ACURA PHARMACEUTICALS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

This discussion and analysis should be read in conjunction with the Company's
financial statements and accompanying notes included elsewhere in this Report.
Historical operating results are not necessarily indicative of results in future
periods.



Forward-Looking Statements

Certain statements in this "Management Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this Quarterly Report on
Form 10-Q that are not statements of historical fact constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance,
or achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terms such as
"anticipate," "believe," "continue," "could," "estimate," "expect," "indicate,"
"intend," "look forward to," "may," "plan," "potential," "predict," "project,"
"seek", "should," "suggest," "target," "will," "would" and similar expressions
that convey the uncertainty of future events or outcomes are used to identify
forward-looking statements. Forward-looking statements include, but are not
necessarily limited to, those relating to:

· our ability to obtain funding for our continuing operations, including the

development of our products utilizing our LIMITx™ and Impede® technologies;

· whether we will receive FDA acceptance for an NDA for LTX-03 by the target

date;

· whether our licensing partners will develop any additional products and utilize

Acura for such development;

· the expected results of clinical studies relating to LTX-03, a LIMITx

hydrocodone bitartrate and acetaminophen combination product, or any successor

product candidate, the date by which such studies will be complete and the

   results will be available and whether LTX-03 will ultimately receive FDA
   approval;




                                      F-23

· our business could be adversely affected by health epidemics in regions where

third parties for which we rely, as in CROs or CMOs, have concentrations of

clinical trial sites or other business operations, and could cause significant

disruption in the operations of third-party manufacturers and CROs upon whom we

rely;

· whether LIMITx will retard the release of opioid active ingredients as dose

levels increase;

· whether the extent to which products formulated with the LIMITx Technology

deter abuse or overdose will be determined sufficient by the FDA to support

approval or labelling describing safety and/or abuse deterrent features;

· whether our LIMITx Technology can be expanded into extended-release

formulations;

· our and our licensee's ability to successfully launch and commercialize our

products and technologies, including Oxaydo® Tablets and our Nexafed® products;

· the results and timing of our development of our LIMITx Technology, including,

but not limited to, the submission of a New Drug Application and/or FDA filing

acceptance;

· our or our licensees' ability to obtain necessary regulatory approvals and

commercialize products utilizing our technologies;

· the market acceptance of, timing of commercial launch and competitive

environment for any of our products;

· expectations regarding potential market share for our products;

· our ability to develop and enter into additional license agreements for our

product candidates using our technologies;

· our exposure to product liability and other lawsuits in connection with the

commercialization of our products;

· the increasing cost of insurance and the availability of product liability

insurance coverage;

· the ability to avoid infringement of patents, trademarks and other proprietary

rights of third parties;

· the ability of our patents to protect our products from generic competition and

our ability to protect and enforce our patent rights in any paragraph IV patent

infringement litigation;

· whether the FDA will agree with or accept the results of our studies for our

product candidates;

· the ability to fulfill the FDA requirements for approving our product

candidates for commercial manufacturing and distribution in the United States,

including, without limitation, the adequacy of the results of the laboratory

and clinical studies completed to date, the results of laboratory and clinical

studies we may complete in the future to support FDA approval of our product

candidates and the sufficiency of our development process to meet

over-the-counter ("OTC") Monograph standards, as applicable;

· the adequacy of the development program for our product candidates, including

whether additional clinical studies will be required to support FDA approval of

our product candidates;

· changes in regulatory requirements;

· adverse safety findings relating to our commercialized products or product

candidates in development;

· whether the FDA will agree with our analysis of our clinical and laboratory

studies;

· whether further studies of our product candidates will be required to support

FDA approval;

· whether or when we are able to obtain FDA approval of labeling for our product

candidates for the proposed indications and whether we will be able to promote

the features of our technologies; and

· whether our product candidates will ultimately perform as intended in

   commercial settings.

These forward-looking statements reflect our current views with respect to
future events and are based on assumptions and subject to known and unknown
risks and uncertainties. Such forward-looking statements are not guarantees of
future performance and are subject to risks, uncertainties and other factors,
some of which are beyond the control of Acura. In light of these risks,
uncertainties and assumptions, the forward-looking events and circumstances
discussed in this Quarterly Report on Form 10-Q may not occur and actual results
could differ materially and adversely from those anticipated or implied in the
forward-looking statements. Given these uncertainties, you should not place
undue reliance on these forward-looking statements Factors that could cause
actual results or conditions to differ from those anticipated by these and other
forward-looking statements include those more fully described and incorporated
by reference in the "RISK FACTORS" section and elsewhere in this Quarterly
Report on Form 10-Q and in our Annual Report of Form 10-K for the fiscal year
ended December 31, 2019. Except as required by law, we assume no obligation to
update any forward-looking statement publicly, or to revise any forward-looking
statement to reflect events or developments occurring after the date of this
Quarterly Report on Form 10-Q, even if new information becomes available in the
future. Thus, you should not assume that our silence over time means that actual
events are bearing out as expressed or implied in any such forward-looking

statement.



                                      F-24





Company Overview



We are an innovative drug delivery company engaged in the research, development
and commercialization of technologies and products intended to address safe use
of medications. We have discovered and developed three proprietary platform
technologies which can be used to develop multiple products. Our Limitx™
Technology is being developed to minimize the risk of overdose, our Aversion®
Technology is intended to address methods of abuse associated with opioid
analgesics while our Impede® Technology is directed at minimizing the extraction
and conversion of pseudoephedrine, or PSE, into methamphetamine. Oxaydo Tablets
(oxycodone HCl, CII), which utilizes the Aversion Technology, is the first
approved immediate-release oxycodone product in the United States with abuse
deterrent labeling.



Limitx, is designed to retard the release of active drug ingredients when too
many tablets are accidentally or purposefully ingested by neutralizing stomach
acid with buffer ingredients but deliver efficacious amounts of drug when taken
as a single tablet with a nominal buffer dose. We have completed four clinical
studies of various product formulations utilizing the Limitx Technology which
have demonstrated proof-of-concept for the Limitx Technology and will allow us
to advance a product to development for a New Drug Application, or NDA. Studies
AP-LTX-400, or Study 400, and Study AP-LTX-401, or Study 401, both utilizing our
LTX-04 hydromorphone formulation demonstrated the mean maximum drug
concentration in blood, or Cmax, was reduced in healthy adult fasted subjects by
50% to 65% when excessive buffer levels were ingested or a situation consistent
with over-ingestion of tablets. Study AP-LTX-301, or Study 301 demonstrated drug
Cmax from LTX-03, a Limitx hydrocodone bitartrate and acetaminophen combination
product, in healthy adult fasted subjects trended toward bioequivalence in test
formulations A through E and showed an increasing reduction in Cmax for
formulations F through H; in which formulations A though H had increasing
incremental amounts of buffer starting with no buffer in formulation A. We
believe the results of Study 301 demonstrated that LTX-03 is a formulation that
optimizes the balance between effective blood levels of drug for pain relief at
a single tablet dose while retarding bioavailability of drug when multiple
tablets are ingested. The FDA designated the development program for LTX-04 as
Fast Track, which is designed to facilitate the development, and expedite the
review of drugs to treat serious conditions and fill an unmet medical need.
However, we intend to advance LTX-03, which combines the hydrocodone
micro-particles, acetaminophen and buffer ingredients into a single tablet, as
our lead Limitx product candidate due to its larger market size and its known
prevalence of oral excessive tablet abuse and overdose, and we voluntarily
placed the Investigational New Drug Application, or IND, for LTX-04 on inactive
status. We submitted an IND for LTX-03 to the FDA in the first quarter of 2018
in order to advance to NDA development, which became effective in April 2018.



On June 28, 2019, we entered into License, Development and Commercialization
Agreement, which was amended in October 2020, ("AD Pharma Agreement") with Abuse
Deterrent Pharma, LLC, a Kentucky limited liability company ("AD Pharma"), a
special purpose company representing a consortium of investors that will finance
Acura's operations through July 2021 and reimburse us for development of LTX-03.
The AD Pharma Agreement grants AD Pharma exclusive commercialization rights in
the United States to LTX-03 as well LTX-02 (oxycodone/acetaminophen) and LTX-09
(alprazolam).

In January 2015, we and Egalet US, Inc. and Egalet Ltd., each a subsidiary of
Egalet Corporation (now known as Assertio Holdings Inc and formerly known as
Zyla Life Sciences), or collectively Assertio, entered into a Collaboration and
License Agreement (the "Assertio Agreement") pursuant to which we exclusively
licensed to Assertio worldwide rights to manufacture and commercialize our
Aversion Technology product Oxaydo. Oxaydo is currently approved by the U. S.
Food and Drug Administration, or FDA, for marketing in the United States in 5mg
and 7.5mg strengths. Assertio launched Oxaydo in the United States late in the
third quarter of 2015. We are not actively developing product candidates
utilizing our Aversion Technology.



We launched our first Impede Technology product, Nexafed, into the United States
market in December 2012 and launched our Nexafed Sinus Pressure + Pain product
in the United States in February 2015. On March 16, 2017, we and MainPointe
Pharmaceuticals, LLC, or MainPointe, entered into a License, Commercialization
and Option Agreement, or the MainPointe Agreement, pursuant to which we granted
MainPointe an exclusive license to our Impede technology in the U.S. and Canada
to commercialize our Nexafed products. The MainPointe Agreement also grants
MainPointe the option to expand the licensed territory to the European Union,
Japan and South Korea and to add additional pseudoephedrine-containing products
utilizing our Impede technology. MainPointe is controlled by Mr. John Schutte,
who became our largest shareholder pursuant to a private placement completed in
July 2017. On January 1, 2020, MainPointe assigned to AD Pharma, with Acura's
consent, all of its right, title and interest in the Agreement between
MainPointe and Acura.



