):

The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented (in thousands).

The following table presents the significant non-cash items and purchases of property, plant and equipment for the discontinued operations that are included in the ~~Company’s contract liability for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021~~accompanying unaudited condensed consolidated statements of cash flows (in thousands):

The following table represents the expected loss on sale of discontinued operations for the three months ended March 31, 2023:

Per ASC 450, we booked a contingent loss against the net assets held for sale in the three months ended March 31, 2023.

On July 14, 2021, the Company entered into a License and Commercialization Agreement, or the PFS Agreement, with Aguettant pursuant to which the Company obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States (i) an ephedrine pre-filled syringe containing 10 ml of a solution of 3 mg/ml ephedrine hydrochloride for injection, and (ii) a phenylephrine pre-filled syringe containing 10 ml of a solution of 50 mcg/ml phenylephrine hydrochloride for injection. Aguettant will supply the Company with the products for use in commercialization, if they are approved in the United States.

The PFS Agreement has an initial term of ten (10) marketing years, with the first marketing year ending on December 31 of the calendar year after the first launch of a product (or December 31 of the same calendar year if the first launch of a product occurs between January 1 and April 30 of a calendar year). The term will automatically renew for successive five marketing year periods unless a party notifies the other party of its intention not to renew at least six (6) months prior to the expiration of the then-current term.

Aguettant is entitled to receive up to $24.0 million in sales-based milestone payments. The Company will purchase each product from Aguettant at an agreed price, or the PFS Purchase Price, subject to adjustment. The Company will also make revenue share payments that, combined with the PFS Purchase Price, will range from 40% to 45% of net sales in the United States.

The Company and Aguettant will agree on minimum sales obligations twelve (12) months prior to the launch of each product.

The Company has the right to grant sublicenses to its affiliates or, with the prior approval of Aguettant, third parties, subject to certain limitations.

As of March 31, 2023, there have been no payments by the Company to Aguettant under the PFS Agreement.

On May 30, 2019, the Company entered into the Loan Agreement with ~~Oxford.~~Oxford Finance LLC, or Oxford, as the Lender. Under the Loan Agreement, the Lender made a term loan to the Company in an aggregate principal amount of $25.0 million, or the Loan, which was funded on May 30, 2019.~~The Loan Agreement requires that the Company always maintain unrestricted cash of~~ ~~not~~ ~~less than $5.0 million in accounts subject to control agreements in favor of the Lender, tested monthly as of the last day of the month.~~

~~In connection with the Loan Agreement, on~~ ~~May 30, 2019,~~ the Company issued warrants to the Lender and its affiliates, or the Warrants, which are exercisable for an aggregate of 176,679 shares of the Company’s common stock with a per share exercise price of $2.83. The Warrants have been classified within stockholders’ deficit and accounted for as a discount to the loan by allocating the gross proceeds on a relative fair value basis.

As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the accrued balance due under the Loan Agreement with Oxford was ~~$9.4~~$3.3 million and ~~$13.3~~$5.4 million, respectively. Interest expense related to the Loan Agreement was ~~$0.3~~$0.1 million, ~~$0.1 million~~$39,000 of which represented amortization of the debt discount, for the three months ended March 31, 2023, and ~~$0.7~~was $0.4 million, ~~$0.2~~$0.1 million of which represented amortization of the debt discount, for the three ~~and~~ ~~six~~months ended ~~June 30, 2022,~~ March 31, 2022.respectively, while such interest expense was $0.6 million, $0.2 million of which represented amortization of the debt discount, and $1.2 million, $0.4 million of which represented amortization of the debt discount for the ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2021,~~ ~~respectively.~~

~~Non-Interest Bearing Payments for the Construction of Leasehold Improvements~~

InSee Note ~~August 2019,~~ ~~the Company entered into a Site Readiness Agreement, or SRA, with Catalent Pharma Solutions, LLC, or Catalent, in contemplation of entering into a commercial supply agreement for its product DSUVIA~~at a future date. Under the SRA, the Company is building out a suite within Catalent’s production facility in Kansas City. If additional equipment and facility modifications are required to meet the Company’s product needs, the Company ~~may~~ be required to contribute to the cost of such additional equipment and facility modifications. The Company has determined that it is the owner of the leasehold improvements related to the build-out which will be paid for in ~~four~~11, ~~installments of $0.5 million through~~ ~~July 2022.~~ ~~As of~~ ~~June 30, 2022~~ ~~and~~ ~~December 31, 2021,~~ ~~the accrued balance under the SRA was $0.5 million, and $1.7 million of these leasehold improvements had been capitalized. The effective interest rate related to the payments at~~ ~~June 30, 2022~~ ~~was 14.4%. The leasehold improvements are recorded as property and equipment, net, in our Condensed Consolidated Balance Sheets.~~“Subsequent Events” below.

On March 26, 2021, the Company entered into a Sublease Agreement to sublet space for its new corporate headquarters, located at 25821 Industrial Boulevard, Hayward, California. The Sublease Agreement commencement date was April 1, 2021. The Sublease Agreement is for a period of two years and three months, ending on June 30, 2023, with monthly rental payments of approximately $17,000, including one month of abated rent. On the lease commencement date, the Company recognized an operating lease right-of-use asset in the amount of $0.4 million.

The Company has entered into commercial supply manufacturing services agreements related to Zalviso and DSUVIA containing fixed fees which it has determined are in-substance lease payments. For additional information on these agreements, refer to Note 9 ~~“Leases” in the Company’s Annual Report on Form~~ 10-K Lease expense was approximately $50,000 for ~~the year ended~~ ~~December 31, 2021.~~

~~The components of lease expense are presented in the following table (in thousands):~~

~~The weighted average remaining lease term and discount rate related to the operating leases are presented in the following table:~~

~~Maturities of lease liabilities as of~~ ~~June 30, 2022~~ ~~are presented in the following table (in thousands):~~

On ~~September 18, 2015,~~ the Company entered into the Royalty Monetization with PDL for which it received gross proceeds of $65.0 million. Under the Royalty Monetization, PDL was to receive 75% of the European royalties under the Amended License Agreement with Grünenthal, as well as 80% of the ~~first~~~~four~~ ~~commercial milestones worth $35.6 million (or~~ ~~80%~~ ~~of $44.5 million), up to a capped amount of~~ ~~$195.0~~ ~~million over the life of the arrangement.~~

The Company periodically assessed the expected royalty and milestone payments using a combination of historical results, internal projections and forecasts from external sources. To the extent such payments were greater or less than the Company’s initial estimates or the timing of such payments is materially different than its original estimates, the Company prospectively adjusted the amortization of the liability and the effective interest rate. During the three months ended ~~June 30, 2020,~~March 31, 2023 ~~Grünenthal notified~~and the ~~Company that it was terminating the Amended License Agreement, effective~~ ~~November 13, 2020.~~ On ~~August 31, 2020,~~ ~~PDL sold its royalty interest for Zalviso to SWK Funding, LLC, or SWK, under the Royalty Monetization. The terms~~remaining lease commitment of ~~the Grünenthal Agreements were extended to~~ ~~May 12, 2021~~ ~~to enable Grünenthal to sell down its Zalviso inventory. The rights to market and sell Zalviso~~approximately $50,000 will be incurred in the ~~Zalviso Territory reverted back to the Company on~~second quarter of ~~May 12, 2021.~~

On ~~May 31, 2022,~~ the Company entered into the Termination Agreement with SWK to fully terminate the Royalty Monetization for which the Company paid cash consideration of $0.1 million, and neither PDL nor SWK retains any further interest in the Royalty Monetization. Accordingly, effective ~~May 31, 2022,~~ ~~the Royalty Monetization is~~ no longer reflected on the Company’s consolidated financial statements or other records as a sale of assets to PDL or SWK and all security interests and other liens of every type held by the parties to the Royalty Monetization have been terminated and automatically released without further action by any party. The $84.1 million gain on extinguishment of the liability related to the sale of future royalties is recognized in the Condensed Consolidated Statements of Operations as Other Income.

~~The effective interest income rate for each of the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June 30, 2022,~~ ~~was approximately 3.2%. The effective interest income rate for each of the~~ ~~three~~~~- and~~ ~~six~~~~-month periods ended~~ ~~June 30, 2021,~~ ~~was approximately 3.6%.~~

~~The following table shows the activity within the liability account related to the sale of future royalties for the~~ ~~six~~ ~~months ended~~ ~~June 30, 2022~~ ~~and the period from inception on~~ ~~September 18, 2015~~ to ~~June 30, 2022 (~~~~in thousands):~~

~~As mentioned above, the Royalty Monetization was terminated on~~ ~~May 31, 2022.~~2023.

On June 8, 2021, a securities class action complaint was filed in the U.S. District Court for the Northern District of California against the Company and 2two of its officers. The plaintiff is a purported stockholder of the Company. The complaint ~~alleges~~alleged that defendants violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by making false and misleading statements and omissions of material fact about the Company’s disclosure controls and procedures with respect to its marketing of DSUVIA. The complaint ~~seeks~~sought unspecified damages, interest, attorneys’ fees, and other costs. On December 16, 2021, the Court appointed co-lead plaintiffs. Plaintiffs’ amended complaint was filed on March 7, 2022. The amended complaint ~~names~~named the Company and three of its officers and ~~continues~~continued to allege that defendants violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by making false and misleading statements and omissions of material fact about the Company’s disclosure controls and procedures with respect to its marketing of DSUVIA. The amended complaint also ~~alleges~~asserted a violation of Section 20A of the Exchange Act against the individual defendants for alleged insider trading. The amended complaint sought unspecified damages, interest, attorneys’ fees, and other costs. On ~~May 6,~~September 1, 2022, the ~~Company filed a~~Court held oral hearings on the Company’s motion to dismiss the amended complaint with prejudice ~~and briefing~~that was ~~complete~~filed on July 21, 2022. ~~A hearing~~On September 28, 2022, the Court issued a formal written opinion dismissing all of plaintiffs’ claims against the Company and the named defendants with leave to amend, and on November 28, 2022, plaintiffs filed a second amended complaint naming the Company and three of its officers and asserting violations under Sections 10(b) and 20(a) of the Exchange Act on the same grounds as in the amended complaint and seeking unspecified damages, interest, attorneys’ fees, and other costs. On January 30, 2023, the Company filed its new motion to dismiss ~~is set~~the second amended complaint and on March 16, 2023, plaintiffs filed their opposition to the Company’s new motion to dismiss and on April 17, 2023, the Company filed its reply to the plaintiffs’ opposition. Oral hearings on the new motion to dismiss are scheduled for ~~September 1, 2022.~~May 25, 2023.

On July 6, 2021, a purported shareholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The complaint names 10ten of the Company’s officers and directors and asserts state and federal claims based on the same alleged misstatements as the ~~shareholder~~securities class action complaint. On September 30, 2021, October 26, 2021, and November 17, 2021, three additional purported shareholder derivative complaints were filed in the U.S. District Court for the Northern District of California. The complaints name nine of the Company’s officers and directors and also assert state and federal claims based on the same alleged misstatements as the ~~shareholder~~securities class action complaint. All four complaints seek unspecified damages, attorneys’ fees, and other costs. On December 6, 2021, the Court entered an order consolidating all four actions and staying the consolidated action pending the outcome of any motion to dismiss the securities class action. Please see “Part II., Item 1A. Risk Factors—Risks of a General Nature—Litigation may substantially increase our costs and harm our ~~business~~.business.”

The Company believes that these lawsuits are without merit and intends to vigorously defend against them. Given the uncertainty of litigation, the preliminary stage of the cases, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions.

~~The Company has entered into the ATM Agreement with Cantor, as agent, pursuant to which the Company~~ ~~may~~ ~~offer and sell, from time to time through Cantor, shares of the Company’s common stock having an aggregate offering price of up to $80.0 million.~~

~~The Company did~~ ~~not~~ ~~sell any shares~~Termination Agreement and Mutual Release Between AcelRx and Catalent

On March 12, 2023, AcelRx and Catalent Pharma Solutions, LCC, or Catalent, entered into a termination agreement and mutual release, or the Termination Agreement, to terminate the Site Readiness Agreement with an effective date of ~~common stock pursuant~~August 15, 2019 and as amended on September 24, 2020, the SRA Agreement, and the commercial supply agreement with an effective date of March 31, 2021, the CSA Agreement. Pursuant to the ~~ATM~~Termination Agreement, ~~for~~as of the ~~three~~date on which AcelRx has removed and ~~six~~ ~~months ended~~ ~~June 30, 2022.~~ ~~For~~transported certain equipment from Catalent’s site, the ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2021,~~ ~~the Company issued and sold approximately 3.0 million shares of common stock pursuant to the ATM~~SRA Agreement and ~~received net proceeds~~the CSA Agreement will terminate except with respect to certain specified provisions of ~~approximately $7.5 million, after deducting fees and expenses. As of~~ ~~June 30, 2022,~~ ~~the Company~~ ~~may~~ ~~offer and sell shares of the Company’s common stock having an aggregate offering price of up to $36.1 million under the ATM Agreement.~~such agreements.

The activity related to warrants during the three months ended March 31, 2023, is summarized as follows:

The pre-funded warrants issued in December 2022 to purchase 2,632,898 shares of common stock, or the 2022 Pre-Funded Warrants, were exercised in full in the three months ended March 31, 2023. The common warrants issued in December 2022 to purchase an aggregate of 4,227,052 shares of common stock, or the 2022 Warrants, were accounted for by the Company as a liability. At March 31, 2023, the 2022 Warrants were valued at approximately $1.8 million, using the Black-Scholes option pricing model as follows: exercise price of $2.07 per share, stock price of $0.658 per share, expected life of 6 years, volatility of 97.06%, a risk-free rate of 3.58% and 0% expected dividend yield. See Note 2, “Investments and Fair Value Measurement” and Note 11, “Subsequent Events”.

The Company recorded total stock-based compensation expense for stock options, restricted stock units, or RSUs, and the Amended and Restated 2011 Employee Stock Purchase Plan, or the Amended ESPP, as follows (in thousands):

The following table summarizes restricted stock unit activity under the Company’s equity incentive plans:

Upon vesting, certain of the Company’s RSUs may be settled on a net-exercise basis to cover any required withholding tax with the remaining amount converted into an equivalent number of shares of common stock. There were ~~0 and 141,966~~12,906 shares of common stock underlying vested RSUs that were withheld during the ~~three~~ ~~and~~ ~~six~~ ~~months~~quarter ended ~~June 30, 2022,~~March 31, 2023, ~~respectively,~~ based on the value of the RSUs as determined by the Company’s closing stock price on the applicable vesting date.

The following table summarizes stock option activity under the Company’s equity incentive plans:

The per-share weighted average grant date fair value of the options granted ~~for~~during the ~~six~~ ~~months~~quarter ended ~~June 30, 2022~~March 31, 2023 was estimated at ~~$0.30~~$1.39 per share on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

As of ~~June 30, 2022,~~March 31, 2023, total stock-based compensation expense related to unvested options to be recognized in future periods was $1.7 million which is expected to be recognized over a weighted-average period of 2.2 years. As of March 31, 2023, there were ~~6,352,183~~127,611 shares available for grant under the Company’s equity incentive plans and ~~4,302,929~~185,860 shares available for grant under the Amended ESPP.

The Company’s basic net ~~income (loss)~~loss per share of common stock is calculated by dividing the net ~~income (loss)~~loss by the weighted average number of shares of common stock outstanding for the period. The diluted net ~~income (loss)~~loss per share of common stock is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, options to purchase common stock, RSUs, and warrants to purchase common stock were considered to be common stock equivalents. In periods with a reported net loss, common stock equivalents are excluded from the calculation of diluted net loss per share of common stock if their effect is antidilutive.

The following ~~table sets forth the computation of the Company’s basic and diluted net income (loss) per share of common stock during the~~ ~~three~~ ~~and~~ ~~six~~ ~~months ended~~ ~~June 30, 2022~~ ~~and~~ ~~2021~~ ~~(in thousands, except for share and per share amounts):~~

~~The following~~ outstanding shares of common stock equivalents were excluded from the computation of diluted net ~~income (loss)~~loss per share of common stock for the periods presented because including them would have been antidilutive:

In addition, the shares held back and contingently issuable in connection with the Lowell Merger, as described in Note 4.4, ~~above,~~“Asset Acquisition” to the Company’s 2022 Annual Report on Form 10-K, have also been excluded from the computation of diluted net ~~income (loss)~~loss per share of common stock for the periods presented because the contingencies for issuance of these shares have not been met.

On ~~August~~April 3, ~~2022,~~2023, the Company, closed the transactions contemplated by the Purchase Agreement entered into ~~a Securities Purchase Agreement~~ on March 12, 2023, with ~~Lincoln Park Capital Fund, LLC, or the Purchaser,~~Alora, pursuant to which Alora agreed to acquire certain assets and assume certain liabilities of AcelRx relating to its sufentanil sublingual tablet product referred to as DSUVIA or DZUVEO, or any other single-dose pharmaceutical product for use in medically supervised settings containing a sublingual tablet that includes sufentanil as the sole active ingredient, as a 30 mcg tablet or other dosage form or strength as reasonably necessary for lifecycle management, or the Product. The Product expressly excludes the pharmaceutical product referred to as Zalviso (sufentanil sublingual tablets, each 15 mcg), any other multi-dose administration system containing sufentanil sublingual tablets (whether as the sole active ingredient or in combination with other active ingredients), and any single-dose formulation of sufentanil for use outside of a medically supervised setting. With the closing of the transaction, AcelRx is entitled to receive (a) up to $116.5 million in sales-based milestones, (b) quarterly payments in an amount equal to 15% of net sales based on sales of Product to all customers, other than sales to the United States Department of Defense, or DoD, under the Marketing Agreement (as defined below), pursuant to which Alora will pay AcelRx 75% of Product net sales to the DoD, and sales by or on behalf of Laboratoire Aguettant, or Aguettant, and (c) 20% of any consideration, excluding royalty payments based on sales of Product and subject to customary exclusions, received by Alora or its affiliates in connection with a grant to any third party of a license related to Product, or by Alora or its affiliates or equityholders in connection with a sale or transfer to any third party of an ownership interest in any assets acquired by Alora under the Purchase Agreement.

The Purchase Agreement contains customary representations, warranties, and covenants by each party. Alora agreed not to practice, license or otherwise exploit any of the intellectual property rights acquired by it under the Purchase Agreement to manufacture, develop or commercialize any product (other than Product) that is or has been commercialized by AcelRx or its affiliate as of the date of the Purchase Agreement, or any product that is competitive with any such product. In addition, Alora will use commercially reasonable efforts to maintain regulatory approvals for and commercialize Product in the United States. If Alora (together with other relevant parties, taken as a whole) fails to commercialize, sell and distribute Product within the six-month period beginning on July 1, 2023, then all rights granted to Alora pursuant to the Purchase Agreement will, upon AcelRx’s written notice, revert back to AcelRx. The Purchase Agreement also contains indemnification rights for each of AcelRx and Alora for breaches of representations, warranties, and covenants, as well as certain other matters, subject to certain specified limitations.

The Closing included the execution of the Amended DZUVEO Agreement (as defined below) and the Amended and Restated Supply Agreement (as defined below) between AcelRx and Aguettant, as well as certain ancillary agreements between AcelRx and Alora. Such ancillary agreements include (a) an intellectual property agreement, pursuant to which Alora granted fully-paid, royalty-free and perpetual licenses to AcelRx under certain specified intellectual property rights acquired by Alora under the Purchase Agreement for, among other things, the development, manufacture, commercialization and exploitation of certain products, including Zalviso, (b) a transition services agreement, pursuant to which, during the period specified therein, AcelRx will be paid to provide certain services (including, manufacturing technology transfer, supply chain, regulatory, and medical affairs services) to Alora, and distribute, on behalf of Alora, certain inventory of Product transferred to Alora under the Purchase Agreement, and (c) a marketing agreement, or the Marketing Agreement, pursuant to which AcelRx will have the exclusive right to market and offer Product for sale to DoD and Alora will pay to AcelRx 75% of net sales of Product sold to DoD, subject to adjustment in certain circumstances.

AcelRx and Aguettant are parties to (a) the License and Commercialization Agreement, dated July 14, 2021, pursuant to which Aguettant obtained the exclusive right to develop and commercialize DZUVEO in certain European countries for the management of acute moderate to severe pain in adults in medically monitored settings, or the DZUVEO Agreement, and (b) the supply agreement, dated December 6, 2021, with respect to the manufacture and supply of DZUVEO in form of bulk product by AcelRx to Aguettant, or the Supply Agreement. Pursuant to the Purchase Agreement, AcelRx and Aguettant entered into an amendment to the DZUVEO Agreement, or the Amended DZUVEO Agreement, and an amendment and restatement to the Supply Agreement, or the Amended and Restated Supply Agreement.

Pursuant to the Amended DZUVEO Agreement, (a) Aguettant’s obligations to make sales-based milestone payments and to achieve certain levels of minimum sales terminated, (b) AcelRx agreed to manufacture and supply DZUVEO in the form of bulk products (i.e., products that are pre-packaged in labeled pouches and packed in bright stock cartons for shipment) to Aguettant or its affiliates or sublicensees, and Aguettant will be responsible for manufacturing finished products from bulk products, before Aguettant establishes a semi-automated packaging line for Product, and (c) after Aguettant has established such semi-automated packaging line, AcelRx will cause DZUVEO to be manufactured and supplied in the form of bulk tablets (i.e., products in tablet forms supplied in bulk (not packaged) quantities) to Aguettant or its affiliates or sublicensees, and Aguettant will be responsible for manufacturing finished products from bulk tablets. The Amended and Restated Supply Agreement will govern the manufacture and supply of DZUVEO in the form of bulk products or bulk tablets, and contain customary terms, including those with respect to manufacturing requirements, forecast, delivery, and post-delivery inspection.

Pursuant to the Purchase Agreement, AcelRx assigned the Amended DZUVEO Agreement and the Amended and Restated Supply Agreement to Alora.

In addition, AcelRx and Aguettant are parties to the License and Commercialization Agreement, dated July 14, 2021, pursuant to which AcelRx obtained exclusive rights to develop and commercialize certain ephedrine pre-filled syringe and certain phenylephrine prefilled syringe in the United States, or the PFS Agreement. In connection with AcelRx’s and Aguettant’s agreement to enter into the Amended DZUVEO Agreement and the Amended and Restated Supply Agreement, the parties entered into an amendment to the PFS Agreement, or the Amended PFS Agreement, pursuant to which, effective April 3, 2023, (a) Aguettant paid AcelRx a complementary payment in the amount of EUR 1,500,000, and (b) AcelRx’s obligation to make a certain specified sales-milestone payment terminated such that the maximum amount in sales-based milestone payments that Aguettant is entitled to receive has been reduced to $21 million.

In connection with the closing of the divestment of DSUVIA to Alora, the Company ~~issued on~~and Oxford agreed that the Company would repay the loan in full without any prepayment penalties or the payment of future remaining interest that otherwise would have been payable under the Loan. On ~~August~~April 3, 2023, the Company paid Oxford the remaining amount due of approximately $3.4 million including accrued interest and fees under the Loan, and the Loan Agreement was terminated with no further obligations by either party.

On April 25, 2023, the 2022 Warrants were amended to remove the full ratchet anti-dilutive adjustment rights in ~~a private placement transaction, an aggregate of 3,000 shares of Series A Preferred Stock, par value $0.001 per share, together with a warrant to purchase up to an aggregate of 1,623,008~~the event the Company issues shares of common stock ofor common stock equivalents in the ~~Company at an~~future with a value less than the then effective exercise price of ~~$0.2033~~such common warrants subject to certain customary exceptions, and further subject to a minimum exercise price of $1.00 per ~~share (subject to adjustment as provided in the warrant, for an aggregate subscription amount equal to $300,000. The warrant is immediately exercisable and has a term ending on~~ ~~February 3, 2028.~~share.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or Form 10-Q, and with the audited Consolidated Financial Statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, or Annual Report.

We are a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings.

