Acura Pharmaceuticals, Inc.
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One) xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCALYEAR ENDED DECEMBER 31, 2017 Or ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _____ to _____ Commission file number 1-10113 ACURA PHARMACEUTICALS, INC.(Exact name of registrant as specified in its charter) New York 11-0853640(State or other jurisdiction of Incorporation or organization) (I.R.S. Employer Identification No.) 616 N. North Court, Suite 120, Palatine, Illinois 60067(Address of principal administrative office) (Zip code) Registrant’s telephone number, including area code: 847 705 7709 Securities registered pursuant to section 12(b) of the Act:NoneName of each exchange on which registered:N/A Securities registered pursuant to section 12(g) of the Act:Common Stock, par value $0.01 per share Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes ¨ No x 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 1934during 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 filingrequirements for the past 90 days. Yes ¨ No x Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes x No ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter is not contained herein, and willnot be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K orany amendment to this Form 10-K. ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, oremerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company"in Rule 12b-2 of the Exchange Act.¨ Large Accelerated Filer¨ Accelerated Filer¨ Non-Accelerated Filerx 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 orrevised 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 x Based on the last sale price on the OTCQB Market of the Common Stock of $0.56 on June 30, 2017 (the last business day of the registrant’s most recentlycompleted second fiscal quarter), the aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $4.2 million. As of June 6, 2018, the registrant had 21,033,528 shares of Common Stock, par value $0.01, outstanding. DOCUMENTS INCORPORATED BY REFERENCE: None.   Acura Pharmaceuticals, Inc. Form 10-K For the Fiscal Year Ended December 31, 2017 Table of Contents PAGE PART I Item 1. Business2Item 1A. Risk Factors28Item 1B. Unresolved Staff Comments53Item 2. Properties53Item 3. Legal Proceedings53Item 4. Mine Safety Disclosures55 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities56Item 6. Selected Financial Data57Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations58Item 7A. Quantitative and Qualitative Disclosures About Market Risk68Item 8. Financial Statements and Supplementary Data68Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure68Item 9A. Controls and Procedures69Item 9B. Other Information69 PART III Item 10. Directors, Executive Officers and Corporate Governance70Item 11. Executive Compensation75Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters87Item 13. Certain Relationships and Related Transactions, and Director Independence90Item 14. Principal Accounting Fees and Services92 PART IV Item 15. Exhibits, Financial Statement Schedules93Item 16. Form 10-K Summary93 ii  Forward-Looking Statements Certain statements in this Report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Suchforward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance orachievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.Forward-looking statements may include, but are not limited to: ·our ability to fund or obtain funding for our continuing operations, including the development of our products utilizing our Limitx and Impedetechnologies;·our ability to remain in compliance with our obligations under our term loan with Oxford Finance LLC, or to obtain a waiver from Oxford FinanceLLC for our failure to comply with our covenants contained in such term loan agreement;·the expected results of clinical studies relating to LTX-03 or any successor product candidate, the date by which such studies will be complete and theresults will be available and whether LTX-03 will ultimately receive FDA approval;·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 will be determined sufficient by the FDA to support approvalor labelling describing 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 pricing and price discounting that may be offered by Egalet for Oxaydo;·the results of our development of our Limitx Technology;·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 IVpatent 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 clinicalstudies 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 FDAapproval 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 topromote the features of our abuse discouraging technologies; and·whether Oxaydo or our Aversion and Limitx product candidates will ultimately deter abuse in commercial settings and whether our Nexafed productsand Impede technology product candidates will disrupt the processing of pseudoephedrine into methamphetamine. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,”“believes,” “indicates,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. Thesestatements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given theseuncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail in Item 1A of thisReport. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Report may not occur and actualresults could differ materially and adversely from those anticipated or implied in the forward-looking statements. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events ordevelopments. Accordingly, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in suchforward-looking statements. 