                                      F-25





According to the 2017 CDC Drug Surveillance Report, opioid analgesics are one of
the largest prescription drug markets in the United States with 214 million
prescriptions dispensed in 2016. Prescription opioids are also the most widely
abused drugs with 12 million people abusing or misusing these products annually.
Oxaydo will compete in the immediate-release opioid product segment. Because
immediate-release opioid products are used for both acute and chronic pain, a
prescription, on average, contains 66 tablets or capsules. According to IMS
Health, in 2016, sales in the immediate-release opioid product segment were
approximately 194 million prescriptions, of which approximately 95% was
attributable to generic products with no known safety features.
Immediate-release oxycodone tablets represent approximately 30 million of these
prescriptions or almost 1.7 billion tablets. The FDA approved label for our
Oxaydo product describes the unique, and we believe promotable, abuse deterrent
features of our product which we believe makes prescribing our product
attractive to some healthcare providers.



The CDC also reported approximately 45,000 suicide deaths in the U.S. in 2016
with poisoning being the third most prevalent route of suicide. Suicides have
increased 30% in the U.S. since 1999. More than 54% of suicides had no prior
indication of mental health issues. We believe a significant portion of these
intentional poisonings included opioid analgesics which are known to induce
respiratory depression related to overdose. An analysis of forensic data
associated with hydrocodone overdose deaths suggests a median dose of sixteen
10mg hydrocodone tablets was measured in the bloodstream.



In 2014, the United States retail market for over-the-counter market, or OTC,
cold and allergy products containing the pseudoephedrine oral nasal decongestant
was approximately $0.7 billion. In 2014, the DEA reported 9,339 laboratory
incidents involving the illegal use of OTC pseudoephedrine products to
manufacture the highly addictive drug methamphetamine, or meth. According to the
Substance Abuse and Mental Health Services Administration, users of
methamphetamine surged in 20167 to 774,000 people up from 440,000 people in
2012. As of March 16, 2017, sales of Nexafed and Nexafed Sinus are covered under
the MainPointe Agreement, for which we receive a royalty.



We conduct research, development, laboratory, manufacturing, and warehousing
activities at our operations facility in Culver, Indiana and lease an
administrative office in Palatine, Illinois. In addition to internal
capabilities and activities, we engage numerous clinical research organizations,
or CROs, with expertise in regulatory affairs, clinical trial design and
monitoring, clinical data management, biostatistics, medical writing, laboratory
testing and related services. Our Supply Agreements with two third-party
pharmaceutical product manufacturers and packagers to supply our commercial
requirements for our Nexafed and Nexafed Sinus Pressure + Pain products were
assigned to MainPointe in accordance with the MainPointe Agreement.

Misuse or Abuse of Prescription Opioid Products and Development of Risk Mitigation Formulations

Prescription opioids drugs, such as morphine and oxycodone, have a long history
of use for the management of pain. Because they are highly effective, they are
one of the largest prescribed drug categories in the U.S. However, a side effect
of high doses of opioids is euphoria, or "a high". For these reasons, opioids
are the most misused or abused prescription drugs in the U.S. Opioids are
offered in a variety of dosages including immediate-release tablets (or
capsules), extended-release tablets (or capsules), patches and other formats.
Those who misuse or abuse drugs will often do so in one of the following
manners:

· Oral Excessive Tablet Abuse (ETA). Generally recognized as the most prevalent

route of administration by abusers, the abuser simply orally ingests more

tablets (or capsules) than is recommended for pain relief.

· Oral Manipulated Tablet Abuse (MTA). Extended-release tablets or patches are

sometimes crushed, chewed or otherwise physically or chemically manipulated to

defeat the extended-release mechanism and provide an immediate-release of the

opioid for oral ingestion.

· Nasal snorting. Crushed tablets are insufflated for absorption of the drug

through the nasal tissues.

· Injection. The opioid is physically or chemically removed from the dosage and

    injected into the vein using a syringe.




                                      F-26





  · Poly-pharmacy. Opioids are sometimes used in conjunction with alcohol,
    methamphetamine, or other drugs to accentuate the high.

· Overdose. Drug abusers may accidentally introduce excessive quantities of

drugs in their systems or combine drugs that may heighten the chance of

adverse effects of drugs. Some patients may over ingest drugs accidentally or

    with the express intent of suicide.




Safe use technology formulations incorporate physical and/or chemical barriers
or functionality in the products to prevent or discourage a user from
inappropriately administering the product. The extent and manner in which any of
the features of these formulations may be described in the FDA approved label
for our development products will be dependent on the results of and the
acceptance by the FDA of our and our licensees' studies for each product.



Development of safe use products typically require one or more studies. These
studies may include in vitro laboratory studies (which may include but not be
limited to: syringeability of the formulation, extractability of the active
ingredient, and particle size of the crushed product), animal studies (which may
include but not be limited to: respiratory depression), and human clinical
studies (which may include but not be limited to: human abuse liability,
respiratory depression studies) comparing the benefits of our product candidates
to currently marketed products.



Because our products use known active ingredients in approved dosage strengths,
the safety and efficacy of the active ingredient(s) will need to be established
by a series of pharmacokinetic studies demonstrating: (a) bioequivalence to an
approved reference drug, (b) food effect of our formulations, (c) dose
proportionality of our formulation, and (d) other external impacts to our unique
formulations. A product candidate that does not achieve satisfactory
pharmacokinetic results may require a phase III clinical efficacy study.



Further development will likely also entail additional safety and/or efficacy
assessment as may be identified by the FDA for each specific formulation during
the Investigational New Drug application, or IND, or NDA phase of development.
In accordance with the FDA's 2015 Guidance, we will likely have a post-approval
requirement for each of our opioid products, if approved, to perform an
epidemiology study to assess the in-market impact on abuse of our formulation
and most approved opioid products are subject to an FDA approved risk evaluation
and mitigations strategy (REMS).

Overdose Risk Mitigation - Products and Development

Any drug may initiate severe unwanted side effects when overdosed. For example,
a known and FDA labelled side effect of the overdose of opioids is respiratory
depression. High doses of opioids can affect the respiratory center of the brain
resulting in a slowing and/or shallowing of the breathing which increases carbon
dioxide (CO2) in the blood stream. Opioids also impact ancillary CO2 monitoring
of the blood preventing the body from taking corrective action. The increased
CO2 and resulting decrease in oxygen in the blood systematically shuts down body
systems and may result in death.



Abusers as well as legitimate pain patients are at risk of overdose. In some
cases, overdose is accidental but anecdotal reports indicate suicide rates among
pain patient are increasing presumably due to their inability to access the pain
medications they need to manage their condition.



In June 2019, FDA issued a draft for public comment guidance on a Benefit-Risk
Assessment Framework for Opioid Analgesic Drugs. The guidance indicates FDA will
"consider the public health risks of the [opioid] drug related to misuse, abuse,
opioid use disorder, accidental exposure, and overdose in both patients and
nonpatients, as well as any properties of the drug that may mitigate such
risks". We intend to develop our LIMITx Technology products consistent with this
pending guidance and perform studies to demonstrate our drug candidates have
properties to mitigate the risk of overdose. Further development will likely
also entail additional safety and/or efficacy assessment as may be identified by
the FDA for each specific formulation during the Investigational New Drug
application, or IND, or NDA phase of development.



                                      F-27





LIMITx™ Technology



LIMITx Technology is intended to address the accidental or intentional
consumption of multiple tablets and provide a margin of safety against
respiratory depression. We believe these benefits for opioids are consistent
with FDA's proposed direction to require all newly approved opioid products to
have features of benefits that provide safety or efficacy benefits over existing
available opioid therapies.

LIMITx Technology Products in Development

We have the following products in development utilizing our LIMITx Technology:

        LIMITx Technology Products                        Status

Immediate-release hydrocodone bitartrate Initial buffer dose ranging study with acetaminophen (LTX-03)

                completed October 2017

                                           Follow on dose ranging study
                                           completed in January 2018

                                           Intermediate commercial scale
                                           manufacture of micro-particles
                                           complete with scale-up to FDA
                                           registration/clinical batches in
                                           planning.
Immediate-release oxycodone HCl (LTX-01) & Formulation development in process
(LTX-02)
Immediate-release non-opioid drug (LTX-09) Formulation development in process
Immediate-release hydromorphone HCI        Two Phase I exploratory
(LTX-04)                                   pharmacokinetic studies completed.
                                           IND no longer active.




Study 400



Study 400 was a two cohort, open label, crossover design pharmacokinetic study
of LTX-04 in healthy adult subjects. Study 400 measured the rate and extent of
absorption of the active drug ingredient into the bloodstream with the maximum
concentration, or Cmax, typically associated with an increase in drug abuse.
Cohort 1 enrolled 30 subjects who were randomized into three subgroups of 10
taking either 1, 2 or 3 tablets. Each subgroup subject orally swallowed the
planned number of tablets in a randomized manner taking single doses of two
different test formulations of LTX-04 (designated as LTX-04P and LTX-04S and
distinguished by their respective acid neutralizing capacity) and Purdue
Pharma's marketed drug Dilaudid® as a comparator. The 1, 2 and 3 tablets
subgroups in Cohort 1 completed 8, 10 and 8 subjects, respectively.



Cohort 2 enrolled 30 subjects who were randomized into three subgroups of 10
taking either 4, 6 or 8 tablets. Each subgroup subject orally swallowed the
planned number of tablets in a randomized manner taking single doses of LTX-04P
and the marketed drug Dilaudid as a comparator. The 4, 6 and 8 tablets subgroups
in Cohort 2 completed 8, 9 and 8 subjects, respectively.



All tablets contained 2mg of hydromorphone hydrochloride. All subjects received
doses of naltrexone and there was a one week washout between doses. Blood
samples were taken at pre-designated time-points after dosing and were
subsequently analyzed for the concentration of hydromorphone contained in the
sample. All subjects in Cohort 1 had continuous pH (a measure of acid
concentration) monitoring of their gastric fluid. The objective of Cohort 1 was
to determine if adequate active drug entered the blood stream when one or two
LIMITx tablets were swallowed and to begin assessing the ability of the LIMITx
Technology to start retarding the release of active ingredients when three
tablets are ingested. The objective of Cohort 2 was to further explore the
extent the release of the hydromorphone active ingredient from LTX-04P tablets
is retarded as the dose level increases to abusive levels.



The topline results from Study 400 demonstrated that a single tablet dose
delivered a Cmax of 45% and 50% lower than the reference drug for LTX-04S and
LTX-04P, respectively. For an 8 tablet dose, the Cmax for LTX-04P was 59% lower
than the reference drug. Doses between 1 and 8 tablets had similar reduction in
Cmax compared to the reference. The extent of drug absorption, measure by area
under the curve (AUC) was consistent between the LIMITx products and the
reference.



                                      F-28

On December 14, 2016, we announced that we had received advice from the FDA on
the continued development of LTX-04 following the FDA's review of summary data
from Study 400. The FDA confirmed our intention to reformulate LTX-04 to provide
increased drug levels following an intended 1 or 2 tablet dose, noting that a
scientific bridge of bioequivalence to the reference product will support a
finding of safety and efficacy. The FDA also recommended that we identify
studies to measure the clinical impact on abuser behavior and overdose outcome
(such as drug liking and respiratory depression) associated with the reduction
in Cmax when three or more LTX-04 tablets were ingested. The FDA's advice also
identified longer term studies necessary for submitting a NDA for LTX-04,
including in vitro extraction studies, drug interaction studies, additional
pharmacokinetic studies assessing the impact of food and beverages, and a
category 3 abuse liability study.



Study 401



Study 401, completed in June 2017, also was a two cohort, open label, crossover
design pharmacokinetic study in fasted, health adult subjects. Study 401
utilized a modified LTX-04 formulation containing micro-particles intended to
improve drug delivery with one and two tablet dosing (LTX-04P3). Study 401
measured the rate and extent of absorption of the active drug ingredient into
the blood stream with the Cmax typically associated with an increase in drug
abuse. 27 subjects completed Cohort 1 swallowing a single dose tablet of LTX-04
compared to a generic hydromorphone tablet. 13 subjects completed Cohort 2
swallowing 7 LTX-04 and generic tablets doses. 15 subjects followed an
undisclosed, exploratory protocol.



All tablets contained 2 mg of hydromorphone hydrochloride. All subjects received
dosages of naltrexone and/or naloxone and there was a one week washout between
dosages. Blood samples were taken at pre-designated time-points after dosing and
were subsequently analyzed for the concentration of hydromorphone contained in
the sample. The objective of Cohort 1 was to determine if adequate active drug
entered the bloodstream when one LIMITx tablet was swallowed. The objective of
Cohort 2 was to explore the extent to which the release of the hydromorphone
active ingredient from LTX-04 tablets is retarded at a seven tablet dose (oral
excess abuse levels). A safety assessment of LIMITx hydromorphone would be

made
from both study cohorts.

The topline results from Study 401 demonstrated that Cmax for a one tablet
LTX-04P3 dose was approximately 50% less than the active comparator. The Cmax
for the 7 tablet LTX-04P3 dose was 65% below the comparator. Study 401 also
included a 7 tablet dose of LTX-04P3 taken simultaneously with an agent known to
increase gastric emptying time (i.e. increase retention time of the ingredients
in the stomach) which demonstrated an increase in Tmax (time of Cmax) of over 1
hour compared to LTX-04P3 taken without this agent. Since the micro-particles
used in Study 401 release drug much faster than the micro-particles used in
Study 400, we have concluded that the buffer levels used in both studies were
excessive and is retarding the release of drug even with a single dose. Also,
given that manipulating the duration of stomach acidity with a gastric emptying
agent produced a significant increase in Tmax which is indicative of a delayed
release of drug from LTX-04P3, we concluded the LIMITx micro-particles are
working as designed in that when we neutralize the stomach acid we are slowing
the release of drug and subsequent absorption of drug into the blood stream.



We believe the results from Study 400 and 401 indicate the micro-particle are
working as designed but that we used too much buffer for even a single tablet
and did not achieve full release of the drug at a 1 tablet dose.



Study 301

Study 301 was an open-label, parallel design pharmacokinetic study testing our
LIMITx formulation LTX-03 in 72 fasted healthy adult subjects randomized into 9
groups (8 subjects per group). One group swallowed a single Norco® 10/325mg
tablet, the marketed comparator or reference drug. The remaining 8 groups
swallowed a single LTX-03 tablet with increasing buffering amounts starting with
no buffer, LTX-03 formulations A through H, respectively. All 72 subjects
completed the study and the doses were generally well tolerated with no serious
adverse events. One subject in the Formulation E group was not analyzed due to
emesis. LTX-03 is a combination of hydrocodone bitartrate and acetaminophen.



                                      F-29





In Study 301 bioequivalence (BE) was examined to generate information for future
registration studies. Results demonstrated a trend toward BE for both active
ingredients in LTX-03 formulations A through E. Formulation E had BE ratios (log
transformed) for hydrocodone of 0.89 and 0.97 for Cmax and Area Under the Curve
(AUC), respectively. In this small sample size study both hydrocodone BE
confidence intervals were below the acceptable lower BE range of 0.80 at 0.74
and 0.79 for Cmax and AUC, respectively. For acetaminophen, Formulation E's BE
Ratios were 1.15 and 1.03 for Cmax and AUC, respectively. While the
acetaminophen AUC's met the BE standards, the Cmax upper confidence interval of
1.61 was above the acceptable upper BE range of 1.25. We believe that
bioequivalence of this formulation may be achieved by reducing data variability
that can be achieved through an adequately powered crossover study design with
sufficient numbers of subjects in the study. For LTX-03 Formulations F though H,
the higher buffer level tablets, Study 301 demonstrated a progressively
increasing reduction in hydrocodone Cmax culminating in a 34% Cmax reduction
associated with Formulation H, the highest level evaluated. The Cmax for
acetaminophen did not decline in Formulations F through H in Study 301.



We believe that Study 301 identified a formulation that optimizes the balance
between providing therapeutic blood levels of drug for pain relief at a single
tablet dose while retarding the bioavailability of drug when higher buffer
levels are ingested.

Non-clinical Study APT-RDR-300

Study APT-RDR-300 was a non-clinical study of respiratory depression in which
five groups of 11 Sprague-Dawley rats were orally administered doses of
hydrocodone ranging from 100mg of drug per kg of body weight (mg/kg) up to 300
mg/kg and one group receiving placebo. 8 subjects in each group were measured
for opioid induced respiratory depression (OIRD) assessing peripheral oxygen
saturation (SpO2) of the blood over a 4 hour observation period. 36 subjects
were analyzed as successfully completing the dosing. The additional 3 subjects
in each group provided blood samples analyzed for hydrocodone at .5, 1, 2 and 4
hours post-dosing.



In Study APT-RDR-300 all doses above 100 mg/kg demonstrated with statistical
significance (p<.05) SpO2 measured OIRD at all time points post-dosing. The 100
mg/kg dose was not statistically significant for OIRD at any time point
post-dosing. The mortality rate was correlated with higher doses. In all animals
exhibiting OIRD, OIRD was acutely evident within 30 minutes of dosing which was
consistent with the Cmax of the hydrocodone dose. Increased Cmax was generally
associated with an increased prevalence of acute OIRD (SpO2 ?70%). Approximately
50% of animals reaching this acute OIRD level resulted in death. Due to a high
variability in the pharmacokinetics and pharmacodynamics observed in the study,
no further associations were possible. Acura believes the results of this study
generally support the development of opioid products with a reduction in Cmax in
overdose situations.



We intend to advance LTX-03 to clinical development for a New Drug Application
(NDA). We submitted an Investigational New Drug Application, or IND with respect
to LTX-03, to the FDA in the first quarter of 2018, which became effective in
April 2018. We have completed a manufacturing formulation and manufacturing
process optimization study for LTX-03. We are currently conducting the scale-up
of the commercial manufacturing process as to-be-marketed formulations are
required for all NDA development work. Ancillary manufacturing equipment has
been installed and initial commercial scale manufacture is in testing.
Successful scale-up will result in supplies of LTX-03 tablets for use in human
clinical studies and start our formal drug stability program for which we need a
minimum of six months of data for a New Drug Application. Among other things, we
believe we will also have to demonstrate a scientific link between Cmax
reductions and a reduction in the risk of respiratory depression.

AD Pharma Agreement covering LTX-03

On June 28, 2019 we announced a License, Development and Commercialization
Agreement, as amended in October 2020 (the "Agreement"), with Abuse Deterrent
Pharma, LLC ("AD Pharma"), a special purpose company representing a consortium
of investors that will finance Acura's operations and completion of development
of LTX-03 (hydrocodone bitartrate with acetaminophen) immediate-release tablets
utilizing Acura's patented LIMITx™ technology which addresses the consequences
of excess oral administration of opioid tablets, the most prevalent route of
opioid overdose and abuse. AD Pharma retains commercialization rights from which
Acura will be entitled to receive royalties and potential sales related
milestones. AD Pharma also has licensed commercialization rights to LTX-02
(oxycodone/acetaminophen) and LTX-09 (alprazolam).



                                      F-30





The Agreement grants AD Pharma exclusive commercialization rights in the United
States to LTX-03. Financial arrangements include monthly license payments by AD
Pharma of $350,000 up to April 2020 and $200,000 thereafter until the earlier of
July 31, 2021 or FDA's acceptance of a New Drug Application ("NDA") for LTX-03
and reimbursement by AD Pharma of Acura's LTX-03 outside development expenses.
Upon commercialization of LTX-03, Acura receives stepped royalties on sales and
is eligible for certain sales related milestones. We have subsequently received
the required monthly license payments for June thru October 2020 from AD Pharma.



AD Pharma may terminate the Agreement at any time. Additionally, if the NDA for
LTX-03 is not accepted by the FDA by July 31, 2021, AD Pharma has the option to
terminate the Agreement and take ownership of the LIMITx intellectual property.
Should AD Pharma choose not to exercise this option to terminate and the NDA for
LTX-03 is subsequently accepted by the FDA, such option expires.



We also granted authority to MainPointe Pharmaceuticals, LLC (MainPointe) to
assign to AD Pharma the option and the right to add, as an Option Product to the
Nexafed® Agreement, a Nexafed® 12-hour dosage (an extended-release
pseudoephedrine hydrochloride product utilizing the IMPEDE® Technology in 120mg
dosage strength) and the Option Product exercise price of $500 thousand was
waived if the exercise of the option occurred by June 28, 2024 (five years from
the effective date of the AD Pharma Agreement), however effective with the
October 2020 amendment to the AD Pharma Agreement, this option and right was
rescinded. In March 2017, we granted MainPointe an exclusive license to our
IMPEDE ® Technology to commercialize our Nexafed® and Nexafed® Sinus Pressure +
Pain Products in the United States and Canada. On January 1, 2020, MainPointe
assigned to AD Pharma, with Acura's consent, all of its right, title and
interest in the MainPointe Agreement between MainPointe and Acura dated March
16, 2017. We understand that MainPointe continues to market the Nexafed
products.



Mr. Schutte is our largest shareholder and directly owns approximately 45.7% of
our common stock (after giving effect to the exercise of warrants he holds). Mr.
Schutte also controls MainPointe and is an investor in AD Pharma.



Aversion Technology



Aversion Technology incorporates gelling ingredients and irritants into tablets
to discourage abuse by snorting and provide barriers to abuse by injection. Our
Aversion Technology and related opioid products, like Oxaydo, are covered by
claims in six issued U.S. patents, which expire between November 2023 and March
2025. Our Aversion Technology products are intended to provide the same
therapeutic benefits of the active drug ingredient as currently marketed
products containing the same active pharmaceutical ingredient.



Oxaydo Tablets

Oxaydo (oxycodone HCI tablets) is a Schedule II narcotic indicated for the management of acute and chronic moderate to severe pain where the use of an opioid analgesic is appropriate. On January 7, 2015, we entered into a Collaboration and License Agreement with Assertio pursuant to which we exclusively licensed to Assertio worldwide rights to manufacture and commercialize Oxaydo. Oxaydo is approved in 5mg and 7.5mg strengths. Assertio commenced shipping Oxaydo in the United States in October 2015.

The 2017 market for immediate-release oxycodone products was approximately 30
million dispensed prescriptions or 1.7 billion tablets. The current market is
predominately serviced by generic formulations that contain no abuse deterrent
features and sell for approximately $0.10 to $0.40 per tablet, depending on
strength. Immediate-release opioids are prescribed by a broad cross-section of
healthcare providers including primary care physicians, surgeons and pain
specialists. We believe Oxaydo, given its differentiated label compared to
generic products, can offer an alternative for opioid prescribing physicians
concerned with the abuse or diversion for abuse of their prescriptions even

at
premium pricing to generics

The safety and efficacy of Oxaydo 5mg and 7.5mg tablets was established by
demonstrating bioequivalence to commercially available oxycodone
immediate-release tablets in the fasted state. Oxaydo differs from oxycodone
tablets when taken with a high fat meal though these differences are not
considered clinically relevant, and Oxaydo can be taken without regard to food.
The FDA-approved label for Oxaydo describes elements unique to our Aversion
Technology, which differs from current commercially available oxycodone
immediate-release tablets. The label for Oxaydo includes the results from a
clinical study that evaluated the effects of nasally snorting crushed Oxaydo and
commercially available oxycodone tablets, and limitations on exposing Oxaydo
tablets to water and other solvents and administration through feeding tubes.
The clinical study evaluated 40 non-dependent recreational opioid users, who
self-administered the equivalent of 15mg of oxycodone. After accounting for a
first sequence effect, the study demonstrated:



                                      F-31

· 30% of subjects exposed to Oxaydo responded that they would not take the drug

again compared to 5% of subjects exposed to immediate-release oxycodone;

· subjects taking Oxaydo reported a higher incidence of nasopharyngeal and facial

adverse events compared to immediate-release oxycodone;

· a decreased ability to completely insufflate two crushed Oxaydo tablets within

a fixed time period (21 of 40 subjects), while all subjects were able to

completely insufflate the entire dose of immediate-release oxycodone; and

· small numeric differences in the median and mean drug liking scores, which were

   lower in response to Oxaydo than immediate-release oxycodone.




Although we believe these abuse deterrent characteristics differentiate Oxaydo
from immediate-release oxycodone products currently on the market, consistent
with FDA guidance which requires epidemiology studies to support a claim of
abuse deterrence, the clinical significance of the difference in drug liking and
difference in response to taking the drug again in this study has not been
established. There is no evidence that Oxaydo has a reduced abuse liability
compared to immediate release oxycodone. We and Assertio have a post-approval
commitment with the FDA to perform an epidemiology study to assess the actual
impact on abuse of Oxaydo tablets.



Further, the Oxaydo product label guides patients not to crush and dissolve the
tablets or pre-soak, lick or otherwise wet the tablets prior to administration.
Similarly, caregivers are advised not to crush and dissolve the tablets or
otherwise use Oxaydo for administration via nasogastric, gastric or other
feeding tubes as it may cause an obstruction.

Assertio Agreement Covering Oxaydo

On January 7, 2015, we and Egalet US, Inc. and Egalet Ltd., each a subsidiary of
Egalet Corporation, (now known as Assertio Holdings Inc and formerly known as
Zyla Life Sciences), entered into a Collaboration and License Agreement, or the
Assertio Agreement, to commercialize Oxaydo tablets containing our Aversion®
Technology. Oxaydo is approved by the FDA for marketing in the United States in
5 mg and 7.5 mg strengths. Under the terms of the Assertio Agreement, we
transferred the approved NDA for Oxaydo to Assertio and Assertio is granted an
exclusive license under our intellectual property rights for development and
commercialization of Oxaydo worldwide, or the Territory, in all strengths,
subject to our right to co-promote Oxaydo in the United States.



In accordance with the Assertio Agreement, we and Assertio formed a joint
steering committee to oversee commercialization strategies and the development
of product line extensions. Assertio pays a significant portion of the expenses
relating to (i) annual NDA PDUFA program fees, (ii) expenses of the FDA required
post-marketing study for Oxaydo and (iii) expenses of clinical studies for
product line extensions (additional strengths) of Oxaydo for the United States
and pays all of the expenses of development and regulatory approval of Oxaydo
for sale outside the United States. Assertio is responsible for all
manufacturing and commercialization activities in the Territory for Oxaydo.
Subject to certain exceptions, Assertio has final decision making authority with
respect to all development and commercialization activities for Oxaydo,
including pricing, subject to our co-promotion right. Assertio may develop
Oxaydo for other countries and in additional strengths, in its discretion.



Assertio paid us an upfront payment of $5.0 million upon signing of the Assertio
Agreement and a $2.5 million milestone in October 2015 in connection with the
launch of Oxaydo. In addition, we will be entitled to a one-time $12.5 million
milestone payment when worldwide Oxaydo net sales reach $150.0 million in a
calendar year. In addition, we are entitled to receive from Assertio a stepped
royalty at percentage rates ranging from mid-single digits to double-digits on
net sales during a calendar year based on Oxaydo net sales during such year
(excluding net sales resulting from our co-promotion efforts). In any calendar
year in which net sales exceed a specified threshold, we will receive a double
digit royalty on all Oxaydo net sales in that year (excluding net sales
resulting from our co-promotion efforts). If we exercise our co-promotion
rights, we will receive a share of the gross margin attributable to incremental
Oxaydo net sales from our co-promotion activities. Assertio's royalty payment
obligations commenced on the first commercial sale of Oxaydo and expire, on a
country-by-country basis, upon the expiration of the last to expire valid patent
claim covering Oxaydo in such country (or if there are no patent claims in such
country, then upon the expiration of the last valid claim in the United States
or the date when no valid and enforceable listable patent in the FDA's Orange
Book remains with respect to the Product). Royalties will be reduced upon the
entry of generic equivalents, as well as for payments required to be made by
Assertio to acquire intellectual property rights to commercialize Oxaydo, with
an aggregate minimum floor.



                                      F-32





The Assertio Agreement expires upon the expiration of Assertio's royalty payment
obligations in all countries. Either party may terminate the Assertio Agreement
in its entirety if the other party breaches a payment obligation, or otherwise
materially breaches the Assertio Agreement, subject to applicable cure periods,
or in the event the other party makes an assignment for the benefit of
creditors, files a petition in bankruptcy or otherwise seeks relief under
applicable bankruptcy laws. We also may terminate the Assertio Agreement with
respect to the U.S. and other countries if Assertio materially breaches its
commercialization obligations. Assertio may terminate the Assertio Agreement for
convenience on 120 days prior written notice, which termination may not occur
prior to the second anniversary of Assertio's launch of Oxaydo. Termination does
not affect a party's rights accrued prior thereto, but there are no stated
payments in connection with termination other than payments of obligations
previously accrued. For all terminations (but not expiration), the Assertio
Agreement provides for the transition of development and marketing of Oxaydo
from Assertio to us, including the conveyance by Assertio to us of the
trademarks and all regulatory filings and approvals relating to Oxaydo, and for
Assertio's supply of Oxaydo for a transition period.

KemPharm Agreement Covering Opioid Prodrugs

On October 13, 2016, we and KemPharm Inc., or KemPharm, entered into a worldwide
License Agreement, or the KemPharm Agreement, pursuant to which we licensed our
Aversion® Technology to KemPharm for its use in the development and
commercialization of three products using 2 of KemPharm's prodrug candidates.
KemPharm has also been granted an option to extend the KemPharm Agreement to
cover two additional prodrug candidates. KemPharm is responsible for all
development, manufacturing and commercialization activities, although we may
provide initial technical assistance.



Upon execution of the KemPharm Agreement, KemPharm paid us an upfront payment of
$3.5 million. If KemPharm exercises its option to use our Aversion Technology
with more than the 2 prodrugs licensed, then KemPharm will pay us up to $1.0
million for each additional prodrug license. In addition, we will receive from
KemPharm a low single digit royalty on commercial sales by KemPharm of products
developed using our Aversion Technology under the KemPharm Agreement. KemPharm's
royalty payment obligations commence on the first commercial sale of a product
using our Aversion Technology and expire, on a country-by-country basis, upon
the expiration of the last to expire patent claim of the Aversion Technology
covering a product in such country, at which time the license for the particular
product and country becomes fully paid and royalty free. As of September 30,
2020 we are unaware of KemPharm's use of our Aversion technology under the
KemPharm Agreement.



The KemPharm Agreement expires upon the expiration of KemPharm's royalty payment
obligations in all countries. Either party may terminate the KemPharm Agreement
in its entirety if the other party materially breaches the KemPharm Agreement,
subject to applicable cure periods. Acura or KemPharm may terminate the KemPharm
Agreement with respect to the U.S. and other countries if the other party
challenges the patents covering the licensed products. KemPharm may terminate
the KemPharm Agreement for convenience on ninety (90) days prior written notice.
Termination does not affect a party's rights accrued prior thereto, but there
are no stated payments in connection with termination other than payments of
obligations previously accrued. For all terminations (but not expiration), the
KemPharm Agreement provides for termination of our license grant to KemPharm.

Aversion Technology Development Opioid Products

We have suspended further development of our Aversion hydrocodone/APAP product
candidate, in order to focus our time and available resources on the development
of our LIMITx Technology product candidates. We currently have 6 additional
opioids at various stages of formulation development using the Aversion
Technology which are not being actively developed.



                                      F-33

Abuse of Pseudoephedrine Products

The chemical structure of pseudoephedrine, or PSE, is very similar to
methamphetamine, facilitating a straight-forward chemical conversion to
methamphetamine. OTC PSE products are sometimes purchased and used for this
conversion. There are multiple known processes to convert PSE to
methamphetamine, all of which are not complex and do not require specialized
equipment; however, many do require readily available but uncommon ingredients.
Two of the three most popular processes follow two general processing steps: (1)
dissolving the PSE tablets in a solvent to isolate, by filtration, purified PSE
and (2) a chemical reduction of the PSE into methamphetamine for drying into
crystals. The third method, or the "one-pot" method, involves the direct
chemical reduction of the PSE to methamphetamine in the presence of the tablet's
inactive ingredients. All the solvents used are ultimately dried off or
otherwise removed, so a wide range of solvents are amenable to the process.

Impede Technology Products



Our initial Impede 1.0 Technology being used in Nexafed Sinus Pressure + Pain
contains a proprietary mixture of inactive ingredients, prevents the extraction
of PSE from tablets using known extraction methods and disrupts the direct
conversion of PSE from tablets into methamphetamine.



We have developed a next generation Impede 2.0 Technology with additional
inactive ingredients to improve the meth-resistance of our technology which is
currently used in Nexafed Tablets. One-pot, direct conversion meth testing
performed by our CRO on the following commercially available products resulted
in:



                                                   Meth Resistant
Product/Formulation                                  Technology      Meth Recovery1        Purity2
Sudafed® 30mg Tablets                              None                           67 %             62 %
Nexafed 30mg Technology                            Impede® 1.0                    38 %             65 %
Zephrex-D® 30mg Pills                              Tarex®                         28 %             51 %
Nexafed 120mg Extended-release tablets             Impede® 2.0            

       17 %             34 %

1 Total methamphetamine HCl recovered from the equivalent of 100 PSE 30mg tablets divided by the maximum theoretical yield of 2.7 grams.

2 Total methamphetamine HCl recovered from the equivalent of 100 PSE 30mg tablets divided by the total weight of powder recovered.

We have previously demonstrated in a pilot clinical study the bioequivalence of
a formulation of our Nexafed extended release tablets utilizing our Impede 2.0
Technology to Sudafed® 12-hour Tablets.

Nexafed Products and the MainPointe Agreement

Nexafed and Nexafed Sinus Pressure + Pain, consist of immediate release tablets.
Nexafed is a 30mg pseudoephedrine tablet which until the third quarter of 2017
incorporated our patented Impede 1.0 Technology and commencing in such quarter
incorporated our Impede 2.0 Technology. Nexafed Sinus Pressure + Pain is a
30/325mg pseudoephedrine and acetaminophen tablet which incorporates our Nexafed
1.0 Technology. PSE is a widely-used nasal decongestant available in many
non-prescription and prescription cold, sinus and allergy products. While the
30mg PSE tablet is not the largest selling PSE product on the market, we believe
it is the most often used product to make meth due to: (a) its relatively low
selling price and (b) its simpler formulation provides better meth yields.



We have demonstrated that our Nexafed 30mg tablets are bioequivalent to Johnson
& Johnson's Sudafed 30mg Tablets when a single 2 tablet dose is administered.
Commencing in 2006, the CMEA, required all non-prescription PSE products to be
held securely behind the pharmacy counter, has set monthly consumer purchase
volume limits, and has necessitated consumer interaction with pharmacy personnel
to purchase PSE-containing products.



On March 16, 2017, we and MainPointe entered into a License, Commercialization
and Option Agreement, or the MainPointe Agreement, pursuant to which we granted
MainPointe an exclusive license to our Impede Technology to commercialize our
Nexafed products in the U.S. and Canada. We also conveyed to MainPointe our
existing inventory and equipment relating to our Nexafed products. MainPointe is
responsible for all development, manufacturing and commercialization activities
with respect to products covered by the Agreement and controls the marketing and
sale of our Nexafed products.



                                      F-34





On signing the MainPointe Agreement, MainPointe paid us an upfront licensing fee
of $2.5 million plus approximately $425 thousand for inventory and equipment
being transferred. The MainPointe Agreement also provides for our receipt of a
7.5% royalty on net sales of licensed products. The royalty payment for each
product will expire on a country-by-country basis when the Impede® patent rights
for such country have expired or are no longer valid; provided that if no Impede
patent right exists in a country, then the royalty term for that country will be
the same as the royalty term for the United States. After the expiration of a
royalty term for a country, MainPointe retains a royalty free license to our
Impede® Technology for products covered by the Agreement in such country.



MainPointe has the option to expand the licensed territory beyond the United
States and Canada to the European Union (and the United Kingdom), Japan and
South Korea for payments of $1.0 million, $500 thousand and $250 thousand,
respectively. In addition, MainPointe has the option to add to the MainPointe
Agreement certain additional products, or Option Products, containing PSE and
utilizing the Impede Technology for a fee of $500 thousand per product (for all
product strengths), including the product candidate Loratadine with
pseudoephedrine. MainPointe has assigned and transferred its option rights to a
Nexafed 12-hour formulation to AD Pharma. If the territory has been expanded
prior to the exercise of a product option, the option fee will be increased to
$750 thousand per product. If the territory is expanded after the payment of the
$500 thousand product option fee, a one-time $250 thousand fee will be due for
each product. If a third party is interested in developing or licensing rights
to an Option Product, MainPointe must exercise its option for that product or
its option rights for such product will terminate. On June 28, 2019, we granted
authority to MainPointe to assign to AD Pharma the option and the right to add,
as an Option Product to the Nexafed® Agreement, a Nexafed® 12-hour dosage (an
extended-release pseudoephedrine hydrochloride product utilizing the IMPEDE®
Technology in 120mg dosage strength) and waived the $500 thousand option fee,
however effective with the October 2020 amendment to the AD Pharma Agreement,
this option and right was rescinded.



The MainPointe Agreement may be terminated by either party for a material breach
of the other party, or by Acura if MainPointe challenges certain of its patents.
Upon early termination of the MainPointe Agreement, MainPointe's licenses to the
Impede Technology and all products will terminate. Upon termination, at Acura's
request the parties will use commercially reasonable efforts to transition the
Nexafed® and Nexafed® Sinus Pressure + Pain products back to Acura.



On January 1, 2020, MainPointe assigned to AD Pharma, with Acura's consent, all
of its right, title and interest in the MainPointe Agreement between MainPointe
and Acura dated March 16, 2017.

Other Impede Technology Products

Given the fragmented nature of the PSE market with products containing multiple active ingredients, we have developed additional products for our Nexafed franchise:

        Impede Technology Products                        Status

Extended-release formulation utilizing     Pilot pharmacokinetic testing
Impede 2.0 Technology                      demonstrated bioequivalence to
                                           Sudafed® 12-hour Tablets. Pre-IND
                                           meeting held with the FDA No imminent
                                           development planned

Extended-release combination products No imminent development planned Loratadine with pseudoephedrine

            No imminent development planned




In July 2015, we had a pre-IND meeting with the FDA to discuss the results from
our pharmacokinetic and meth-resistance testing studies to determine the
development path for our extended-release development product. The FDA
acknowledged the potential value of the development of risk-mitigating
strategies for new formulations of pseudoephedrine products while also
recognizing an approved "meth-deterrent" extended release pseudoephedrine
product would be novel in the over-the-counter (OTC) setting. The FDA did not
make a formal determination whether "meth-resistant" claims would be appropriate
but is open to consider such an appropriately worded, evidence-based claim
directed to the consumer and/or retailer. As recommended by the FDA, we have
submitted additional "meth-resistant" testing information to the FDA for review
prior to submitting an IND. In October 2016, we received FDA recommendations on
our meth-resistant testing protocols for our Nexafed extended release tablets.
We can now scale-up our manufacture batch size at a contract manufacturer which
allows us to submit an IND to the FDA for our Nexafed extended release tablets,
however, we have not yet committed to that level of development.



                                      F-35





In March 2017, we completed a pilot pharmacokinetic study for the PSE and
Loratadine combination product using our Impede 1.0 Technology. The study in 24
healthy adult subjects demonstrated sufficient, but not bioequivalent blood
levels of PSE to the comparator while the second active ingredient achieved
bioequivalence. Based on the product profile, we believe this formulation can be
moved into final development for a 505(b)(2) NDA submission. The Company has
upgraded a portion of this formulation with its Impede 2.0 Technology.

U.S. Market Opportunity for Impede PSE Products

PSE is a widely-used nasal decongestant available in many non-prescription and
prescription cold, sinus and allergy products. PSE is sold in products as the
only active ingredient in both immediate and extended-release products. In
addition, PSE is combined with other cold, sinus and allergy ingredients such as
pain relievers, cough suppressants and antihistamines. PSE also competes against
phenylephrine, an alternate nasal decongestant available in non-prescription
products. In 2014, a data service reported approximately $0.7 billion in retail
sales of non-prescription products containing PSE. The top retail selling PSE
OTC cold/allergy products in 2014 were:



                                              Active           2014 Retail Sales
     Reference Brand1   Brand Company      Ingredient(s)         ($ Millions)
     Claritin-D         Bayer           PSE & Loraditine2     $             208.0
     Allegra-D          Chattem         PSE & Fexofenadine2   $             101.3
     Zyrtec-D           Pfizer          PSE & Ceterizine2     $             101.7
     Advil Sinus        Pfizer          PSE & Ibuprofen       $              58.4
     Sudafed 12 Hour    J&J             PSE2                  $              82.3
     Sudafed 30mg       J&J             PSE                   $              70.4

1 Branded product only. Does not include store brand sales.

2 Extended release PSE formulations

The 2014 market for 30mg PSE tablets, including store brands was approximately
470 million tablets or 19 million boxes of 24 tablets. MainPointe controls the
price of Nexafed and Nexafed Sinus under the terms of the MainPointe Agreement.
The market for cold, sinus and allergy products is highly competitive and many
products have strong consumer brand recognition and, in some cases, prescription
drug heritage. Category leading brands are often supported by national mass
marketing and promotional efforts. Consumers often have a choice to purchase a
less expensive store brand. Store brands contain the same active ingredients as
the more popular national brands but are not supported by large marketing
campaigns and are offered at a lower price. Non-prescription products are
typically distributed through retail outlets including drug store chains, food
store chains, independent pharmacies and mass merchandisers. The distribution
outlets for PSE products are highly consolidated. According to Chain Drug
Review, the top 50 drug, food and mass merchandising chains operate
approximately 40,000 pharmacies in the U.S., of which 58% are operated by the
four largest chains. Stocking decisions and pharmacists recommendations for
these chain pharmacies are often centralized at the corporate headquarters.

Product Labeling for Impede Technology Products

Nexafed and Nexafed Sinus Pressure + Pain products are marketed pursuant to the
FDA's OTC Monograph regulations, which require that our products have labeling
as specified in the regulations. Marketing for the Nexafed products includes
advertising the extraction characteristics and methamphetamine-resistant
benefits of these products which is supported by our published research studies.



We expect that any of our other Impede Technology products that are marketed
pursuant to an NDA or ANDA will be subject to a label approved by the FDA. We
expect that such a label will require submission of our scientifically derived
abuse liability data and we intend to seek descriptions of our abuse liability
studies in the FDA approved product label, although there can be no assurance
that this will be the case.



                                      F-36

U.S. Market Opportunity for Opioid Analgesic Products

The misuse and abuse of opioid analgesics continues to constitute a dynamic and
challenging threat to the United States and is the nation's fastest growing drug
problem. During 2017, the US Government declared opioid abuse as an epidemic and
national health emergency. According to the 2017 Centers on Disease Control Drug
Surveillance Report, 11.8 million Americans aged 12 and over abused or misused
prescription opioids in 2016. Further, this Report calculates that, on average,
115 Americans die every day from an opioid overdose. The majority of drug
overdose deaths (66%) involve an opioid. Immediate release, or IR, opioid
products comprise the vast majority of this abuse compared with extended
release, or ER, opioid products.



It is estimated that more than 75 million people in the United States suffer
from pain and the FDA estimates more than 61 million people receive a
prescription for the opioid hydrocodone annually. For many pain sufferers,
opioid analgesics provide their only pain relief. As a result, opioid analgesics
are among the largest prescription drug classes in the United States with over
214 million tablet and capsule prescriptions dispensed in 2016 of which
approximately 194 million were for IR opioid products and 204 million were for
ER opioid products. However, physicians and other health care providers at times
are reluctant to prescribe opioid analgesics for fear of misuse, abuse, and
diversion of legitimate prescriptions for illicit use.



We expect our Aversion and LIMITx Technology opioid products, to compete
primarily in the IR opioid product segment of the United States opioid analgesic
market. Because IR opioid products are used for both acute and chronic pain, a
prescription, on average, contains 66 tablets or capsules. According to IMS
Health, in 2016, sales in the IR opioid product segment were approximately $2.7
billion, of which ~98% was attributable to generic products. Due to fewer
identified competitors and the significantly larger market for dispensed
prescriptions for IR opioid products compared to ER opioid products, we have
initially focused on developing IR opioid products utilizing our Aversion and
LIMITx Technologies. A summary of the IR opioid product prescription data for
2016 is provided below:



                                                                           %
     IR Opioid Products(1)   2016  US Prescriptions (Millions)(2)      of Total
     Hydrocodone                                                90            43 %
     Oxycodone                                                  55            26 %
     Tramadol                                                   43            21 %
     Codeine                                                    15             7 %
     4 Others                                                    5             3 %
            Total                                              208           100 %

1 Includes all salts and esters of the opioid and opioids in combination with other active ingredients such as acetaminophen.

2 IMS Health, 2016

Despite considerable publicity regarding the abuse of OxyContin®
extended-release tablets and other ER opioid products, U.S. government
statistics suggest that far more people have used IR opioid products
non-medically than ER opioid products. These statistics estimate that nearly
four times as many people have misused the IR opioid products Vicodin®, Lortab®
and Lorcet® (hydrocodone bitartrate/acetaminophen brands and generics) than
OxyContin®.

Product Labeling for Products Using Our Technologies

We or our licensee may seek to include descriptions of studies that characterize
the safety features of our technologies in the label for our products in
development. Assertio has committed to undertake FDA required epidemiological
studies to assess the actual consequences of abuse of Oxaydo in the market for
which we share a minority portion of appropriate fees and expenses. The extent
to which a description of the results of epidemiological or other studies will
be added to or included in the FDA approved product label for our products in
development will be the subject of our discussions with the FDA as part of the
NDA review process. Further, because the FDA closely regulates promotional
materials, even if FDA initially approves labeling that includes a description
of the properties of the product, the FDA's Office of Prescription Drug
Promotion, or OPDP, will continue to review the acceptability of promotional
labeling claims and product advertising campaigns for our marketed products.



                                      F-37





In April 2015, the FDA published guidance for industry on the evaluation and
labeling of abuse-deterrent opioids and in June 2019, FDA issued a draft for
public comment guidance on a Benefit-Risk Assessment Framework for Opioid
Analgesic Drugs which may be beneficial to use in the development and labeling
of our product candidates.

Patents and Patent Applications

We have the following issued patents covering, among other things, our LIMITx
Technology:



    Patent No.                    Subject matter                 Issued    Expires
  (Jurisdiction)
9,101,636 (US)      Abuse deterrent products wherein the       Aug. 2015  Nov. 2033
                    release of active ingredient is retarded
                    when 3 or more doses are consumed
9,320,796 (US)      Abuse deterrent products wherein the       Apr. 2016  Nov. 2033
                    release of active ingredient is retarded
                    when 3 or more doses are consumed
9,662,393 (US)      Abuse deterrent products wherein the        May 2017  Nov. 2033
                    release of active ingredient is retarded
                    when 3 or more doses are consumed
10,441,657 (US)     Abuse deterrent products wherein the       Sept. 2019 Nov. 2033
                    release of active ingredient is retarded
                    when 3 or more doses are consumed
10,688,184          Abuse deterrent products wherein the       Jun. 2020  Nov. 2033
                    release of active ingredient is retarded
                    when 3 or more doses are consumed
2,892,908 (CAN)     Abuse deterrent products wherein the       Apr. 2016  Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed
5,922,851 (JAPAN)   Abuse deterrent products wherein the       Apr. 2016  Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed
ZL201380062421.0    Abuse deterrent products wherein the       Jul. 2018  Nov. 2033
(CHN)               release of active ingredient is retarded
                    when excessive doses are consumed
201711090908.6      Abuse deterrent products wherein the        Oct.2020  Nov. 2033
(CHN)               release of active ingredient is retarded
                    when excessive doses are consumed
2,925,304 (EUR)     Abuse deterrent products wherein the       Sept. 2018 Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed
2015124694 (RUS)    Abuse deterrent products wherein the       Nov. 2018  Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed
2013352162 (AUS)    Abuse deterrent products wherein the       Dec. 2018  Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed
366159 (MEX)        Abuse deterrent products wherein the       Jul. 2019  Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed
238713 (ISR)        Abuse deterrent products wherein the       Jul. 2019  Nov. 2033
                    release of active ingredient is retarded
                    when excessive doses are consumed




We have the following issued patents covering, among other things, Oxaydo and
our Aversion Technology:



    Patent No.                   Subject Matter                Issued    Expires
  (Jurisdiction)
7,201,920 (US)      Pharmaceutical compositions including a   Apr. 2007 Mar. 2025
                    mixture of functional inactive
                    ingredients and specific opioid
                    analgesics
7,510,726 (US)      A wider range of compositions than those  Mar. 2009 Nov. 2023
                    described in the 7,201,920 Patent
7,981,439 (US)      Pharmaceutical compositions including any Jul. 2011 Aug. 2024
                    water soluble drug susceptible to abuse
8,409,616 (US)      Pharmaceutical compositions of            Apr. 2013 Nov. 2023
                    immediate-release abuse deterrent dosage
                    forms
8,637,540 (US)      Pharmaceutical compositions of            Jan. 2014 Nov. 2023
                    immediate-release abuse deterrent opioid
                    products
9,492,443 (US)      Pharmaceutical compositions of            Nov. 2016 Nov. 2023
                    immediate-release abuse deterrent opioid
                    products




We have the following additional issued patents relating to our Aversion
Technology:



    Patent No.                   Subject Matter                Issued    Expires
  (Jurisdiction)
8,822,489 (US)      Pharmaceutical compositions of certain    Jul. 2014 Nov. 2023
                    abuse deterrent products that contain
                    polymers, surfactant and polysorb 80
2,004,294,953 (AUS) Abuse deterrent pharmaceuticals           Apr. 2010 Nov. 2024
2,010,200,979 (AUS) Abuse deterrent pharmaceuticals           Aug. 2010 Nov. 2024
2,547,334 (CAN)     Abuse deterrent pharmaceuticals           Aug. 2010 Nov. 2024
2,647,360 (CAN)     Abuse deterrent pharmaceuticals           May 2012  Apr. 2027
175,863 (ISR)       Abuse deterrent pharmaceuticals           Nov. 2004 Nov. 2024
221,018 (ISR)       Abuse deterrent pharmaceuticals           Nov. 2004 Nov. 2024
1694260 (EUR)       Abuse deterrent pharmaceuticals           Nov. 2004 Nov. 2024




                                      F-38

We have the following issued patents covering, among other things, our Nexafed product line and Impede 1.0 and 2.0 technologies:

    Patent No.                    Subject Matter                 Issued    Expires
  (Jurisdiction)

8,901,113 (US) Pharmaceutical compositions suitable for Dec. 2014 Feb. 2032

                    reducing the chemical conversion of
                    precursor compounds

9,757,466 (US) Pharmaceutical compositions suitable for Sept. 2017 Feb. 2032

                    reducing the chemical conversion of
                    precursor compounds

10,004,699 (US) Methods and compositions for interfering Jun. 2018 Dec. 2035

                    with extraction or conversion of a drug
                    susceptible to abuse

10,155,044 (US) Pharmaceutical compositions suitable for Dec. 2018 Feb. 2032

                    reducing the chemical conversion of
                    precursor compounds

2010300641 (AUS) Pharmaceutical compositions suitable for Jun. 2016 Sept. 2030

                    reducing the chemical conversion of
                    precursor compounds

2,775,890 (CAN) Pharmaceutical compositions suitable for Jun. 2016 Sept. 2030

                    reducing the chemical conversion of
                    precursor compounds
2,488,029 (EUR)     Pharmaceutical compositions suitable for   Mar. 2016  Sept. 2030
                    reducing the chemical conversion of
                    precursor compounds
218533 (ISR)        Pharmaceutical compositions suitable for   Jan. 2016  Sept. 2030
                    reducing the chemical conversion of
                    precursor compounds

2015274936 (AUS) Methods and compositions for interfering Sept. 2018 Jun. 2035

                    with extraction or conversion of a drug
                    susceptible to abuse
13102020.5 (HK)     Pharmaceutical compositions suitable for   Oct. 2016  Sept. 2030
                    reducing the chemical conversion of
                    precursor compounds




In addition to our issued patents listed above and additional unlisted issued
patents, we have filed multiple U.S. patent applications and international
patent applications relating to compositions containing abusable active
pharmaceutical ingredients as well as applications covering our Impede 1.0 and
2.0 Technologies and filed U.S. patent applications for our LIMITx Technology.
Except for the rights granted in the Assertio Agreement, the KemPharm Agreement,
the MainPointe Agreement, and the AD Pharma Agreement and in the patent
infringement settlement agreements described below, we have retained all
intellectual property rights to our Aversion Technology, Impede Technology,
LIMITx Technology and related product candidates.



Between October, 2013 and May, 2014 we settled on an individual basis, patent
infringement suits we brought against generic manufacturers Par Pharmaceuticals,
Inc., Impax Laboratories, Inc., Sandoz Inc. and Ranbaxy Inc. initiated by their
seeking to market generic versions of Oxaydo. Principally, the settlements grant
to Par a royalty bearing license to use our Aversion Technology patents in an
immediate-release oxycodone product starting in January 2022, or sooner
depending on other generic competition. None of such settlements impacted the
validity or enforceability of our Patents.



                                      F-39





On May 20, 2016, we, Purdue Pharma L.P. and Assertio settled patent infringement
actions initiated by Purdue against Oxaydo and an Intes Parties Review initiated
by us against a Purdue patent. The parties dismissed or withdrew the actions,
requested that the USPTO terminate the IPR Review and exchanged mutual releases.
No payments were made by the parties under the settlement agreement. The
settlement provides that Acura will not, in the future, assert certain Acura
U.S. Aversion Technology patents against selected Purdue immediate and
extended-release products. In addition, Purdue has certain rights to negotiate
to exclusively distribute an authorized generic version of certain Assertio
products, including, in some circumstances, Oxaydo® and other products using
Acura's Aversion® Technology if licensed to Assertio.



Reference is made to the Risk Factors contained in our Annual Report on Form
10-K for the year ended December 31, 2018 for a discussion, among other things,
of patent applications and patents owned by third parties, including claims that
may encompass our Aversion Technology and Oxaydo tablets, and the risk of
infringement, interference or opposition proceedings that we may be subject to
arising from such patents and patent applications.

Company's Present Financial Condition

As of September 30, 2020, we had cash of $0.5 million, working capital of $0.4
million and an accumulated deficit of $389 million. We had a loss from
operations of $0.6 million and a net loss of $1.0 million for the nine months
ended September 30, 2020, and had a loss from operations of $725 thousand and a
net loss of $3.8 million for the year ended December 31, 2019. We have suffered
recurring losses and have not generated positive cash flows from operations. We
anticipate operating losses to continue for the foreseeable future. As of
November 12, 2020 our cash balance was approximately $1.0 million.



Additionally, the License, Development and Commercialization Agreement dated
June 28, 2019 and amended in October 2020 (the "AD Pharma Agreement") requires
AD Pharma to pay us monthly license payments of $350,000 from July 2019 through
April 2020 and $200,000 thereafter until the earlier of July 31, 2021 or FDA's
acceptance of a New Drug Application ("NDA") for LTX-03 and to pay all outside
development costs for LTX-03. However, the Agreement allows AD Pharma to
terminate the Agreement "for convenience". Should AD Pharma exercise their right
to terminate the Agreement, we would need to raise additional financing or enter
into license or collaboration agreements with third parties relating to our
technologies. No assurance can be given that we will be successful in obtaining
any such financing or in securing license or collaboration agreements with third
parties on acceptable terms, if at all, or if secured, that such financing or
license or collaboration agreements will provide payments to the Company
sufficient to fund continued operations. In the absence of such financing or
third-party license or collaboration agreements, the Company will be required to
scale back or terminate operations and/or seek protection under applicable
bankruptcy laws. An extended delay or cessation of the Company's continuing
product development efforts will have a material adverse effect on the Company's
financial condition and results of operations. Our independent auditors have
included in their report relating to our 2019 financial statements a "going
concern" explanatory paragraph as to substantial doubt of our ability to
continue as a going concern.



Also included in the AD Pharma Agreement is the requirement that the NDA for
LTX-03 now be accepted by the FDA by July 31, 2021, or AD Pharma has the option
to terminate the AD Pharma Agreement and take ownership of the LIMITx
intellectual property. Importantly, such failure to meet this date will be an
event of default under their $6.0 million note to Acura.



In view of the matters described above, management has concluded that
substantial doubt exists with respect to the Company's ability to continue as a
going concern within one year after the date the financial statements are issued
and our independent registered public accounting firm have included in their
report relating to our 2019 financial statements a "going concern" explanatory
paragraph as to substantial doubt of our ability to continue as a going concern.



In view of the matters described above, recoverability of a major portion of the
recorded asset amounts shown in the Company's accompanying balance sheets is
dependent upon continued operations of the Company, which in turn is dependent
upon the Company's ability to meet its financing requirements on a continuous
basis, to maintain existing financing and to succeed in its future operations.
The Company's financial statements do not include any adjustment relating to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
in existence.



                                      F-40

Our future sources of revenue, if any, will be derived from licensing fees,
milestone payments and royalties under the AD Pharma Agreement, the Assertio
Agreement, the KemPharm Agreement, the MainPointe Agreement and similar
agreements which we may enter into for our LIMITx products in development with
other pharmaceutical company partners, for which there can be no assurance.



The amount and timing of our future cash requirements will depend on regulatory
and market acceptance of our product candidates and the resources we devote to
the development and commercialization of our product candidates.



Three months Ended September 30, 2020 Compared to Three months Ended September
30, 2019



                                           September 30
                                         2020       2019          Increase (decrease)
                                                     $000's                     Percent
    Revenues:
    Royalties                           $   14     $   172     $     (158 )          (92 )%
    Collaboration - related party           96         102             (6 )           (6 )
    License fees - related party           300       1,050           (750 )          (71 )
    Total revenues                         410       1,324           (914 )          (69 )

    Expenses:
    Research and development               519         465             54             12
    General and administrative             456         548            (92 )          (17 )
    Total expenses                         975       1,013            (38 )           (4 )
    Operating income (loss)               (565 )       311           (876 )         (282 )

    Interest expense - related party      (113 )      (111 )            2              2
    Income (loss) before income taxes     (678 )       200           (878 )         (439 )
    Provision for income taxes               -           -              -              -
    Net income (loss)                   $ (678 )   $   200     $     (878 )         (439 )%




License Fees



Under our license and development agreement with Abuse Deterrent Pharma, LLC
("AD Pharma") for LTX-03, we earned license fees $0.3 million and $1.05 million
during the three months ended September 30, 2020 and 2019, respectively.



Collaboration Revenue

Collaboration revenue is derived from research and development services we
perform under the license and development agreement with AD Pharma for LTX-03.
We recognized $96 thousand and $102 thousand of collaboration revenue during the
three months ended September 30, 2020 and 2019, respectively.



Royalty Revenue

In connection with our license agreement with Assertio for Oxaydo Tablets, we
earn a royalty based on product net sales. We recognized $11 thousand and $171
thousand of royalty revenue during the three months ended September 30, 2020 and
2019, respectively.



In connection with our license agreement with MainPointe for our Nexafed product
line, we earn a royalty based on product net sales. We recognized $3 thousand
and $1 thousand of royalty revenue during the three months ended September

30,
2020 and 2019, respectively.



                                      F-41





Operating Expenses



Research and Development



Research and development expense is primarily associated with our Limitx
Technology LTX-03 development activity under the AD Pharma agreement. Included
in September 30, 2019 reported quarterly expenses are share-based compensation
expenses of approximately $5 thousand. Excluding the share-based compensation
expense, our research and development expenses increased by approximately $59
thousand between reporting periods.



General and Administrative

Our general and administrative expenses primarily consisted of legal, audit and
other professional services, corporate insurance, and payroll. Included in the
2020 and 2019 quarterly results are share-based compensation expenses of
approximately $9 thousand and $43 thousand, respectively. Excluding this
share-based compensation expense, our general and administrative expenses
decreased by approximately $58 thousand between reporting periods.



Non-Operating Expense



Interest Expense

During the three months ended September 30, 2020 and 2019, we incurred interest expense of $113 thousand and $111 thousand, respectively on our term loans.

Income Taxes

Our results for the three months ended September 30, 2020 and 2019 show no federal or state income tax benefit provisions due to 100% allowances placed against them for the uncertainty of their future utilization.

Nine months Ended September 30, 2020 Compared to Nine months Ended September 30,
2019



                                          September 30
                                       2020         2019           Increase (decrease)
                                                     $000's                       Percent
   Revenues:
   Royalties                          $    81     $    285     $       (204 )          (72 )%
   Collaboration - related party          148          102               46             45
   License fees - related party         2,400        1,050            1,350            129
   Product sales, net                     223            -              223              -
   Total revenues                       2,852        1,437            1,415             99

   Expenses:
   Research and development             1,351        1,040              311             30
   General and administrative           2,128        1,391              737             53
   Total expenses                       3,479        2,431            1,048             43
   Operating loss                        (627 )       (994 )           (367 )          (37 )

   Loss on debt extinguishment              -       (2,600 )         (2,600 )         (100 )
   Interest expense - related party      (338 )       (335 )              3              1
   Loss before income taxes              (965 )     (3,929 )         (2,964 )          (75 )
   Provision for income taxes               -            -                -              -
   Net loss                           $  (965 )   $ (3,929 )   $     (2,964 )          (75 )%




License Fees

Under our license and development agreement with Abuse Deterrent Pharma, LLC ("AD Pharma") for LTX-03, we recognized license fees $2.4 million and $1.05 million during the nine months ended September 30, 2020 and 2019, respectively.

                                      F-42





Collaboration Revenue



Collaboration revenue is derived from research and development services we
perform under the license and development agreement with AD Pharma for LTX-03.
We recognized $148 thousand and $102 thousand of collaboration revenue during
the nine months ended September 30, 2020 and 2019, respectively.



Royalty Revenue

In connection with our license agreement with Assertio for Oxaydo Tablets, we
earn a royalty based on product net sales. We recognized $72 thousand and $269
thousand of royalty revenue during the nine months ended September 30, 2020

and
2019, respectively.



In connection with our license agreement with MainPointe for our Nexafed product
line, we earn a royalty based on product net sales. We recognized $9 thousand
and $16 thousand of royalty revenue during the nine months ended September

30,
2020 and 2019, respectively.



Product Sales, net

Nexafed was launched in mid-December 2012 and Nexafed Sinus Pressure + Pain was
launched in February 2015. In March 2017, we and MainPointe entered into the
MainPointe Agreement, pursuant to which we granted MainPointe an exclusive
license to our Impede Technology to commercialize both of our Nexafed and
Nexafed Sinus Pressure + Pain product ("Nexafed products") in the U.S. and
Canada. Prior to entering into the MainPointe Agreement, we sold the Nexafed
products in the United States to wholesale pharmaceutical distributors as well
as directly to chain drug stores. The Nexafed products were previously sold by
us subject to the right of return usually for a period of up to twelve months
after the product expiration. During the second quarter 2020, we reviewed our
product sales return allowance liability and recorded a $223 thousand favorable
amount to product sales as we believe sufficient time has passed where the
Nexafed product sold by us is no longer subject to right of return and we
estimate no additional product will be returned



Operating Expenses



Research and Development



Research and development expense is primarily associated with our Limitx
Technology LTX-03 development activity under the AD Pharma agreement. Included
in September 30, 2019 reported nine month expenses are share-based compensation
expenses of approximately $17 thousand. Excluding the share-based compensation
expense, our research and development expenses increased by approximately $328
thousand between reporting periods.



General and Administrative

Our general and administrative expenses primarily consisted of legal, audit and
other professional services, corporate insurance, and payroll. Included in the
2020 and 2019 nine month expenses are share-based compensation expenses of
approximately $42 thousand and $99 thousand, respectively. Excluding this
share-based compensation expense, our general and administrative expenses
increased approximately $794 thousand between reporting periods, primarily due
to the $668 thousand impairment expense on the intangible asset we recorded
during the first quarter 2020.



Non-Operating Expense



Interest Expense

During the nine months ended September 30, 2020 and 2019, we incurred interest expense of $338 thousand and $335 thousand, respectively on our term loans.

                                      F-43





Income Taxes

Our results for the nine months ended September 30, 2020 and 2019 show no federal or state income tax benefit provisions due to 100% allowances placed against them for the uncertainty of their future utilization.

Liquidity and Capital Resources

At September 30, 2020 we had cash of $0.5 million and at December 31, 2019 we
had cash of $0.9 million. At November 12, 2020 our cash balance was
approximately $1.0 million. Additionally, the License, Development and
Commercialization Agreement dated June 28, 2019, as amended October 2020, (the
"AD Pharma Agreement") requires AD Pharma to pay us monthly license payments of
$350 thousand from July 2019 through April 2020 and $200 thousand thereafter
until the earlier of July 31, 2021 or FDA's acceptance of a New Drug Application
("NDA") for LTX-03 and pay all outside development costs for LTX-03. We have
subsequently received the required monthly license payments for June thru
October 2020 from AD Pharma.



However, the Agreement allows AD Pharma to terminate the Agreement for
"convenience on 30 days prior written notice". Should AD Pharma exercise their
right to terminate the Agreement, we would need to raise additional financing or
enter into license or collaboration agreements with third parties relating to
our technologies. No assurance can be given that we will be successful in
obtaining any such financing or in securing license or collaboration agreements
with third parties on acceptable terms, if at all, or if secured, that such
financing or license or collaboration agreements will provide payments to the
Company sufficient to fund continued operations. In the absence of such
financing or third-party license or collaboration agreements, the Company will
be required to scale back or terminate operations and/or seek protection under
applicable bankruptcy laws. An extended delay or cessation of the Company's
continuing product development efforts will have a material adverse effect on
the Company's financial condition and results of operations. In light of AD
Pharma's right to terminate the Agreement for "convenience on 30 days prior
written notice", our independent auditors have included in their report relating
to our 2018 financial statements a "going concern" explanatory paragraph as to
substantial doubt of our ability to continue as a going concern.



Also, the required monthly license payments by AD Pharma cease in July 2021 at
which time the Company will need to have additional capital to fund operations
until such time as LTX-03 is approved and royalty payments commence. To fund
further operations beyond July 2021, we must raise additional financing or enter
into license or collaboration agreements with third parties relating to our
technologies or explore a variety of capital raising and other transactions to
provide additional funding. No assurance can be given that we will be successful
in obtaining any such financing or in securing license or collaboration
agreements with third parties on acceptable terms, if at all, or if secured,
that such financing or license or collaboration agreements will provide payments
to the Company sufficient to fund continued operations. In the absence of such
financing or third-party license or collaboration agreements, there will be
substantial doubt about the Company's ability to continue as a going concern and
the Company will be required to scale back or terminate operations and/or seek
protection under applicable bankruptcy laws. An extended delay or cessation of
the Company's continuing product development efforts will have a material
adverse effect on the Company's financial condition and results of operations.



Also included in the AD Pharma Agreement is the requirement that the NDA for
LTX-03 now be accepted by the FDA by July 31, 2021, or AD Pharma has the option
to terminate the AD Pharma Agreement and take ownership of the LIMITx
intellectual property. Importantly, such failure to meet this date will be an
event of default under their $6.0 million note to Acura.



In view of the matters described above, recoverability of a major portion of the
recorded asset amounts shown in the Company's accompanying balance sheets is
dependent upon continued operations of the Company, which in turn is dependent
upon the Company's ability to meet its financing requirements on a continuous
basis, to maintain existing financing and to succeed in its future operations.
The Company's financial statements do not include any adjustment relating to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
in existence.

Our future sources of revenue, if any, will be derived from licensing fees,
milestone payments and royalties under the AD Pharma Agreement, the Assertio
Agreement, the KemPharm Agreement, the MainPointe Agreement and similar
agreements which we may enter into for our Limitx products in development with
other pharmaceutical company partners, for which there can be no assurance.

                                      F-44





The amount and timing of our future cash requirements will depend on regulatory
and market acceptance of our product candidates and the resources we devote to
the development and commercialization of our product candidates.



Critical Accounting Policies

Note 1 of the Notes to Consolidated Financial Statements, in the Company's 2019
Annual Report on Form 10-K, includes a summary of the Company's significant
accounting policies and methods used in the preparation of the financial
statements. The application of these accounting policies involves the exercise
of judgment and use of assumptions as to future uncertainties and, as a result,
actual results could differ from these estimates. The Company's critical
accounting policies described in the 2019 Annual Report are also applicable to
2020.

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