Our portfolio ~~of products and product candidates~~ consists of ~~sufentanil sublingual products and product candidates, pre-filled syringe~~nafamostat product candidates and ~~nafamostat~~pre-filled syringe product candidates, as further described below. On April 3, 2023, we closed the transactions contemplated by the Asset Purchase Agreement, or the DSUVIA Agreement, with Vertical Pharmaceuticals, LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, entered into on March 12, 2023, pursuant to which Alora acquired certain assets and assumed certain liabilities of AcelRx relating to its sufentanil sublingual tablet product referred to as DSUVIA or DZUVEO, or any other single-dose pharmaceutical product for use in medically supervised settings containing a sublingual tablet that includes sufentanil as the sole active ingredient, as a 30 mcg tablet or other dosage form or strength as reasonably necessary for lifecycle management, or the Product. Refer to Note 3, “Discontinued Operations” and Note 11, “Subsequent Events” to the unaudited condensed consolidated financial statements to this Quarterly Report on Form 10-Q for additional information. We do not have plans to further develop any sufentanil sublingual product candidates.

Niyad is the first nafamostat product candidate we are developing to be used as a regional anticoagulant for injection into the extracorporeal circuit. There are currently no products approved by the FDA for use as an anticoagulant in the extracorporeal circuit. Niyad would be the first and only product approved for this indication, if approved. The current standards of care being used today are heparin and citrate. Heparin is a systemic anticoagulant and cannot be used in patients at risk of bleeding. Citrate is complex to administer and requires significant human resource time and attention given the nature of the product, and cannot be used in patients with liver failure, which is approximately 43% of acute kidney injury patients. Based on our market research of the CRRT market, heparin is used approximately 43% of the time, while citrate is used approximately 28% of the time. The remaining 29% of the time there is no anticoagulant used which is partly driven by the safety concerns with heparin or citrate. We believe the primary opportunity for Niyad is within the 57% of the market that uses either citrate or no anticoagulant.

The second indication for our nafamostat product development candidate, LTX-608, on which we are focused is for the treatment of ARDS and DIC, an indication for which nafamostat is approved in Japan and South Korea. We have pending patent applications directed to the use of nafamostat in DIC, as an antiviral agent (e.g., COVID treatment), in ARDS and other indications.

~~Nafamostat Product Candidates~~Hospitals currently purchase non-FDA approved ready-to-use, pre-filled syringe products from compounding facilities, or manually dilute the products in-house. Our product candidates have been developed in a ready-to-use strength and pre-filled into syringes that can be immediately administered to patients, potentially eliminating the need for calculations and additional dilution and filling steps. We therefore believe that, if approved, our products may offer significant benefits to hospitals and surgery centers over the current compounded products. In addition, our pre-filled syringe product candidates will also compete with existing generic versions of concentrated vial forms of product, ready-to-use diluted vial forms of product, and for Fedsyra, two recently FDA-approved pre-filled syringes with a different formulation and/or concentration than our product candidate.

~~Government-mandated orders and related safety policies on account of the COVID-19 pandemic continue to prevent us from operating our business in the normal course.~~ We continue to adhere to the various and diverse orders issued by government officials in the jurisdictions in which we operate. In addition, some hospitals, ambulatory surgery centers and other healthcare facilities have barred visitors that are not caregivers or mission-critical and otherwise restricted access to such facilities. As a result, the educational and promotional efforts of our commercial and medical affairs personnel have been substantially reduced, and in some cases, stopped. Cancellation or delays of formulary committee meetings and delays of elective surgeries have also affected the pace of formulary approvals and, consequently, the rate of adoption and use of DSUVIA. We expect our near-term sales volumes to continue to be adversely impacted as long as access to healthcare facilities by our commercial and medical affairs personnel continues to be limited, especially in light of the rise in COVID-19 cases associated with the emerging variants. We will continue to evaluate the impact on our revenues and related metrics and operating expenses during this period and assess the need to adjust our expenses and expectations.

As a result of COVID-19 and related international travel restrictions, in addition to the testing requirements of our vendor, the timing for testing and acceptance of our DSUVIA fully automated packaging line, and subsequent FDA approval, has been delayed. Based on our best estimate, now that the line has been installed, we expect FDA approval in the first half of 2023.

~~We will~~ continue to engage with various elements of our supply chain and distribution channel, including our customers, contract manufacturers, and logistics and transportation providers, to ~~meet demand~~supply our product candidates for ~~products~~development purposes and to remain informed of any challenges within our supply chain. We ~~continue to monitor demand and~~ intend to adapt our plans as needed to continue to drive our ~~business and meet our obligations during the evolving COVID-19 pandemic.~~product development programs. However, ~~if the COVID-19 pandemic continues and persists for an extended period of time,~~ we may face disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our ~~products.~~products if the COVID-19 pandemic persists for an extended period of time and continues to impact our global supply chain. Such supply disruptions may adversely impact our ability to continue development of our product candidates and ultimately generate sales of and revenues from ~~our~~any approved products, and our business, financial condition, results of operations and growth prospects could be adversely affected.

As the global pandemic of COVID-19 continues to rapidly evolve, it could result in a significant long-term disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. The extent to which the COVID-19 pandemic continues to impact our business, our ability to generate sales of and revenues from our approved products, and our future clinical development and regulatory efforts will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, quarantines and social distancing requirements in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the virus.

We do not believe that inflation has had a material impact on our business or operating results during the periods presented. However, inflation, led by supply chain constraints, federal stimulus funding, increases to household savings, and the sudden macroeconomic shift in activity levels arising from the loosening or removal of many government restrictions and the broader availability of COVID-19 vaccines, has had, and may continue to have, an impact on overhead costs and transportation costs and may in the future adversely affect our operating results. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, any potential additional funding.

In April 2020, DSUVIA achieved Milestone C approval by the Department of Defense, or DoD, a decision that clears the path for the DoD to begin placing orders for DSUVIA for inclusion in all Army Sets, Kits, and Outfits, or SKOs, for deployed/deploying troops. This SKO fulfillment is dependent on the Army’s completion of their product information package including instructions on fulfillment and training which remains in process. In September 2020, we announced that DSUVIA was added to the DoD Joint Deployment Formulary, a core list of pharmaceutical products that are designated for deploying military units across all service branches. Also in September 2020, the U.S. Army awarded AcelRx with an initial contract of up to $3.6 million over the next four years for the purchase of DSUVIA to support a DoD-sponsored study to aid the development of clinical practice guidelines. We believe that study will initiate clinically in 2022. Since the fourth quarter of 2020, DSUVIA orders are being fulfilled for the Army Prepositioned Stock Program, or APS. The aforementioned clinical and APS orders are separate from the planned SKO fulfillment.

On ~~January 7, 2022,~~April 3, 2023, we ~~acquired Lowell Therapeutics, Inc., or Lowell, in~~closed our divestment of DSUVIA to Alora. In connection with the closing of the transaction, we received a ~~transaction for consideration~~total of approximately ~~$32.5~~$2.7 million ~~plus net cash acquired~~from Aguettant and ~~certain other adjustments, inclusive~~Alora. In connection with the closing, we also decided to fully repay our senior loan with Oxford Finance, LLC, or Oxford, leaving us debt-free after the closing of ~~approximately $26.0 million~~the transaction.

On April 25, 2023, we executed a Memorandum of ~~contingent consideration payable~~Understanding, or MoU, with a contract manufacturer, or the CMO, for the active pharmaceutical ingredient, or API for Niyad. The MoU provides us with a secured supply of nafamostat API on an exclusive basis outside of all Asian countries for our request for Emergency Use Authorization, or EUA, submitted to the FDA in ~~cash~~April 2023, and for our planned registrational study for Niyad later this year. The MoU also provides us access to the CMOs drug master file, or ~~stock at AcelRx's option, upon~~DMF for the nafamostat API. AcelRx and the CMO are required to use good faith efforts to execute a Master Supply Agreement, or MSA, with exclusivity outside of Asian countries, which will ensure a long-term supply of nafamostat API. The MoU requires that we make payments to the CMO based on the achievement of ~~regulatory~~four separate milestones: (a) execution of the MoU, (b) receipt of an EUA from the FDA, (c) an approved Pre-Market Application, or PMA, from the FDA, and ~~sales-based milestones. For additional information regarding~~(d) execution of the ~~acquisition of Lowell, see Note 4. “Asset Acquisition” in the accompanying notes to the Condensed Consolidated Financial Statements.~~MSA. The MoU is considered legally binding on both parties.

On ~~March 28, 2022,~~April 27, 2023, we ~~received~~submitted a ~~close-out letter from the Office of Prescription Drug Promotion, or OPDP, of the U.S. Food~~request for EUA for Niyad and ~~Drug Administration, or~~responded to previous questions outlined by the FDA toin a prior submission made by Lowell. Our submission included information on the Warning Letter we received on February 11, 2021 relating to certain DSUVIA-related promotional materials we used in 2019. The close-out letter indicated that the FDA had concluded its evaluation of our corrective actions in response to the Warning Letteractive pharmaceutical ingredient and ~~that we had addressed the issues raised~~finished drug product, including stability testing data and a process validation protocol for Niyad, amongst other items requested by the ~~Warning Letter.~~FDA.

On September 18, 2015, we sold the majority of the royalty rights and certain commercial sales milestones we were entitled to receive under the Collaboration and License Agreement, entered into on December 16, 2013, with Grünenthal GmbH, or Grünenthal, which was amended effective July 17, 2015 and September 20, 2016, or the Amended License Agreement, to PDL BioPharma, Inc., or PDL, in a transaction referred to as the Royalty Monetization. On August 31, 2020, PDL announced that it had sold its royalty interest for Zalviso to SWK Funding, LLC, or SWK. On May 31, 2022, we entered into the Termination Agreement with SWK to fully terminate the Royalty Monetization for which we paid cash consideration of $0.1 million, and neither PDL nor SWK retains any further interest in the Royalty Monetization. Accordingly, effective May 31, 2022, the Royalty Monetization is no longer reflected on our financial statements or other records as a sale of assets to PDL or SWK and all security interests and other liens of every type held by the parties to the Royalty Monetization have been terminated and automatically released without further action by any party. The $84.1 million gain on extinguishment of the liability related to the sale of future royalties is recognized in the Condensed Consolidated Statements of Operations as Other Income.

~~Although the termination of the Royalty Monetization resulted in net income for the three and six months ended June 30, 2022, we~~We have incurred net losses and generated negative cash flows from operations ~~since inception~~ and expect to continue to incur losses in the future as we continue ~~commercialization activities~~ to ~~support the U.S. launch of DSUVIA, support European sales of DZUVEO by Aguettant, and~~ fund any future research and development activities needed to support the FDA regulatory review of our product candidates.

We will incur capital expenditures related to our fully automated packaging line for DSUVIA, which has been installed, and awaits final site acceptance testing by our contract manufacturer and submission of final data to the FDA for approval. FDA approval is expected in the first half of 2023. We anticipate that the fully automated line for DSUVIA will contribute to a significant decrease in costs of goods sold in 2023 and beyond.

Our ~~net income for the three and six months ended June 30, 2022 was $70.7 million and $62.0 million, respectively, while our~~ net loss for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2023 and 2022 was ~~$9.9~~$8.2 million and ~~$18.8~~$8.7 million, respectively. As of ~~June 30, 2022,~~March 31, 2023, we had an accumulated deficit of ~~$411.6~~$434.0 million. As of ~~June 30, 2022,~~March 31, 2023, we had cash, cash equivalents ~~restricted cash~~ and short-term investments totaling ~~$27.9~~$13.4 million compared to ~~$51.6~~$20.8 million as of December 31, ~~2021.~~

To extend our financial resources, we are realigning our cost structure from a focus on commercialization to a focus on advancing our recently acquired late-stage development pipeline, namely the pre-filled syringes and Niyad product candidates. As a result, we have also decided to not focus any development resources on Zalviso in the U.S. and do not expect to resubmit the Zalviso NDA in the foreseeable future. In addition, due to the termination of our agreements with Grünenthal for Zalviso in Europe and the related withdrawal of our Marketing Authorization in Europe in July 2022, we do not expect any revenues from Zalviso in Europe in the foreseeable future. Accordingly, we recorded a non-cash impairment charge of $4.9 million for the three months ended June 30, 2022 related to Zalviso property and equipment. Future development of Zalviso will be contingent upon identification of corporate partnership resources.

We believe that the uptake of DSUVIA will be maximized through a partner with a larger commercial infrastructure and, as such, we are in discussions with potential partners that can execute a more robust commercial plan to support DSUVIA sales expansion, while further reducing our operating costs. The ultimate structure of a potential transaction with a third party may take multiple forms and is not known at this time. Accordingly, we initiated a reorganization that we estimate will result in an annual savings of $9 million beginning in the third quarter of 2022, and will eliminate approximately 40% of our employees. For the three and six months ended June 30, 2022, we recognized $0.5 million in restructuring charges related to this restructuring in our Condensed Consolidated Statement of Operations.2022.

The accompanying discussion and analysis of our financial condition and results of operations are based upon our unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and the related disclosures, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Our critical accounting policies and estimates are detailed in our Annual Report.

There have been no significant changes to our critical accounting policies or significant judgements and estimates for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, from those previously disclosed in our Annual Report, ~~except~~ as follows:

In accordance with ASC 205-20 “~~Acquisitions~~Presentation of Financial Statements: Discontinued Operations”, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, non-current assets, current liabilities, and non-current liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes, shall be reported as components of net loss separate from the net income (loss) of continuing operations.

~~We evaluate acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a~~Our DSUVIA business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether or not we have acquired inputs and processes that have the ability to create outputs, which would meetmet the definition of a ~~business. Significant judgment is required~~discontinued operation as of March 31, 2023. Accordingly, we have classified the results of the DSUVIA business as discontinued operations in our unaudited condensed consolidated statements of operations for all periods presented. All assets and liabilities associated with the DSUVIA business were classified as assets and liabilities of discontinued operations in the ~~application of~~unaudited condensed consolidated balance sheets for the ~~screen test~~periods presented. All amounts included in the notes to ~~determine whether an acquisition is a business combination or an acquisition of assets.~~the unaudited condensed consolidated financial statements relate to continuing operations unless otherwise noted. For additional information, see Note 3, “Discontinued Operations” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

In June 2016, the ~~definition of business combinations are accounted for~~Financial Accounting Standards Board, or FASB, issued Topic 326, or the Credit Losses standard, which we adopted using ~~the acquisition method of accounting, which~~a modified retrospective approach on January 1, 2023. Topic 326 requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the ~~purchase price~~amount of credit losses to be ~~allocated~~recognized for available-for-sale debt securities to the ~~net assets acquired at their respective~~amount by which carrying value exceeds fair ~~values. In~~value. The adoption of this standard did not have a ~~business combination, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.~~material impact on our financial statements or related disclosures.

~~For asset acquisitions,~~We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a ~~cost accumulation model is used to determine the cost~~material effect on our consolidated financial position, statements of an asset acquisition. Direct transaction costs are recognized as part of the cost of an asset acquisition. We also evaluate which elements of a transaction should be accounted for as a part of an asset acquisitionoperations and which should be accounted for separately. The cost of an asset acquisition, including transaction costs, is allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis. Goodwill is not recognized in an asset acquisition. Any difference between the cost of an asset acquisition and the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on their relative fair values. When a transaction accounted for as an asset acquisition includes an in-process research and development (“IPR&D”) asset, the IPR&D asset is only capitalized if it has an alternative future use other than in a particular research and development project. For an IPR&D asset to have an alternative future use: (a) we must reasonably expect that we will use the asset acquired in the alternative manner and anticipate economic benefit from that alternative use, and (b) our use of the asset acquired must not be contingent on further development of the asset subsequent to the acquisition date (that is, the asset can be used in the alternative manner in the condition in which it existed at the acquisition date). Otherwise, amounts allocated to IPR&D that have no alternative use are expensed. Our asset acquisitions typically include contingent consideration arrangements that encompass obligations to make future payments to sellers contingent upon the achievement of future financial targets. Contingent consideration is not recognized until all contingencies are resolved and the consideration is paid or probable of payment, at which point the consideration is allocated to the assets acquired on a relative fair value basis.cash flows.

Our unaudited condensed consolidated results of operations ~~have fluctuated from period~~are presented for the three months ended March 31, 2023 and 2022. Certain financial results (revenues and expenses) relating to ~~period and may continue to fluctuate in~~ the ~~future, based upon the progress~~divestment of our ~~commercial launch of DSUVIA, our research and development efforts, variations~~DSUVIA/DZUVEO business are reflected in Note 3, “Discontinued Operations” to the ~~level of expenditures related to commercial launch, development efforts and debt service obligations during any given period,~~unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information. Unless otherwise noted, the discussion below, and the ~~uncertainty as~~revenue and expense amounts discussed below, are based on and relate to the extent and magnitude of the impact from the COVID-19 pandemic. Results of operations for any period may be unrelated to results of operations for any other period. In addition, historical results should not be viewed as indicative of future operating results. In particular, to the extent our commercial and medical affairs personnel continue to be subject to varying levels of restriction on accessing hospitals and ambulatory surgical centers due to COVID-19, and to the extent government authorities and certain healthcare providers are continuing ~~to limit elective surgeries, we expect our sales volume to be adversely affected.~~operations.

Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~

~~Product sales revenue consists of sales of DSUVIA in the U.S. and, prior to May 13, 2021, Zalviso in Europe.~~

~~Product sales revenue by product for the three and six months ended June 30, 2022 and 2021, was as follows (in thousands, except percentages):~~

~~The increase in DSUVIA product sales revenue for the three and six months ended June 30, 2022, as compared to the three and six months ended June 30, 2021, was primarily the~~As a result of ~~increased sales volume for DSUVIA and DZUVEO. For~~ the six months ended June 30, 2021, there was $0.3 million in product sales revenue of Zalviso by Grünenthal. In May 2020, Grünenthal terminated the Collaboration and License Agreement and the Manufacture and Supply Agreement, or together, the Grünenthal Agreements, accordingly the rights to market and sell Zalviso in Europe reverted back to us on May 12, 2021.

~~On July 14, 2021, we granted Aguettant the license rights to DZUVEO in the European Union~~divestiture, all DSUVIA/DSUVEO-related revenues have been reclassified under ~~the DZUVEO Agreement. As of June 30, 2022 and December 31, 2021, we had current and non-current portions of deferred revenue under the DZUVEO Agreement of $0.1 million and $1.1 million.~~

Contract and other collaboration revenue included revenue under the Grünenthal Agreements, related to research and development services, non-cash royalty revenue related to the sale of the majority of our royalty rights and certain commercial sales milestones to SWK under the Royalty Monetization, and royalty revenue for sales of Zalviso in Europe. Contract and other collaboration revenue for the three and six months ended June 30, 2021 was $0.05 million and $0.1 million, respectively.discontinued operations.

~~Total cost~~As a result of the divestiture, all DSUVIA/DSUVEO-related costs of goods sold ~~for the three and six months ended June 30, 2022 and 2021, was as follows (in thousands, except percentages):~~

Direct costs from contract manufacturers for DSUVIA totaled $0.3 million and $0.5 million, respectively, for the three and six months ended June 30, 2022. Direct costs from contract manufacturers for DSUVIA and Zalviso totaled $0.1 million and $0.4 million, respectively, for the three and six months ended June 30, 2021, and included inventory impairment charges of $0 and $0.1 million, respectively, primarily related to Zalviso component parts inventory. The increase in direct costs for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 is primarily due to DZUVEO third-party manufacturing costs. For the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, the increase in indirect costs related to DZUVEO manufacturing expenses was mostly offset by a decrease in costs incurred related to Zalviso component parts. Direct cost of goods sold for DSUVIA and Zalviso includes the inventory costs of the active pharmaceutical ingredient, or API, third-party contract manufacturing costs, estimated warranty costs, packaging and distribution costs, shipping, handling and storage costs.have been reclassified under discontinued operations.

The indirect costs to manufacture DSUVIA totaled $0.6 million and $1.2 million for the three and six months ended June 30, 2022, while the indirect costs to manufacture DSUVIA and Zalviso totaled $0.9 million and $1.6 million for the three and six months ended June 30, 2021, respectively. The decrease in indirect costs for the three and six months ended June 30, 2022 as compared to the prior year periods is primarily due to reductions in compensation expense. Indirect costs include internal personnel and related costs for purchasing, supply chain, quality assurance, depreciation and related expenses.

~~The majority~~As a result of ~~our operating expenses to date have been for~~the divestiture, all DSUVIA/DSUVEO-related research and development ~~activities related to Zalviso and DSUVIA.~~ expenses have been reclassified under discontinued operations.

We expect to incur future research and development expenditures to support the FDA regulatory review of our product candidates and anticipated activities required for the development of our nafamostat product candidates, and the preparation and submission of the NDAs for our two in-licensed pre-filled syringe, or PFS, product candidates from Aguettant. ~~Future development of Zalviso in the United States is contingent upon identification of corporate partnership resources.~~

We track external development expenses on a program-by-program basis. Our development resources are shared among all our programs. Compensation and benefits, facilities, depreciation, stock-based compensation, and development support services are not allocated specifically to projects and are considered research and development overhead.

Below is a summary of our research and development expenses ~~for~~during the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands, except percentages):

Research and development expenses for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 increased as compared to the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, primarily due to Niyad ~~development activities, increased DSUVIA manufacturing-related development costs, regulatory costs, depreciation expense~~research and ~~compensation~~development costs.

Selling, general and administrative expenses consisted primarily of salaries, benefits and stock-based compensation for personnel engaged in commercialization, administration, finance and business development activities. Other significant expenses included allocated facility costs and professional fees for general legal, audit and consulting services.

Total selling, general and administrative expenses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ were as follows (in thousands, except percentages):

Selling, general and administrative expenses ~~decreased by $1.9 million and $2.2 million for the three and six months ended June 30, 2022, respectively, as compared to the three and six months ended June 30, 2021. The decrease for~~remained flat during the three months ended ~~June 30, 2022~~March 31, 2023, as compared to the three months ended ~~June 30, 2021, is primarily~~March 31, 2022, due to ~~net decreases~~a reduced headcount in ~~selling, general and administrative~~2023 partially offset by increased legal expenses ~~including $0.7 million in facilities-related expenses in the second quarter of 2022, primarily due~~related to the ~~termination~~divestment of our former headquarters lease and related sublease in 2021, $0.5 million in DSUVIA-related selling expenses and $0.4 million in non-cash stock-based compensation expense. The decrease for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, is primarily due to net decreases in selling, general and administrative expenses including $0.8 million in personnel-related expenses, $0.7 million reduction in non-cash stock-based compensation expense and $0.5 million in DSUVIA-related selling expenses.DSUVIA.

In the second quarter of 2022, we eliminated 14 positions, mainly within the commercial organization. For additional information regarding the Restructuring Costs see Note 1 “Organization and Summary of Significant Accounting Policies” in the accompanying notes to the Condensed Consolidated Financial Statements.

We have decided to not focus any development resources on Zalviso in the United States and do not expect to resubmit the Zalviso NDA in the foreseeable future. In addition, we do not expect any revenues from Zalviso in Europe in the foreseeable future. Accordingly, we determined that it is no longer probable that we will realize the future economic benefit associated with the costs of the Zalviso-related purchased equipment and manufacturing-related facility improvements we have made at our contract manufacturer and, therefore, recorded a non-cash impairment charge of $4.9 million to the Zalviso-related assets for the three months ended June 30, 2022.

Total other income for the three ~~and six~~ months ended ~~June 30 ,~~March 31, 2023 and 2022, ~~and 2021,~~ was as follows (in thousands, except percentages):

Interest expense consisted primarily of interest accrued or paid on our debt obligation agreements and amortization of debt discounts. Interest expense decreased for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, as compared to the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, primarily as a result of a lower average outstanding loan balance. As of ~~June 30, 2022,~~March 31, 2023, the outstanding balance due under the Loan Agreement with Oxford was ~~$9.4~~$3.3 million. On April 3, 2023, in connection with the closing of the DSUVIA Agreement, we fully repaid the Loan Agreement with Oxford. Refer to Note 75, “Long-Term Debt” ~~in the accompanying notes~~and Note 11, “Subsequent Events” to the ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.

Interest income and other income, ~~(expense),~~ net, for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ primarily consisted of ~~the change~~changes in the fair value of our warrant liability and contingent put option and interest earned on our investments. The increase in interest income and other income, net for the three months ended March 31, 2023 as compared to 2022, was primarily due to the $5.3 million decrease in the fair value of our warrant liability.

The non-cash interest income on the liability related to the sale of future royalties is attributable to the ~~Royalty Monetization that we completed in September 2015. As described in~~royalty monetization which was fully terminated on May 31, 2022. Please refer to Note 911, “Liability Related to Sale of Future Royalties”, to the ~~Royalty Monetization was recorded~~consolidated financial statements in our 2022 Annual Report on Form 10-K for additional information.