1  PART I ITEM 1. BUSINESS Overview We are a specialty pharmaceutical company engaged in the research, development and commercialization of technologies and products intended toaddress medication abuse and misuse. We have discovered and developed three proprietary platform technologies which can be used to develop multipleproducts. Our Aversion® and Limitx™ Technologies are 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.On January 7, 2015, we entered into a Collaboration and License Agreement with Egalet US, Inc. and Egalet Ltd., each a subsidiary of Egalet Corporation, orcollectively Egalet, pursuant to which we exclusively licensed to Egalet worldwide rights to manufacture and commercialize Oxaydo. Oxaydo is currentlyapproved by the U. S. Food and Drug Administration, or FDA, for marketing in the United States in 5mg and 7.5mg strengths. Egalet launched Oxaydo in theUnited States late in the third quarter of 2015. We launched our first Impede Technology product, Nexafed, into the United States market in December 2012 and launched our Nexafed SinusPressure + Pain product in the United States in February 2015. We have a third pseudoephedrine product in development utilizing our Impede Technology.On March 16, 2017, we and MainPointe Pharmaceuticals, LLC, or MainPointe, entered into a License, Commercialization and Option Agreement, or theMainPointe Agreement, pursuant to which we granted MainPointe an exclusive license to our Impede technology in the U.S. and Canada to commercializeour Nexafed products. The MainPointe Agreement also grants MainPointe the option to expand the licensed territory to the European Union, Japan andSouth Korea and to add additional pseudoephedrine-containing products utilizing our Impede technology. MainPointe is controlled by John Schutte, whobecame our largest shareholder pursuant to a private placement completed in July 2017. On June 28, 2017, Bayer Healthcare LLC, or Bayer, terminated a 2015 License and Development Agreement in which we granted Bayer an exclusiveworldwide license to our Impede technology for use in an undisclosed methamphetamine resistant PSE containing product. As a result of the termination,MainPointe has the option to license our Impede Technology with respect to such product in the United States and Canada upon payment of a fee.MainPointe has not yet exercised this option. Our third abuse deterrent technology, Limitx, is designed to retard the release of active drug ingredients when too many tablets are accidently orpurposefully ingested by neutralizing stomach acid with buffer ingredients but deliver efficacious amounts of drug when taken as a single tablet with anominal buffer dose. We have completed four clinical studies of various product formulations utilizing the Limitx technology which have demonstratedproof-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 drugconcentration, or Cmax, was reduced in healthy adult fasted subjects by 50% to 65% when excessive buffer levels were ingested or a situation consistent withover-ingestion of tablets. Study AP-LTX-301, or Study 301, the results for which were announced in January 2018, demonstrated drug Cmax from LTX-03, aLimitx hydrocodone bitartrate and acetaminophen combination product, in healthy adult fasted subjects trended toward bioequivalence in test formulationsA through E while showed an increasing reduction in Cmax for formulations F through H; in which formulations A though H had increasing incrementalamounts 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 thebalance between effective blood levels of drug for pain relief at a single tablet dose while retarding bioavailability of drug when multiple tablets are ingested.Study AP-LTX-300, or Study 300, was inconclusive in its results due to observed issues with drug release from over-encapsulated test product. We submittedan Investigational New Drug Application, or IND, for LTX-03 to the FDA in the first quarter of 2018 in order to advance to NDA development, which becameeffective in April 2018. The FDA has designated the development program for LTX-04 as Fast Track, which is designed to facilitate the development, andexpedite the review of drugs to treat serious conditions and fill an unmet medical need. However, we intend to advance LTX-03, which combines thehydrocodone micro-particles, acetaminophen and buffer ingredients into a single tablet, as our lead Limitx product candidate due to its larger market size andits known prevalence of oral excessive tablet abuse and we have voluntarily placed the IND for LTX-04 on inactive status. 2  According to the 2017 CDC Drug Surveillance Report, opioid analgesics are one of the largest prescription drug markets in the United States with214 million prescriptions dispensed in 2016. Prescription opioids are also the most widely abused drugs with 12 million people abusing or misusing theseproducts annually. Oxaydo will compete in the immediate-release opioid product segment. Because immediate-release opioid products are used for bothacute and chronic pain, a prescription, on average, contains 66 tablets or capsules. According to IMS Health, in 2016, sales in the immediate-release opioidproduct segment were approximately 194 million prescriptions, of which approximately 95% was attributable to generic products. Immediate-releaseoxycodone tablets represent approximately 30 million of these prescriptions or almost 1.7 billion tablets. The FDA approved label for our Oxaydo productdescribes the unique, and we believe promotable, abuse deterrent features of our product which we believe makes prescribing our product attractive to somehealthcare providers. In 2014, the United States retail market for over-the-counter market, or OTC, cold and allergy products containing the pseudoephedrine oral nasaldecongestant was approximately $0.7 billion. In 2014, the DEA reported 9,339 laboratory incidents involving the illegal use of OTC pseudoephedrineproducts to manufacture the highly addictive drug methamphetamine, or meth. According to the Substance Abuse and Mental Health ServicesAdministration, users of methamphetamine surged in 2016 to 684,000 people up from 440,000 people in 2012. As of March 16, 2017, sales of Nexafed andNexafed Sinus are covered under the MainPointe Agreement, for which we receive a royalty. On March 23, 2015, we announced preliminary top line results from our pilot clinical study demonstrating bioequivalence of our Nexafed extendedrelease tablets to Johnson & Johnson’s Sudafed® 12-hour Tablets. In October 2016, we received FDA recommendations on our meth-resistant testingprotocols for our Nexafed extended release tablets which utilizes our Impede 2.0 enhanced meth-resistant technology. Our Impede 2.0 Technology hasdemonstrated, in the direct conversion, or “one-pot”, methamphetamine conversion process performed by an independent pharmaceutical services company,the ability to reduce meth-yields, on average, by 75% compared to Sudafed® Tablets. We can now scale-up our manufacture batch size at a contractmanufacturer which will allow us to submit an IND to the FDA for our Nexafed extended release tablets, however, we have not yet committed to that level ofdevelopment. In March 2017, we completed a pilot pharmacokinetic study for a PSE and loratadine-combination product using our Impede 1.0 technology. Thestudy in 24 healthy adult subjects demonstrated sufficient, but not bioequivalent blood levels of PSE to the comparator while the second active ingredientachieved bioequivalence. Based on the product profile, we believe this formulation can be moved into final development for a 5050(b)(2) NDA submission.The Company intends to upgrade this formulation with its Impede 2.0 technology before determining any advancement in development. Our objective is to establish, either directly or through third-party licensees, the Nexafed franchise in the United States with multiple productofferings, including both immediate and extended release products utilizing both single and combinations of active ingredients. We aim to make meth-resistant PSE product the standard of care in all U.S. pharmacies. In addition to the MainPointe Agreement, we may license our Impede technology tocommercial partners to extend our internal development resources to develop difficult to formulate products, such as extended-release. We conduct research, development, laboratory, manufacturing, and warehousing activities at our operations facility in Culver, Indiana and lease anadministrative 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 andrelated services. Our Supply Agreements with two third-party pharmaceutical product manufacturers and packagers to supply our commercial requirementsfor our Nexafed and Nexafed Sinus Pressure + Pain products were assigned to MainPointe in accordance with the MainPointe Agreement. 3  Our Strategy Our goal is to become a leading specialty pharmaceutical company focused on addressing the growing societal problem of pharmaceutical drugabuse by developing a broad portfolio of products with abuse deterrent features and benefits. Specifically, we intend to: ·Capitalize on our experience and expertise in the research and development of technologies that address medication abuse and misuse. We haveone FDA approved product containing our Aversion Technology commercially launched in the United States by our licensee, and two productscommercially launched containing our Impede Technology. We continue to invest in improvements in these technologies and innovate newtechnologies, including our Limitx technology, to address medication abuse and misuse. ·Leverage our technologies by developing a full line of pharmaceutical products which utilize our proprietary technologies. Medication abuse andmisuse is not limited to single drugs but often pervades entire drug categories. We intend to develop or collaborate with strategically focusedpharmaceutical companies to develop multiple products in the prescription opioid and OTC cold/allergy markets with our technologies, and areseeking licensing partners for products in development utilizing our Limitx technology. ·Commercialize our products by licensing to strategically focused companies in the United States and other geographic territories. We havelicensed our Oxaydo product to Egalet for commercialization, have licensed our Aversion technology to KemPharm for use in certain of its prodrugproducts, have licensed our Nexafed products utilizing our Impede technology to MainPointe for commercialization (and granted MainPointeoptions to other Impede products), and we are seeking licensing partners for our products in development utilizing our Limitx, Aversion and Impedetechnologies. While we had developed a small infrastructure to commercialize our OTC products that utilize the Impede Technology, thisinfrastructure has been discontinued in conjunction with our entering into the MainPointe Agreement. ·Maintain an efficient internal cost structure. Our internal cost structure is focused on discovering new technologies and developing productformulations using those technologies. We outsource many high cost elements of development and commercialization, such as clinical trials andcommercial manufacturing that minimize required fixed overhead and capital investment and thereby reduces our business risk. Abuse of Prescription Opioid Products and Development of Abuse Deterrent Formulations Prescription opioids drugs, such as morphine and oxycodone, have a long history of use for the management of pain. Because they are highlyeffective, 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 thesereasons, 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. Abusers will often manipulate or tamper with the formulations to achieve theirhigh, including: ·Oral Excessive Tablet Abuse (ETA). Generally recognized as the most prevalent route of administration by abusers, the abuser simply orally ingestsmore 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 chemicallymanipulated 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. ·Poly-pharmacy. Opioids are sometimes used in conjunction with alcohol or other drugs to accentuate the high. 4  Abuse deterrent formulations of opioid dosages incorporate physical and/or chemical barriers or functionality in the formulations to prevent ordiscourage an abuser from inappropriately administering the product. The extent and manner in which any of the features of abuse deterrent opioids may bedescribed in the FDA approved label for our pipeline 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 our Limitx and Aversion (if recommenced) product candidates will require one or more abuse deterrent studies consistent with theFDA 2015 published guidance for industry on the evaluation and labeling of abuse-deterrent opioids (the “2015 Guidance”). These studies may include invitro laboratory studies to determine, among other things, syringeability of the formulation, extractability of the opioid, and particle size of the crushedproduct. It is also expected that development will include human abuse liability studies comparing the abuse liability of our product candidates to currentlymarketed products. Because our products use known active ingredients in approved dosage strengths, the safety and efficacy of the opioid will need to beestablished by a series of pharmacokinetic studies demonstrating: (a) bioequivalence to an approved reference drug, (b) food effect of our formulations, and(c) dose proportionality of our formulation. A product candidate that does not achieve satisfactory pharmacokinetic results may require a phase III clinicalpain study. Further development will likely also entail additional safety and/or efficacy assessment as may be identified by the FDA for each specificformulation during the Investigational New Drug application, or IND, or NDA phase of development. In accordance with the FDA’s 2015 Guidance, we willlikely have a post-approval requirement for each of our products, if approved, to perform an epidemiology study to assess the in-market impact on abuse ofour formulation. Limitx™ Technology Limitx Technology is intended to address oral ETA or accidental consumption of multiple tablets and provide a margin of safety during accidentalover-ingestion of tablets. Limitx is also expected to exhibit barriers to abuse by snorting and injection. The FDA’s 2015 Guidance singles out immediate-release combination products with acetaminophen as being predominately abused by the oralroute and that reducing nasal snorting of these products may not be meaningful. The initial Limitx formulation (LTX-04) utilizes hydromorphone as its soleactive ingredient. During 2017 we redirected our development focus from LTX-04 to a hydrocodone/APAP product utilizing our Limitx Technology (LTX-03). In August 2015, April 2016, and May 2017 the United States Patent and Trademark Office, or USPTO, issued to us patents 9,101,636, 9,320,796 and9,662,393, respectively, covering, among other things, our Limitx Technology. Development of our Limitx Technology was supported by a $300 thousand grant by the National Institute on Drug Abuse of the National Institutesof Health for Phase I development, which entailed the development of an optimized formulation of LTX-04 suitable for commercial manufacture and humantesting. NIDA Disclaimer: Research on LTX-04 was supported by the National Institute On Drug Abuse of the National Institutes of Health under AwardNumber R44DA037921. The results and content of any such research is solely the responsibility of Acura and does not necessarily represent the officialviews of the National Institutes of Health. The LTX-04 development program is also designated as Fast Track by the FDA for its potential to address an unmet medical need but we havevoluntarily placed the IND for LTX-04 on inactive status to pursue development of LTX-03. Limitx Technology Products in Development We have the following products in development utilizing our Limitx Technology: Limitx Technology Product Status Immediate-release hydromorphone HCI (LTX-04) Two Phase I exploratory pharmacokinetic studies completed Immediate-release hydrocodone bitartrate with acetaminophen (LTX-03) Initial buffer dose ranging study completed October 2017 Follow on dose ranging study completed in January 2018 Immediate-release oxycodone HCl (LTX-01) & (LTX-02) Formulation development in process Immediate-release non-opioid drug (LTX-09) Formulation development in process 5  Study 400 Study 400 was a two cohort, open label, crossover design pharmacokinetic study in healthy adult subjects. Study 400 measured the rate and extentof absorption of the active drug ingredient into the bloodstream with the maximum concentration, or Cmax, typically associated with an increase in drugabuse. Cohort 1 enrolled 30 subjects who were randomized into three subgroups of 10 taking either 1, 2 or 3 tablets. Each subgroup subject orally swallowedthe 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-04Sand distinguished by their respective acid neutralizing capacity) and Purdue Pharma’s marketed drug Dilaudid® as a comparator. The 1, 2 and 3 tabletssubgroups 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 orallyswallowed 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, 6and 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 betweendoses. Blood samples were taken at pre-designated time-points after dosing and were subsequently analyzed for the concentration of hydromorphonecontained in the sample. All subjects in Cohort 1 had continuous pH (a measure of acid concentration) monitoring of their gastric fluid. The objective ofCohort 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 abilityof the Limitx Technology to start retarding the release of active ingredients when three tablets are ingested. The objective of Cohort 2 was to further explorethe extent the release of the hydromorphone active ingredient from LTX-04P tablets is retarded as the dose level increases to abusive levels. A safetyassessment of Limitx Hydromorphone will be made from both study cohorts. 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 hadsimilar reduction in Cmax compared to the reference. The extent of drug absorption, measure by area under the curve (AUC) was consistent between theLimitx products and the reference. On December 14, 2016, we announced that we had received advice from the FDA on the continued development of LTX-04 following the FDA’sreview of summary data from Study 400. The FDA confirmed our intention to reformulate LTX-04 to provide increased drug levels following an intended 1 or2 tablet dose, noting that a scientific bridge of bioequivalence to the reference product will support a finding of safety and efficacy. The FDA alsorecommended that we identify studies to measure the clinical impact on abuser behavior and overdose outcome (such as drug liking and respiratorydepression) associated with the reduction in Cmax when three or more LTX-04 tablets were ingested. The FDA’s advice also identified longer term studiesnecessary for submitting a NDA for LTX-04, including in vitro extraction studies, drug interaction studies, additional pharmacokinetic studies assessing theimpact 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 anincrease in drug abuse. 27 subjects completed Cohort 1 swallowing a single dose tablet of LTX-04 compared to a generic hydromorphone tablet. 13 subjectscompleted Cohort 2 swallowing 7 LTX-04 and generic tablets doses. 15 subjects followed an undisclosed, exploratory protocol. 6  All tablets contained 2 mg of hydromorphone hydrochloride. All subjects received dosages of naltrexone and/or naloxone and there was a one weekwashout between dosages. Blood samples were taken at pre-designated time-points after dosing and were subsequently analyzed for the concentration ofhydromorphone contained in the sample. The objective of Cohort 1 was to determine if adequate active drug entered the bloodstream when one Limitx tabletwas swallowed. The objective of Cohort 2 was to explore the extent to which the release of the hydromorphone active ingredient from LTX-04 tablets isretarded 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 withan 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 themicro-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 witha single dose. Also, given that manipulating the duration of stomach acidity with a gastric emptying agent produced a significant increase in Tmax which isindicative of a delayed release of drug from LTX-04P3, we concluded the Limitx micro-particles are working as designed in that when we neutralize thestomach 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 asingle tablet and did not achieve full release of the drug at a 1 tablet dose. Study 300 Study 300, completed in October 2017, yielded unreliable and inconclusive results due to inconsistent drug release from over-encapsulated testproduct. Study 301 Study 301 was an open-label, parallel design pharmacokinetic study testing our LIMITx formulation LTX-03 in 72 fasted healthy adult subjectsrandomized into 9 groups (8 subjects per group). One group swallowed a single Norco® 10/325mg tablet, the marketed comparator or reference drug. Theremaining 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 FormulationE group was not analyzed due to emesis. LTX-03 is a combination of hydrocodone bitartrate and acetaminophen. In Study 301 bioequivalence (BE) was examined to generate information for future registration studies. Results demonstrated a trend toward BE forboth 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 andArea Under the Curve (AUC), respectively. In this small sample size study both hydrocodone BE confidence intervals were below the acceptable lower BErange 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 of1.25. We believe that bioequivalence of this formulation may be achieved by reducing data variability that can be achieved through an adequately poweredcrossover study design with sufficient numbers of subjects in the study. For LTX-03 Formulations F though H, the higher buffer level tablets, Study 301demonstrated a progressively increasing reduction in hydrocodone Cmax culminating in a 34% Cmax reduction associated with Formulation H, the highestlevel evaluated. The Cmax for acetaminophen did not decline in Formulations F through H in Study 301. 7  We believe that Study 301 identified a formulation that optimizes the balance between providing therapeutic blood levels of drug for pain relief at asingle tablet dose while retarding the bioavailability of drug when higher buffer levels are ingested. We intend to advance LTX-03 to clinical development for a New Drug Application (NDA). Therefore, we submitted an Investigational New DrugApplication, or IND with respect to LTX-03, to the FDA in the first quarter of 2018, which became effective in April 2018. We are also commencing the scale-up of the commercial manufacturing process as to-be-marketed formulations are required for all NDA development work. We may run additional exploratorystudies before manufacturing scale-up is complete to further understand the Limitx technology. Aversion Technology Aversion Technology incorporates gelling ingredients and irritants into tablets to discourage abuse by snorting and provide barriers to abuse byinjection. Our Aversion Technology and related opioid products, like Oxaydo, are covered by claims in six issued U.S. patents, which expire betweenNovember 2023 and November 2024. Our Aversion Technology products are intended to provide the same therapeutic benefits of the active drug ingredientas 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 useof an opioid analgesic is appropriate. On January 7, 2015, we entered into a Collaboration and License Agreement with Egalet pursuant to which weexclusively licensed to Egalet worldwide rights to manufacture and commercialize Oxaydo. Oxaydo is approved in 5mg and 7.5mg strengths. Egaletlaunched Oxaydo in the United States late in the third quarter of 2015. The 2017 market for immediate-release oxycodone products was approximately 30 million dispensed prescriptions or 1.7 billion tablets. The currentmarket 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, surgeonsand pain specialists. We believe Oxaydo, given its differentiated label compared to generic products, can offer an alternative for opioid prescribingphysicians 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 oxycodoneimmediate-release tablets in the fasted state. Oxaydo differs from oxycodone tablets when taken with a high fat meal though these differences are notconsidered clinically relevant, and Oxaydo can be taken without regard to food. The FDA-approved label for Oxaydo describes elements unique to ourAversion Technology, which differs from current commercially available oxycodone immediate-release tablets. The label for Oxaydo includes the resultsfrom a clinical study that evaluated the effects of nasally snorting crushed Oxaydo and commercially available oxycodone tablets, and limitations onexposing Oxaydo tablets to water and other solvents and administration through feeding tubes. The clinical study evaluated 40 non-dependent recreationalopioid users, who self-administered the equivalent of 15mg of oxycodone. After accounting for a first sequence effect, the study demonstrated: ·30% of subjects exposed to Oxaydo responded that they would not take the drug again compared to 5% of subjects exposed to immediate-releaseoxycodone;·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 ableto 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. 8  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 drugliking 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 abuseliability compared to immediate release oxycodone. We and Egalet have a post-approval commitment with the FDA to perform an epidemiology study toassess 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 toadministration. Similarly, caregivers are advised not to crush and dissolve the tablets or otherwise use Oxaydo for administration via nasogastric, gastric orother feeding tubes as it may cause an obstruction. Our laboratory studies demonstrated that the Oxaydo tablet may gel when Oxaydo is exposed to certainsolvents, including water. Egalet has advised that late in the fourth quarter of 2016 it filed a supplemental NDA for Oxaydo with the FDA to support an abuse-deterrent labelclaim for the intravenous route of abuse. Egalet reported that it submitted a prior approval supplement to support approval of 10 and 15 mg dosage strengthswhich was accepted by the FDA on April 18, 2017. On June 20, 2017, Egalet announced that it had received a complete response letter from the FDA inresponse to this prior approval supplement. Eaglet has advised that the FDA is requesting more information regarding the effect of food on Oxaydo 15mg andthe intranasal abuse-deterrent properties of Oxaydo 10mg and 15mg and have publicly stated that it is working to determine next steps to respond to suchletter. Egalet commenced shipping Oxaydo in October 2015 and we are advised that Egalet is actively promoting Oxaydo to targeted opioid prescribingphysicians. Egalet Agreement Covering Oxaydo On January 7, 2015, we and Egalet US, Inc. and Egalet Ltd., each a subsidiary of Egalet Corporation, or Egalet, entered into a Collaboration andLicense Agreement, or the Egalet Agreement, to commercialize Oxaydo tablets containing our Aversion® Technology. Oxaydo is approved by the FDA formarketing in the United States in 5 mg and 7.5 mg strengths. Under the terms of the Egalet Agreement, we transferred the approved NDA for Oxaydo to Egaletand Egalet is granted an exclusive license under our intellectual property rights for development and commercialization of Oxaydo worldwide, or theTerritory, in all strengths, subject to our right to co-promote Oxaydo in the United States. In accordance with the Egalet Agreement, we and Egalet have formed a joint steering committee to oversee commercialization strategies and thedevelopment of product line extensions. Egalet will pay a significant portion of the expenses relating to (i) annual NDA PDUFA program fees, (ii) expenses ofthe FDA required post-marketing study for Oxaydo and (iii) expenses of clinical studies for product line extensions (additional strengths) of Oxaydo for theUnited States and will bear all of the expenses of development and regulatory approval of Oxaydo for sale outside the United States. Egalet is responsible forall manufacturing and commercialization activities in the Territory for Oxaydo. Subject to certain exceptions, Egalet will have final decision makingauthority with respect to all development and commercialization activities for Oxaydo, including pricing, subject to our co-promotion right. Egalet maydevelop Oxaydo for other countries and in additional strengths, in its discretion. Egalet paid us an upfront payment of $5.0 million upon signing of the Egalet Agreement and a $2.5 million milestone in October 2015 inconnection with the launch of Oxaydo. In addition, we will be entitled to a one-time $12.5 million milestone payment when worldwide Oxaydo net salesreach $150.0 million in a calendar year. In addition, we will receive from Egalet a stepped royalty at percentage rates ranging from mid-single digits todouble-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). Inany 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 netsales resulting from our co-promotion efforts). If we exercise our co-promotion rights, we will receive a share of the gross margin attributable to incrementalOxaydo net sales from our co-promotion activities. Egalet’s royalty payment obligations commenced on the first commercial sale of Oxaydo and expire, on acountry-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 insuch 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’sOrange Book remains with respect to the Product). Royalties will be reduced upon the entry of generic equivalents, as well as for payments required to bemade by Egalet to acquire intellectual property rights to commercialize Oxaydo, with an aggregate minimum floor. 9  The Egalet Agreement expires upon the expiration of Egalet’s royalty payment obligations in all countries. Either party may terminate the EgaletAgreement in its entirety if the other party breaches a payment obligation, or otherwise materially breaches the Egalet Agreement, subject to applicable cureperiods, or in the event the other party makes an assignment for the benefit of creditors, files a petition in bankruptcy or otherwise seeks relief underapplicable bankruptcy laws. We also may terminate the Egalet Agreement with respect to the U.S. and other countries if Egalet materially breaches itscommercialization obligations. Egalet may terminate the Egalet Agreement for convenience on 120 days prior written notice, which termination may notoccur prior to the second anniversary of Egalet’s launch of Oxaydo. Termination does not affect a party’s rights accrued prior thereto, but there are no statedpayments in connection with termination other than payments of obligations previously accrued. For all terminations (but not expiration), the EgaletAgreement provides for the transition of development and marketing of Oxaydo from Egalet to us, including the conveyance by Egalet to us of thetrademarks and all regulatory filings and approvals relating to Oxaydo, and for Egalet’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 towhich we licensed our Aversion® technology to KemPharm for its use in the development and commercialization of three products using 2 of KemPharm’sprodrug candidates. KemPharm has also been granted an option to extend the KemPharm Agreement to cover two additional prodrug candidates. KemPharmis 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 ourAversion 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 theKemPharm Agreement. KemPharm’s royalty payment obligations commence on the first commercial sale of a product using our Aversion technology andexpire, 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. The KemPharm Agreement expires upon the expiration of KemPharm’s royalty payment obligations in all countries. Either party may terminate theKemPharm Agreement in its entirety if the other party materially breaches the KemPharm Agreement, subject to applicable cure periods. Acura or KemPharmmay 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 rightsaccrued prior thereto, but there are no stated payments in connection with termination other than payments of obligations previously accrued. For allterminations (but not expiration), the KemPharm Agreement provides for termination of our license grant to KemPharm. Aversion Technology Development Opioid Products On April 9, 2015, we announced the indefinite suspension of further development of our Aversion hydrocodone/APAP product candidate, in order tofocus our time and available resources on the development of our Limitx technology product candidates. We currently have 6 additional opioids at variousstages of formulation development using the Aversion Technology which are not being actively developed. 10  Abuse of Pseudoephedrine Products The chemical structure of pseudoephedrine, or PSE, is very similar to methamphetamine, facilitating a straight-forward chemical conversion tomethamphetamine. OTC PSE products are sometimes purchased and used for this conversion. There are multiple known processes to convert PSE tomethamphetamine, all of which are not complex and do not require specialized equipment; however, many do require readily available but uncommoningredients. 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 thedirect chemical reduction of the PSE to methamphetamine in the presence of the tablet’s inactive ingredients. All the solvents used are ultimately dried off orotherwise removed, so a wide range of solvents are amenable to the process. Impede 1.0 Technology Our Impede 1.0 Technology, a proprietary mixture of inactive ingredients, prevents the extraction of PSE from tablets using known extractionmethods and disrupts the direct conversion of PSE from tablets into methamphetamine. Studies sponsored by us at an international, independent laboratory demonstrated our Impede 1.0 Technology prevents the extraction of PSE fromtablets for conversion into methamphetamine using what we believe are the two most common extraction methods, each requiring extraction of PSE as aninitial step. Laboratory tests conducted on our behalf by an independent Clinical Research Organization, or CRO, using the “one-pot” method demonstratedthat our Impede Technology disrupted the direct conversion of PSE from the tablets into methamphetamine. The study compared the amount of puremethamphetamine hydrochloride produced from Nexafed and Johnson & Johnson’s Sudafed® tablets. Using one hundred 30 mg tablets of both products,multiple one-pot tests and a variety of commonly used solvents, the study demonstrated an average of 38% of the maximum 2.7 grams of puremethamphetamine hydrochloride was recovered from Nexafed. Comparatively, approximately twice as much pure methamphetamine hydrochloride wasrecovered from Sudafed tablets. Both products yielded a substantial amount of additional solids such that the purity of the total powder provided containedapproximately 65% methamphetamine hydrochloride. Impede 2.0 Technology We have developed a next generation, or Impede 2.0 Technology to improve the meth-resistance of our technology. We have completed one-pot,direct conversion meth testing performed by our CRO on the following commercially available products and on our Nexafed Impede 2.0 extended-releaseproduct, with the following results: Product/Formulation Meth ResistantTechnology 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%1Total methamphetamine HCl recovered from the equivalent of 100 PSE 30mg tablets divided by the maximum theoretical yield of 2.7 grams.2Total methamphetamine HCl recovered from the equivalent of 100 PSE 30mg tablets divided by the total weight of powder recovered. We have demonstrated in a pilot clinical study the bioequivalence of a formulation of our Nexafed extended release tablets utilizing our Impede 2.0Technology to Sudafed® 12-hour Tablets. We have completed a project to integrate Impede 2.0 Technology into our commercially available Nexafed 30mgtablet while moving supply to an alternate contract manufacturer. We have completed process validation on this new formulation and we believe MainPointelaunched the new formulation into the market in the 3rd quarter of 2017. 11  Nexafed Products The Nexafed products currently marketed, Nexafed and Nexafed Sinus Pressure + Pain, consist of immediate release tablets. Nexafed is a 30mgpseudoephedrine tablet which until the third quarter of 2017 incorporated our patented Impede 1.0 technology and commencing in such quarter incorporatedour Impede 2.0 technology and Nexafed Sinus Pressure + Pain is a 30/325mg pseudoephedrine and acetaminophen tablet which incorporates our Nexafed 1.0technology. PSE is a widely-used nasal decongestant available in many non-prescription and prescription cold, sinus and allergy products. While the 30mgPSE 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 sellingprice and (b) its simpler formulation provides better meth yields. However, as meth-resistant products become pervasive, we believe meth cooks will migrateto other, larger selling, PSE containing products. We have demonstrated that our Nexafed 30mg tablets are bioequivalent to Johnson & Johnson’s Sudafed 30mg Tablets when a single 2 tablet doseis administered. Commencing in 2006, the CMEA, required all non-prescription PSE products to be held securely behind the pharmacy counter, has setmonthly consumer purchase volume limits, and has necessitated consumer interaction with pharmacy personnel to purchase PSE-containing products. Priorto the MainPointe Agreement completed in March 2017, we capitalized on this consumer-pharmacist interaction at the point of sale by soliciting distributionto pharmacies and educating and encouraging pharmacists to recommend Nexafed to their customers. Under the terms of the MainPointe Agreement,MainPointe controls the marketing and sale of our Nexafed products. We launched Nexafed commercially in mid-December 2012 into the United States OTC market for cold and allergy products. Prior to theMainPointe Agreement, we distributed our Nexafed products through several regional and national drug wholesalers for redistribution to pharmacies, whichincluded the three largest U.S. drug wholesalers: McKesson, Cardinal Health and AmerisourceBergen and we also shipped directly to the warehouses ofcertain pharmacy chains. Prior to the MainPointe Agreement, Nexafed was stocked in approximately 13,900 pharmacies or about approximately 21% of theestimated 65,000 U.S. pharmacy outlets. Initial adoption was primarily in independent pharmacies in predominately rural communities with high methawareness. Chain pharmacies, with more centralized control of the pharmacy operations, began adopting in mid-2013, including Kroger, Publix, Fruth andBartells. Some pharmacists actively recommended Nexafed to their customers while some replaced all 30mg PSE products, brand and generic, with Nexafed.Rite Aid, the nation’s fourth largest pharmacy operator, began purchasing Nexafed in late 2013. In late 2014, Kmart and Kroger initiated chain-wide stockingof Nexafed. In February 2015, we began initial shipments of Nexafed Sinus Pressure + Pain. Prior to the MainPointe Agreement, we were marketing this productconsistent with our Nexafed marketing efforts to pharmacists concerned with meth abuse of their products. We are not aware of any branded non-prescriptionproduct that contains PSE and acetaminophen believing that brands containing these ingredients have either been discontinued or reformulated withphenylephrine. We expect Nexafed Sinus Pressure + Pain to compete primarily against Advil® Cold and Sinus (PSE/ibuprofen) and to a lesser extent Aleve®-D and Sudafed® Pressure + Pain which are extended-release products. Nexafed and Nexafed Sinus Pressure + Pain products are marketed under FDA’s regulations applicable to OTC Monograph products. