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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022 
or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______to______.
 
Commission File Number: 001-38193
 
OPIANT PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter) 
Delaware46-4744124
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
  
233 Wilshire Blvd.Suite 400Santa Monica,CA90401
(Address of principal executive offices)(Zip Code)
 
(310)-598-5410 
(Registrant’s telephone number, including area code) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large Accelerated FilerAccelerated Filer
Non-Accelerated Filer Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No  
As of August 8, 2022, the registrant had 5,164,151 shares of common stock outstanding.
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of each exchange on which registered
Common stock, par value $0.001 per shareOPNTNasdaq Stock Market LLC



CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
    This Quarterly Report on Form 10-Q (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue”, negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.
    We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management, any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts. 
    From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-K and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
    Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.
CERTAIN TERMS USED IN THIS REPORT
    When this Report uses the words “we,” “us,” “our,” “Opiant,” and the “Company,” they refer to Opiant Pharmaceuticals, Inc. “SEC” refers to the Securities and Exchange Commission.




OPIANT PHARMACEUTICALS, INC. 
TABLE OF CONTENTS
 
 
   
   
   
Defaults Upon Senior Securities


3


PART 1 - FINANCIAL INFORMATION

Item 1.           Financial Statements
Opiant Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
June 30, 2022December 31, 2021
Assets(unaudited) 
Current assets  
Cash and cash equivalents$40,173,386 $37,853,947 
Marketable securities 15,014,750 
Accounts receivable2,335,911 13,327,364 
Unbilled receivable1,636,539  
Prepaid and other current assets3,612,175 2,962,903 
Total current assets47,758,011 69,158,964 
Other assets  
Property and equipment, net70,668 78,107 
Right of use assets - operating leases733,224 999,567 
Patents and patent applications, net10,942 11,628 
Other non-current assets251,599 179,532 
Total assets$48,824,444 $70,427,798 
Liabilities and Stockholders' Equity  
Liabilities  
Current liabilities  
Accounts payable and accrued liabilities$3,101,419 $3,369,848 
Accrued salaries and wages1,226,029 201,254 
Royalty payable439,807 2,920,148 
Deferred revenue 16,618 
Operating leases - current227,413 337,690 
Total current liabilities4,994,668 6,845,558 
Long-term liabilities
Operating leases - long term523,043 673,347 
   Convertible debt, net of unamortized discount13,710,422 16,069,085 
Total liabilities19,228,133 23,587,990 
Stockholders' equity  
Common stock; par value $0.001; 200,000,000 shares authorized; 5,122,575 and 4,909,846 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
5,121 4,910 
Additional paid-in capital115,438,991 108,569,988 
Accumulated other comprehensive loss(243,150)(54,815)
Accumulated deficit(85,604,651)(61,680,275)
Total stockholders' equity29,596,311 46,839,808 
Total liabilities and stockholders' equity$48,824,444 $70,427,798 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4


Opiant Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
Three months ended June 30,Six months ended June 30,
 2022202120222021
Revenues    
Royalty revenue$2,326,292 $9,314,207 $4,519,505 $13,647,707 
Grant and contract revenue1,567,983 1,945,103 3,844,779 3,998,487 
Total revenue3,894,275 11,259,310 8,364,284 17,646,194 
Operating expenses    
General and administrative4,010,682 2,733,565 8,342,632 5,379,894 
Research and development7,916,288 3,149,503 16,739,467 7,237,690 
Sales and marketing2,815,708 1,022,988 5,492,298 2,020,562 
Royalty expense517,013 2,106,726 943,269 3,086,192 
Total operating expenses15,259,691 9,012,782 31,517,666 17,724,338 
Income (loss) from operations(11,365,416)2,246,528 (23,153,382)(78,144)
Other income (expense)  
Interest income62,622 3,637 67,716 6,836 
Interest expense(401,281)(542,091)(822,171)(1,078,977)
Gain (loss) on foreign exchange18 (24,483)15,950 (10,354)
Total other income (expense)(338,641)(562,937)(738,505)(1,082,495)
Income (loss) before income taxes(11,704,057)1,683,591 (23,891,887)(1,160,639)
Income tax (expense)(32,489) (32,489) 
Net income (loss)$(11,736,546)$1,683,591 $(23,924,376)$(1,160,639)
Other comprehensive loss:
Foreign currency translation adjustment(161,185)(4,446)(188,335)8,055 
Comprehensive income (loss)$(11,897,731)$1,679,145 $(24,112,711)$(1,152,584)
Net income (loss) per share of common stock:  
Basic$(2.31)$0.39 $(4.74)$(0.27)
Diluted$(2.31)$0.31 $(4.74)$(0.27)
Weighted average shares outstanding used to compute net income (loss) per share:    
Basic5,087,651 4,332,601 5,051,814 4,308,027 
Diluted5,087,651 5,427,831 5,051,814 4,308,027 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


Opiant Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(unaudited)
 Common StockAdditional
Paid In
Capital
Accumulated
Deficit
Accumulated
Other Comprehensive Loss
 Total
 SharesAmount
Balance at December 31, 20214,909,846 $4,910 $108,569,988 $(61,680,275)$(54,815)$46,839,808 
Return of profit— — 5,824 — — 5,824 
Exercise of stock options7,097 7 91,627 — — 91,634 
Restricted stock issued31,746 32(32)— —  
Stock issued from converted debt130,916 1312,571,069 — — 2,571,200 
Debt issuance cost associated with debt conversion— — (109,399)— — (109,399)
Stock based compensation— — 2,079,159 — — 2,079,159 
Net loss— — — (12,187,830)— (12,187,830)
Foreign currency translation adjustment — — — — (27,150)(27,150)
Balance at March 31, 20225,079,605 $5,080 $113,208,236 $(73,868,105)$(81,965)$39,263,246 
Exercise of stock options— — — — — — 
Restricted stock issued15,375 15(15)— —  
Performance stock units issued20,185 20 (20)— —  
Issuance of common stock, net of issuance cost7,410 6 135,672 — — 135,678 
Stock based compensation— — 2,095,118 — — 2,095,118 
Net loss— — — (11,736,546)— (11,736,546)
Other comprehensive loss - foreign currency translation adjustment — — — — (161,185)(161,185)
Balance at June 30, 20225,122,575 5,121 115,438,991 (85,604,651)(243,150)29,596,311 
Balance at December 31, 20204,258,105 $4,259 $100,203,979 $(64,689,065)(26,931)$35,492,242 
Exercise of stock options65,962 66 579,553 — — 579,619 
Restricted stock issued6,527 6 (6)— —  
Stock based compensation— — 745,620 — — 745,620 
Net loss— — — (2,844,230)— (2,844,230)
Other comprehensive income - Foreign currency translation adjustment— — — — 12,501 12,501 
Balance at March 31, 20214,330,594 $4,331 $101,529,146 $(67,533,295)(14,430)$33,985,752 
Exercise of stock options5,630 6 36,599 — — 36,605 
Restricted stock issued13,375 13 (13)— —  
Stock based compensation— — 654,562 — — 654,562 
Net income— — — 1,683,591 — 1,683,591 
Other comprehensive income - Foreign currency translation adjustment— — — — (4,446)(4,446)
Balance at June 30, 20214,349,599 4,350 102,220,294 (65,849,704)(18,876)36,356,064 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


Opiant Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
For the Six Months Ended
June 30, 2022June 30, 2021
Cash flows from operating activities  
Net loss$(23,924,376)$(1,160,639)
Adjustments to reconcile net income (loss) to net cash provided in operating activities:  
   Depreciation and amortization16,007 62,945 
Amortization of debt discount103,137 136,785 
   Non-cash lease expense207,477 289,839 
   Stock based compensation4,174,277 1,400,182 
Change in assets and liabilities: 
   (Increase) decrease in accounts receivable10,991,453 (814,415)
   (Increase) decrease in unbilled revenue(1,636,539) 
   (Increase) decrease in prepaid expenses(764,369)714,181 
    Increase (decrease) in accounts payable and accrued liabilities(248,191)(631,078)
    Increase (decrease) in accrued salaries and wages1,049,638 87,526 
    Increase (decrease) in lease liabilities(200,132)(292,813)
    Increase (decrease) in royalty payable(2,480,342)198,792 
    Increase (decrease) in deferred revenue(16,618)(354,756)
Net cash used in operating activities(12,728,578)(363,451)
Cash flows from investing activities
Maturity (purchase) of marketable securities15,014,750 (15,072,325)
Purchase of property and equipment(7,881) 
   Net cash provided by (used in) investing activities15,006,869 (15,072,325)
Cash flows from financing activities 
  Proceeds from issuance of common shares135,678  
  Proceeds from stock option and warrant exercises97,458 616,224
Net cash provided by financing activities233,136 616,224 
Effect of foreign currency translation on cash(191,988)11,489 
Net increase (decrease) in cash and cash equivalents2,319,439 (14,808,063)
Cash and cash equivalents, beginning of period37,853,947 48,251,336 
Cash and cash equivalents, end of period$40,173,386 $33,443,273 
Supplemental disclosure
   Interest paid during the period$808,134 $583,014 
   Income taxes paid during the period$66,924 $ 
Supplemental disclosure of non-cash finance transactions
Common stock issued for debt conversion$2,571,200 $ 
Debt issuance cost associated with debt conversion$109,399 $ 
Right of use assets obtained in exchange for new lease obligations $1,094,259 
Issuance of restricted stock and performance stock units$67 $19 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Opiant Pharmaceuticals, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Description of Business 
Company 
    Opiant is a specialty pharmaceutical company developing medicines for addiction and drug overdose. The Company developed NARCAN® (naloxone hydrochloride) Nasal Spray (“NARCAN®”), a treatment to reverse opioid overdose. This product was conceived and developed by the Company, licensed to Adapt Pharma Operations Limited (“Adapt”), an Ireland based pharmaceutical company in December 2014 and approved by the U.S. Food and Drug Administration (“FDA”) in November 2015. In October 2018, Emergent BioSolutions, Inc. ("EBS") completed its acquisition of Adapt.
    The Company's current pipeline includes medicines in development for Opioid Overdose Reversal (“OOR”), Alcohol Use Disorder (“AUD”), and Acute Cannabinoid Overdose (“ACO”). The Company is also pursuing other treatment opportunities within the addiction and drug overdose field.
    The Company has not had a bankruptcy, receivership or similar proceeding. The Company is required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the clinical testing and manufacturing and sale of pharmaceutical products.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies 
Basis of Presentation
    The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the applicable rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.
    The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly the Company's financial position as of June 30, 2022 and December 31, 2021, results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the months ended June 30, 2022 and 2021. The interim results are not necessarily indicative of the results for any future interim period or for the entire year.
    The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Opiant Pharmaceuticals UK Limited, a company incorporated on November 4, 2016 under the England and Wales Companies Act of 2006. Intercompany balances and transactions are eliminated upon consolidation.  
    The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in the Company's Annual Report on Form 10-K filed with the SEC on March 15, 2022.
Use of Estimates
    The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of expenses in the financial statements and accompanying notes. Actual results could differ from those estimates. Key estimates included in the financial statements include the valuation of: deferred income tax assets, equity instruments, stock-based compensation, acquired intangibles, and allowances for accounts receivable.
Cash and Cash Equivalents
    The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents were approximately $40.2 million and $37.9 million at June 30, 2022 and December 31, 2021, respectively. The Company maintains cash balances at financial institutions insured up to $250 thousand by the Federal Deposit Insurance Corporation. Balances in the UK are insured up to £85 thousand by the Financial Services Compensation Scheme (UK Equivalent). Although the Company’s cash balances exceeded these insured amounts at various times during the six months ended June 30, 2022, the Company has not experienced any losses on its deposits of cash and cash equivalents for the periods presented.
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Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share is computed by dividing loss attributable to common stockholders by the weighted average number of shares of Common Stock outstanding during the period.
    Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of shares of Common Stock outstanding during the respective period presented in the Company’s accompanying condensed consolidated financial statements. Fully-diluted earnings (loss) per share is computed similarly to basic income (loss) per share except that the denominator is increased to include the number of Common Stock equivalents (primarily outstanding options and warrants).
(in thousands, except per share data)For the Three Months Ended June 30,For the Six Months Ended June 30,
Numerator:2022202120222021
Net Income (loss)$(11,737)$1,684 $(23,924)$(1,161)
Denominator:
Denominator for basic income (loss)
per share - weighted average shares5,087,651 4,332,601 5,051,814 4,308,027 
Effect of dilutive securities:
Equity incentive plans 1,095,230   
Denominator for diluted income (loss) per share5,087,651 5,427,831 5,051,814 4,308,027 
Income (loss) per share - Basic$(2.31)0.39$(4.74)(0.27)
Income (loss) per share - Diluted$(2.31)0.31$(4.74)(0.27)

    The Company excluded the following securities from the calculation of basic and diluted net loss per share as the effect would have been antidilutive.
For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
Options to purchase common stock2,745,815 476,580 2,745,815 3,126,446 
Warrants to purchase common stock278,800  278,800 278,800 
Unvested restricted stock272,643 102,741 272,643 102,741 
Unvested performance stock60,551  60,551  
Shares issuable upon conversion of convertible debt222,332 509,165 222,332 509,165 
Total3,580,141 1,088,486 3,580,141 4,017,152 
Foreign Currency Translation
    The functional currency of the Company's wholly-owned subsidiary, Opiant UK is the British Pound, its local currency. Consequently, its assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of Opiant Pharmaceuticals UK Limited (“Opiant UK”), into U.S. dollars, the reporting currency, are excluded from the determination of net loss and are recorded in accumulated other comprehensive loss, a separate component of equity. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.
Recently Adopted Accounting Pronouncements
    From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, ("FASB"), or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.
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    The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its consolidated financial statements.
Note 3.     Marketable Securities
The Company invests in debt securities and has the intent and ability to hold until maturity. Therefore, the Company's Securities are classified as held-to-maturity. The Company's debt securities are all U.S. Treasury securities. The investments in debt securities are carried at either amortized cost or fair value. As of June 30, 2022, the Company had no marketable securities. Any debt securities with original maturities of three months or less are classified as cash equivalents.
Note 4.     Accounts Receivable
    As of June 30, 2022 and December 31, 2021, the Company had accounts receivable of $2.3 million and $13.3 million respectively, which primarily relates to royalty revenue from net sales of NARCAN®.
Note 5.     Unbilled Receivable
    As of June 30, 2022, the Company had an unbilled receivable of $1.6 million, which relates to an unbilled amount to BARDA. This amount represents the payment to the FDA during the period ended June 30, 2022 which will be reimbursed from BARDA per the contract award dated August 2, 2022.

Note 6. Prepaid Expenses and Other Current Assets
    As of June 30, 2022, the Company had prepaid expenses and other current assets of approximately $3.6 million. The Company's prepaid expenses are primarily for advance research and development payments, insurance, software licenses, prepaid rent, and other amounts that relate to future periods of service. Other current assets primarily consist of such items as other receivables and security deposits.
Note 7. Leases
    On January 1, 2019, the Company adopted a new accounting standard, Topic 842, that amends the guidance for the accounting and reporting of leases. Leases with terms of 12 months or less are expensed on a straight-line basis over the term and are not recorded in the Company's Condensed Consolidated Balance Sheets.
    The Company had two operating leases with terms greater than 12 months during the six months ended June 30, 2022. In accordance with the guidance of Topic 842, the leases which are classified as operating leases must be included in the Company's Condensed Consolidated Balance Sheets. Lease one was included in the Company's Condensed Balance Sheets at June 30, 2022. The other lease was not included in the Company's Condensed Balance Sheets at June 30, 2022 as the lease had not commenced at June 30, 2022. The Company's operating leases do not include options to renew, do not contain residual value guarantees, do not have variable lease components, or impose significant restrictions or covenants.
Right of use assets, "ROU assets", represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments over the respective lease term, with the ROU asset adjusted for deferred rent liability. Lease expense is recognized on a straight line basis over the lease term. As the implicit rate on the leases is not determinable, the Company uses judgement to estimate the incremental borrowing rate which is used as the discount rate to determine the present value of lease payments. The weighted average discount rate used was 8.8% and the weighted average remaining lease term is 3.92 years.
The following table summarizes information related to the Company's operating leases and are included in the Company's Balance Sheet as of June 30, 2022.
Balance Sheet descriptionsJune 30, 2022
Assets:(in thousands)
Right of use assets - operating leases$733 
Liabilities:
Operating leases - current227 
Operating leases - long term523 
Total lease liabilities:$750 

The following table summarizes the components of operating lease cost for the three and six months ended June 30, 2022:
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Lease costs, (in thousands)
Three months ended June 30, 2022Six months ended June 30, 2022
Operating expenses lease costs$149 $246 
    As of June 30, 2022, future minimum operating leases payments related to the Company’s operating lease liabilities were as follows:
(in thousands)
June 30, 2022
2022 (six months remaining)122 
2023208 
2024218 
2025243 
2026101 
Total lease payments892 
Less imputed interest(142)
Present value of operating lease liabilities$750 
Note 8. Other Non-Current Assets
As of June 30, 2022 and December 31, 2021, the Company had other non-current assets of approximately $252 thousand and $180 thousand, respectively. The Company's non-current prepaid expenses are primarily for lease deposits.
Note 9. Revenue
NARCAN® Royalties
The Company's primary source of revenue is from royalty payments received from NARCAN® net sales by EBS. During the three and six months ended June 30, 2022 the Company recorded revenue of $2.3 million and $4.5 million, respectively, related to its agreement with EBS.
On August 10, 2022, the Company, delivered a notice (the "Default Notice") to EBS under section 10.3 of the License Agreement between Adapt Pharma Operations Limited and the Company, dated December 15, 2014 (the “Adapt Agreement”). The Default Notice put EBS on notice that EBS had materially breached one or more of its obligations under the Adapt Agreement. Specifically, the Company stated cause for breach based upon the royalty report EBS provided for the quarter ended June 30, 2022 (the “Royalty Report”), which incorrectly stated the royalty payable to the Company for U.S. net NARCAN® sales during the current quarter. EBS applied an erroneous 2% rate to the U.S. net NARCAN® sales for the quarter, resulting in a royalty payable of approximately $2.3 million. According to the Royalty Report, the $2.3 million includes royalties at the tiered rates for net NARCAN® sales in Canada for the quarter. The Company believes that it is due a royalty of approximately $9.1 million using the tiered royalty rate structure under section 5.4.1 of the Adapt Agreement, for all net NARCAN® sales in the quarter.
The Company intends to pursue all available legal remedies under the Adapt Agreement, including terminating the Adapt Agreement and reclaiming the assets subject thereto, if the material breach is not cured within the timeframe provided in the Adapt Agreement.
BARDA Contract
    On September 19, 2018, the Company entered into a contract with the Biomedical Advanced Research and Development Authority (“BARDA”), which is part of the U.S. Health and Human Services Office of the Assistant Secretary for Preparedness and Response, to accelerate the Company’s development of OPTN003, its lead product candidate. OPTN003, nasal nalmefene, is a potent, long-acting opioid antagonist currently in development for the treatment of opioid overdose. The contract provides funding up to approximately $10.8 million and covers activities related to the New Drug Application for OPTN003 with the Food and Drug Administration. BARDA has awarded approximately $8.7 million of the contract as of June 30, 2022. The remaining balance of $2.1 million was awarded on August 2022 - see Footnote 5. During the three and six months ended June 30, 2022 the Company recognized revenue of $1.6 million and $3.8 million, respectively related to this contract.
Deferred revenue
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    On April 17, 2018, the Company was awarded a grant of approximately $7.4 million from the National Institutes of Health’s National Institute on Drug Abuse, ("NIDA"). The grant provided the Company with additional resources for the development of OPNT003.
Government grants are agreements that generally provide cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period. The Company recognized revenues from grants in the period during which the related costs were incurred, provided that the conditions under which the grants were provided had been met and only perfunctory obligations were outstanding.
The Company was awarded the entire $7.4 million, and all the work related to the grant was complete as of March 31, 2022. During the three and six months ended June 30, 2022, the Company recognized revenue of $0 and $17 thousand, respectively related to this grant.
The following is a summary of the Company’s deferred revenue activity as of June 30, 2022:

(in thousands)NIDA Grant Total
Balance as of December 31, 2021$17 $17 
Additions to deferred revenue  
Recognized as revenue(17)(17)
Balance as of June 30, 2022$ 


Note 10. Royalty Payable
    The Company entered into various agreements and subsequently received funding from investors for use by the Company for the research and development of its Opioid Overdose Reversal Treatment Product ("OORTP"). In exchange for this funding, the Company agreed to provide investors with interest in the OORTP net profit generated from NARCAN® sales by EBS into perpetuity. As of June 30, 2022 and December 31, 2021, the Company recorded a royalty payable of $0.4 million and $2.9 million, respectively.
Note 11. Long Term Debt
As of June 30, 2022 and December 31, 2021 the Company had long term debt (net of amortization discount) of $13.7 million and $16.1 million, respectively. There have been no changes to the maturity or other conditions of the debt for the six months ended June 30, 2022. During the six months ended June 30, 2022 approximately $2.6 million of debt was converted to Common Stock at a conversion price of $19.64 per share.
Note 12. Stockholders' Equity 
Common Stock
    During the six months ended June 30, 2022, the Company issued 7,097 shares of Common Stock as a result of stock option exercises, and received net cash proceeds of approximately $92 thousand.    
During the six months ended June 30, 2022, the Company sold 7,410 shares of Common Stock and received net proceeds of $136 thousand after deducting sales commission under its Controlled Equity Offering with Cantor Fitzgerald & Company.
During the six months ended June 30, 2022, the Company issued 47,121 shares of Common Stock for restricted stock that vested.
During the six months ended June 30, 2022, the Company issued 20,185 shares of Common Stock for performance stock units that vested.
Equity Plans 
    On September 8, 2017, the Company held its Annual Meeting of Stockholders (the “Annual Meeting”), at which time the 2017 Long-Term Incentive Plan ("2017 Plan") was approved by stockholder vote. The 2017 Plan allows the Company to grant both incentive stock options (“ISOs”) and non-qualified stock options (“NSOs”) to purchase a maximum of 400,000 shares of the Company's Common Stock. Under the terms of the 2017 Plan, ISOs may only be granted to Company employees and directors, while NSOs may be granted to employees, directors, advisors, and consultants. The Company's Board of Directors (the "Board") has the authority to determine to whom options will be granted, the number of options, the term, and the
12


exercise price. Options are to be granted at an exercise price not less than fair value for an ISO or an NSO. The vesting period is normally over a period of four years from the vesting date. The contractual term of an option is no longer than 10 years. The 2017 Plan also allows the Company to issue restricted stock.

    As provided in the 2017 Plan, on January 1, 2022 the number of shares available for issuance was increased by 4% of the outstanding stock as of December 31, 2021, which represents an increase of 196,394 shares. As of June 30, 2022, the Company had 92,510 shares available for future issuance under the 2017 Plan.

    Prior to adopting the 2017 Plan, the Company did not have a formal long-term incentive stock plan. Prior to the implementation of the 2017 Plan, the Company had discretion to provide designated employees of the Company and its affiliates, certain consultants, and advisors who perform services for the Company and its affiliates, and non-employee members of the Board and its affiliates with the opportunity to receive grants of non-qualified stock options (the "Pre-2017 Non-Qualified Stock Options"). All of the Pre-2017 Non-Qualified Stock Option Grants were intended to qualify as non-qualified stock options. There were no Pre-2017 Non-Qualified Stock Option Grants that were intended to qualify as incentive stock options.
On July 8, 2021, the Board of Directors of the Company adopted the 2021 Inducement Equity Incentive Plan (the “Inducement Plan”) and, subject to the adjustment provisions of the Inducement Plan, reserved 100,000 shares of the Company’s Common Stock for issuance pursuant to equity awards granted under the Inducement Plan. On December 9, 2021, the Board of Directors of the Company amended the Inducement Plan to reserve an additional 100,000 shares of the Company’s Common Stock under the Inducement Plan.
Pre-2017 Non-Qualified Stock Options
    As of December 31, 2021, the Company had outstanding Pre-2017 Non-Qualified Stock Options to purchase, in the aggregate, 1,950,500 shares of the Company's Common Stock. During the six months ended June 30, 2022, the Company did not grant any Pre-2017 Non-Qualified Stock Options.
    Stock option activity for the Pre-2017 Non-Qualified Stock Options for the six months ended June 30, 2022 is presented in the table below:
 Number of SharesWeighted-average Exercise PriceWeighted-average Remaining Contractual Term (years)Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 20211,950,500 $7.17 3.4$51,602 
Exercised  
Forfeited  
Outstanding at June 30, 20221,950,500 $7.17 2.9$9,393 

A summary of the status of the Company’s non-vested Pre-2017 Non-Qualified Stock Options as of June 30, 2022 is presented below:
Number of OptionsWeighted Average Grant Date Fair Value
Vested at June 30, 20221,950,500 $7.17 

During the six months ended June 30, 2022 and 2021, the Company did not recognize any non-cash expense related to Pre-2017 Non-Qualified Stock Options, and there is no further compensation expense to be recognized for the Pre-2017 Non-Qualified Stock Options.
The 2017 Plan
    During the six months ended June 30, 2022, the Company did not grant any options under the 2017 Plan.
Stock option activity for options granted under the 2017 Plan during the six months ended June 30, 2022 is presented in the table below:
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Number of Options OutstandingWeighted-average Exercise PriceWeighted-average Remaining Contractual Term (years)Aggregate Intrinsic Value (in thousands)
Balance at December 31, 2021759,058 $19.61 7.31$10,997 
Granted $ 
Exercised(7,097)12.91
Forfeited(13,146)$13.69 
Balance at June 30, 2022738,815 $19.78 6.78$143 

A summary of the status of the Company’s vested and non-vested options granted under the 2017 Plan as of June 30, 2022 is presented in the following table:
Number of SharesWeighted Average Grant Date Fair Value per Share
Vested at June 30, 2022572,307 $20.65 
Non-vested at June 30, 2022166,508 $9.60 

During the six months ended June 30, 2022 and 2021, the Company recognized approximately $359 thousand and $1.0 million, respectively of non-cash expense related to options granted under the 2017 Plan. As of June 30, 2022, there was approximately $525 thousand of unrecognized compensation costs related to non-vested stock options that were granted under the 2017 Plan.
Restricted Stock Activity
    The following summarizes the restricted stock activity under the Company's 2017 Plan during the six months ended June 30, 2022:
Number of SharesWeighted Average Fair Value Per Share
Restricted stock outstanding and unvested at December 31, 2021104,416 $12.57 
Restricted stock granted147,475 $31.04 
Restricted stock vested(47,123)$12.58 
Restricted stock forfeited(6,925)$24.76 
Restricted stock outstanding and unvested at June 30, 2022197,843 $25.91 
    The Company has different vesting terms for RSU's. Twenty five percent or (1/3) of the restricted stock units will vest on the one year anniversary of the vesting commencement date, and twenty-five percent or (1/3) will vest annually thereafter on the same day as the vesting commencement date. During the six months ended June 30, 2022 and 2021, the Company recognized approximately $1.5 million and $368 thousand, respectively of non-cash expense related to restricted stock units. As of June 30, 2022, there was $3.4 million of total unrecognized compensation cost related to restricted stock units.
Performance Stock Unit Activity
During the six months ended June 30, 2022, the Company granted 80,735 performance stock units to certain employees. The performance stock units vest upon meeting various performance criteria established by the Compensation and Human Capital Committee of the Board of Directors.
Performance stock unit activity granted under the 2017 Plan during the six months ended June 30, 2022 is presented in the table below:


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Number of SharesWeighted Average Fair Value Per Share
Performance stock outstanding and unvested at December 31, 2021 $ 
Performance stock granted80,735 $32.85 
Performance stock vested(20,185)$32.85 
Performance stock forfeited $ 
Performance stock outstanding and unvested at June 30, 202260,550 $32.85 
During the six months ended June 30, 2022, the Company recognized approximately $1.7 million of non-cash expense related to performance stock units under the 2017 Plan. As of June 30, 2022, there was $0.9 million of total unrecognized compensation cost related to performance stock units under the 2017 Plan.
Inducement Plan
During the six months ended June 30, 2022, the Company did not grant any options under the Inducement Plan.
Stock option activity for options granted under the Inducement Plan during the six months ended June 30, 2022 is presented in the table below:

Number of Options OutstandingWeighted-average Exercise PriceWeighted-average Remaining Contractual Term (years)Aggregate Intrinsic Value (in thousands)
Balance at December 31, 202156,500 $16.41 9.55$973 
Granted $ 
Exercised $ 
Forfeited $ 
Balance at June 30, 202256,500 $16.41 9.05$ 

During the six months ended June 30, 2022, the Company recognized approximately $183 thousand of non-cash expense related to options granted under the Inducement Plan. As of June 30, 2022, there was approximately $255 thousand of total unrecognized compensation cost related to the non-vested stock options that were granted under the Inducement Plan.
Restricted Stock Activity
The following summarizes the restricted stock activity under the Inducement Plan during the six months ended June 30, 2022:


Number of SharesWeighted Average Fair Value Per Share
Restricted stock outstanding and unvested at December 31, 202149,800 $26.98 
Restricted stock granted30,450 $13.89 
Restricted stock vested $ 
Restricted stock forfeited(5,450)$28.52 
Restricted stock outstanding and unvested at June 30, 202274,800 $21.27 


During the six months ended June 30, 2022, the Company recognized approximately $396 thousand of non-cash expense related to restricted stock units granted under the Inducement Plan. As of June 30, 2022, there was $1.2 million of total unrecognized compensation cost related to restricted stock units granted under the Inducement Plan.
Warrants
During the six months ended June 30, 2022, the Company did not issue any warrants.
Warrant activity for the six months ended June 30, 2022 is presented in the table below:
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Number of SharesWeighted-average Exercise PriceWeighted-average Remaining Contractual Term (years)Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021278,800 $9.72 2.51$6,666 
Exercised $ 
Forfeited $ 
Outstanding at June 30, 2022278,800 $9.72 2.01$632 
Exercisable at June 30, 2022278,800 $9.72 2.01$632 
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Note 13. Commitments and Contingencies
Commitments
    The Company has entered into various agreements related to its business activities. The following is a summary of the Company’s commitments:
Aptar Agreement
On October 26, 2020, the Company entered into a Master Services Agreement (“MSA”) with AptarGroup, Inc. and Aptar France (collectively “Aptar”) to provide non-exclusive technology access and co-development services for the development and submission of an opioid antagonist for the treatment of opioid overdose using Aptar’s nasal Unidose device (the “UDS Device”). In addition to the cost of the UDS Devices, the Company expects to spend up to approximately $5.2 million over the course of the development program. Under the Master Service Agreement, the Company will be required to pay Aptar 750 thousand Euro upon the successful NDA filing.
On June 8, 2022, the Company entered into a Capacity Investment Agreement (the "Capacity Agreement") with Aptar, whereby the Company will make non-refundable payments in the aggregate amount of 2.0 million Euro’s over eighteen months. In consideration of these payments, Aptar will guarantee that it has equipment installed and maintained for the future production of Aptar's unidose nasal device to meet the Company's potential commercial demand for OPNT003, nasal nalmefene. During the three months ended June 30, 2022 the Company made the first payments of 1 million Euro to Aptar related to the Capacity Agreement.
Summit Agreement
On July 22, 2020, the Company entered into a Project Scope Agreement ("PSA") pursuant to a Master Services Agreement ("MSA") with Summit Biosciences, Inc. ("Summit"), to support the development and manufacture of a nasal spray device for opioid overdose, with the ability to expand to additional programs in the future. In accordance with the PSA, Summit will develop and produce certain pre-filled nasal spray products using a device previously evaluated as part of other FDA-approved nasal spray products. The Company will pay Summit estimated costs and fees up to approximately $10.0 million which includes paid deposits of approximately $1.1 million, which is included in current assets in the condensed consolidated balance sheet as of June 30, 2022. As of June 30, 2022 the Company has incurred $8.7 million of expense under PSAs related to the MSA with Summit.
Torreya Agreement
    The Company entered into a consulting agreement with Torreya Partners LLP ("Torreya"), a financial advisory firm, under which Torreya agreed to provide certain financial advisory services. The Company is required to pay fees equivalent to 3.375% of all amounts received by the Company from net sales of NARCAN® into perpetuity.
During the six months ended June 30, 2022 and 2021, the Company recorded $153 thousand and $461 thousand, respectively of expense related to Torreya.
Exclusive License and Collaboration Agreement
    On November 19, 2015, the Company entered into an exclusive license agreement and collaboration agreement (“LOI”) with a pharmaceutical company with certain desirable proprietary information. Pursuant to the agreement, the Company is obligated to issue shares of unregistered Common Stock upon the occurrence of various milestones. No shares were required to be issued under this agreement during the six months ended June 30, 2022 and 2021.
Supply Agreement
    On June 22, 2017, the Company entered into a license agreement (the "License Agreement") and a related supply agreement (the “Supply Agreement”) with Aegis Therapeutics LLC ("Aegis") pursuant to which the Company was granted an exclusive license (the “License”) to Aegis’ proprietary chemically synthesizable delivery enhancement and stabilization agents, including, but not limited to, Aegis’ Intravail® absorption enhancement agents, ProTek® and HydroGel® (collectively, the “Technology”) to exploit (a) the Compounds (as such are defined in the License Agreement) and (b) a product containing a Compound and formulated using the Technology (“Product”), in each case of (a) and (b) for any and all purposes. The License Agreement restricts the Company's ability to manufacture any Aegis excipients included in the Technology (“Excipients”), except for certain instances of supply failure, supply shortage or termination of the Supply Agreement, and the Company shall obtain all supply of such Excipients from Aegis under the Supply Agreement. The License Agreement also restricts Aegis’s ability to compete with the Company worldwide with respect to the Exploitation (as defined in the License Agreement) of any therapeutic containing a Compound or derivative or active metabolite of a Compound without the Company's prior written consent. The effective date of the License Agreement and the Supply Agreement is January 1, 2017.
    As consideration for the grant of the License, the Company paid Aegis two immaterial upfront payments, of which the Company paid 50% by issuing the Company's Common Stock to Aegis, with the number of shares issued equal to 75% of the average closing price of the Company's Common Stock over the 20 trading days preceding the date of payment. The License
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Agreement also provides for (A) additional developmental milestone payments for each Product containing a different Compound equal to up to an aggregate of $1.8 million, (B) additional commercialization milestone payments for each Product containing a different Compound equal to up to an aggregate of $5.0 million, and (C) single low digit royalties on the Annual Net Sales (as defined in the License Agreement) of all Products during the Royalty Term (as defined in the License Agreement) according to a tiered royalty rate based on Annual Net Sales of the Products by the Company, the Company's sublicensees and affiliates. The Company shall also pay to Aegis a sublicense fee based on a sublicense rate negotiated in good faith by the parties. The License Agreement contains customary representations and warranties, ownership, patent rights, confidentiality, indemnification and insurance provisions. The License Agreement shall expire upon the expiration of the Company's obligation to pay royalties under such License Agreement; provided, however, that the Company shall have the right to terminate the License granted on a Product-by-Product or country-by-country basis upon 30 days prior written notice to Aegis.
    Under the terms of the Supply Agreement, Aegis shall deliver to the Company any preclinical, clinical and commercial supply of the Excipients, which Aegis sources from various contract manufacturers. The Supply Agreement has a term of 20 years but shall terminate automatically in the event of expiration or termination of the License Agreement or at any time upon the written agreement of both parties. The Supply Agreement contains customary provisions relating to pricing for such materials, forecasts, delivery, inspection, indemnification, insurance and representations, warranties and covenants. The Supply Agreement includes technology transfer provisions for the transfer of all materials and know-how specific to the manufacturing of the Excipients that is necessary or useful for the Company to manufacture such Excipients. The Company does not have the right to manufacture such Excipients except in the event that Aegis is unable to supply and sell any portion of the material to the Company (subject to a 60-day cure period).
    Under the License Agreement, the Company will be required to pay Aegis $250 thousand upon the successful NDA filing.
    For the six months ended June 30, 2022, and June 30, 2021, the Company did not have any expenses associated with the License Agreement.
Contingencies
The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss will be incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. If any legal matter, were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s would reflect any potential claim in the consolidated financial statements for that reporting period.
The Company and Emergent BioSolutions Inc., through its Adapt Pharma subsidiaries (collectively, “Plaintiffs”), filed complaints, in 2016 against Teva Pharmaceuticals Industries Ltd. (“Teva”), and in 2018 against Perrigo UK FINCO Limited Partnership (“Perrigo”), relating to Teva’s and Perrigo’s respective abbreviated new drug applications (each, an “ANDA”) seeking to market generic versions of NARCAN® (naloxone hydrochloride) Nasal Spray 4mg/spray. On January 21, 2022, the Plaintiffs and Teva Canada Limited entered into a settlement agreement to resolve the ongoing litigation. Under the terms of the settlement, Teva Canada can launch a generic NARCAN® after December 15, 2023. This date can be accelerated if a third party receives approval from the Canadian Food Inspection Agency prior to this date.
On February 12, 2020, Plaintiffs and Perrigo entered into a settlement agreement to resolve the ongoing litigation. Under the terms of the settlement, Perrigo has received a non-exclusive license under the Company's patents licensed to Adapt to make, have made and market its generic naloxone hydrochloride nasal spray under its own ANDA. Perrigo’s license will be effective as of January 5, 2033 or earlier under certain circumstances including circumstances related to the outcome of the current litigation against Teva or litigation against future ANDA filers. The Perrigo settlement agreement is subject to review by the U.S. Department of Justice and the Federal Trade Commission, and entry of an order dismissing the litigation by the U.S. District Court for the District of New Jersey.
Closing arguments in the Teva trial were held on February 26, 2020. On June 5, 2020, the U.S. District Court for the District of New Jersey entered a decision in the patent litigation regarding NARCAN® (naloxone HCl) Nasal Spray 4mg/spray product. The Court ruled in favor of Teva.
The Company's commercial partner Emergent BioSolutions, appealed the decision to the Court of Appeals for the Federal Circuit.
On February 10, 2022, the Court of Appeals for the Federal Circuit affirmed the decision by the U.S. District Court for the District of New Jersey in favor of Teva.
On August 10, 2022, the Company, delivered a notice (the "Default Notice") to EBS under section 10.3 of the Adapt Agreement that EBS had materially breached one or more of its obligations under the Adapt Agreement. Specifically, the Company stated cause for breach based upon the royalty report EBS provided for the quarter ended June 30, 2022 (the “Royalty Report”), which incorrectly stated the royalty payable to the Company for U.S. net NARCAN® sales during such quarter. EBS
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applied an erroneous two percent rate to the U.S. net NARCAN® sales for the quarter, resulting in a total royalty payable of approximately $2.3 million. According to the Royalty Report, the $2.3 million includes royalties at the tiered rates for net NARCAN® sales for the quarter in Canada. The Company believes that it is due a royalty of approximately $9.1 million using the tiered royalty rate structure, under section 5.4.1 of the Adapt Agreement, for all net NARCAN® sales in the quarter.
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Note 14. Subsequent Events
In July and August 2022, the Company sold 37,826 shares of Common Stock and raised net proceeds of approximately $403 thousand under its Controlled Equity OfferingSM agreement with Cantor Fitzgerald & Co.

    On August 2, 2022, the Company received notification from BARDA that they had exercised the final commitment amount of approximately $2.1 million, of the total contract amount of $10.8 million, which includes an additional contract modification increase of approximately $459,000.

On August 10, 2022, the Company, delivered a notice (the "Default Notice") to EBS under section 10.3 the “Adapt Agreement”). The Default Notice put EBS on notice that EBS had materially breached one or more of its obligations under the Adapt Agreement (see Note 9 for description of the nature of the breach). As provided under Section 10.3, the Company has the right to terminate the License Agreement if the breach asserted in the Default Notice has not been cured within sixty days after such Default Notice.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
    The interim consolidated financial statements included in this Quarterly Report on Form 10-Q (this "Report") and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto in this Report, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Form 10-K for the year ended December 31, 2021 (the "Form 10-K"). In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to risks and uncertainties, including those set forth in Part II - Other Information, Item 1A and in the Form 10-K. Risk Factors below and elsewhere in this Report could cause actual results to differ materially from historical results or anticipated results. 
Overview
    We are a specialty pharmaceutical company developing medicines for addiction and drug overdose. We developed NARCAN® (naloxone hydrochloride) Nasal Spray ("NARCAN®"), a treatment to reverse opioid overdose. This product was conceived and developed by us, licensed to Adapt now a wholly owned Subsidiary of EBS, in December 2014 and approved by the FDA in November 2015.
    We have not consistently attained profitable operations and have historically depended upon obtaining sufficient financing to fund our operations. We anticipate if revenues are not sufficient, then additional funding will be required in the form of debt financing and/or equity financing from the sale of our Common Stock, and/or financings from the sale of interests in our prospective products and/or royalty transactions. However, we may not be able to generate sufficient revenues or raise sufficient funding to fund our operations.
    We have not had a bankruptcy, receivership or similar proceeding. We are required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the clinical testing and manufacturing and sale of pharmaceutical products.
Plan of Operation
    During the fiscal year ending December 31, 2022, we plan to continue to focus on developing medicines in our product pipeline for Opioid Overdose Reversal (“OOR”), Alcohol Use Disorder (“AUD”), and Acute Cannabinoid Overdose (“ACO”). Our lead development product is OPNT003 - Nasal Nalmefene for OOR, which is further described below.
OPNT003 - Nasal Nalmefene for OOR 
Development Program for OPNT003
              In 2017, NIH leadership called for the development of stronger, longer-acting formulations of antagonists to counteract the very high potency synthetic opioids that are now claiming thousands of lives each year. We are pursuing a 505(b)(2) development path for OPNT003, with the potential to submit an NDA for the drug and intranasal delivery device combination in the second half of 2022. Nalmefene for injection was previously approved by the FDA for treating suspected or confirmed opioid overdose. The 505(b)(2) pathway allows companies to rely in part on the FDA’s findings of safety and efficacy for a previously approved product and to supplement these findings with a more limited set of their own studies to satisfy FDA requirements, as opposed to conducting the full array of preclinical and clinical studies that would typically be required.
In February 2021, the first subjects were dosed in a confirmatory pharmacokinetic (“PK”) study for OPNT003, nasal nalmefene, for the treatment of opioid overdose. In July 2021, we announced positive top-line results from the study. The study was conducted in 68 healthy subjects and compared OPNT003, nasal nalmefene, with an intramuscular nalmefene hydrochloride injection, 1 mg, which was the comparator previously agreed upon with the FDA.
              In April 2021, dosing was initiated in a head-to-head clinical pharmacodynamic ("PD") study comparing the effectiveness of its investigational opioid antagonist OPNT003, nasal nalmefene, with nasal naloxone in an experimental model of olpioid-induced respiratory depression.
In November 2021, we received Fast Track Designation from the FDA for OPNT003, nasal nalmefene. Fast Track is an FDA process designed to facilitate the development and expedite review of potential therapies that seek to treat serious conditions and fill an unmet medical need. This designation enables early and frequent communication with the FDA.
In February 2022, we announced positive topline results from a multi-dose PK study for OPNT003, nasal nalmefene, for the treatment of opioid overdose. The crossover design study was conducted in 23 healthy subjects comparing the PK
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profile, safety, and tolerability of OPNT003 when given as a single 3mg dose in one nostril, as a single dose in each nostril, and as two doses in one nostril.
In April of 2022, we announced positive top-line results from our head-to-head PD study comparing OPNT003, nasal nalmefene, to nasal naloxone. A preliminary analysis of the 50 subjects who received both study drugs found that treatment with OPNT003, nasal nalmefene, produced a greater reversal of respiratory depression that was nearly twice that produced by nasal naloxone at the primary endpoint, five minutes post dosing. The increases in minute ventilation were 5.745 L/min and 3.011 L/min, with nalmefene and naloxone, respectively. OPNT003 met the primary endpoint of non-inferiority, which was designed to assess whether nasal nalmefene performed as well as nasal naloxone. Completion of the PD study concludes the planned clinical development program for OPNT003.
In May of 2022, we received minutes for the pre-NDA meeting held with the FDA on March 30, 2022. As a feature of the Fast Track designation we received in November of 2021, the FDA noted that our NDA will qualify for a rolling review. However, the FDA cautioned that if it accepts a portion of the application, this does not necessarily mean that review will commence or proceed before the complete application is submitted. Actual commencement and scheduling of review depends on many factors, including staffing, workload, competing priorities, timeline for completing the application, and the perceived efficiency of commencing review before receipt of the complete submission.
In June of 2022, we announced the submission of the first module of the NDA. We intend to complete the submission of the NDA in the second half of 2022.
Intellectual Property for OPNT003
On August 2, 2022, we announced that the U.S. Patent and Trademark Office has issued a Notice of Allowance for U.S. Patent Application No. 16/461,354, with formulation and method of use claims around OPNT003, our investigational treatment for opioid overdose. The allowed patent application, entitled,“Compositions and Methods for the Treatment of Opioid Overdose,” includes claims covering combinations of nalmefene and Intravail® in a nasal formulation.
We expect this patent to issue within the next few months and to have a patent term extending to 2037. We also expects this patent to be listed in the FDA Approved Drug Products with Therapeutic Equivalence Evaluations, or Orange Book, if OPNT003 is approved by the FDA.
Market and Commercial potential for OPNT003
                There is a large and growing addressable market for opioid overdose reversal agents driven by sales into community based and first responder institutions, as well as directly to patients via pharmacies. The current addressable market is substantial, to ensure an opioid overdose reversal agent is available for all first responders, including fire departments, emergency medical services, federal law enforcement, local law enforcement, and other community groups. The co-prescribing of opioid overdose reversal agents alongside prescription opioids has also driven growth. It is estimated that only five percent of patients at higher risk of an opioid overdose have a naloxone prescription. Currently there are only twelve states that have some form of mandatory co-prescription legislation in place, however several states are considering co-prescribing legislation in the near future. 
               We have full commercial rights to OPNT003. We were awarded a grant of approximately $7.4 million from the National Institutes of Health (“NIH”). The grant provides us with additional resources for the ongoing development of OPNT003. As of March 31, 2022, we have completed all the work associated with the $7.4 million grant. We have also received a contract for approximately $10.8 million from the Biological Advance Research and Development Agency (“BARDA”) to fund development of this project through NDA submission. BARDA has awarded approximately $8.7 million of the contract through June 30, 2022, and the remaining amount of $2.1 million was awarded August 2, 2022.
As we continue to advance OPNT003 towards market approval and should we self-commercialize the product, we anticipate that our sales and marketing expenses will increase in several areas to support the development of a commercial platform that would allow us to commercialize OPNT003, as well as future pipeline products. The development of this commercial infrastructure includes increasing commercial personnel, pre-launch sales and marketing planning activities, establishing the supply chain and distribution. As we build this infrastructure, we are continuing to evaluate the ideal go-to-market strategy that will allow us to maximize the full commercial potential of OPNT003 and shareholder value.
NARCAN® Royalties
We developed NARCAN®, a treatment to reverse opioid overdose. This product was conceived and developed by us, licensed to Adapt, an Ireland based pharmaceutical company in December 2014 and approved by the FDA in November 2015. Emergent BioSolutions, Inc. ("EBS") acquired Adapt in October of 2018 and Adapt became its wholly owned subsidiary. In exchange for licensing our treatment to Adapt ("Adapt Agreement"), we receive up to double-digit percentage royalties on net sales.
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On December 22, 2021, Teva launched a generic version of Narcan. In response, EBS through Sandoz Pharmaceuticals launched an authorized generic.
As provided under the Adapt agreement, in each subsequent quarter after the launch of a generic version of Narcan, if aggregate net NARCAN® sales, including net sales of an authorized generic, on a country-by-country baasis are less than seventy percent of the aggregate net NARCAN® sales in the last full calendar quarter immediately preceding the date on which a generic product was first launched in such country, then the royalty rate for that quarter is reduced to two percent ("the Generic Reduction Clause"). This calculation is completed separately each quarter.
For the quarter ended June 30, 2022, net NARCAN® sales were approximately $101.5 million and the Generic Reduction Clause should not have applied. Net NARCAN® sales in Canada were not subject to the Generic Reduction Clause, as a generic version of Narcan has not been launched in that country.
On August 10, 2022, we delivered a notice (the "Default Notice") to EBS under section 10.3 of the License Agreement between Adapt Pharma Operations Limited and the Company, dated December 15, 2014 (the “Adapt Agreement”). The Default Notice put EBS on notice that EBS had materially breached one or more of its obligations under the Adapt Agreement. Specifically, we stated cause for breach based upon the royalty report EBS provided for the quarter ended June 30, 2022 (the “Royalty Report”), which incorrectly stated the royalty payable to the Company for U.S. net NARCAN® sales during the current quarter. EBS applied an erroneous 2% rate to the U.S. net NARCAN® sales for the quarter, resulting in a royalty payable of approximately $2.3 million. According to the Royalty Report, the $2.3 million includes royalties at the tiered rates for net NARCAN® sales in Canada for the quarter. The Company believes that it is due a royalty of approximately $9.1 million using the tiered royalty rate structure under section 5.4.1 of the Adapt Agreement, for all net NARCAN® sales in the quarter.
We intend to pursue all available legal remedies under the Adapt Agreement, including terminating the Adapt Agreement and reclaiming the assets subject thereto, if the material breach is not cured within the timeframe provided in the Adapt Agreement (see Note 14).
In February 2022, Teva reached a $225 million settlement related to claims that Teva contributed to the State of Texas’ opioid crisis and Teva agreed to pay $150 million over 15 years, as well as provide $75 million worth of generic Narcan over 10 years. In March 2022, Teva reached a settlement related to claims that Teva contributed to the State of Rhode Island's opioid crisis and Teva agreed to pay $21 million over 13 years, as well as provide $62.5 million worth of generic Narcan over 10 years. In March 2022, Teva reached a settlement related to claims that Teva contributed to the State of Florida's opioid crisis and Teva agreed to pay $177 million over 15 years, as well as provide $84 million worth of generic Narcan over 10 years. In May 2022, Teva reached a settlement related to claims that Teva contributed to the State of West Virginia's opioid crisis and Teva agreed to pay $83 million over 15 years, as well as provide $27 million worth of generic Narcan over 10 years.
In July of 2022, Teva reached an agreement in principle with the working group of States' Attorneys General, counsel for Native American Tribes, and plaintiffs' lawyers representing the States and subdivisions, on the primary financial terms of a nationwide settlement. Under the agreement, Teva will pay up to $4.25 billion (including the already settled cases in Texas, Rhode Island, Florida and West Virginia) plus $100 million for the Tribes, spread over 13 years. The $4.25 billion includes the supply of up to $1.2 billion of its generic Narcan over 10 years.
Free product could have a negative impact on demand of NARCAN®, and thereby reduce the amount of royalties we earn under the Adapt Agreement.
Debt Financing
On December 10, 2020 (the “Closing Date”), we entered into a Note Purchase and Security Agreement (the “Loan Agreement”) with a syndicate of Pontifax Medison Finance, a healthcare-dedicated venture and debt fund, and Kreos Capital VI (Expert Fund) LP (collectively, the “Lender”).
The Loan Agreement provides for term loans in an aggregate principal amount of up to $50.0 million in three tranches as follows: (a) on the Closing Date, a loan in the aggregate principal amount of $20.0 million, (b) upon the submission of a New Drug Application with the U.S. Food and Drug Administration, a loan in the aggregate principal amount of $10.0 million, and (c) upon FDA approval of an opioid overdose product, a loan in the aggregate principal amount of $20.0 million (each a “Loan, and collectively, the “Loans”).
The outstanding principal of each term Loan bears an average interest rate of 8.75% per annum based on the date of issuance and a year consisting of 365 days. There is an interest-only period of 30 months, with interest on outstanding Loans payable on a quarterly basis based on the principal amount outstanding during the preceding quarter. After the interest-only period, principal of the outstanding Loans is payable in ten equal quarterly installments. All Loans have a maturity date of October 1, 2025.
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Each Lender may, at its option, elect to convert up to half of the then-outstanding Loans and all accrued and unpaid interest thereon into shares our Common Stock. The “Conversion Price” shall be $19.64 subject to certain customary adjustments as specified in the Loan Agreement.
On December 10, 2020, we received the first tranche of $20 million. As of June 30, 2022 the Lenders elected to convert approximately $5.7 million of debt to Common Stock at a conversion price of $19.64 per share.
Financing
On August 13, 2021, we entered into a Controlled Equity OfferingSM (the "Sales Agreement") with Cantor Fitzgerald & Co. ("Cantor"), as agent, pursuant to which we may offer and sell, from time to time through Cantor, shares of our Common Stock.
During the quarter ended June 30, 2022 we sold shares of Common Stock under the Sales Agreement, and raised net proceeds of approximately $136 thousand. In July and August 2022, we sold shares of Common Stock and raised net proceeds of approximately $403 thousand under the Sales Agreement with Cantor.
We believe that we have sufficient capital resources to sustain operations through at least the next 12 months from the date of the filing of this Report.

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Results of Operations
The following table sets forth the results of operations for the periods shown (in thousands):
For the Three Months Ended June 30,For the Six Months Ended June 30,
 20222021Increase (Decrease)20222021Increase (Decrease)
Revenue
    Royalty Revenue$2,326 $9,314 $(6,988)$4,520 $13,648 $(9,128)
    Grant and contract revenue1,5681,945(377)3,845 3,998 (153)
       Total revenue3,894 11,259 (7,365)8,365 17,646 (9,281)
Operating expenses:   
    General and administrative 4,011 2,734 1,277 8,343 5,380 2,963 
    Research and development 7,916 3,150 4,766 16,739 7,238 9,501 
    Sales and marketing2,816 1,023 1,793 5,492 2,021 3,471 
    Royalty expense 517 2,107 (1,590)943 3,086 (2,143)
       Total operating expenses 15,260 9,014 6,246 31,517 17,725 13,792 
Income (loss) from operations (11,366)2,245 (13,611)(23,152)(79)(23,073)
Other income (expense):  
    Interest income63 59 68 61 
    Interest expense(401)(542)141 (822)(1,079)257 
    Gain (loss) on foreign exchange— (24)24 16 (10)26 
Total other income (expense)(338)(562)224 (738)(1,082)344 
Net income (loss ) before income taxes(11,704)1,683 (13,387)(23,890)(1,161)(22,729)
Income tax expense(32)— (32)(32)— (32)
Net income (loss)$(11,736)$1,683 $(13,419)$(23,922)$(1,161)$(22,761)

Comparison of Three Months ended June 30, 2022 to the Three Months ended June 30, 2021
Revenues 
We recognized $3.9 million of revenue during the three months ended June 30, 2022, compared to $11.3 million for the three months ended June 30, 2021.  For the three months ended June 30, 2022, we recognized approximately $2.3 million of revenue from our license agreement with EBS, and $1.6 million from grant and contract revenue. For the three months ended June 30, 2021, we recognized $9.3 million of revenue from our license agreement with EBS and $1.9 million from grant and contract revenue. For the three months ended June 30, 2022, the royalties of $2.3 million from EBS resulted from the application of an erroneous 2% royalty rate. We believe EBS has materially breached one or more of its obligations under the Adapt Agreement by applying an erroneous 2% royalty rate. We believe EBS has materially breached one or more of its obligations under the Adapt Agreement by applying the an erroneous royalty rate of 2%, and on August 10, 2022 we delivered notice ("Default Notice") to EBS, (see Note 14).
General and Administrative Expenses  
Our general and administrative expenses for the three months ended June 30, 2022 increased by $1.3 million to $4.0 million from $2.7 million for the three months ended June 30, 2021. Personnel and related expense including stock based compensation increased by $1.3 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.
Research and Development Expenses 
Our research and development expenses for the three months ended June 30, 2022 increased by $4.8 million to $7.9 million, from $3.1 million for the three months ended June 30, 2021. External development expense increased by $3.9 million primarily due to increased activity on our lead product candidate, OPNT003 - Nasal Nalmefene for OOR, and personnel and related expense including stock based compensation increased by $0.9 million.

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Sales and Marketing Expenses
    Our sales and marketing expenses for the three months ended June 30, 2022 increased by $1.8 million to $2.8 million from $1.0 million for the three months ended June 30, 2021. Personnel and related expense including stock based compensation increased by $1.1 million and external third party expenses related to pre-commercial activities increased by $0.7 million.
Royalty Expenses
    Our royalty expenses were $0.5 million and $2.1 million for the three months ended June 30, 2022 and 2021, respectively. The decrease of $1.6 million is attributable to the decrease in net royalty revenue recorded from sales of NARCAN® by EBS.
Other Income (expense)
During the three months ended June 30, 2022, interest expense was $0.4 million compared to $0.5 million during the three months ended June 30, 2021. Interest expense is all related to our convertible debt.
Comparison of Six Months ended June 30, 2022 to the Six Months ended June 30, 2021
Revenues 
We recognized $8.4 million of revenue during the six months ended June 30, 2022, compared to $17.6 million for the six months ended June 30, 2021. For the six months ended June 30, 2022 we recognized approximately $4.5 million of revenue from our license agreement with EBS and $3.8 million from grant and contract revenue. For the six months ended June 30, 2021, we recognized $13.6 million of revenue from our license agreement with EBS and $4.0 million from grant and contract revenue. For the six months ended June 30, 2022, the royalties of $4.5 million from EBS resulted from the application of the Generic Reduction Clause under the Adapt Agreement whereby we received a royalty rate of 2% for the first quarter net U.S. NARCAN® sales and application of an erroneous 2% royalty rate for the second quarter net U.S. NARCAN® sales.
General and Administrative Expenses  
Our general and administrative expenses were approximately $8.3 million and $5.4 million for the six months ended June 30, 2022 and 2021, respectively. Personnel and related expense including stock based compensation increased by $2.4 million along with a net increase of approximately $0.5 million associated with legal and other fees for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Research and Development Expenses 
Our research and development expenses during the six months ended June 30, 2022 increased by $9.5 million to $16.7 million, compared to $7.2 million for the six months ended June 30, 2021. Our external development expense increased by $7.8 million primarily due to increased activity on our lead product candidate, OPNT003 - Nasal Nalmefene for OOR, and personnel and related expense including stock based compensation increased by $1.7 million.
Sales and Marketing Expenses
    Our sales and marketing expenses for the six months ended June 30, 2022 increased by $3.5 million to $5.5 million from $2.0 million for the six months ended June 30, 2021. Personnel and related expense including stock based compensation increased by $2.0 million, and external third party expenses related to pre-commercial activities increased by $1.5 million.
Royalty Expenses
    Our royalty expenses were $0.9 million and $3.1 million during the six months ended June 30, 2022 and 2021, respectively. The decrease of $2.2 million is attributable to the decrease in net royalty revenue recorded from sales of NARCAN® by EBS.
Other Income (expense)
During the six months ended June 30, 2022, interest income was $67.7 thousand compared to interest income of $6.8 thousand for the six months ended June 30, 2021, which primarily resulted from an increased rate of return on our invested cash balances.
During the six months ended June 30, 2022, interest expense was approximately $0.8 million compared to $1.1 million during the six months ended June 30, 2021. Interest expense is all related to our convertible debt.
Liquidity and Capital Resources
Cash Flows
The following table sets forth the primary sources and uses of cash for each of the periods presented below:
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