As of March 31, 2023, the DSUVIA business met all the conditions to be classified as ~~debt under~~held for sales, and because we consider the ~~applicable accounting guidance. The effective interest income rate for each~~divestiture of the ~~three~~DSUVIA business to be a strategic shift that will have a major effect on our operations and ~~six~~financial results, represented a discontinued operation. All assets and liabilities associated with DSUVIA/DZUVEO were therefore classified as assets and liabilities of discontinued operations in our unaudited condensed consolidated balance sheets for the periods presented. Further, all historical operating results for DSUVIA/DZUVEO are reflected within discontinued operations in the unaudited condensed consolidated statements of operations for all periods presented. For the three months ended ~~June 30, 2022 was approximately 3.2%, while the effective interest income rate~~March 31, 2023, we recognized an impairment on net assets held for ~~each~~sale of $7.0 million and a loss from discontinued operations of $1.2 million. For the three ~~and six~~ months ended ~~June 30, 2021 was approximately 3.6%.~~

~~On May~~March 31, 2022, we ~~entered into the Termination Agreement with SWK to fully terminate the Royalty Monetization and we~~ recognized ~~an $84.1 million gain on extinguishment~~a loss from discontinued operations of ~~the liability related to the sale of future royalties.~~$4.1 million.

~~The termination of the Royalty Monetization resulted~~We have incurred losses and generated negative cash flows from operations and we expect to incur significant losses in ~~net income for the three~~2023 and ~~six months ended June 30, 2022; however, before this, we had incurred recurring operating~~may incur significant losses and negative cash flows from ~~operating activities since inception and we expect to continue to incur operating losses and negative cash flows~~operations in the future. These conditions raise substantial doubt about our ability to continue as a going concern. Considering our current cash resources and current and expected levels of operating expenses for the next twelve months, we expect to need additional capital to fund our planned operations ~~for at least one year from~~prior to the twelve-month anniversary of the filing date of this Quarterly Report on Form ~~10-Q is filed with the United States Securities and Exchange Commission, or SEC.~~10-Q. We may seek to raise such additional capital through public or private equity offerings, including under the Controlled Equity Offering^SM Sales Agreement, or the ATM Agreement, with Cantor Fitzgerald & Co., or Cantor, debt securities, ~~monetize~~a new debt facility, monetizing or ~~securitize~~securitizing certain assets, ~~refinance our loan agreement, enter~~entering into product development, license or distribution agreements with third parties, or ~~divest DSUVIA in the United States, DZUVEO in Europe, or~~divesting any of our product candidates. On April 26, 2023, we received a notice from Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Rule”) because our common stock failed to maintain a minimum closing bid price of $1.00 for 30 consecutive business days. This notice had no immediate effect on the Nasdaq listing or trading of our common stock; however, our depressed stock price will make it more difficult for us to raise additional capital through equity offerings. Please see “Part II., Item 1A. Risk Factors— Risks Related to Ownership of Our Common Stock — If we cannot regain compliance with Nasdaq’s continued listing requirements, our common stock may be delisted from The Nasdaq Global Market.” While we believe our plans to raise additional funds will alleviate the conditions that raise substantial doubt about our ability to continue as a going concern, these plans are not entirely within our control and cannot be assessed as being probable of occurring. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to further reduce our workforce, reduce the scope of, or cease, the ~~commercial launch of DSUVIA, or the~~ development of our product candidates in advance of the date on which our cash resources are exhausted to ensure that we have sufficient capital to meet ~~its~~our obligations and continue on a path designed to preserve stockholder value. In addition, if we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish rights to our technologies, future revenue streams or product candidates, or to grant licenses on terms that may not be favorable to us.

We have funded our operations primarily through issuance of equity securities, borrowings, payments from Grünenthal, monetization of certain future royalties and commercial sales milestones from the European sales of Zalviso by Grünenthal, funding of approximately $22.6 million from the DoD, ~~and more recently~~ with revenues from sales of DSUVIA ~~since~~which we recently divested to Alora, and payments under the ~~commercial launch in the first quarter of 2019 and the upfront payment under the~~Amended DZUVEO Agreement with Aguettant.

As of ~~June 30, 2022,~~March 31, 2023, we had cash, cash equivalents ~~restricted cash~~ and ~~short-term~~ investments totaling ~~$27.9~~$13.4 million, compared to ~~$51.6~~$20.8 million as of December 31, ~~2021.~~2022. The decrease was primarily due to cash required to fund our continuing operations, including debt service, development activities for our newly acquired late-stage pipeline product candidates, ~~commercialization activities for DSUVIA, including installation of our fully automated packaging line for DSUVIA,~~ and business development ~~activities. If we are unsuccessful in our efforts to raise additional~~activities, including the divestment of DSUVIA. Our existing capital ~~based on our current and expected levels of operating expenses our current capital will not be sufficient to fund our operations for the next twelve months and~~resources will not be sufficient to fund our operations until such time as we may be able to generate sufficient revenues to sustain our operations.

Pursuant to the ATM Agreement with Cantor, as our agent, ~~pursuant to which~~ we may offer and sell, from time to time through Cantor, shares of our common stock. ~~We did not sell any shares of common stock pursuant to~~There were no sales under the ATM Agreement for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 or 2022. ~~For the three and six months ended June 30, 2021, we issued and sold~~As of March 31, 2023, approximately ~~3.0~~$35.6 million ~~shares~~ of our common stock ~~pursuant~~remained available for sale and issuance under the ATM Agreement; however, our ability to sell such shares under the shelf registration statement and the ATM Agreement ~~and received net proceeds of approximately $7.5 million, after deducting fees and expenses. As of June 30, 2022,~~will be limited until we ~~had~~are no longer subject to the ~~ability to offer and sell shares of the Company’s common stock having an aggregate offering price of up to $36.1 million under the ATM Agreement.~~SEC's “baby shelf” limitations.

On May 30, 2019, we entered into the Loan Agreement with Oxford. Under the Loan Agreement, we borrowed an aggregate principal amount of $25.0 million under a term loan. After deducting all loan initiation costs and outstanding interest on the prior loan agreement with Hercules, we received $15.9 million in net proceeds. As of ~~June 30, 2022,~~March 31, 2023, the outstanding balance due under the Loan Agreement with Oxford was ~~$9.4~~$3.3 million. ~~For more information, see~~On April 3, 2023, in connection with the closing of the DSUVIA Agreement, we fully repaid the Loan Agreement with Oxford. Refer to Note 75, “Long-Term Debt” ~~in the accompanying notes~~and Note 11, “Subsequent Events” to the ~~Condensed Consolidated Financial Statements.~~unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.

Our cash and investment balances are held in a variety of interest-bearing instruments, including obligations of commercial paper, ~~corporate debt securities,~~ U.S. government sponsored enterprise debt securities and money market funds. Cash in excess of immediate requirements is invested with a view toward capital preservation and liquidity. We do not expect COVID-19 to have a material impact on our high quality, short-dated investments.

The following is a summary of our cash flows for the periods indicated and has been derived from our ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements which are included elsewhere in this Form 10-Q (in thousands):

The primary use of cash for our continuing operating activities during these periods was to support our product development efforts for our product candidates while the primary use of cash for discontinued operations was to fund commercial activities for ~~our approved product, DSUVIA, and more recently for development of our newly acquired late-stage pipeline product candidates.~~DSUVIA. Our cash used in operating activities also reflected changes in our working capital, net of adjustments for non-cash charges, such as stock-based compensation, depreciation and amortization of our fixed assets, ~~stock-based compensation,~~ non-cash interest income (expense) related to the sale of future royalties and interest expense related to our debt financings.

Cash used in operating activities of ~~$17.7~~$5.3 million during the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, reflected a net ~~income~~loss of ~~$62.0~~$8.2 million, partially offset by aggregate non-cash ~~inflows~~charges of ~~$77.7~~$2.1 million and included an approximate ~~$2.0~~$0.8 million net change in our operating assets and liabilities. Non-cash ~~inflows~~adjustments included an ~~$84.2~~impairment charge of $7.0 million on our net assets held for sale in connection with our divestment of DSUVIA, an impairment charge of $1.1 million on fixed assets, a gain onof $1.1 million related to the termination of lease liabilities, a $5.3 million decrease in the ~~Royalty Monetization, partially offset by a $4.9 million charge for the impairment~~fair value of ~~Zalviso-related property~~our warrant liability and ~~equipment and $1.5~~$0.6 million in stock-based compensation ~~expense. The net change in our operating assets and liabilities included a $1.6 million decrease in accrued liabilities and~~expense, a $0.4 million ~~decrease in operating lease liabilities.~~

~~Cash used in operating activities~~gain on extinguishment of ~~$18.1 million during the six months ended June 30, 2021, reflected a net loss of $18.8 million, partially offset by aggregate non-cash charges of $2.0 million~~debt, and included an approximate $1.3 million net change in our operating assets and liabilities. Non-cash charges included $2.3 million for stock-based compensation expense, $1.6 million in non-cash interest income on the liability related to the Royalty Monetization, and $1.0$0.3 million in depreciation and amortization expense. The net change in our operating assets and liabilities included a $1.6 million decrease in prepaid expenses and other assets and a $1.0 million decrease in accrued liabilities.

Cash used in operating activities of $8.9 million during the three months ended March 31, 2022, reflected a net loss of $8.7 million, partially offset by aggregate non-cash charges of $0.7 million and included an approximate $0.9 million net change in our operating assets and liabilities. Non-cash charges included $0.8 million in stock-based compensation expense, $0.7 million in interest income on the liability related to the Royalty Monetization, and $0.4 million in depreciation expense. The net change in our operating assets and liabilities included a $1.5 million decrease in accrued liabilities.

Our investing activities have consisted primarily of our capital expenditures and purchases and sales and maturities of our available-for-sale investments.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, cash provided by investing activities of ~~$29.3~~$0.4 million was primarily the net result ~~$38.6~~$0.5 million in proceeds from maturity of investments partially offset by ~~$7.4~~$0.1 million for purchases of property and equipment.

During the three months ended March 31, 2022, cash provided by investing activities of $20.2 million was primarily the net result $27.6 million in proceeds from maturity of investments partially offset by $6.2 million for purchases of investments and ~~$1.7~~$1.2 million in cash paid for the Lowell asset acquisition, net of cash acquired. During the six months ended June 30, 2021, cash used in investing activities of $15.0 million was primarily the net result of $38.2 million for purchases of investments and $1.6 million for purchases of property and equipment, partially offset by $24.8 million in proceeds from maturity of investments.

Cash flows from financing activities primarily reflect proceeds from the sale of our securities and payments made on debt financings.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, cash used in financing activities of ~~$4.2~~$2.1 million was primarily due to long-term debt payments under the Loan Agreement with Oxford. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, cash ~~provided by~~used in financing activities of ~~$32.1~~$2.1 million was primarily due to ~~$36.4 million in net proceeds received~~long-term debt payments under the Loan Agreement with Oxford. On April 3, 2023, in connection with ~~equity financings, partially offset by $4.2 million used~~the closing of the DSUVIA Agreement, we fully repaid the Loan Agreement with Oxford. Refer to Note 5, “Long-Term Debt” and Note 11, “Subsequent Events” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for ~~payment of long-term debt.~~additional information.

Our current operating plan includes expenditures related to the development of our product ~~candidates and the continued launch of DSUVIA in the United States.~~candidates. In addition, on January 7, 2022, we acquired Lowell in a transaction for consideration of approximately $32.5 million plus net cash acquired and certain other adjustments, inclusive of approximately $26.0 million of contingent consideration payable in cash or stock at ~~AcelRx's~~AcelRx’s option, upon the achievement of regulatory and sales-based milestones. For additional information regarding the acquisition of Lowell, see Note 4.4, “Asset Acquisition” ~~in the accompanying notes~~ to the ~~Condensed Consolidated Financial Statements.~~consolidated financial statements in our 2022 Annual Report on Form 10-K for additional information. Our operating plan includes anticipated activities required for the development and supply of our nafamostat product candidates, and the preparation and submission of the NDAs for our two in-licensed PFS product candidates from Aguettant. These assumptions may change as a result of many factors. We will continue to evaluate the work necessary to ~~successfully launch DSUVIA and~~ gain approval of our product candidates in the United States and intend to update our cash forecasts accordingly. Considering our current cash resources and current and expected levels of operating expenses for the next twelve months, we expect to need additional capital to fund our planned operations for at least the next twelve months.

Our future capital requirements may vary materially from our expectations based on numerous factors, including, but not limited to, the following:

In the ~~long-term,~~long term, our existing capital resources will not be sufficient to fund our operations until such time as we may be able to generate sufficient revenues to sustain our operations. We will have to raise additional funds through the sale of our equity securities, monetization of current and future assets, issuance of debt or debt-like securities or from development and licensing arrangements to sustain our operations and continue our development programs.

Please see “Part II., Item 1A. Risk Factors—Risks Related to Our Financial Condition and Need for Additional Capital.”

We have material cash requirements and other contractual obligations related to our Loan Agreement with Oxford (as described in Note 7 “Long-Term Debt” in the accompanying notes to the Condensed Consolidated Financial Statements) and contract manufacturing services and office rent (as described in Note 8 “Leases” in the accompanying notes to the Condensed Consolidated Financial Statements).

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information specified under this item.

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As disclosed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q, we previously identified a material weakness in our internal control over financial reporting related to the review procedures related to the technical accounting review and analysis over earnings per share calculations that were insufficient to prevent or detect errors in the calculation. Specifically, the error was due to management’s failure to identify warrants issued in November 2021 as participating securities and consequently attribute earnings to these securities as part of a two-class EPS calculation. This material weakness resulted in the restatement of our unaudited condensed consolidated financial statements for the quarterly periods ended June 30, 2022 and September 30, 2022.

We commenced measures to remediate the identified material weakness. Those remediation measures are ongoing and include enhanced processes to identify and appropriately apply applicable accounting requirements related to the earnings per share calculation to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. We continue to provide access to accounting literature, research materials and documents, enhance the review and analysis process around the earnings per share calculation and increase communications among our personnel and third-party professionals with whom we consult regarding complex accounting applications.

We believe we are making progress toward achieving the effectiveness of our internal controls and disclosure controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight.

Evaluation of disclosure controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. ~~In accordance with guidance issued by~~Because of the ~~SEC, companies are permitted to exclude acquisitions from their final assessment of~~material weakness in our internal control over financial reporting previously disclosed in our Annual Report on Form 10-K for the ~~fiscal~~ year in which the acquisition occurred while integrating the acquired operations; our management’s evaluation of internal control over financial reporting excluded the internal control activities of Lowell which are included in our consolidated financial statements. Based on the foregoing,ended December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, our disclosure controls and procedures were ~~effective at~~not effective. In light of this fact, our management, including our Chief Executive Officer and Chief Financial Officer, has performed an enhanced review and analysis of the ~~reasonable assurance level.~~process around the earnings per share calculation and increased communications among our personnel and third-party professionals with whom we consult and has concluded that, notwithstanding the material weakness in our internal control over financial reporting, the condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Changes in internal control over financial reporting. ~~There have been~~We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there was no ~~changes~~change in our internal control over financial reporting that occurred during ~~our most recent fiscal quarter~~the period covered by this Quarterly Report on Form 10-Q that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we may be involved in legal proceedings relating to intellectual property, commercial, employment and other matters arising in the ordinary course of business. Such matters are subject to uncertainty and there can be no assurance that such legal proceedings will not have a material adverse effect on our business, results of operations, financial position or cash flows. Please see the matters under the caption “Part I. Financial Information—Item 1. Financial Statements—Note ~~10,~~7, Commitments and Contingencies—Litigation.”

This Quarterly Report on Form 10-Q contains forward-looking information based on our current expectations. Because our actual results may differ materially from any forward-looking statements made by or on behalf of us, this section includes a discussion of important factors that could affect our actual future results, including, but not limited to, our revenues, expenses, net loss and loss per share. You should carefully consider these risk factors, together with all of the other information included in this Quarterly Report on Form 10-Q as well as our other publicly available filings with the U.S. Securities and Exchange Commission, or SEC.

Our business is subject to numerous risks, as more fully described in this section below this summary. You should read these risks before you invest in our common stock. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. . In particular, our risks ~~include~~include::

Our ~~business~~Emergency Use Authorization Application for Niyad™ is ~~being adversely impacted by~~premised on the declared COVID-19 ~~pandemic.~~health emergency.

Our ~~business has been adversely affected~~Emergency Use Authorization, or EUA, submission that is currently under review by FDA for Niyad is based upon the ~~COVID-19 outbreak. Federal, state, local and foreign government orders on account~~U.S. government’s declaration of the COVID-19 pandemic are preventing us from conducting certain activities. Following local and state government orders in California, where our corporate office is located and many of our employees live, we implemented work from home policies, which are limiting certain of our operations. If the COVID-19 outbreak continues, we may need to limit operations further and implement additional limitations, such as extending our work from home policies.

~~In response~~a national health emergency due to the COVID-19 ~~pandemic, some hospitals, ambulatory surgery centers~~pandemic. On January 30, 2023, President Joe Biden informed Congress that he will end the twin national emergencies for addressing COVID-19 on May 11, 2023. Although the FDA will maintain the discretion to keep EUAs in effect after the public health emergency has ended, the anticipation of its end may negatively impact our prospects for obtaining authorization in the first place, and ~~other healthcare facilities have barred visitors that are not caregivers~~even if authorized, any sales for a COVID-related indication may be limited and distract us from the goal of obtaining Premarket Approval, or ~~mission-critical and we have no visibility as to when these restrictions on access will be lifted~~PMA, for all of our customers. As a result, our commercial and medical affairs teams’ educational and promotional efforts have been reduced, and in some cases, stopped. Furthermore, some governments, hospitals and doctors, as a measure to combat the further spread of COVID-19, reduced the number of procedures in which DSUVIA is administered as part of the pain treatment program, and temporarily halted performing elective surgeries, which adversely impacted the level of our sales relating to such procedures. We expect our near-term sales volumes to be adversely impacted for as long as access to healthcare facilities by our commercial and medical affairs personnel and the number of procedures in which DSUVIA is administered continues to be limited. The ultimate impact of the COVID-19 outbreak remains highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19 situation closely.Niyad.

We may fail to realize the benefits expected from our acquisition of Lowell, which could adversely affect our stock price.

Our ~~success~~acquisition of Lowell is ~~highly dependent~~our largest acquisition to date. Our primary business strategy is focused on developing, obtaining approval, and commercializing our product candidates, including Niyad and LTX-608 that we acquired from Lowell. The anticipated benefits we expect from this acquisition are, necessarily, based on projections and assumptions about the combined businesses of our company and Lowell, which may not materialize as expected or which may prove to be inaccurate. The value of our common stock could be adversely affected if we are unable to realize the anticipated benefits from the acquisition on a timely basis or at all. Achieving the benefits of the acquisition of Lowell will depend, in part, on our ability to continue integrate the business, operations and products of Lowell successfully and efficiently with our business. The challenges involved in this integration include, but are not limited to, (i) difficulties entering new markets and integrating new product candidates with which we have no or limited direct prior experience; and (ii) successfully managing relationships with our combined supplier base.

Our failure to identify or accurately assess the magnitude of certain liabilities we assumed in the acquisition could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition.

Whether we receive royalties from DSUVIA is dependent on the ability of Alora to successfully commercialize DSUVIA. If Alora is unable to successfully commercialize DSUVIA, our business, financial condition, and results of operations will be materially harmed.

We have ~~invested a significant portion of our efforts and financial resources~~divested DSUVIA to ~~develop and gain regulatory approval for DSUVIA and expect to~~Alora, who will continue ~~making significant investments~~ to commercialize ~~DSUVIA. We believe our success is highly dependent~~the product and we will receive royalties and milestone payments based on ~~and a significant portion of the value of our company relates to, our ability to successfully commercialize DSUVIA in the United States.~~their sales. The commercial success of DSUVIA ~~depends~~will depend heavily on numerous factors, including:

If ~~we are~~Alora is unable to successfully commercialize DSUVIA, our business, financial condition, and results of operations will be materially harmed.

Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales.

We ~~believe that~~have experienced and may in the ~~uptake~~future experience delays in clinical trials of ~~DSUVIA will~~our product candidates. Our FDA-required clinical trials for our product candidates, could be ~~maximized through~~delayed for a ~~partner~~variety of reasons, including:

If any future FDA-required clinical trials are delayed for any reason, our development costs may increase, our approval process for our product candidates could be delayed, our ability to commercialize and commence sales of our product candidates could be materially harmed, which could have a ~~larger commercial infrastructure and, as such, we are in discussions with potential partners that can execute a more robust commercial plan to support DSUVIA sales expansion, while further reducing~~material adverse effect on our ~~operating costs. The ultimate structure of a potential transaction with a third party may take multiple forms and is not known at this time.~~business.

Our drug discovery and development efforts might not generate successful product candidates.

We plan to invest a significant portion of our efforts and financial resources in the identification or asset acquisition of our product candidates, Niyad, LTX-608 and the pre-filled syringes. Our ability to generate product revenue from these product candidates, which may not occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of Niyad, LTX-608 and the pre-filled syringes. The ~~commercial~~ success of ~~DSUVIA~~these product candidates and any other product candidates we may develop will depend on many factors, including the following:

If we do not accomplish one or more of these goals in a timely manner, or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would harm our business.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials could occur at any stage of testing. The outcome of early clinical trials may not be predictive of the success of later clinical trials, and interim results of a particular clinical trial do not necessarily predict final results of that trial.

Moreover, clinical data is often susceptible to multiple interpretations and analyses. Many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including that:

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates, could allow our competitors to bring products to market before we do, and could impair our ability to successfully commercialize our product candidates, any of which may harm our business and results of operations.

If we experience delays or difficulties in enrolling patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials as required by the U.S. Food and Drug Administration, or the FDA, or analogous regulatory authorities outside the United ~~States,~~States. In addition, some of our competitors may have ongoing clinical trials for product candidates that would treat the same indications as ~~well as DZUVEO~~our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in ~~Europe,~~clinical trials of our competitors’ product candidates. Patient enrollment is also affected by other factors, including:

Our inability to enroll enough patients for our clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

If serious adverse effects or unexpected characteristics of our product candidates are identified during development, we may need to abandon or limit our development of some or all of our product candidates.

It is impossible to predict when or if any of our product candidates will ~~depend upon~~prove effective or safe in humans or will receive marketing approval. Adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause us, any current or future collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our product candidates and could result in a more restrictive label, or the ~~acceptance~~delay or denial of ~~these products~~marketing approval by the ~~medical community, including physicians, nurses,~~FDA or comparable foreign regulatory authorities. If adverse effects were to arise in patients being treated with any of our product candidates, it could require us to halt, delay or interrupt clinical trials of such product candidate or adversely affect our ability to obtain requisite approvals to advance the development and ~~pharmacy~~commercialization of such product candidate. If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

We may expend our limited resources to pursue a particular product candidate or indication and ~~therapeutics committees.~~fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have limited financial and managerial resources. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements.

The ~~degree~~process for obtaining approval of ~~market acceptance~~a PMA or NDA is time consuming, subject to unanticipated delays and costs, and requires the commitment of ~~DSUVIA~~substantial resources.

If the FDA determines that any of the clinical work submitted, including the clinical trials, Human Factors studies and bench testing submitted for a product candidate in support of a premarket approval application (PMA) or NDA were not conducted in full compliance with the applicable protocols for these trials, studies and testing as well as with applicable regulations and standards, or if ~~approved,~~the FDA does not agree with our interpretation of the results of such trials, studies and testing, the FDA may reject the data and results. The FDA may audit some or all of our clinical trial sites to determine the integrity of our clinical data. The FDA may audit some or all of our study sites to determine the integrity of our data and may audit the data and results of bench testing. Any rejection of any of our data would negatively impact our ability to obtain marketing authorization for our product candidates and would have a material adverse effect on our business and financial condition. In addition, an NDA or PMA may not be approved, or approval may be delayed, as a result of changes in FDA policies for drug or device approval during the review period. For example, although many products have been approved by the FDA in recent years under Section 505(b)(2) of the FDCA, objections have been raised to the FDA’s interpretation of Section 505(b)(2). If challenges to the FDA’s interpretation of Section 505(b) (2) are successful, the FDA may be required to change its interpretation, which could delay or prevent the approval of such an NDA. Any significant delay in the acceptance, review or approval of an NDA or PMA that we have submitted would have a material adverse effect on our business and financial condition and would require us to obtain significant additional funding.

Our expectations for FDA approvability of our product candidates may be inaccurate, and we may be required to conduct additional manufacturing, nonclinical or clinical development work in order to obtain FDA approval for these products, which would add to our expenses and delay any associated revenue.

On July 14, 2021, we entered into the PFS Agreement with Aguettant pursuant to which we obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States ~~as well as DZUVEO~~(i) an ephedrine pre-filled syringe containing 10 ml of a solution of 3 mg/ml ephedrine hydrochloride for injection, and (ii) a phenylephrine pre-filled syringe containing 10 ml of a solution of 50 mcg/ml phenylephrine for injection. Aguettant will supply us with the products for use in ~~Europe,~~commercialization, if they are approved in the U.S. Our current expectation based on our communication with the FDA is that Fedsyra™, the PFS ephedrine product candidate, will be approvable by the ~~medical community will depend on a number of factors, including:~~

~~If our approved products do~~FDA without additional manufacturing changes or clinical development. We have not ~~achieve an adequate level of acceptance by~~yet received all the ~~medical community, including physicians, nurses, patients and pharmacy and therapeutics committees, we may not generate sufficient revenue and become or remain profitable.~~

available data to support the planned NDA submission for the PFS phenylephrine product. If we ~~are unable to maintain~~ or ~~grow our sales and marketing capabilities or enter into agreements with third parties to market and sell our products and, if approved, our~~the FDA determine that additional development work will be needed for U.S. approval of either of the PFS product candidates, we ~~may~~would incur additional expense and be ~~unable to generate sufficient product revenue.~~delayed in obtaining any revenue from that product.

~~In order to commercialize DSUVIA~~Nafamostat is being developed for both medical device and ifdrug indications for use. Although nafamostat is approved ~~our product candidates~~for certain uses in the United States, we must maintain or grow internal sales, marketing, distribution, managerial and other capabilities or make arrangements with third parties to perform these services. We have entered into agreements with third parties for the distribution of DSUVIA and may enter into such agreements for our product candidates, if approved, in the United States, including the product candidates we in-licensed from Laboratoire Aguettant, or Aguettant, in July 2021 pursuant to a License and Commercialization Agreement, or the PFS Agreement, and the product candidates we acquired through our acquisition of Lowell; however, if these third parties do not perform as expected or there are delays in establishing such relationships,Japan, our ability to ~~effectively distribute products would suffer.~~

~~We have entered into strategic partnerships~~leverage that for an expedited development and approval pathway with ~~third parties to commercialize our products outside of~~ the ~~United States. In July 2021, we entered a License~~FDA may be limited, and Commercialization Agreement, or the DZUVEO Agreement, with Aguettant for the commercialization of DZUVEO in the European Union, Norway, Iceland, Liechtenstein, Andorra, Vatican City, Monaco, Switzerland and the United Kingdom, or the DZUVEO Territory. We intend to enter into additional strategic partnerships with third parties to commercialize our products outside of the United States.

We face significant competition in seeking appropriate strategic partners, and these strategic partnerships can be intricate and time consuming to negotiate and secure. We may not be able to negotiate future strategic partnerships on acceptable terms, or at all. For example, in 2013 we entered into a collaboration with Grünenthal GmbH, or Grünenthal, for the commercialization of Zalviso® in Europe and Australia. Grünenthal ceased commercializing Zalviso on May 12, 2021 and the rights to market and sell Zalviso reverted back to us. The European Marketing Authorization for Zalviso was withdrawn in July 2022. We are unable to predict when, if ever, we will enter into any new strategic partnerships because of the numerous risks and uncertainties associated with establishing strategic partnerships. Our current or future collaboration partners, if any, may not dedicate sufficient resources to the commercialization of our products and product candidates, if approved, or may otherwise fail in their commercialization due to factors beyond our control. If we are unable to establish effective collaborations to enable the sale of our products to healthcare professionals and in geographical regions that will not be covered by our own marketing and sales force, or if our potential future collaboration partners do not successfully commercialize our products, our ability to generate revenues from product sales will be adversely affected.

If we are unable to maintain or grow adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and become profitable. We compete with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be ~~unable~~required to ~~compete successfully against these more established companies.~~conduct additional unanticipated nonclinical studies and clinical trials in order to seek approval in the U.S. We plan to study Niyad™ under an investigational device exemption, or IDE and although we have submitted an IDE to FDA, it remains under review. Niyad has received Breakthrough Device Designation from the FDA for regional anticoagulant for injection into the extracorporeal circuit and is expected to be used during renal replacement therapy for acute kidney injury patients in the hospital and for end-stage renal disease patients receiving dialysis in outpatient clinics. We expect that Niyad will require approval of a Premarket Approval, or PMA, application for commercialization in the U.S., and as a company we have never submitted nor received approval for a PMA.

The active drug component of Niyad, nafamostat, is also being developed for drug indications as LTX-608, for which we expect to submit Investigational New Drug applications once IND-enabling studies have been completed. We may be delayed in the submission of our planned INDs if there are unexpected findings in our nonclinical studies.

A key part of our business strategy is to establish collaborative relationships to commercialize and fund development and approval of our products, particularly outside of the United States. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize our products successfully, if at all.

We will need to establish and maintain successful collaborative relationships to obtain international sales, marketing and distribution capabilities for our products. The process of establishing and maintaining collaborative relationships is difficult, time-consuming and involves significant uncertainty. For example:

If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, any research, clinical development, manufacturing or commercialization efforts pursuant to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative relationships on acceptable terms we may have to undertake development and commercialization activities at our own expense.

We may experience difficulties in retaining our existing employees and managing our ~~operations, including our continued commercialization of DSUVIA.~~operations.

We need to retain and maintain our existing ~~sales,~~ managerial, operational, regulatory, developmental, finance and other personnel and resources in order to ~~continue the commercialization of DSUVIA~~develop our product candidates and manage our operations. Our current infrastructure may be inadequate to support our strategy and any future workforce reduction, such as the reduction that eliminated approximately 40% of our workforce in May 2022 and subsequent related workforce reductions, may be disruptive to our operations, may negatively affect our productivity, and may constrain our commercialization activities. For example, a further workforce reduction could yield unanticipated consequences, such as attrition beyond planned staff reductions, negatively impacting employee morale and our corporate culture, or increased difficulties in our day-to-day operations, and prevent us from ~~successfully commercializing DSUVIA~~developing our product candidates as rapidly as planned. If we encounter such unanticipated consequences, we may have difficulty retaining and attracting personnel. In addition, the implementation of any additional workforce or expense reduction programs may divert the efforts of our management team and other key employees, which could adversely affect our business. Furthermore, we may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our cost reduction plan, due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings from the cost reduction plan, our operating results and financial condition would be adversely affected.

~~Guidelines and recommendations published by government agencies, as well as non-governmental organizations, and existing laws and regulations can reduce the use of DSUVIA in the United States.~~

Government agencies and non-governmental organizations promulgate regulations and guidelines applicable to certain drug classes that may include DSUVIA in the United States. Recommendations of government agencies or non-governmental organizations may relate to such matters as maximum quantities dispensed to patients, dosage, route of administration, and use of concomitant therapies. Government agencies and non-governmental organizations have offered commentary and guidelines on the use of opioid-containing products. We are uncertain how these activities and guidelines may impact DSUVIA in the United States. Regulations or guidelines suggesting the reduced use of certain drug classes that may include DSUVIA, or the use of competitive or alternative products as the standard-of-care to be followed by patients and healthcare providers, could result in decreased use of DSUVIA, or negatively impact our ability to gain market acceptance and market share. The U.S. government and state legislatures have prioritized combatting the growing misuse and addiction to opioids and opioid overdose deaths and have enacted legislation and regulations as well as other measures intended to fight the opioid epidemic. Addressing opioid drug abuse is a priority for the current U.S. administration and the FDA and is part of a broader initiative led by the U.S. Department of Health and Human Services, or HHS. Overall, there is greater scrutiny of entities involved in the manufacture, sale and distribution of opioids. These initiatives, existing laws and regulations, and any negative publicity related to opioids may have a material impact on our business and our ability to manufacture opioid products.

Governmental investigations, inquiries, and regulatory actions and lawsuits brought against us by government agencies and private parties with respect to our commercialization of opioids could adversely affect our business, financial condition, results of operations and cash flows.

As a result of greater public awareness of the public health issue of opioid abuse, there has been increased scrutiny of, and investigation into, the commercial practices of opioid manufacturers by state and federal agencies. As a result of our manufacturing and commercial sale of DSUVIA in the United States, and DZUVEO in Europe, we could become the subject of federal, state and foreign government investigations and enforcement actions, focused on the misuse and abuse of opioid medications.

In addition, a significant number of lawsuits have been filed against opioid manufacturers, distributors, and others in the supply chain by cities, counties, state Attorney’s General and private persons seeking to hold them accountable for opioid misuse and abuse. The lawsuits assert a variety of claims, including, but not limited to, public nuisance, negligence, civil conspiracy, fraud, violations of the Racketeer Influenced and Corrupt Organizations Act, or RICO, or similar state laws, violations of state Controlled Substance Acts or state False Claims Acts, product liability, consumer fraud, unfair or deceptive trade practices, false advertising, insurance fraud, unjust enrichment and other common law and statutory claims arising from defendants’ manufacturing, distribution, marketing and promotion of opioids and seek restitution, damages, injunctive and other relief and attorneys’ fees and costs. The claims generally are based on alleged misrepresentations and/or omissions in connection with the sale and marketing of prescription opioid medications and/or an alleged failure to take adequate steps to prevent abuse and diversion. While DSUVIA is designed for use solely in certified medically supervised healthcare settings and administered only by a healthcare professional in these settings, and is not distributed or available at retail pharmacies to patients by prescription, we can provide no assurance that parties will not file lawsuits of this type against us in the future. In addition, current public perceptions of the public health issue of opioid abuse may present challenges to favorable resolution of any potential claims. Accordingly, we cannot predict whether we may become subject to these kinds of investigations and lawsuits in the future, and if we were to be named as a defendant in such actions, we cannot predict the ultimate outcome. Any allegations against us may negatively affect our business in various ways, including through harm to our reputation.

If we were required to defend ourselves in these matters, we would likely incur significant legal costs and could in the future be required to pay significant amounts as a result of fines, penalties, settlements or judgments. It is unlikely that our current product liability insurance would fully cover these potential liabilities, if at all. Moreover, we may be unable to maintain insurance in the future on acceptable terms or with adequate coverage against potential liabilities or other losses. For more information about our product liability insurance and exclusions therefrom, please see the risk factor entitled “We face potential product liability claims, and, if such claims are successful, we may incur substantial liability” elsewhere in this section. The resolution of one or more of these matters could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Furthermore, in the current climate, stories regarding prescription drug abuse and the diversion of opioids and other controlled substances are frequently in the media or advocated by public interest groups. Unfavorable publicity regarding the use or misuse of opioid drugs, the limitations of abuse-deterrent formulations, the ability of drug abusers to discover previously unknown ways to abuse opioid products, public inquiries and investigations into prescription drug abuse, litigation, or regulatory activity regarding sales, marketing, distribution or storage of opioids could have a material adverse effect on our reputation and impact on the results of litigation.

Finally, various government entities, including Congress, state legislatures or other policy-making bodies, or public interest groups have in the past and may in the future hold hearings, conduct investigations and/or issue reports calling attention to the opioid crisis, and may mention or criticize the perceived role of manufacturers, including us, in the opioid crisis. Similarly, press organizations have and likely will continue to report on these issues, and such reporting may result in adverse publicity for us, resulting in reputational harm.

~~Approval of DZUVEO in Europe has resulted in a variety of risks associated with international operations that could materially adversely affect our business.~~

Our collaborations with international partners, including Aguettant, requires us to supply product to support the commercialization of our products in Europe and it is likely that any new international collaborations would also include such a requirement. Entering into international business relationships subjects us to additional risks including:

If we, or current and potential partners, are unable to compete effectively, our products may not reach their commercial potential.

The U.S. biotechnology and pharmaceutical industries are characterized by intense competition and cost pressure. ~~DSUVIA competes, and our~~Our Niyad product ~~candidates,~~candidate, if approved in the U.S., ~~will compete, with a number of existing and future pharmaceuticals and drug delivery devices developed, manufactured and marketed by others. In particular, DSUVIA~~ may compete with ~~a wide variety of products and product candidates including (i) injectable opioid products,~~currently available anticoagulants such as ~~morphine, fentanyl, hydromorphone~~heparin and meperidine; (ii) oral opioids such as oxycodone and hydrocodone; (iii) generic injectable local anesthetics, such as bupivacaine or branded formulations thereof; (iv) non-steroidal anti-inflammatory drugs, or NSAIDS, including ketorolac in intranasal or generic IV form, and IV meloxicam; and (v) transmucosal fentanyl products.citrate. The PFS product candidates, if approved in the U.S., may compete with other ready-to-use formulations of ephedrine and phenylephrine. The nafamostat product candidates, if approved in the U.S., may compete with heparin and citrate.

Key competitive factors affecting the commercial success of our approved products are likely to be efficacy, safety profile, reliability, convenience of dosing, price and reimbursement. Many of our competitors and potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of drug candidates, obtaining FDA and other regulatory approval of products, and the commercialization of those products. Accordingly, our competitors may be more successful than we are in obtaining FDA approval for drugs and devices and achieving widespread market acceptance. Our competitors’ drugs, devices or drug delivery systems may be more effective, have fewer adverse effects, be less expensive to develop and manufacture, or be more effectively marketed and sold than any product we may seek to commercialize. This may render our products obsolete or non-competitive. We anticipate that we will face intense and increasing competition as new drugs and devices enter the market, additional technologies become available, and competitors establish collaborative or licensing relationships, which may adversely affect our competitive position. These and other competitive risks may materially adversely affect our ability to attain or sustain profitable operations.

Hospital or other health care facility formulary approvals for DSUVIA or our product candidates, if approved, in the United States may not be achieved, or could be subject to certain restrictions, which could make it difficult for us to sell our products.

Obtaining hospital or other health care facility formulary approvals can be an expensive and time-consuming process. We cannot be certain if and when we will obtain formulary approvals to allow us to sell our products into our target markets. In particular, the COVID-19-related restrictions on our commercial and medical affairs teams’ access to hospitals and other health care facilities has adversely impacted the number of formulary approvals we achieved to date, and for as long as these restrictions remain in place, or new restrictions are implemented, we may have limited visibility or difficulties in obtaining these formulary approvals. Failure to obtain timely formulary approvals will limit our commercial success. In order to obtain formulary approvals, we often are required to complete evaluation programs whereby DSUVIA, or our product candidates, if approved, are used on a limited basis for certain patient types. The evaluation period may last several months and there can be no assurance that use during the evaluation period will lead to formulary approvals of DSUVIA, or our product candidates, if approved. Further, even successful formulary approvals are subject to certain restrictions based on patient type or hospital protocol. Failure to obtain timely formulary approvals for DSUVIA, or our product candidates, if approved, would materially adversely affect our ability to attain or sustain profitable operations.

Coverage and adequate reimbursement may not be available for ~~DSUVIA or~~ our product candidates, if approved, in the United States ~~or DZUVEO~~and in Europe, which could make it difficult for us, or our partners, to sell our products profitably.

Our and our partners’ ability to commercialize ~~DSUVIA or~~ our product candidates in the future, if approved, in the United States ~~and Aguettant’s ability to commercialize DZUVEO in Europe successfully~~ will depend, in part, on the extent to which coverage and adequate reimbursement will be available from government payer programs at the federal and state levels, authorities, including Medicare and Medicaid, private health insurers, managed care plans and other third-party payers.

No uniform policy requirement for coverage and reimbursement for drug products exists among third-party payers in the United States or Europe. Therefore, coverage and reimbursement can differ significantly from payer to payer. As a result, the coverage determination process is often a time-consuming and costly process that will require us or our partners to provide scientific and clinical support for the use of ~~our~~the approved products to each payer separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such products. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact utilization. Our or our partners’ inability to promptly obtain and sufficiently maintain coverage and adequate reimbursement rates from third party payers could significantly harm our operating results, our ability to raise capital needed to commercialize our approved drugs and our overall financial condition.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payers have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. There have been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign jurisdictions that could affect our or our partners’ ability to sell ~~our~~the products profitably. These legislative and/or regulatory changes may negatively impact the reimbursement for our products, following approval. The availability of numerous generic pain medications may also substantially reduce the likelihood of reimbursement for ~~DSUVIA in the United States, and DZUVEO~~approved products in Europe and elsewhere. The application of user fees to generic drug products may expedite the approval of additional pain medication generic drugs. We would expect tothat our product candidates will experience pricing pressures in connection with ~~our sales of DSUVIA in~~ the ~~United States, and~~ product ~~sales of DZUVEO by Aguettant in Europe,~~sale due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. If we or our partners fail to successfully secure and maintain reimbursement coverage for our products or are significantly delayed in doing so, ~~we will have~~there may be difficulty achieving market acceptance of our products and our business will be harmed.

Furthermore, market acceptance and sales of our products will depend on reimbursement policies and may be affected by future healthcare reform measures. Government authorities and third-party payers, such as private health insurers, hospitals and health maintenance organizations, decide which drugs and devices they will pay for and establish reimbursement levels. We cannot be sure that reimbursement will be available for ~~DSUVIA or~~ our product candidates, if approved, in the United States or ~~DZUVEO~~ in Europe. Also, reimbursement amounts may reduce the demand for, or the price of, our products. For example, additional studies ~~of DZUVEO~~ in Europe may be needed to ensure premium reimbursement in certain countries. If reimbursement is not available, or is available only to limited levels, we, or our partners, may not be able to successfully commercialize ~~DSUVIA or~~ our product candidates, if approved, in the United States or ~~DZUVEO~~ in Europe.

Additionally, the regulations that govern marketing approvals, pricing, coverage and reimbursement for new drugs and devices vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues able to be generated from the sale of the product in that country. For example, separate pricing and reimbursement approvals may impact Aguettant’s ability to market and successfully commercialize DZUVEO in the 27 member states of the European Union. Adverse pricing limitations may hinder our ability to recoup our investment in DSUVIA in the United States, or our other product candidates, even after obtaining FDA marketing approval.

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

If we are found to have improperly promoted off-label uses of our products ~~including DSUVIA or our product candidates, if approved,~~ in the United States, we may become subject to significant liability. Such enforcement has become more common in the industry. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription drug and device products. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. While we have received marketing approval for DSUVIA for our proposed indication, physicians may nevertheless use our products for their patients in a manner that is inconsistent with the approved label, if the physicians personally believe in their professional medical judgment it could be used in such manner. However, ifIf the FDA determines that our or our partners’ public disclosures, promotional materials or training constitutes promotion of annon-approved or off-label use, it could request ~~that we modify our~~modifications to disclosure policies, training or promotional materials or subject us or our partners to regulatory or enforcement actions, including the issuance of an untitled letter, a Warning Letter, injunction, seizure, civil fine or criminal penalties and a requirement for corrective advertising, including Dear Doctor letters. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our or our partners’ promotional or training materials to constitute promotion of annon-approved or off-label use, which could result in significant civil, criminal and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, increased losses and diminished profits and the curtailment or restructuring of ~~our~~ operations, any of which could adversely affect our or our partners’ ability to operate and, thus, adversely impact our business and our financial results. The FDA or other enforcement authorities could also request that we enter into a consent decree or a corporate integrity agreement or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed. If we cannot successfully manage the promotion of ~~DSUVIA or~~ our product candidates, if approved, in the United States, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

If we or our partners are unable to establish and maintain relationships with group purchasing organizations any future revenues or future profitability could be jeopardized.

Many end-users of pharmaceutical and medical device products have relationships with group purchasing organizations, or GPOs, whereby such GPOs provide such end-users access to a broad range of pharmaceutical and medical device products from multiple suppliers at competitive prices and, in certain cases, exercise considerable influence over the drug and device purchasing decisions of such end-users. Hospitals and other end-users contract with the GPO of their choice for their purchasing needs. We expect to derive revenue from end-user customers that are members of GPOs for ~~DSUVIA and~~ our product candidates, if approved. Establishing and maintaining strong relationships with these GPOs will require us to be a reliable supplier, remain price competitive and comply with FDA regulations. The GPOs with whom we have relationships may have relationships with manufacturers that sell competing products, and such GPOs may earn higher margins from these products or combinations of competing products or may prefer products other than ours for other reasons. If we, or our partners, are unable to establish or maintain our GPO relationships, sales of ~~DSUVIA and~~ our product candidates, if approved, and related revenues could be negatively impacted.

~~We intend to rely on a limited number of distributors and pharmaceutical wholesalers to distribute DSUVIA and our product candidates, if approved, in the United States.~~

We intend to rely primarily upon distributors and pharmaceutical wholesalers in connection with the distribution of DSUVIA and our product candidates, if approved, in the United States. As part of the DSUVIA REMS program, we monitor distribution and audit wholesalers’ data and will monitor such data from other distributors. If our distributors and wholesalers do not comply with the DSUVIA REMS requirements, or if we are unable to establish or maintain our business relationships with these distributors and pharmaceutical wholesalers on commercially acceptable terms, or if our distributors and wholesalers are unable to distribute our drugs for regulatory, compliance or any other reason, it could have a material adverse effect on our sales and may prevent us from achieving profitability.

Risks Related to ~~Clinical Development~~Regulatory Approval of Our Product Candidates and ~~Regulatory Approval~~Other Legal Compliance Matters

On July 14, 2021, we entered into the PFS Agreement with Aguettant pursuant to which we obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States (i) an ephedrine pre-filled syringe containing 10 ml of a solution of 3 mg/ml ephedrine hydrochloride for injection, and (ii) a phenylephrine pre-filled syringe containing 10 ml of a solution of 50 mcg/ml phenylephrine hydrochloride for injection. Aguettant will supply us with the products for use in commercialization, if they are approved in the U.S. Our current expectation based on our communication with the FDA is that the PFS products will be approvable by the FDA without additional manufacturing changes or clinical development, but we have not yet received all the available data to support the planned NDA filings for the PFS products. If we determine that additional development work will be needed for U.S. approval, we would incur additional expense and be delayed in obtaining any revenue from the PFS products.

Nafamostat is being developed for both medical device and drug indications for use. Although nafamostat is approved for certain uses in Japan, our ability to leverage that for an expedited development and approval pathway with the FDA may be limited, and we may be required to conduct additional unanticipated nonclinical studies and clinical trials in order to seek approval in the U.S. We plan to study Niyad™ under an investigational device exemption, or IDE. Niyad has received Breakthrough Device Designation from the FDA for regional anticoagulant for injection into the extracorporeal circuit and is expected to be used during renal replacement therapy for acute kidney injury patients in the hospital and for end-stage renal disease patients receiving dialysis in outpatient clinics. We expect that Niyad will require filing of a Premarket Approval, or PMA, application. In addition, the Breakthrough Designation allows for more frequent and informal FDA communication regarding development plans and allows for priority review once the marketing application is submitted.

~~The active drug component of Niyad, nafamostat, is also being developed for drug indications for which we expect to submit Investigational New Drug applications.~~

Existing and future legislation may increase the difficulty and cost for us to commercialize our products and affect the prices we may obtain.

In the United States and some foreign jurisdictions, the legislative landscape continues to evolve, including changes to the regulation of opioid-containing products. There have been a number of legislative and regulatory changes and proposed changes regarding healthcare systems that will restrict or regulate post-approval activities for DSUVIA and DZUVEO and affect our ability to profitably sell any products for which we obtain marketing approval.

In the European Union, or EU, the pricing of prescription drugs is subject to government control. The EU also provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. In addition, the EMA has a “sunset clause” which provides that the marketing authorization of a medicine will cease to be valid if it is not placed on the market within three years of the authorization being granted or if it is removed from the market for three consecutive years; however, the European Commission has extended this date to December 31, 2022 for DZUVEO.

In the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, was enacted in an effort to, among other things, broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, impose new taxes and fees on the health industry and impose additional health policy reforms. ~~Aspects of the Affordable Care Act that may impact our business include:~~

The Affordable Care Act continues to substantially change health care financing and delivery by both governmental and private insurers, which may increase our regulatory burdens and operating costs.

There have been executive, judicial and Congressional challenges to certain aspects of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law. The Tax Cuts and Jobs Act of 2017 includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care ActFor example, on ~~certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. On~~ June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. ~~Thus,~~In addition, there have been a number of health reform initiatives by the Biden administration that have impacted the Affordable Care Act ~~will remain in effect in its current form. Moreover, prior to the U.S. Supreme Court ruling,~~. For example, on ~~January 28, 2021,~~August 16, 2022, President Biden ~~issued an executive order that initiated a special enrollment period~~signed the Inflation Reduction Act of 2022, or the IRA, into law, which among other things, extends enhanced subsidies for ~~purposes of obtaining~~individuals purchasing health insurance coverage ~~through the~~in Affordable Care Act ~~marketplace, which began on February 15, 2021~~marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and ~~remained open through August 15, 2021. The executive order instructed certain governmental agencies to review and reconsider their existing policies and rules~~creating a new manufacturer discount program. It is possible that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access tothere will be additional health ~~insurance coverage through Medicaid or the Affordable Care Act.~~reform measures It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is also unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care Act. We expect that the Affordable Care Act and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to successfully commercialize our products. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our products may lose regulatory approval and we may not achieve or sustain profitability, which would adversely affect our business.

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. Aggregate reductions of Medicare payments to providers of 2% per fiscal year went into effect on April 1, 2013 and due to subsequent legislative amendments to the statute will stay in effect until 2031, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless Congressional action is taken. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. The American Taxpayer Relief Act further reduced Medicare payments to several providers, including hospitals. Additionally, on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024. ~~Congress is also considering additional health reform measures.~~

Moreover, the Drug Supply Chain Security Act of 2013 imposes additional obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, label drug product with a product identifier, and keep certain records regarding the drug product.

In the United States, there has been increasing legislative and enforcement interest with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, President Trump announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals. The FDA concurrently released a final rule and guidance in September 2020, implementing a portion of the importation executive order providing pathways for states to build and submit importation plans for drugs from Canada. Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. The implementation of the rule has been delayed until January 1, 2027. Further, on November 20, 2020, the Centers for Medicare & Medicaid Services, or CMS, issued an interim final rule implementing President Trump’s Most Favored Nation, or MFN, executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. As a result of litigation challenging the MFN model, on December 27, 2021, CMS published a final rule that rescinds the MFN Model interim final rule. In July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue to advance these principles. In addition, the IRA, among other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges. In addition, the Biden administration released an additional executive order on October 14, 2022, directing HHS to report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, measures designed to encourage importation from other countries and bulk purchasing. Furthermore, even after initial price and reimbursement approvals, reductions in prices and changes in reimbursement levels can be triggered by multiple factors, including reference pricing systems and publication of discounts by third party payers or authorities in other countries. In Europe, prices can be reduced further by parallel distribution and parallel trade (i.e., arbitrage between low-priced and high-priced countries). If any of these events occur, revenue from sales of ~~DZUVEO~~our products in Europe would be negatively affected.

Legislative and regulatory proposals have been made to expand post-approval requirements and further restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our products, if any, may be.

We expect that additional healthcare reform measures will be adopted within and outside the United States in the future, any of which could negatively impact our business. ~~For instance, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.~~ The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect the demand for any drug or device products for which we have obtained or may obtain regulatory approval, our ability to set a price that we believe is fair for our products, our ability to obtain coverage and reimbursement approval for a product, our ability to generate revenues and achieve or maintain profitability, and the level of taxes that we are required to pay.

We have experienced and may in the future experience delays in clinical trials of our product candidates. Our post-approval clinical trials for DSUVIA, or any future FDA-required clinical trials for our product candidates, could be delayed for a variety of reasons, including:

~~DSUVIA may cause adverse effects or have other properties that could limit market acceptance.~~

In our Phase 2 DSUVIA placebo-controlled bunionectomy study (SAP202), two patients in the DSUVIA 30 mcg group (5%) discontinued treatment due to an AE, one unrelated to study drug and the other probably related to study drug. There were no SAEs deemed related to study drug. In our Phase 3 placebo-controlled abdominal surgery study (SAP301), one DSUVIA-treated patient (1%) dropped out of the trial prematurely due to an AE (4% in placebo group). There were two SAEs determined to be related to study drug in the placebo-treated group and no related SAEs in the DSUVIA group. In our Phase 3 open-label, single-arm emergency room study (SAP302), no DSUVIA-treated patients dropped out of the trial prematurely due to an AE. One patient had an SAE – angina pectoris – possibly related to study drug. In our post-operative study in patients aged 40 years or older (SAP303), 3% of DSUVIA-treated patients dropped out of the trial prematurely due to an AE. There were no SAEs deemed related to study drug.

~~If DSUVIA causes serious or unexpected side effects, a number of potentially significant negative consequences could result, including:~~

~~Any of these events could prevent us from achieving or maintaining market acceptance of DSUVIA and could substantially increase the costs of commercializing our products.~~

~~The process for obtaining approval of an NDA is time consuming, subject to unanticipated delays and costs, and requires the commitment of substantial resources.~~

If the FDA determines that any of the clinical work submitted, including the clinical trials, Human Factors studies and bench testing submitted for a product candidate in support of an NDA were not conducted in full compliance with the applicable protocols for these trials, studies and testing as well as with applicable regulations and standards, or if the FDA does not agree with our interpretation of the results of such trials, studies and testing, the FDA may reject the data and results. The FDA may audit some or all of our clinical trial sites to determine the integrity of our clinical data. The FDA may audit some or all of our Human Factors study sites to determine the integrity of our data and may audit the data and results of bench testing. Any rejection of any of our data would negatively impact our ability to obtain marketing authorization for our product candidates and would have a material adverse effect on our business and financial condition. In addition, an NDA may not be approved, or approval may be delayed, as a result of changes in FDA policies for drug approval during the review period. For example, although many products have been approved by the FDA in recent years under Section 505(b)(2) of the FDCA, objections have been raised to the FDA’s interpretation of Section 505(b)(2). If challenges to the FDA’s interpretation of Section 505(b) (2) are successful, the FDA may be required to change its interpretation, which could delay or prevent the approval of such an NDA. Any significant delay in the acceptance, review or approval of an NDA that we have submitted would have a material adverse effect on our business and financial condition and would require us to obtain significant additional funding.

Although we have obtained regulatory approval for DSUVIA, and even if we obtain regulatory approval for our product candidates in the United States, we and our collaborators face extensive regulatory requirements, and our products may face future development and regulatory difficulties.

Although we have obtained regulatory approval for DSUVIA, and even if we obtain regulatory approval for our product candidates in the United States, the FDA may impose significant restrictions on the indicated uses or marketing of our products or impose ongoing requirements for potentially costly post-approval trials or post-market surveillance. For example, DSUVIA is subject to a deferred post-marketing requirement for study in the pediatric population ages 6-17 years. A final protocol for this trial was submitted to the FDA in August 2020, in conjunction with a previously FDA approved request to defer initiation of pediatric studies until additional post-market safety data is obtained in adult patients using DSUVIA. Additionally, the labeling approved for DSUVIA includes restrictions on use due to the opioid nature of sufentanil.

DSUVIA in the United States is also subject to ongoing FDA requirements governing the labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. The holder of an approved NDA is obligated to monitor and report AEs and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process.

Advertising and promotional materials must comply with FDA rules and are subject to FDA review, in addition to compliance with other potentially applicable federal and state laws. Failure to comply with these regulations can result in the receipt of Warning Letters and further liability if off-label promotion is involved. For example, on February 11, 2021, we received a Warning Letter from the Office of Prescription Drug Promotion, or OPDP, of the FDA relating to a banner advertisement we submitted to the OPDP on December 6, 2019, and a tabletop display we submitted on February 28, 2020, and resubmitted to the OPDP at its request on September 23, 2020. We submitted the materials to the OPDP pursuant to the FDA requirement that sponsors submit all promotional materials to the FDA at the time of their initial dissemination or publication. The FDA’s concerns identified in the letter include its view that the promotional material makes misleading claims and representations about the risks and efficacy of DSUVIA because the material does not reveal facts that are material in light of the representations made. As a result, we conducted a review of our marketing materials to identify any potential revisions in light of the letter. We responded to the FDA within the timeframe requested in the letter and, on March 23, 2021, held a teleconference with OPDP to seek guidance and clarification on the concerns raised in the letter. Following our meeting with OPDP, we conducted a further review of our marketing materials to identify any potential revisions in light of the letter and OPDP’s guidance. We submitted a second response to FDA on April 7, 2021, and on June 17, 2021 we announced that the FDA agreed with our proposed plan to update certain promotional materials, including providing a letter to healthcare professionals, or the DHCP letter, explaining the corrections to the discontinued promotional materials. We included this DHCP letter on the DSUVIA.com website for a period of eight months. On February 18, 2022, in agreement with OPDP, the link to the corrective DCHP letter was removed from the DSUVIA.com website. Although we believe we have updated all promotional materials currently in use by our commercial team to address the FDA's concerns and we received a close-out Letter to the Warning Letter in March 2022, we cannot give any assurances that we will not receive additional FDA Warning Letters in the future. If approved, our product candidates will be subject to these same requirements.

We must also register and obtain various state prescription drug distribution licenses and controlled substance permits, and any delay or failure to obtain or maintain these licenses or permits may limit our market and materially impact our business. In certain states we cannot apply for a license until a drug is approved by the FDA. The state licensing process may take several months which would delay commercialization in those states. In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMPs and adherence to commitments made in the NDA. If we, or a regulatory agency, discover previously unknown problems with a product, such as AEs of unanticipated severity or frequency, or problems with the facilities where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facilities, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

~~If we fail to comply with applicable regulatory requirements following approval of our products, a regulatory agency may:~~

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize DSUVIA, or, if approved, our product candidates, and generate revenues.

Except for DZUVEO, which is approved in Europe, we may never obtain additional regulatory approvals for our products and product candidates outside of the United States, which would limit our ability to realize their full market potential.

In order to market any products outside of the United States, we or our commercial partners, must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. In June 2018, we announced that the EC had granted marketing approval of DZUVEO for the treatment of patients with moderate-to-severe acute pain in medically monitored settings. In July 2021, we entered into the DZUVEO Agreement with Aguettant.

Part of the foreign regulatory approval process includes compliance inspections of manufacturing facilities to ensure adherence to applicable regulations and guidelines. The foreign regulatory agency may delay, limit or deny marketing approval as a result of such inspections. We, our contract manufacturers, and their vendors, are all subject to preapproval and post-approval inspections at any time. The results of these inspections could impact our ability to obtain regulatory approval of DSUVIA/DZUVEO or our product candidates in countries outside of the United States and Europe, or our ability to launch and successfully commercialize these products, once approved. In addition, results of EMA inspections could impact our ability to maintain EC approval of DZUVEO and Aguettant’s ability to expand and sustain commercial sales of DZUVEO in Europe.

Outside of Europe, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs for us and require additional non-clinical trials or clinical trials, which could be costly and time consuming. Regulatory requirements can vary widely from country-to-country and could delay or prevent the introduction of our products in those countries. Our current clinical trial data may not be sufficient to support marketing approval or premium reimbursement in all territories. For example, we anticipate we may need comparator studies for DZUVEO in Europe to ensure premium reimbursement in certain countries. While we have obtained approval of DZUVEO in Europe, we will be substantially dependent on Aguettant to comply with regulatory requirements. If we, or our commercial partners, fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.

DSUVIA was approved in the United States with a REMS program. The DSUVIA REMS program includes restrictions on product distribution and use only in certified medically supervised settings. Before DSUVIA is distributed, an authorized representative from each medically supervised setting must sign an attestation that they have the ability to manage acute opioid overdose and will train all relevant staff on administration of DSUVIA, including the importance of only dispensing the product in a medically supervised setting. Therefore, REMS-certification is a key gating item to generating product revenues for DSUVIA. In addition, the REMS program for DSUVIA may significantly increase our costs to commercialize this product.

We have incurred significant losses since our inception and anticipate that we ~~may~~will continue to incur losses in the future.

We have incurred significant net losses since our inception in July 2005, and as of ~~June 30, 2022,~~March 31, 2023, we had an accumulated deficit of ~~$411.6~~$434.0 million. In addition, we have generated negative cash flows from operations and we expect to incur significant losses in 2023 and may incur significant losses and negative cash flows from operations in the future. These conditions raise substantial doubt about our ability to continue as a going concern.

We have devoted most of our financial resources to research and development, including our non-clinical development activities and clinical trials. To date, we have financed our operations primarily through the issuance of equity securities, borrowings, payments from Grünenthal, the monetization of certain future royalties and commercial sales milestones from the European sales of Zalviso by Grünenthal, funding from the Department of Defense, or DoD, ~~and more recently~~ with revenues from sales of DSUVIA, ~~since~~and payments under the ~~commercial launch in the first quarter of 2019 and the upfront payment under the~~Amended DZUVEO Agreement with Aguettant. The size of our future net losses will depend, in part, on the rate of future expenditures and our ability to generate revenues. We expect to continue to incur substantial expenses as we support ~~commercialization activities for DSUVIA, manufacturing and supply activities for DZUVEO, and~~ research and development activities for our product candidates. If ~~DSUVIA is not successfully commercialized in the U.S., if~~ our product candidates are not successfully developed or commercialized in the U.S., or if revenues are insufficient following marketing approval, we will not achieve profitability and our business may fail. Our success is also dependent on current and future collaborations to market our products outside of the United States, which may not materialize or prove to be successful.

We ~~will~~ require additional capital and may be unable to raise such capital, which would force us to delay, reduce or eliminate our commercialization efforts and product development programs and could cause us to be unable to continue to operate as a going concern and cease operations.

Launch of a commercial pharmaceutical product and pharmaceutical development activities can be time consuming and costly. We expect to incur significant expenditures in connection with supporting our ~~ongoing commercialization activities for DSUVIA, manufacturing and supply activities for DZUVEO, and~~ research and development activities for our product candidates.

Clinical trials, regulatory reviews, and the launch of a commercial product are expensive activities. In addition, commercialization costs for ~~DSUVIA and~~ our product candidates, if approved, in the United States may be significantly higher than estimated as a result of technical difficulties or otherwise. Revenues may be lower than expected and costs to produce such revenues may exceed those revenues. We will need to seek additional capital to continue operations. Such capital demands could be substantial. In the future, we may seek to ~~sell~~raise such additional capital through public or private equity ~~securities,~~offerings, including under the Controlled Equity Offering^SMSales Agreement, or the ATM Agreement, with Cantor Fitzgerald & Co., or Cantor, ~~as agent, and~~ debt securities, ~~monetize~~a new debt facility, monetizing or ~~securitize~~securitizing certain assets, ~~refinance our loan agreement, enter~~entering into product development, license or distribution agreements with third parties, or ~~divest DSUVIA in the United States, DZUVEO in Europe, or~~divesting any of our product candidates. Such arrangements may not be available on favorable terms, if at all.

If we are unsuccessful in efforts to raise additional capital, based on our current levels of operating expenses, our current capital is not expected to be sufficient to fund our operations for the next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern.

The ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements for the ~~three and six months~~quarterly period ended ~~June 30, 2022~~March 31, 2023 were prepared on the basis of a going concern, which contemplates that we will be able to realize our assets and discharge liabilities in the normal course of business. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Future events and circumstances, including those beyond our control, may cause us to consume capital more rapidly than we currently anticipate. Furthermore, any product development, licensing, distribution or sale agreements that we enter into may require us to relinquish valuable rights. We may not be able to obtain sufficient additional funding or enter into a strategic transaction in a timely manner. If adequate funds are not available, we would be required to reduce our workforce, reduce the scope of, or cease, the development and subsequent potential commercial launch ~~of DSUVIA, or the development~~ of our product candidates in advance of the date on which we exhaust our cash resources to ensure that we have sufficient capital to meet our obligations and continue on a path designed to preserve stockholder value.

Securing additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to ~~commercialize DSUVIA or~~ develop our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

During the past several years, domestic and international financial markets have experienced, and they may continue to experience, extreme disruption from time to time, including, among other things, high volatility, significant declines in stock prices and severely diminished liquidity and credit availability for both borrowers and investors. Such adverse capital and credit market conditions could make it more difficult to obtain additional capital on favorable terms, or at all, which could have a material adverse effect on our business and growth prospects. For example, our ability to raise additional capital may be adversely impacted by deteriorating global economic conditions and the disruptions to and volatility in the credit and financial markets in the U.S. and worldwide resulting from the evolving effects of the COVID-19 pandemic and the ongoing military conflict between Russian and Ukraine and related sanctions imposed against Russia.

To fund our operations and capital requirements, we may sell additional equity securities, which may result in dilution to our stockholders, or debt securities, or enter into a new debt facility which may impose restrictions on our business.

We expect that significant additional capital will be needed in the future to continue our planned operations and capital requirements. In the long-term, our existing capital resources will not be sufficient to fund our operations until such time as we may be able to generate sufficient revenues to sustain our operations. In order to raise additional funds to support our operations, we may sell additional equity securities, including under the ATM Agreement with Cantor. We may sell common stock, convertible securities, or other equity securities in one or more transactions at prices and in a manner we determine from time to time. Selling additional equity securities may result in dilution to our existing stockholders and new investors may be materially diluted by subsequent sales. Incurring additional indebtedness, including through the sale of debt securities or entering into a new debt facility, would result in increased fixed payment obligations and could also result in additional restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions, such as minimum cash balances, that could adversely impact our ability to conduct our business. Sales of equity or debt securities may also provide new investors with rights superior to our existing stockholders. If we are unable to expand our operations or otherwise capitalize on our business opportunities, our business, financial condition and results of operations could be materially adversely affected, and we may not be able to meet our debt service obligations.

We have not yet generated significant product revenue and may never be profitable.

Our ability to generate revenue from commercial sales and/or royalties and achieve profitability depends on our ability, alone and with collaborators, to successfully complete the development of, obtain the necessary regulatory approvals for, and commercialize our products. Although we received FDA approval of DSUVIA and began the commercial launch of DSUVIA in the United States, we may never generate enough revenues from sales of DSUVIA, or our product candidates, if approved, in the United States to become profitable. ~~Although the EC granted marketing approval of DZUVEO in June 2018, we only recently entered into the DZUVEO Agreement with Aguettant to commercialize DZUVEO in Europe and there~~There can be no assurance that ~~Aguettant~~Alora pursuant to the DSUVIA Agreement will successfully commercialize ~~DZUVEO.~~DSUVIA. Although we had a collaboration agreement with Grünenthal for commercialization of Zalviso in Europe and Australia, Grünenthal was unable to achieve a level of commercial sales of Zalviso to trigger sales milestone payments that would have been payable to us. The Grünenthal Agreements have been terminated and Grünenthal’s rights to market and sell Zalviso reverted back to us on May 12, 2021. The European Marketing Authorization for Zalviso was withdrawn in July 2022.

We do not anticipate generating significant near-term revenues ~~from~~under the DSUVIA Agreement or from our product candidates, if approved, in the United States. Our ability to generate future revenues from product sales depends heavily on ~~our~~the success in:

Because of the numerous risks and uncertainties associated with launching a commercial pharmaceutical product, pharmaceutical product development and the regulatory environment, we are unable to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability. Our expenses could increase beyond expectations if we are delayed in receiving regulatory approval for our product candidates in the United States, or if we are required by the FDA to complete activities in addition to those we currently anticipate or have already completed.

~~We anticipate continuing to incur significant costs associated with commercializing DSUVIA in the United States.~~ Even if we are able to generate revenues ~~from~~under the ~~sale of~~ DSUVIA Agreement or from our product candidates, if approved, in the United States, we may not become profitable and may need to obtain additional funding to continue operations.

Future sales of DSUVIA to the DoD are not predictable, may occur on an irregular basis and may not meet our expectations due to various U.S. government-related factors that are beyond our control and into which we have little to no visibility, including the timing and extent of future U.S. military deployments. If DoD spending on DSUVIA does not meet our expectations, it could adversely affect our expected results of operations, financial condition and liquidity.

In April 2020, DSUVIA achieved Milestone C approval by the DoD, a decision that clears the path for the DoD to begin placing orders for DSUVIA to fulfill its updating requirements for all Army Sets, Kits, and Outfits, or SKOs, for deployed/deploying troops. Completion of this SKO fulfillment process is dependent on the Army’s completion of their product information package including instructions on fulfillment and training which remains in process. In September 2020, we announced that DSUVIA was added to the DoD Joint Deployment Formulary, a core list of pharmaceutical products that are designated for deploying military units across all service branches. Under the DSUVIA Agreement, Alora will be responsible for commercializing DSUVIA except that we will retain the responsibility for driving the demand within the DoD, and we will receive quarterly payments in an amount equal to 75% of net Product sales to the DoD. Refer to Note 3, “Discontinued Operations” and Note 11, “Subsequent Events” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information. Future sales of DSUVIA by Alora to the DoD are not predictable, may occur on an irregular basis, and may not meet ~~our~~ expectations due to various U.S. government-related factors that are beyond our control and into which we have little to no visibility, including the timing and extent of future U.S. military deployments. Even if ~~we do~~Alora does generate revenue from such sales and we receive payments, we may never generate revenue that is significant or predictable, which could impair our value and our ability to raise capital, expand our business or continue our operations. The placement of new orders by the DoD is, among other things, contingent upon overall U.S. government policies, budget and appropriation decisions and processes which are driven by numerous factors, including geo-political events, deployment of military units, macroeconomic conditions, and the ability of the U.S. government to enact relevant legislation, such as appropriations bills and accords on the debt ceiling. ~~Our expectations about the~~The timing and size of initial stocking orders for the SKOs and other orders by the DoD are based on ~~our understanding of~~ troop deployment schedules. If DoD spending on DSUVIA does not meet our expectations, it could have a material adverse effect on our expected results of operations, financial condition and liquidity.

~~We will be substantially dependent on Aguettant to successfully commercialize DZUVEO in Europe.~~

In June 2018, the EC granted marketing approval for DZUVEO and in July 2021 we entered into the DZUVEO Agreement with Aguettant to commercialize DZUVEO in Europe. We will be substantially dependent on Aguettant to successfully commercialize DZUVEO in Europe. Any failures in the commercialization of DZUVEO in Europe could have a significant adverse impact on our revenues and operating results.

The DZUVEO Agreement requires us to support the manufacturing and supply of DZUVEO for Aguettant. In addition, we anticipate we may need comparator studies in Europe to ensure premium reimbursement in certain countries. Our inability to profitably manufacture and supply DZUVEO to Aguettant, or to successfully complete these additional comparator studies and obtain premium reimbursement in certain countries, may prevent, limit or delay commercialization and any associated future revenues from DZUVEO in Europe.

~~We have limited experience commercializing DSUVIA, which may make it difficult to predict our future performance or evaluate our business and prospects.~~

Since inception, our operations have been primarily focused on developing our technology and undertaking pharmaceutical development and clinical trials for DSUVIA and Zalviso, understanding the market potential for DSUVIA and Zalviso, and preparing for the commercialization of DSUVIA in the United States. We launched commercialization efforts for DSUVIA in February 2019. As a result of our limited commercialization experience, any predictions that are made about our future performance, or viability, or evaluation of our business and prospects, may not be accurate.

The terms of our loan agreement with Oxford may restrict our current and future operations, particularly our ability to respond to changes in business or to take certain actions, including to pay dividends to our stockholders.

On May 30, 2019, we entered into the Loan Agreement with Oxford Finance LLC, or Oxford, a Delaware limited liability company, as the Lender. The Loan Agreement contains, and any future indebtedness we incur will likely contain, a number of restrictive covenants that impose operating restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interests. The Loan Agreement includes covenants that, among other things, restrict our ability to (i) declare dividends or redeem or repurchase equity interests; (ii) incur additional liens; (iii) make loans and investments; (iv) incur additional indebtedness; (v) engage in mergers, acquisitions, and asset sales; (vi) transact with affiliates; (vii) undergo a change in control; (viii) add or change business locations; and (ix) engage in businesses that are not related to our existing business. The Loan Agreement also requires that we at all times maintain unrestricted cash of not less than $5.0 million.

A breach of any of these covenants could result in an event of default under the Loan Agreement. Upon the occurrence of such an event of default, a default interest rate of an additional 5% may be applied to the outstanding loan balances and all outstanding obligations under the Loan Agreement can be declared to be immediately due and payable If our indebtedness is accelerated, we cannot assure you that we will have sufficient assets to repay the indebtedness. The restrictions and covenants in the Loan Agreement and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.

~~We might be unable to service our existing debt due to a lack of cash flow and might be subject to default.~~

As of June 30, 2022, we had approximately $9.4 million of outstanding debt under the Loan Agreement. The Loan Agreement has a scheduled maturity date of June 1, 2023 and is secured by a first priority security interest in substantially all of our assets, with the exception of our intellectual property and those assets sold under the Royalty Monetization, where the security interest is limited to proceeds of intellectual property if it is licensed or sold.

If we do not make the required payments when due, either at maturity, or at applicable installment payment dates, or if we breach the agreement or become insolvent, the Lender could elect to declare all amounts outstanding, together with accrued and unpaid interest, and other payments, to be immediately due and payable. Additional capital may not be available on terms acceptable to us, or at all. Even if we were able to repay the full amount in cash, any such repayment could leave us with little or no working capital for our business. If we are unable to repay those amounts, the Lender will have a first claim on our assets pledged under the Loan Agreement. If the lender should attempt to foreclose on the collateral, it is unlikely that there would be any assets remaining after repayment in full of such secured indebtedness. Any default under the Loan Agreement and resulting foreclosure would have a material adverse effect on our financial condition and our ability to continue our operations.

We will rely on third party manufacturers to produce ~~commercial supplies of DSUVIA in the United States, and DZUVEO for Aguettant in Europe, and will rely on Aguettant to produce commercial~~clinical supplies of our ~~PFS~~ product ~~candidates, if approved, in the United States.~~candidates. The failure of third-party manufacturers to provide us with adequate commercial and clinical supplies could result in a material adverse effect on our business.

~~Third~~We currently use third party manufacturers produce commercial and clinical supplies of our products and product candidates. Reliance on third party manufacturers entails many risks including:

Any of these events could lead to stock outs, inability to successfully commercialize our products, clinical trial delays, or failure to obtain regulatory approval. Some of these events could be the basis for FDA action, including injunction, recall, seizure, or total or partial suspension of production.

In addition, the DZUVEO Agreement requires us to manufacture and supply DZUVEO to Aguettant. If we are unable to establish a reliable commercial supply of DZUVEO for Aguettant, we may be unable to satisfy our obligations under the DZUVEO Agreement in a timely manner or at all, and we may, as a result, be in breach of then DZUVEO Agreement. If any such breach, or other breach, were to be material and remain uncured, it could result in termination of the DZUVEO Agreement. If any of these events were to occur, our business would be materially adversely affected.

We rely on limited sources of supply for the active pharmaceutical ingredient, or API, of ~~DSUVIA~~our nafamostat-based product candidates and any disruption in the chain of supply may cause a delay in ~~supplying DSUVIA.~~developing our product candidates.

~~Currently we only~~We currently have ~~one supplier qualified as~~ a ~~vendor~~single source of supply of API for ~~the manufacture of DSUVIA, known as DZUVEO in Europe, with the FDA and EMA, respectively.~~our nafamostat-based product candidates. If supply from ~~the approved~~that vendor is interrupted or discontinued, there could be a significant disruption in commercial supply. Any alternate vendor would need to be qualified through an NDA supplement and/or an MAA variation which could result in delays. The FDA or other regulatory agencies outside of the United States may also require additional trials if a new sufentanil supplier is relied uponimpact on our development activities for ~~commercial production.~~those product candidates.

~~Manufacture of sufentanil sublingual tablets requires specialized equipment and expertise.~~

Ethanol, which is used in the manufacturing process for our sufentanil sublingual tablets, is flammable, and sufentanil is a highly potent, Schedule II controlled substance. These factors necessitate the use of specialized equipment and facilities for manufacture of sufentanil sublingual tablets. There are a limited number of facilities that can accommodate our manufacturing process and we or our partners need to use dedicated equipment throughout development and commercial manufacturing to avoid the possibility of cross-contamination. If our or our partners’ equipment breaks down or needs to be repaired or replaced, it may cause significant disruption in clinical or commercial supply, which could result in delay in the process of obtaining approval for or sale of our products. Furthermore, we are using one manufacturer to produce our sufentanil sublingual tablets. Any problems with our or our partners’ facilities or equipment may impair our ability to successfully commercialize DSUVIA and increase our cost.

Manufacturing issues may arise that could delay or increase costs related to ~~commercialization,~~ product development and regulatory approval.

We have relied, and will continue to rely, on contract manufacturers, component fabricators and third-party service providers to produce the necessary ~~DSUVIA/DZUVEO single-dose applicator, or SDA,~~Niyad product for ~~the~~clinical and non-clinical development and eventually for commercial ~~marketplace.~~sales. We currently outsource manufacturing and packaging of ~~DSUVIA/DZUVEO~~Niyad to third parties and intend to continue to do so. ~~Some of these~~These component purchases were made and will continue to be made utilizing short-term purchase agreements and we may not be able to enter into long-term agreements for commercial supply ~~of DSUVIA/DZUVEO components~~ with these third-party manufacturers or may be unable to do so on acceptable terms. In addition, we ~~have encountered and~~ may ~~continue to~~ encounter production issues with our current or future contract manufacturers and other ~~third party~~third-party service providers, including the reliability of the production equipment, quality of the components produced, their inability to meet demand or other unanticipated ~~delays including scale-up and automating processes, which could adversely impact our ability to supply our customers with DSUVIA, in the U.S. and DZUVEO in Europe, and any other foreign territories.~~delays.

As we scale up manufacturing of ~~DSUVIA/DZUVEO,~~Niyad in the future to support commercial demand, and conduct required production and stability testing, these processes may require refinement or resolution. For example, as we scale up, we may identify significant issues which could result in failure to maintain regulatory approval of ~~DSUVIA/DZUVEO,~~Niyad, increased scrutiny by regulatory agencies, delays in clinical development and regulatory approval, ~~of our product candidates,~~ increases in our operating expenses, or failure to obtain approval for our product candidates in the United States.

We have built out a suite within our CMO’s production facility in Cincinnati, Ohio that serves as a manufacturing facility for clinical and commercial supplies of sufentanil sublingual tablets. Late-stage development and manufacture of registration stability lots, which were utilized in clinical trials, were manufactured at this location. While we produced a number of commercial lots to support Grünenthal’s launch in Europe, our experience is limited, which impacted our ability to deliver commercial supplies to Grünenthal on a timely basis, and may in the future impact our ability to deliver commercial supplies of DZUVEO to Aguettant on a timely basis.

On August 22, 2017, we entered into an amendment to our January 2013 agreement with a CMO to manufacture, supply, and provide certain validation and stability services with respect to DSUVIA for sales in the United States, and potential sales in Canada and Mexico, and other countries. There is no guarantee that our CMO’s services will be satisfactory or that they will continue to meet the strict regulatory guidelines of the FDA or other foreign regulatory agencies. If our CMO cannot provide us with an adequate supply of sufentanil sublingual tablets, we may be required to pursue alternative sources of manufacturing capacity. Switching or adding commercial manufacturing capability can involve substantial cost and require extensive management time and focus, as well as additional regulatory filings which may result in significant delays. In addition, there is a natural transition period when a new manufacturing facility commences work. As a result, delays may occur, which can materially impact our ability to meet our desired commercial timelines, thereby increasing our costs and reducing our ability to generate revenue.

The facilities of any of our future manufacturers of ~~sufentanil-containing sublingual tablets~~Niyad must be approved by the FDA ~~or the relevant foreign regulatory agency, such as the EMA,~~ before commercial distribution from such manufacturers occurs. We do not fully control the manufacturing process ~~of sufentanil sublingual tablets~~ and are completely dependent on these third-party manufacturing partners for compliance with the FDA or other foreign regulatory agency’s requirements for manufacture. In addition, although our third-party manufacturers are well-established commercial manufacturers, we are dependent on their continued adherence to cGMP manufacturing and acceptable changes to their ~~process.~~processes. If our manufacturers do not meet the FDA or other foreign regulatory agency’s strict regulatory requirements, they will not be able to secure FDA or other foreign regulatory agency approval for their manufacturing facilities. Although European inspectors have approved our tablet manufacturing site, our third-party manufacturing partner is responsible for maintaining compliance with the relevant foreign regulatory agency’s requirements. If the FDA or the relevant foreign regulatory agency does not approve these facilities for the commercial manufacture of ~~sufentanil sublingual tablets,~~Niyad, we will need to find alternative suppliers, which would result in significant delays in obtaining ~~foreign~~ regulatory agency ~~approval of DSUVIA/DZUVEO outside Europe.~~approval. These challenges may have a material adverse impact on our business, results of operations, financial condition and prospects.

We may not be able to establish additional sources of supply for ~~sufentanil-containing sublingual tablets or device manufacture.~~Niyad. Such suppliers are subject to FDA and other foreign regulatory agency’s regulations requiring that materials be produced under cGMPs or Quality System Regulations, or ~~QSR, or in ISO 13485 accredited facilities, and subject to ongoing inspections by regulatory agencies.~~QSR. Failure by any of our suppliers to comply with applicable regulations may result in ~~delays and interruptions to our product supply while we seek to secure another supplier that meets all regulatory requirements.~~

For DSUVIA, we currently package the finished goods under a manual process and would package DZUVEO in the same manner. The capacity and cost to package the goods under this manual process are not optimal to support successful future sales of DSUVIA and DZUVEO. We have purchased and installed an automated filling and packaging line to support increased capacity packaging for DSUVIA and DZUVEO. We have experienced delays to final implementation of our automated linedelays. In addition, due to the impact of COVID-19, in addition to testing requirements of our vendor. While we have now completed the acquisition and installation of this line; there can be no assurance that we will be able to successfully complete the qualification and validation of this line and obtain the necessary regulatory approvals to manufacture commercial product on this line. Due to the recent strains on the global supply chain, the lead ~~time~~times for many components used in our production are getting longer and may impact our ability to manufacture our products in a timely manner.

We rely on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business.

We utilized contract research organizations, or CROs, for the conduct of the Phase 2 and 3 clinical trials of DSUVIA, as well as our Phase 3 clinical program for Zalviso. We will also utilize CROs for development of our product candidates. We will continue to rely on such CROs, as well as clinical trial sites, to ensure the proper and timely conduct of our clinical trials and document preparation. While we have agreements or will enter into such agreements governing their activities, we have limited influence over their actual performance. We have relied and plan to continue to rely upon CROs to monitor and manage data for our post-approval clinical programs for ~~DSUVIA and~~ any FDA-required clinical programs for our product candidates, as well as the execution of nonclinical and clinical trials. We control only certain aspects of our CROs’ activities. Nevertheless, we are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We, and our CROs, are required to comply with the FDA’s current good clinical practices, or cGCPs, which are regulations and guidelines enforced by the FDA for all product candidates in clinical development. The FDA enforces these cGCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. Upon inspection, the FDA may determine that our clinical trials do not comply with cGCPs. Accordingly, if our CROs or clinical trial sites fail to comply with these regulations, we may be required to repeat clinical trials, which would delay the regulatory process.

Our CROs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our ongoing clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may allow our potential competitors to access our proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates, if approved, would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

~~Failure to receive required quotas of controlled substances or comply with the Drug Enforcement Agency regulations, or the cost of compliance with these regulations, may adversely affect our business.~~

Our sufentanil-based products are subject to extensive regulation by the DEA, due to their status as scheduled drugs. Sufentanil is classified as a Schedule II controlled substance, considered to present a high risk of abuse. The manufacture, shipment, storage, sale and use of controlled substances are subject to a high degree of regulation, including security, record-keeping and reporting obligations enforced by the DEA and also by comparable state agencies. In addition, our contract manufacturers are required to maintain relevant licenses and registrations. This high degree of regulation can result in significant compliance costs, which may have an adverse effect on the commercialization of DSUVIA.

The DEA limits the availability and production of all Schedule II controlled substances, including sufentanil, through a quota system. The DEA requires substantial evidence and documentation of expected legitimate medical and scientific needs before assigning quotas to manufacturers. Our contract manufacturers apply for quotas on our behalf. We will need significantly greater amounts of sufentanil to successfully commercialize DSUVIA and to support Aguettant’s European commercialization of DZUVEO. Any delay by the DEA in establishing the procurement quota, reduction in our quota for sufentanil, failure to increase our quota over time to meet anticipated increases in demand, or refusal by the DEA to establish the procurement quota could delay or stop the commercial sale of DSUVIA. This, in turn, could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our relationships with clinical investigators, health care professionals, consultants, commercial partners, third-party payers, hospitals, and other customers are subject to applicable anti-kickback, fraud and abuse and other healthcare laws, which could expose us to significant penalties.

Healthcare providers, including physicians, and others play a primary role in the recommendation and prescribing of any products for which we may obtain marketing approval. Our business operations and arrangements with investigators, healthcare professionals, consultants, commercial partners, hospitals, third-party payers and customers may expose us to broadly applicable fraud and abuse and other healthcare laws. These laws may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute the products for which we obtain marketing approval. Applicable federal and state healthcare laws include, but are not limited to, the following:

Recently, there has been a substantial increase in anti-bribery law enforcement activity by U.S. regulators, with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC. A determination that our operations or activities are not, or were not, in compliance with United States or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. Other internal or government investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws involve substantial costs. It is possible that governmental authorities will conclude that our or our partners’ business practices may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws. If our operations are found to be in violation of any of these or any other healthcare regulatory laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, increased losses and diminished profits, additional oversight and reporting obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations any of which could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses or divert our management’s attention from the operation of our business.

Significant disruptions of our information technology systems or data security incidents could result in significant financial, legal, regulatory, business and reputational harm to us.

We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. In the ordinary course of our business, we collect, store, process and transmit large amounts of sensitive information, including intellectual property, proprietary business information, personal information and other confidential information. It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such sensitive information. We have also outsourced elements of our operations (including elements of our information technology infrastructure) to third parties, and as a result, we manage a number of third-party vendors who may or could have access to our computer networks or our confidential information. In addition, many of those third parties in turn subcontract or outsource some of their responsibilities to third parties. While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the accessibility and distributed nature of our information technology systems, and the sensitive information stored on those systems, make such systems potentially vulnerable to unintentional or malicious internal and external attacks on our technology environment. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. In addition to the extraction of sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information. In addition, the prevalent use of mobile devices increases the risk of data security incidents.

Significant disruptions of our third-party vendors’ and/or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive information, which could result in financial, legal, regulatory, business and reputational harm to us. In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war and telecommunication and electrical failures, could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered. While we have no reason to believe this to be the case, attackers have become very sophisticated in the way they conceal access to systems, and many companies that have been attacked are not aware that they have been attacked. Any event that leads to unauthorized access, use or disclosure of personal information, including but not limited to personal information regarding our patients or employees, could disrupt our business, harm our reputation, compel us to comply with applicable federal and state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information. This could result in increased costs to us, and result in significant legal and financial exposure and/or reputational harm. In addition, any failure or perceived failure by us or our vendors or business partners to comply with our privacy, confidentiality or data security-related legal or other obligations to third parties, or any further security incidents or other inappropriate access events that result in the unauthorized access, release or transfer of sensitive information, which could include personally identifiable information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others, and could cause third parties, including clinical sites, regulators or current and potential partners, to lose trust in us or we could be subject to claims by third parties that we have breached our privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects. Moreover, data security incidents and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above. While we have implemented security measures intended to protect our information technology systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or security incidents.

Our headquarters is located in the San Francisco Bay Area, near known earthquake fault zones and is vulnerable to significant damage from earthquakes. Our contract manufacturers, suppliers, clinical trial sites and local and national transportation vendors are all subject to business interruptions due to weather, outbreaks of pandemic diseases, natural disasters, or man-made incidents. We are also vulnerable to other types of natural disasters and other events that could disrupt our operations. If any of these events occurred and prevented us or third parties on which we rely from using all or a significant portion of our or their facilities, it may be difficult or, in certain cases, impossible for us to continue our business and operations for a substantial period of time.

We do not carry insurance for earthquakes or other natural disasters, and we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our business operations.

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on principal members of our executive team, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into offer letters with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. Recruiting and retaining qualified scientific, manufacturing, and commercial personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. There is currently a shortage of skilled executives in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. In addition, failure to succeed in clinical trials, or delays in the regulatory approval process, may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of the services of any executive or key employee might impede the progress of our research, development and commercialization objectives.

We may ~~fail to realize the benefits expected from our acquisition of Lowell, which could adversely affect our stock price.~~

Our acquisition of Lowell is our largest acquisition to date. The anticipated benefits we expect from this acquisition are, necessarily, based on projections and assumptions about the combined businesses of our company and Lowell, which may not materialize as expected or which may prove to be inaccurate. The value of our common stock could be adversely affected if we are unable to realize the anticipated benefits from the acquisition on a timely basis or at all. Achieving the benefits of the acquisition of Lowell will depend, in part, on our ability to integrate the business, operations and products of Lowell successfully and efficiently with our business. The challenges involved in this integration include, but are not limited to, (i) difficulties entering new markets and integrating new product candidates with which we have no or limited direct prior experience; and (ii) successfully managing relationships with our combined supplier base.

The financial results of the combined company may be adversely affected by cash expenses and non-cash accounting charges incurred in connection with our integration of the business and operations of Lowell. The amount and timing of these possible charges are not yet known. Further, our failure to identify or accurately assess the magnitude of certain liabilities we assumed in the acquisition could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, operating results or financial condition. The price of our common stock could decline to the extent the combined company’s financial results are materially affected by any of these events.

~~We may~~ acquire companies, product candidates or products or engage in strategic transactions, which could divert our management’s attention and cause us to incur various costs and expenses.

We may acquire or invest in companies, product candidates or products that we believe could complement or expand our business or otherwise offer growth opportunities. The pursuit of potential acquisitions or investments may divert the attention of management and has caused, and in the future may cause, us to incur various costs and expenses in identifying, investigating, and pursuing them, whether or not they are consummated. We may not be able to identify desirable acquisitions or investments or be successful in completing or realizing anticipated benefits from such transactions. In addition, the acquisition of product candidates and products is a highly competitive area, and many other companies are pursuing the same or similar product candidates to those that we may consider attractive. Larger companies with more well-established and diverse revenue streams may have a competitive advantage over us due to their size, financial resources and more extensive clinical development and commercialization capabilities.

In addition, we receive inquiries relating to potential strategic transactions, including collaborations, licenses, and acquisitions. Such potential transactions may divert the attention of management and may cause us to incur various costs and expenses in investigating and evaluating such transactions, whether or not they are consummated.

We face potential product liability claims, and, if such claims are successful, we may incur substantial liability.

~~Commercial~~Our past sales of DSUVIA/DZUVEO expose us to the risk of product liability claims. Product liability claims might be brought against us by patients, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

Our current product liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. In addition, our current product liability insurance contains an exclusion related to any claims related to our products from a governmental body, or payer, or those claims arising from a multi-plaintiff action for bodily injury or property damage. Multi-plaintiff claims caused by product defects are covered. This exclusion does not apply to any bodily injury claim related to our products made by an individual. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim, or series of claims, brought against us could cause our stock price to decline and, if judgments are excluded from our insurance coverage or exceed our insurance coverage, could adversely affect our results of operations and business. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. There can be no assurance that such coverage will be adequate to protect us against any future losses due to liability.

Our employees, independent contractors, principal investigators, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk that our employees, independent contractors, investigators, consultants, commercial partners and vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct that violates (1) regulations implemented by the FDA and similar foreign regulatory bodies; (2) laws requiring the reporting of true, complete and accurate information to such regulatory bodies; (3) healthcare fraud and abuse laws of the United States and similar foreign fraudulent misconduct laws; and (4) laws requiring the reporting of financial information or data accurately. The promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry are subject to extensive laws designed to prevent misconduct, including fraud, kickbacks, self-dealing and other abusive practices. These laws may restrict or prohibit a wide range of pricing, discounting, marketing, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. It is not always possible to identify and deter employee and other third-party misconduct. The precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws. If any such actions are instituted against us, and we are not successful in defending ourselves, those actions could have a significant impact on our business, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, disgorgement, imprisonment, additional oversight and reporting obligations if we become subject to a corporate integrity agreement or similar agreements to resolve allegations of non-compliance with these laws, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

If we cannot defend our issued patents from third party claims or if our pending patent applications fail to issue, our business could be adversely affected.

To protect our proprietary technology, we rely on patents as well as other intellectual property protections including trade secrets, nondisclosure agreements, and confidentiality provisions. As of June 30, 2022, we are the owner of record of 92 issued patents worldwide drawn to AcelRx’s sufentanil sublingual tablets and related medication delivery devices. These issued patents include 18 patents that we have listed in the FDA’s Orange Book for DSUVIA, some of which have expiration dates that extend into 2031. These issued patents also include a European patent drawn to the DZUVEO device that has an expiration date that extends into 2036.

Because sufentanil is not a new chemical entity, potential regulatory (data) exclusivity periods for new formulation, dosage form and/or dosage strength sufentanil products in the United States is limited to three years under the Hatch-Waxman Act. While the FDA was not able to approve a 505(b)(2) NDA or an abbreviated new drug application, or ANDA, using DSUVIA as its reference listed drug prior to November 2, 2021, we may now be subject to a third party’s Paragraph IV or other patent certification based on the patents we have listed in the FDA’s Orange Book for DSUVIA and engage in litigation against such a 505(b)(2) or ANDA applicant at any time.

~~In addition, we~~We are pursuing a number of U.S. patent applications and foreign national applications directed to ~~DSUVIA,~~ Niyad, and LTX-608. The patent applications that we have filed and have not yet been granted may fail to result in issued patents in the United States or in foreign countries. Even if the patents do successfully issue, third parties may challenge the patents. We have entered into the DSUVIA Agreement with Alora pursuant to which Alora acquired all patents and trademarks related to DSUVIA and DZUVEO. In addition, we and Alora entered into an intellectual property agreement pursuant to which Alora granted fully-paid, royalty-free and perpetual licenses to us under certain specified intellectual property rights acquired by Alora under the DSUVIA Agreement for, among other things, the development, manufacture, commercialization and exploitation of certain products, including Zalviso.

As we continue to develop our product candidates ~~ephedrine,~~Fedsyra, phenylephrine, Niyad and LTX-608, we generally expect to pursue 505(b)(2) NDA application pathways ~~since all~~with the exception of the ~~base pharmacological agents are not~~first LTX-608 application which we expect to be treated as a new chemical ~~entities.~~entity. As a result of ~~this~~these filing ~~avenue,~~avenues, we will need to include patent certifications regarding the reference listed drugs that our 505(b)(2) applications are based upon. These patent certifications could trigger patent litigation by the patent holders that we have certified against.

Our commercial success will depend in part on successfully defending our current patents against third party challenges and expanding our existing patent portfolio to provide additional layers of patent protection, as well as extending patent protection. There can be no assurance that we will be successful in defending our existing and future patents against third party challenges, or that our pending patent applications will result in additional issued patents.

The patent positions of pharmaceutical companies, including ours, can be highly uncertain and involve complex and evolving legal and factual questions. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States. Legal developments may preclude or limit the scope of available patent protection.

There is also no assurance that any patents issued to us will not become the subject of adversarial or post-issuance proceedings such as opposition, inter partes review, post-grant review, ex parte re-examination or other post-issuance proceedings. In addition, there is no assurance that the relevant patent office court or agency in such adversarial proceedings would not make unfavorable decisions, such as reducing the scope of a patent of ours, invalidating issued claims or determining that a patent of ours is invalid or unenforceable. There is also no assurance that any patents issued to us will provide us with competitive advantages, will not be challenged by any third parties, or that the patents of others will not prevent the commercialization of products incorporating our technology. Furthermore, there can be no guarantee that others will not independently develop similar products, duplicate any of our products, or design around our patents.

Litigation involving patents, patent applications and other proprietary rights is expensive and time consuming. If we are involved in such litigation, it could cause delays in bringing our products to market and interfere with our business.

Our commercial success depends in part on our not infringing patents or misappropriating trademarks or ~~misappropriating~~ other third-party intellectual ~~property.~~property rights. Although we are not currently aware of litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation related to ~~DSUVIA or~~ our product candidates, the pharmaceutical industry is especially prone to extensive litigation proceedings between competitors regarding their patents and other intellectual property rights.

As we enter our target markets, it is possible that competitors or other third parties will claim that our products and/or processes infringe or misappropriate their intellectual property rights. These third parties may have obtained and may in the future obtain patents covering products or processes that are similar to our products, or may include composition or method claims that encompass our technology, allowing them to assert that our continued use of our own technologies infringes such newly emerging patent rights.

In the event that a patent infringement claim is asserted against us, we may counter, as an affirmative defense, that we do not infringe the relevant patent claims, that the patent is invalid or otherwise unenforceable or any combination thereof. The strength of our defenses will depend on the patents asserted, the interpretation of those patents, and our ability to establish the invalidity of the asserted patents. However, we could be unsuccessful in advancing non-infringement, invalidity or unenforceability arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof.

If a court in a final and non-appealable decision were to hold that we have infringed someone else’s valid patent claim, we could be prevented from using that third-party patented technology and may also be required to pay the owner of the patent for damages for past sales and need to seek license access to the patented technology for future sales. If we decide to pursue such a license to one or more of these patents, we may not be able to obtain a license on commercially reasonable terms, if at all, or the license we obtain may require us to pay substantial royalties or grant cross licenses to our patent rights. For example, if the relevant patent is owned by a competitor, that competitor may choose not to license patent rights to us. If we decide to develop alternative technology to avoid the third-party patent claims, we may not be able to do so in a timely or cost-effective manner, if at all.

In addition, because patent applications remain unpublished for 18 months from their initial filing date and some applications may be afforded confidentiality during prosecution that can take years to issue, there may currently be pending applications that are unknown to us and that may later result in issued patents that could cover one or more of our products.

It is possible that we may in the future receive communications from competitors and other companies alleging that we may be infringing their patents, misappropriating their trade secrets or otherwise violating their intellectual property rights, where they may offer license access to such intellectual property or threaten litigation. In addition to patent infringement claims, third parties may assert copyright, trademark or other intellectual property rights against us. We may need to expend considerable resources to counter such claims and may not be successful in our defense. Our business may suffer if a finding of infringement or misappropriation is established.

It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.

The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States. The pharmaceutical patent situation outside the United States is just as uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property estate.

We cannot predict the breadth of claims that may be allowed or enforced in the patents that may issue from the applications that we currently have pending, or may in the future file ourselves or acquire or license from third parties. Claims could be brought regarding the validity of our patents by third parties. Further, if any patent right that we obtain is deemed invalid and/or unenforceable, it could impact our ability to commercialize or partner our technology.

Competitors or third parties may infringe our patents. We may decide it is necessary to assert patent infringement claims against such entities, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or that the third party’s technology does not in fact infringe upon our patents. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our related pending patent applications at risk of not issuing. Litigation may fail and, even if successful, may result in substantial costs and be a distraction to our management. We may not be able to prevent misappropriation of our intellectual property rights, particularly in countries outside the United States where national laws and court systems are less robust, making patent rights more difficult to enforce, and very expensive to pursue. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

If we do not adequately protect our intellectual property rights, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could materially harm our business, negatively affect our position in the marketplace, limit our ability to commercialize ~~DSUVIA/DZUVEO or~~ any of our ~~ephedrine,~~Fedsyra, phenylephrine, Niyad or LTX-608 product opportunities, if approved, and delay or render impossible our achievement of profitability.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

We rely on trade secrets to protect our proprietary know-how and technological advances, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our business partners, employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and proprietary information without misappropriating our rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and applications will be due to be paid to the United States Patent and Trademark Office and various foreign governmental patent agencies in several stages over the lifetime of the patents and/or applications.

We have systems in place, including use of third-party vendors, to manage payment of periodic maintenance fees, renewal fees, annuity fees and various other patent and application fees. The United States Patent and Trademark Office, or the USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. There are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If this occurs, our competitors might be able to enter the market, which would have a material adverse effect on our business.

We may not be able to enforce our intellectual property rights throughout the world.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. Additionally, claims may be brought regarding the validity of our patents by third parties in the United States and foreign countries. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and the enforcement of our intellectual property rights.

We have not yet registered our trademarks in all our potential markets, and failure to secure those registrations could adversely affect our business.

We have registered our ACELRX mark in the United States, Canada, the EU and ~~India. In November 2018, the FDA accepted the DSUVIA mark.~~India, and we have applied for registration of our Niyad and Fedsyra marks. Although we are not currently aware of any oppositions to or cancellations of our registered trademarks or pending applications, it is possible that one or more of the applications and/or registrations could be subject to rejection, opposition or ~~cancellation after~~cancellation. In addition, we will need to seek FDA approval to use Niyad and Fedsyra as part of future potential applications for marketing approval of the ~~marks are registered.~~relevant developmental products. The registrations will be subject to use and maintenance requirements. It is also possible that we have not yet registered all of our trademarks in all of our potential markets, ~~such as securing the registration of DSUVIA in Canada,~~ and that there are names or symbols other than “ACELRX” that may be protectable marks for which we have not sought registration, and failure to secure those registrations could adversely affect our business. Opposition or cancellation proceedings may be filed against our trademarks and our trademarks may not survive such proceedings.

The market price of our common stock has historically been and may continue to be highly volatile.

The trading price of our common stock has experienced significant volatility and is likely to be volatile in the future. For example, the closing price of our common stock ranged between ~~$0.61~~$0.58 and ~~$0.18~~$2.59 during the ~~first half of 2022,~~three months ended March 31, 2023, and ~~between $0.49~~$1.78 and ~~$2.77~~$12.10 during the year ended December 31, ~~2021.~~2022. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

In addition, the stock market in general, and The Nasdaq Global Market, or Nasdaq, in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

~~Our~~If we cannot regain compliance with Nasdaq’s continued listing requirements, our common stock may be delisted from The Nasdaq Global ~~Market if we cannot regain compliance with Nasdaq~~’~~s continued listing requirements.~~Market.

In order to maintain our listing on Nasdaq, we are required to comply with the Nasdaq requirements, which includes maintaining a minimum bid price and a minimum public float. In particular, we are required to maintain a minimum bid price of $1.00 per share. On ~~December 2, 2021,~~April 26, 2023, we received a notice from Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5450(a)(1)~~, or the Minimum~~ (the “Minimum Bid Price ~~Rule,~~Rule”) because our common stock failed to maintain a minimum closing bid price of $1.00 for 30 consecutive business days. This notice had no immediate effect on the Nasdaq listing or trading of our common stock.

We have a compliance period for the Minimum Bid Price Rule of 180 calendar days, or until October 23, 2023, in which to regain compliance, pursuant to Nasdaq Marketplace Rule 5810(c)(3)(A). If, at any time before that date the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq will notify us that we have achieved compliance with the Rule.

~~On June 1, 2022,~~If we ~~received written notice from Nasdaq notifying us~~do not achieve compliance with the Minimum Bid Price Rule during the initial 180 calendar day period, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to transfer the listing of our ~~failure~~common stock to the Nasdaq Capital Market, provided that it meets the continued listing requirement for market value of publicly held shares and all other initial listing standards of the Nasdaq Capital Market, with the exception of the Minimum Bid Price Rule. In addition, the Company would also be required to notify Nasdaq of its intent to cure the minimum bid price deficiency, which may include, if necessary, implementing a reverse stock split. However, if it appears to Nasdaq that we will not be able to cure the deficiency, or if we do not meet the other listing standards, Nasdaq could provide notice that the common stock will become subject to delisting. In the event we receive notice that our common stock is being delisted, Nasdaq rules permit us to appeal any delisting determination by Nasdaq to a Hearings Panel (the “Panel”). We expect that our common stock would remain listed pending the Panel's decision. However, there can be no assurance that, if we do appeal the delisting determination by Nasdaq to the Panel, that such appeal would be successful, or that we will be able to regain compliance with the Minimum Bid Price Rule and that our common stock was again subject to delisting from The Nasdaq Global Market. We appealed Nasdaq’s determination pursuant to the procedures set forth in the Nasdaq Listing Rule 5800 Series and on June 8, 2022, timely requested a hearing before the Nasdaq Hearings Panel, or ~~the Panel, and subsequently delivered written materials for the Panel’s consideration in lieu of a hearing.~~

~~On July 27, 2022, we received written notice from Nasdaq notifying us that the Panel had granted us an additional time period to regain compliance. On or before November 28, 2022, we must demonstrate~~maintain compliance with the Minimum Bid Price Rule, by evidencing a closing bid price of $1.00 or more per share for a minimum of ten consecutive trading sessions. The Panel advised us that the extension to November 28, 2022 represents the full extent of the Panel’s discretion to grant continuedother listing while it is non-compliant with the Minimum Bid Price Rule and should we fail to demonstrate compliance with the Minimum Bid Price Rule, the Panel will issue a final delisting determination and we will be suspended from trading on The Nasdaq Global Market.requirements.

We intend to regain compliance with the Minimum Bid Price Rule within the additional time period allowed by Nasdaq, including, if necessary, with a reverse stock split. We intend to actively monitor the closing bid price of our common stock and will evaluate available options to regain compliance with the Minimum Bid Price Rule. If we fail to effect a reverse stock split, thus regaining compliance with the Minimum Bid Price Rule, our common stock may be delisted. Delisting from the Nasdaq Global Market or any Nasdaq market could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, stockholders may have a difficult time getting a quote for the sale or purchase of our common stock, the sale or purchase of our common stock would likely be made more difficult and the trading volume and liquidity of our common stock could decline. Delisting from Nasdaq could also result in negative publicity and could also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB market, where an investor may find it more difficult to sell our common stock or obtain accurate quotations as to the market value of our common stock. We cannot assure you that our common stock, if delisted from Nasdaq, will be listed on another national securities exchange or quoted on an over-the counter quotation system. If our common stock is delisted, it may come within the definition of “penny stock” as defined in the Exchange Act, and would be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of stockholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

Sales of a substantial number of shares of our common stock in the public market by us or our stockholders could cause our stock price to fall.

Because we will continue to need additional capital in the future to continue to expand our business and our research and development activities, among other things, we may conduct additional equity offerings. For example, under the universal shelf registration statement filed by us in June 2020 and declared effective by the SEC in July 2020, we may offer and sell any combination of common stock, preferred stock, debt securities and warrants in one or more offerings, up to a cumulative value of $150 million. To date, we have approximately ~~$40.5~~$68.6 million (including shares that may be sold under the ATM Agreement with Cantor) remaining under such universal shelf registration ~~statement.~~statement; however, our ability to sell securities under the shelf registration statement will be limited until we are no longer subject to the SEC's “baby shelf” limitations. Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants under our equity incentive plans. Grants under our equity incentive plans may also cause our stockholders to experience additional dilution, which could cause our stock price to fall. In May 2022 we filed a resale registration statement to permit the former stockholders of Lowell to sell the shares of common stock we issued such stockholders in exchange for their shares of Lowell capital stock. In addition, in November 2022 we filed a resale registration statement to permit Lincoln Park Capital Fund, LLC to sell the shares of common stock that are issuable upon conversion of the Series A Redeemable Convertible Preferred Stock and that are issuable upon exercise of the warrant, which were issued in a private placement transaction in August 2022. We may ~~also~~in the future issue additional shares of our common stock as consideration in mergers, acquisitions and other business development transactions. We are unable to predict the effect that sales may have on the prevailing market price of our common stock. All of our shares of common stock outstanding are eligible for sale in the public market, subject in some cases to the volume limitations and manner of sale requirements of Rule 144 under the Securities Act. Sales of stock by our stockholders could have a material adverse effect on the trading price of our common stock.

We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our results of operations and financial condition. In the future, we may identify additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material errors in our financial statements or cause us to fail to meet our period reporting obligations.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, evaluating the effectiveness of our internal controls and disclosing any changes or material weaknesses identified through such evaluation. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During the preparation of our consolidated financial statements for the year ended December 31, 2022, we identified an error within our earnings per share calculation for the three and six months ended June 30, 2022, and the nine months ended September 30, 2022, whereby we did not properly apply the two-class method of calculating earnings per share with respect to the warrants issued in November 2021. Our management subsequently concluded that a material weakness existed and our internal control over financial reporting was not effective as of June 30, 2022.

As a result, we determined that there were material errors in the financial statements that required a restatement of the unaudited condensed consolidated financial statements included in our Forms 10-Q for the quarterly periods ended June 30, 2022 and September 30, 2022. This was due to the inadequate design and implementation of controls related to the technical accounting review and analysis over earnings per share calculations which were insufficient to prevent or detect errors in the calculation. Specifically, the error was due to management’s failure to identify warrants issued in November 2021 as participating securities and consequently attribute earnings to these securities as part of a two-class EPS calculation.

Management has implemented enhanced internal controls to remediate the material weakness. Specifically, we enhanced our processes to identify and appropriately apply applicable accounting requirements related to the earnings per share calculation to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. We plan to continue to provide access to accounting literature, research materials and documents, enhance the review and analysis process around the earnings per share calculation and increase communications among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. If we are not able to comply with the requirements of the Sarbanes-Oxley Act or if we are unable to maintain effective internal control over financial reporting, we may not be able to produce timely and accurate financial statements or guarantee that information required to be disclosed by us in the reports that we file with the SEC, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Any failure of our internal control over financial reporting or disclosure controls and procedures could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our results of operations.

We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

We have never declared or paid any cash dividends on our capital stock, and we are prohibited from doing so under the terms of the Loan Agreement. Regardless of the restrictions in the Loan Agreement or the terms of any potential future indebtedness, we anticipate that we will retain all available funds and any future earnings to support our operations and finance the growth and development of our business and, therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board of Directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board of Directors may deem relevant.

Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management. These provisions include:

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our Board of Directors. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders. Further, other provisions of Delaware law may also discourage, delay or prevent someone from acquiring us or merging with us.

We have been, are, and may in the future become, party to lawsuits including, without limitation, actions and proceedings in the ordinary course of business relating to our directors, officers, stockholders, intellectual property rights, employment matters and the safety or efficacy of our products, which will cause us to incur legal fees and other costs related thereto, including potential expenses for the reimbursement of legal fees of officers and directors under indemnification obligations. The expense of defending against such litigation may be significant and there can be no assurance that we will be successful in any defense. Further, the amount of time that may be required to resolve such lawsuits is unpredictable, and these actions may divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations, and cash flows. Our insurance carriers may deny coverage, may be inadequately capitalized to pay on valid claims, or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our consolidated operations, cash flows and financial position. Additionally, any such claims, whether or not successful, could damage our reputation and business. Litigation is subject to inherent uncertainties, and an adverse result in such matters that may arise from time to time could have a material adverse effect on our business, results of operations, and financial condition. Please see Note 107 to the ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information about pending legal proceedings.

Our involvement in securities-related class action litigation could divert our resources and management's attention and harm our business.

The stock markets have from time-to-time experienced significant price and volume fluctuations that have affected the market prices for the common stock of pharmaceutical companies. These broad market fluctuations may cause the market price of our common stock to decline. In addition, the market price of our common stock may vary significantly based on AcelRx-specific events, such as receipt of Complete Response Letters, Warnings Letters, such as the Warning Letter we received from the FDA on February 11, 2021, negative clinical results, a negative vote or decision by an FDA advisory committee, or other negative feedback from the FDA, EMA, or other regulatory agencies. In the past, securities-related class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies often experience significant stock price volatility in connection with their investigational drug candidate development programs and the ~~FDA's~~FDA’s review of their NDAs. Following receipt of the FDA’s Warning Letter, a securities class action complaint was filed against us and two of our officers on June 8, 2021 in the United States District Court for the Northern District of California. The amended securities class action complaint, which was filed on March 7, 2022, named a third officer as a defendant. ~~The~~On September 28, 2022, the Court issued a formal written opinion, or the Opinion, dismissing all of the plaintiff’s claims against the Company and the named defendants. On November 28, 2022 the plaintiffs filed their second amended complaint. On January 30, 2023 the Company filed its new motion to dismiss the second amended ~~securities class action~~ complaint ~~has been fully briefed~~ and ~~a hearing is~~on March 16, 2023, plaintiffs filed their opposition to the Company’s new motion to dismiss and on April 17, 2023, the Company filed its reply to the plaintiffs’ opposition. Oral hearings on the new motion to dismiss are scheduled for ~~September 1, 2022.~~May 25, 2023. On July 6, 2021, September 30, 2021, October 26, 2021 and November 17, 2021, four purported shareholder derivative complaints were filed in the United States District Court for the Northern District of California asserting state and federal claims based on the same alleged misstatements as the securities class action complaint. On December 6, 2021, the Court entered an order consolidating all four actions and staying the consolidated action pending the outcome of any motion to dismiss the securities class action. Please refer to Note 107 to the ~~Condensed Consolidated Financial Statements~~unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information about these pending legal proceedings. Securities-related class action litigation often is expensive and diverts ~~management's~~management’s attention and our financial resources, which could harm our business. Additional lawsuits related to the pending litigation may follow. Moreover, if AcelRx experiences a decline in its stock price, we could face additional securities class action lawsuits.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, ~~2021,~~2022, we had federal net operating loss carryforwards of ~~$308.5~~$346.4 million, of which $114.9 million federal net operating losses generated before January 1, 2018 will begin to expire in 2029. ~~Federal~~$231.5 million of such federal net operating losses ~~of $193.6 million~~were generated after ~~January 1, 2018 will carryforward indefinitely but are subject to the 80% taxable income limitation.~~December 31, 2017. As of December 31, ~~2021,~~2022, we had state net operating loss carryforwards of ~~$154.7~~$167.9 million, which begin to expire in 2028. Under current law, federal net operating losses generated in tax years beginning prior to January 1, 2018 generally will expire 20 years after they were generated if not used prior thereto; federal net operating losses generated in tax years beginning after December 31, 2017 will carryforward indefinitely, but the deductibility of such federal net operating losses generally is limited to 80% of current year taxable income. Many states have similar laws. Our ability to use our federal and state net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income before the expiration dates of the net operating losses, and we cannot predict with certainty when, or whether, we will generate sufficient taxable income to use all of our net operating losses. Federal net operating losses generated prior to 2018 will continue to be governed by the net operating loss tax rules as they existed prior to the adoption of the Tax Cuts and Jobs Act of 2017, or Tax Act, which means that generally they will expire 20 years after they were generated if not used prior thereto. Many states have similar laws. Accordingly, our federal and state net operating losses could expire unused and be unavailable to offset future income tax liabilities. Under the newly enacted Tax Act as modified by CARES Act, federal net operating losses incurred in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding such loss, and federal net operating losses arising in tax years beginning after December 31, 2020 may not be carried back. Moreover, federal net operating losses generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited to 80% of current year taxable income for tax years beginning after December 31, 2020.

In addition, under ~~Section~~Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. The completion of the July 2013 public equity offering, together with our public equity offering in December 2012, our initial public offering, private placements and other transactions that have occurred, have triggered such an ownership change. ~~In addition, since we will need to raise substantial~~We may experience additional ~~funding to finance our operations, we may undergo further~~ ownership changes as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. Furthermore, our ability to utilize net operating losses of companies that we have acquired or may acquire in the ~~future.~~future may be subject to limitations. In the future, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards or other tax attributes to offset ~~United States~~U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to ~~us.~~us and could adversely affect our business, results of operations, and cash flows.

Our effective tax rate may fluctuate, we may be adversely affected by changes in tax laws and regulations, and we may incur obligations in tax jurisdictions in excess of accrued amounts.

We are subject to taxation in numerous U.S. ~~states~~federal, state, and ~~territories.~~local jurisdictions. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various ~~places~~jurisdictions that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each ~~of such places.~~jurisdiction. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including ~~passage of the newly enacted federal income tax law,~~ changes in the mix of our profitability ~~from state to state,~~among the jurisdiction in which we operate, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and enactment of new tax laws. Or changes in the interpretation and application of existing tax laws. New income, sales, use or other tax laws, rules, regulations, or ordinances could be enacted at any time. For example, recent legislation commonly referred to as the Inflation Reduction Act imposes a one percent excise tax on share buybacks imposed on the corporation repurchasing such stock, effective for tax years beginning after December 31, 2022. Also, the Tax Act eliminated the option to currently deduct research and development expenditures in the year incurred, and instead requires taxpayers to capitalize and amortize U.S.-based and non-U.S.-based research and development expenditures over five and fifteen years, respectively. Although there has been proposed legislation that would defer the capitalization requirement to later years, we have no assurance that the provision will be repealed, deferred, or otherwise modified. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.

Macroeconomic uncertainties, including inflationary pressures, supply chain disruptions, labor shortages, significant volatility in global markets, recession risks, and the COVID-19 pandemic have in the past and may continue to adversely affect our business, future results of operations, and financial condition, the effects of which remain uncertain.

Global economic and business activities continue to face widespread macroeconomic uncertainties, including inflation, supply chain disruptions, labor shortages, as well as recession risks, which may continue for an extended period. In addition, the mitigation measures we have taken in responses to the COVID-19 pandemic have represented a significant disruption in how we operate our business, including a loss of productivity. The operations of our partners, suppliers, and other third parties with whom we have a business relationship have likewise been disrupted. While our offices are now reopened, many of our employees who were hired remotely during the pandemic continue to work remotely and others are working on a hybrid basis. We do not currently have visibility on whether we may return to normal operations of having everyone work in office on a full-time basis. Our efforts to keep our offices open safely may not be successful and could expose our employees to health risks. If there are further waves or variants of the virus, we may need to further modify our business practices in a manner that may impact our business. If our employees are not able to perform their job duties due to illness or are unable to perform them as efficiently at home for an extended period of time, we may not be able to deliver on our business priorities, and we may experience an overall lower productivity of our workforce.

The COVID-19 pandemic has already had an adverse effect on the global economy and our business. Actual and potential impacts include:

We continue to monitor the impact of the COVID-19 pandemic and there may be additional costs or impacts to our business and operations, including in connection with returning to our offices, if we return to normal operations of having everyone work in office on a full-time basis. In addition, there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business. The potential long-term impact of the COVID-19 pandemic or a similar health epidemic on our business, operations, or the global economy as a whole remains uncertain. Accordingly, it remains difficult for us to predict the duration and extent to which this will affect our business, future results of operations, and financial condition at this time.

To the extent that macroeconomic uncertainties and the COVID-19 pandemic continue to harm our business, many of the other risks described in these risk factors may be exacerbated.

* The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	•	our ability to obtain additional required financing and to continue as a going concern;
	•	our ability to manage our operating costs and reduce our cash burn;
	•	the accuracy of our estimates regarding the sufficiency of our cash resources, future revenues, expenses, and capital ~~requirements and needs for additional financing, and our ability to obtain additional financing and continue as a going concern;~~ requirements;
	•
•		our ability to maintain listing of our securities trading on the Nasdaq exchange;
	•	the historical performance and high volatility in the market price of our common stock;
	•	macroeconomic uncertainties, including inflationary pressures, domestic and global supply chain disruptions, labor shortages, significant volatility in global markets, recession risks and the worldwide COVID-19 pandemic;

•		~~the uncertainties~~our ability to file for and ~~impact arising from the worldwide COVID-19 pandemic, including restrictions on the ability of~~secure a potential Emergency Use Authorization for our ~~sales force to contact and communicate with target customers and resulting delays and challenges to our commercial sales of DSUVIA®(sufentanil sublingual tablet, 30 mcg)~~lead nafamostat developmental product candidate, Niyad™;
	•	our ability to conduct ourselves, or through a contract research organization, clinical trials in a timely and effective manner to advance the development of our product candidates;

•	our ability to successfully file for and obtain regulatory approval for, and then successfully launch and commercialize our developmental product candidates;
	•	the success of our ~~success~~new corporate partner, Vertical Pharmaceuticals LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, in integrating and commercializing the DSUVIA asset in the United States, including ~~the~~their effectiveness in marketing, sales, and distribution of the DSUVIA product, ~~whether alone~~itself or with ~~contract sales organizations and other~~potential collaborators;

•		~~our ability~~the extent of future sales of DSUVIA by Alora to ~~satisfactorily comply with U.S. Food and Drug Administration,~~the Department of Defense, or ~~FDA, regulations concerning the advertising and promotion of DSUVIA;~~DoD;

•		the size and growth potential of the potential markets for ~~DSUVIA, and~~ our ~~other~~developmental product candidates in the United States and in other jurisdictions, and our ability to serve those markets;

•		our ~~ability to maintain regulatory approval~~estimates of ~~DSUVIA in~~ the ~~United States, including effective management~~existence of and ~~compliance with the DSUVIA Risk Evaluation and Mitigation Strategies, or REMS, program;~~commercial potential for markets for our developmental product candidates, if approved;

•		~~acceptance of DSUVIA by physicians, patients and the healthcare community, including the acceptance of pricing and placement of DSUVIA on payers’ formularies;~~

•		our ability to realize the expected benefits and potential value created by the acquisition of Lowell Therapeutics, Inc., or Lowell, for our stockholders, on a timely basis or at all;

•		~~our ability to develop and commercialize products and product candidates that we have in-licensed or acquired;~~

•		our ability to develop sales and marketing capabilities in a timely fashion, whether alone through recruiting qualified employees, by engaging a contract sales organization, or with potential future collaborators;

•		successfully establishing and maintaining commercial manufacturing and supply chain relationships with ~~third party~~domestic and global third-party service providers;

•		our ability to manage effectively, and the impact of any costs associated with, potential governmental investigations, inquiries, regulatory actions or lawsuits that may be, or have been, brought against us;

•		~~continued demonstration of an acceptable safety profile of DSUVIA;~~

•		~~effectively competing with other medications for the treatment of moderate-to-severe acute pain in medically supervised settings, including IV-opioids and any subsequently approved products;~~

•		our ability to manufacture and supply DZUVEO® to Laboratoire Aguettant, or Aguettant, in accordance with their forecasts and the License and Commercialization Agreement, or DZUVEO Agreement, with Aguettant, including compliance with any import/export controls or restrictions;

•		~~the status of the DZUVEO Agreement or any other future potential collaborations, including potential milestones and revenue share payments under the DZUVEO Agreement;~~

•		~~our, or Aguettant’s, ability to maintain regulatory approval of DZUVEO in the European Union, or EU;~~

•		our ability to obtain adequate government or third-party payer ~~reimbursement;~~reimbursement for our developmental product candidates, if approved;

•	our ability to gain access to formularies and establish and then maintain effective relationships with pharmaceutical benefit managers and/or group purchasing organizations for our developmental product candidates, if approved;
	•	our ability to attract additional collaborators with development, regulatory and commercialization expertise;

	•		our ability to identify and secure potential ~~commercial~~strategic partners to develop, secure regulatory approval for and then commercialize our developmental product candidates;

•		our ability to successfully retain our key commercial, scientific, engineering, medical or management personnel and hire new personnel as needed;

•		existing and future legislation and other regulatory developments in the United States and foreign countries;

•		the performance of our third-party suppliers and manufacturers, including any supply chain impacts or work limitations;

•		the success of competing therapies that are or become available;

•		~~our liquidity and capital resources;~~ and

•		our ability to obtain and maintain intellectual property protection for our approved products and product candidates.

	As of December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash, cash equivalents and restricted cash:
Cash	$	1,443	$	—	$	—	$	1,443
Money market funds		2,822		—		—		2,822
Commercial paper		8,398		—		—		8,398
Total cash, cash equivalents and restricted cash		12,663		—		—		12,663

Short-term investments:
Commercial paper		29,504		0		0		29,504
Corporate debt securities		9,463		0		0		9,463
Total short-term investments		38,967		0		0		38,967
Total cash, cash equivalents, restricted cash and short-term investments	$	51,630	$	—	$	—	$	51,630

	As of June 30, 2022								As of March 31, 2023
	Fair Value		Level I		Level II		Level III		Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	1,150	$	1,150	$	0	$	0	$	146	$	146	$	—	$	—
U.S. government agency securities										5,677		—		5,677		—
Commercial paper		24,136		0		24,136		0		5,814		—		5,814		—
Total assets measured at fair value	$	25,286	$	1,150	$	24,136	$	0	$	11,637	$	146	$	11,491	$	—

Liabilities
Contingent put option liability	$	49	$	0	$	0	$	49
Warrant liability										1,787		—		—		1,787
Total liabilities measured at fair value	$	49	$	0	$	0	$	49	$	1,787	$	—	$	—	$	1,787

									As of December 31, 2022
	As of December 31, 2021								Fair Value		Level I		Level II		Level III
Assets	*Fair Value*		*Level I*		*Level II*		*Level III*
Money market funds	$	2,822	$	2,822	$	0	$	0	$	321	$	321	$	—	$	—
U.S. government agency securities										2,444		—		2,444		—
Commercial paper		37,902		0		37,902		0		4,730		—		4,730		—
Corporate debt securities		9,463		0		9,463		0
Total assets measured at fair value	$	50,187	$	2,822	$	47,365	$	0	$	7,495	$	321	$	7,174	$	—

Liabilities
Contingent put option liability	$	81	$	0	$	0	$	81
Warrant liability										7,098		—		—		7,098
Total liabilities measured at fair value	$	81	$	0	$	0	$	81	$	7,098	$	—	$	—	$	7,098

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue:
Product sales	$	570		$	392		$	1,012		$	843
Contract and other collaboration		0			51			0			111
Total revenue		570			443			1,012			954

Operating costs and expenses:
Cost of goods sold		876			1,040			1,660			2,080
Research and development		1,544			724			2,859			1,693
Selling, general and administrative		6,822			8,694			14,160			16,338
Impairment of property and equipment		4,901			0			4,901			0
Total operating costs and expenses		14,143			10,458			23,580			20,111
Income (loss) from operations		(13,573	)		(10,015	)		(22,568	)		(19,157	)
Other income:
Interest expense		(327	)		(614	)		(717	)		(1,286	)
Interest income and other (expense) income, net		51			(16	)		89			60
Non-cash interest income on liability related to the sale of future royalties		463			799			1,136			1,581
Gain on extinguishment of liability related to the sale of future royalties		84,052			0			84,052			0
Total other income		84,239			169			84,560			355
Net income (loss) before income taxes		70,666			(9,846	)		61,992			(18,802	)
Provision for income taxes		(3	)		(5	)		(3	)		(5	)
Net income (loss)	$	70,663		$	(9,851	)	$	61,989		$	(18,807	)
Net income (loss) per share of common stock, basic	$	0.48		$	(0.08	)	$	0.42		$	(0.16	)
Shares used in computing net income (loss) per share of common stock, basic – See Note 13		147,139,032			119,120,040			146,385,577			116,204,492
Net income (loss) per share of common stock, diluted	$	0.48		$	(0.08	)	$	0.42		$	(0.16	)
Shares used in computing net income (loss) per share of common stock, diluted – See Note 13		147,209,065			119,120,040			146,420,437			116,204,492

	Balance as of
	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	15,165	$	7,663
Restricted cash		5,000		0
Restricted cash, net of current portion		0		5,000
Total cash, cash equivalents, and restricted cash	$	20,165	$	12,663

	Balance as of
	June 30, 2021		December 31, 2020
Cash and cash equivalents	$	21,327	$	22,274
Restricted cash, net of current portion		5,000		5,000
Total cash, cash equivalents, and restricted cash	$	26,327	$	27,274

	Three Months Ended June 30, 2022			Six Months Ended June 30, 2022
Fair value—beginning of period	$	55		$	81
Change in fair value of contingent put option associated with the Loan Agreement		(6	)		(32	)
Fair value—end of period	$	49		$	49

	Three Months Ended March 31, 2023
Fair value—beginning of period	$	7,098
Change in fair value of 2022 Warrants liability		(5,311	)
Fair value—end of period	$	1,787

Consideration
Cash	$	3,536
Issuance of common stock to Lowell security holders in connection with asset acquisition		5,161
Issuance of common stock to settle Lowell’s transaction costs in connection with asset acquisition		350
Liability for issuance of 1,396,526 hold back shares to Lowell securityholders⁽¹⁾		800
Transaction costs		2,521
Total consideration	$	12,368

IPR&D Asset Acquired
Purchase price	$	12,368
Cash acquired		(3,549	)
Total IPR&D asset acquired⁽²⁾	$	8,819

	Three months ended June 30, 2022		Six months ended June 30, 2022
Product sales:
DSUVIA	$	444	$	886
DZUVEO¹		126		126
Total product sales	$	570	$	1,012

	Three months ended June 30, 2021		Six months ended June 30, 2021
Product sales:
DSUVIA	$	392	$	573
Zalviso		0		270
Total product sales		392		843

Contract and collaboration revenue:
Non-cash royalty revenue related to Royalty Monetization (Note 9)		38		83
Royalty revenue		13		28
Total revenues from contract and other collaboration		51		111
Total revenue	$	443	$	954

	Three months ended
	March 31,
	2023			2022
Total revenues	$	501		$	442
Cost of goods sold		711			414
Selling, general and administrative expense		683			3,608
Impairment of net assets held for sale		7,007			—
Impairment of fixed assets		1,065			—
Gain on termination of lease liabilities		(1,098	)		—
Research and development expenses	349				479
Loss from operations		8,216			4,059
Loss from discontinued operations before loss on disposal	$	8,216		$	4,059

	March 31, 2023			December 31, 2022
Cash and cash equivalents	$	—		$	—
Accounts receivable, net		276			309
Inventories		1,117			1,178
Prepaid expenses and other current assets		231			444
Property, plant and equipment, net		8,509			—
Operating lease right-of-use assets		178			—
Other assets		172			—
Less: expected loss on sale of discontinued operations		(7,007	)		—
Total current assets of discontinued operations		3,476			1,931
Property, plant and equipment, net		—			10,261
Operating lease right-of-use assets		—			3,499
Other assets		—			176
Total non-current assets of discontinued operations		—			13,936
Total assets of discontinued operations	$	3,476		$	15,867

Accounts payable		618			784
Accrued liabilities		1,184			1,720
Operating lease liabilities, current portion		354			1,601
Note payable, current portion		—			400
Deferred revenue, current portion		1,122			115
Total current liabilities of discontinued operations		3,278			4,620
Operating lease liabilities, net of current portion		—			2,959
Deferred revenue, net of current portion		—			1,036
Total non-current liabilities of discontinued operations		—			3,995
Total liabilities of discontinued operations		3,278			8,615
Net assets of discontinued operations	$	198		$	7,252

Balance at January 1, 2022	$	1,237
Deductions for performance obligations satisfied:
In current period		(29	)
Balance at June 30, 2022	$	1,208

Balance at January 1, 2021	$	49
Deductions for performance obligations satisfied:
In current period		(49	)
Balance at June 30, 2021	$	0

	March 31, 2023
Expected cash proceeds	$	2,723
Less: net assets transferred		(8,840	)
Less: expected disposal costs		(890	)
Expected loss on sale of discontinued operations, before income taxes		(7,007	)
Income tax expense		—
Expected loss on sale of discontinued operations	$	(7,007	)

	June 30, 2022			June 30, 2021
Weighted-average remaining lease term – operating leases (years)	4.57			5.41
Weighted-average remaining discount rate – operating leases		12.8	%		12.8	%

Year:
2022 (remaining six months)	$	921
2023		1,344
2024		1,040
2025		1,040
2026		1,040
Thereafter		415
Total future minimum lease payments		5,800
Less imputed interest		(1,299	)
Total	$	4,501

Reported as:
Operating lease liabilities	$	4,501
Operating lease liabilities, current portion		(1,142	)
Operating lease liabilities, net of current portion	$	3,359

	Six months ended June 30, 2022			Period from inception to June 30, 2022
Liability related to sale of future royalties — beginning balance	$	85,288		$	0
Proceeds from sale of future royalties		0			61,184
Non-cash royalty revenue		0			(1,083	)
Non-cash interest (income) expense recognized		(1,136	)		24,051
Consideration paid for termination of Royalty Monetization		(100	)		(100	)
Gain on termination of liability related to sale of future royalties		(84,052	)		(84,052	)
Liability related to sale of future royalties as of June 30, 2022	$	0		$	0

	Common Stock from Warrants		Weighted- average Exercise Price (per share)
Outstanding at December 31, 2022		7,824,933	$	1.72
Pre-funded warrants exercised		2,632,898	$	0.0001
Outstanding at March 31, 2023		5,192,035	$	2.59
Exercisable at March 31, 2023		964,983	$	4.89

	Three Months Ended June 30,				Six Months Ended June 30,				March 31, 2023		March 31, 2022
	2022		2021		2022		2021
Cost of goods sold	$	16	$	21	$	35	$	43
Research and development		153		200		327		381	$	93	$	174
Selling, general and administrative		584		951		1,174		1,837		457		464
Discontinued operations										19		145
Total	$	753	$	1,172	$	1,536	$	2,261	$	569	$	783

				Weighted
	Number of			*Average*
	*Restricted*			Grant Date
	Stock Units			Fair Value
Restricted stock units outstanding, January 1, 2022		1,774,376		$	1.71
Granted		1,061,826			0.40
Vested		(880,315	)		1.78
Forfeited		(313,288	)		1.29
Restricted stock units outstanding, June 30, 2022		1,642,599		$	0.91

	Number of Stock Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value		Number of Stock Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
								(in thousands)									(in thousands)
January 1, 2022		14,284,050		$	2.99
January 1, 2023											725,623		$	52.98
Granted		2,123,650			0.40						264,520			1.76
Forfeited		(552,745	)		1.37						(1,950	)		19.41
Expired		(812,693	)		3.31						(90,802	)		83.75
Exercised		0			0						—			—

June 30, 2022		15,042,262		$	2.67		5.8	$	0

Vested and exercisable options—June 30, 2022		10,473,947		$	3.31		4.5	$	0
Vested and expected to vest—June 30, 2022		15,042,262		$	2.67		5.8	$	0
March 31, 2023											897,391		$	34.84		6.9	$	—
Vested and exercisable options— March 31, 2023											459,397		$	58.42		4.7	$	—
Vested and expected to vest— March 31, 2023											897,391		$	34.84		6.9	$	—

	Six months ended June 30, 2022
Expected term (in years)		6.3
Risk-free interest rate	1.6%	-	2.2%
Expected volatility		88%
Expected dividend rate		0%

	Three months ended March 31, 2023
Expected term (in years)		6.3
Risk-free interest rate		3.9%
Expected volatility		94%
Expected dividend rate		0%

	Three Months Ended June 30,					Six Months Ended June 30,
	2022		2021			2022		2021
	(in thousands, except share and per share amounts)
Numerator:
Net income (loss)	$	70,663	$	(9,851	)	$	61,989	$	(18,807	)
Denominator:
Weighted average shares outstanding — basic		147,139,032		119,120,040			146,385,577		116,204,492
Dilutive effect of RSUs		70,033		0			34,860		0
Weighted average shares outstanding — diluted		147,209,065		119,120,040			146,420,437		116,204,492

Net income (loss) per share — basic	$	0.48	$	(0.08	)	$	0.42	$	(0.16	)
Net income (loss) per share — diluted	$	0.48	$	(0.08	)	$	0.42	$	(0.16	)

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
RSUs, stock options and ESPP to purchase common stock		16,520,200		16,907,412		16,463,459		16,907,412		989,011		893,223
Common stock warrants		17,676,679		176,679		17,676,679		176,679		5,192,035		883,833

Product/Product Candidate	Description	Target Use	Status
~~DSUVIA®~~ Niyad™	~~Sufentanil sublingual tablet, 30 mcg~~Lyophilized vial containing nafamostat for injection	~~Moderate-to-severe acute pain in a medically supervised setting, administered by a healthcare professional~~Regional anticoagulant for injection into the extracorporeal circuit	~~Received U.S.~~Submitted an investigational device exemption, or IDE, and received Breakthrough Device Designation from the United States Food and Drug Administration, or ~~FDA, approval in November 2018; commercial launch began first quarter of 2019.~~FDA. Submitted a request for Emergency Use Authorization to the FDA.

~~DZUVEO®~~ LTX-608	~~Sufentanil sublingual tablet, 30 mcg~~Lyophilized vial containing nafamostat for injection	~~Moderate-to-severe acute pain in a medically monitored setting, administered by a healthcare professional~~IV infusion as an anti-viral treatment for COVID-19	~~Granted European Commission, or EC, marketing approval in June 2018. Sunset date extended~~IND to ~~December 31, 2022 by EC. To~~ be ~~commercialized in Europe by Laboratoire Aguettant, or Aguettant.~~submitted following toxicology evaluation to enable Phase 2 study

~~Zalviso®~~LTX-608	~~Sufentanil sublingual tablet system, 15 mcg~~Lyophilized vial containing nafamostat for injection	~~Moderate-to-severe acute pain in the hospital setting, administered by the patient as needed~~IV infusion for disseminated intravascular coagulation, or DIC	~~In the U.S., positive results from~~IND to be submitted following toxicology evaluation to enable Phase ~~3 trial, IAP312, announced in August 2017.~~ ~~Approved in the European Union, where it was marketed commercially by Grünenthal GmbH, or Grünenthal, through May 12, 2021. Marketing Authorization withdrawn in July 2022.~~ ~~Future development and commercialization efforts contingent upon identification of corporate partnership resources.~~ 2 study

~~ARX-02~~LTX-608	~~Higher Strength Sufentanil Sublingual Tablet~~Lyophilized vial containing nafamostat for injection	~~Cancer breakthrough pain in opioid-tolerant patients~~IV infusion for acute respiratory distress syndrome, or ARDS	IND to be submitted following toxicology evaluation to enable Phase 2 ~~clinical trial and End of Phase 2 meeting completed. Investigational New Drug, or IND, application was inactivated.~~ ~~Future development contingent upon identification of corporate partnership resources.~~study

~~ARX-03~~LTX-608	~~Combination Sufentanil/Triazolam Sublingual Tablet~~Lyophilized vial containing nafamostat for injection	~~Mild sedation and pain relief during painful procedures in a physician’s office~~IV infusion for acute pancreatitis	IND to be submitted following toxicology evaluation to enable Phase 2 ~~clinical trial and End of Phase 2 meeting completed. IND application was inactivated.~~ ~~Future development contingent upon identification of corporate partnership resources.~~study

Product/Product Candidate	Description	Target Use	Status
~~Ephedrine~~Fedsyra™	Ephedrine pre-filled syringe, containing 10 ml of a solution of 3 mg/ml ephedrine for injection	Clinically important hypotension occurring in the setting of anesthesia	Product candidate licensed from Aguettant; preparing New Drug Application, or NDA, for submission to FDA. Approved in the European Union; owned and marketed by Aguettant.

Phenylephrine	Phenylephrine pre-filled syringe containing 10 ml of a solution of 50 mcg/ml phenylephrine for injection	Clinically important hypotension resulting primarily from vasodilation in the setting of anesthesia	Product candidate licensed from Aguettant; preparing NDA for submission to FDA. Approved in the European Union; owned and marketed by Aguettant.

~~Product/Product Candidate~~ Overview On April 3, 2023, we closed the transactions contemplated by the DSUVIA Agreement with Alora pursuant to which Alora acquired certain assets and assume certain liabilities relating to the Product. The Product expressly excludes Zalviso, any other multi-dose administration system containing sufentanil sublingual tablets (whether as the sole active ingredient or in combination with other active ingredients), and any single-dose formulation of sufentanil for use outside of a medically supervised setting. Under the Purchase Agreement, we are entitled to receive quarterly payments in an amount equal to 15% of net Product sales to all customers excluding net sales to the Department of Defense and sales by or on behalf of Aguettant, and quarterly payments in an amount equal to 75% of net Product sales to the Department of Defense. We are also entitled to receive sales milestones up to $116.5 million based on the achievement of Alora attaining certain levels of annual sales. Refer to Note 3, “Discontinued Operations” and Note 11, “Subsequent Events” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information. On January 7, 2022, we acquired Lowell Therapeutics, Inc., or Lowell, a privately held company, pursuant to the Agreement and Plan of Merger, dated as of November 14, 2021, or the Merger Agreement, in a transaction for consideration of approximately $32.5 million plus net cash acquired and certain other adjustments, and which includes up to approximately $26.0 million of contingent consideration payable in cash or stock at AcelRx’s option, upon the achievement of regulatory and sales-based milestones, or the Merger Agreement. In connection with the Merger Agreement we acquired Niyad and LTX-608 (lyophilized vials of nafamostat for injection into the extracorporeal circuit or direct IV infusion to the patient, respectively), an in-process research and development, or IPR&D, asset. For additional information regarding the Merger Agreement, see Note 4, “Asset Acquisition” to the consolidated financial statements in our 2022 Annual Report on Form 10-K for additional information. 21 On July 14, 2021, we entered into a License and Commercialization Agreement, or the PFS Agreement, with Laboratoire Aguettant, or Aguettant, pursuant to which we obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States (i) an ephedrine pre-filled syringe containing 10 ml of a solution of 3 mg/ml ephedrine hydrochloride for injection and (ii) a phenylephrine pre-filled syringe containing 10 ml of a solution of 50 mcg/ml phenylephrine hydrochloride for injection. Aguettant will supply us with the products for use in commercialization and, if they are approved in the U.S., Aguettant was originally entitled to receive up to $24 million in sales-based milestone payments. In connection with our and Aguettant’s agreement to enter into the Amended DZUVEO Agreement (as defined below) and the Amended and Restated Supply Agreement (as defined below), we entered into an amendment to the PFS Agreement with Aguettant pursuant to which, effective on April 3, 2023, (a) Aguettant paid us a complementary payment in the amount of €1.5 million, and (b) the maximum amount in sales-based milestone payments that Aguettant is entitled to receive will reduce to $21 million. On July 14, 2021, we also entered into a License and Commercialization Agreement, or the DZUVEO Agreement, with Aguettant pursuant to which Aguettant obtained the exclusive right to develop and commercialize DZUVEO in the European Union, Norway, Iceland, Liechtenstein, Andorra, Vatican City, Monaco, Switzerland and the United Kingdom, or the DZUVEO Territory, for the management of acute moderate to severe pain in adults in medically monitored settings. We supply Aguettant with primary packaged product and Aguettant then completes secondary packaging of the finished product. Pursuant to the DSUVIA Agreement (as defined below), we and Aguettant entered into an amendment to the DZUVEO Agreement, or the Amended DZUVEO Agreement, and an amendment and restatement to the supply agreement with respect to the manufacture and supply of DZUVEO, or the Amended and Restated Supply Agreement. The rights and obligations under the Amended DZUVEO Agreement and the Amended and Restated Supply Agreement were assumed by Alora, as part of the DSUVIA asset divestment agreement. We received €2.5 million, or approximately $2.9 million, in 2021 under the DZUVEO Agreement. Refer to Note 4, “In-License Agreement”, and Note 11, “Subsequent Events” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information. Our strategy is focused on developing, obtaining approval, and commercializing our product candidates, Niyad and the pre-filled syringes. Accordingly, we divested DSUVIA to Alora in April 2023, who will continue to commercialize the product and pay us sales-based milestone and other payments. We believe this will maximize the value of DSUVIA as Alora has more available resources to invest on DSUVIA commercialization and as a result can execute a more robust commercial plan to support DSUVIA sales expansion, while we further reduce our operating costs. We have no plans on further developing or commercializing any of our other sufentanil sublingual products that were previously our product candidates. We are focused on achieving an Emergency Use Authorization, or EUA, for Niyad in 2023, and if successful, we expect to begin commercialization, while also initiating the clinical study for full regulatory approval. On October 25, 2022, we filed a certificate of amendment to our amended and restated certificate of incorporation to effect a 1-for-20 reverse stock split of our outstanding common stock, effective as of 5:01 p.m. Eastern Time on October 25, 2022, or the Reverse Stock Split. Unless expressly stated herein, all share amounts of our common stock presented in this Annual Report have been adjusted to reflect the Reverse Stock Split. See Note 1 to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.	~~Description~~	~~Target~~~~Use~~	~~Status~~
~~Niyad™~~	~~Lyophilized vial containing nafamostat for injection~~	~~Regional anticoagulant for injection into the extracorporeal circuit~~	~~Submitted an investigational device exemption, or IDE, and received Breakthrough Device Designation from the FDA.~~

~~LTX-608~~	~~Lyophilized vial containing nafamostat for injection~~	~~IV infusion as an anti-viral treatment for COVID-19~~	~~IND to be submitted following toxicology evaluation to enable Phase 2 study~~

~~LTX-608~~	~~Lyophilized vial containing nafamostat for injection~~	~~IV infusion for disseminated intravascular coagulation, or DIC~~	~~IND to be submitted following toxicology evaluation to enable Phase 2 study~~

~~LTX-608~~	~~Lyophilized vial containing nafamostat for injection~~	~~IV infusion for acute respiratory distress syndrome, or ARDS~~	~~IND to be submitted following toxicology evaluation to enable Phase 2 study~~

~~LTX-608~~	~~Lyophilized vial containing nafamostat for injection~~	~~IV infusion for acute pancreatitis~~	~~IND to be submitted following toxicology evaluation to enable Phase 2 study~~

	Three Months Ended June 30,									Six Months Ended June 30,
	2022		2021		$ Change 2022 vs. 2021		% Change 2022 vs. 2021			2022		2021		$ Change 2022 vs. 2021			% Change 2022 vs. 2021
	(In thousands, except percentages)
DSUVIA	$	570	$	392	$	178		45	%	$	1,012	$	573	$	439			77	%
Zalviso		—		—		—		—	%		—		270		(270	)		(100	)%
Total product sales revenue	$	570	$	392	$	178		45	%	$	1,012	$	843	$	266			20	%


	•	employee-related expenses, which include salaries, benefits and stock-based compensation;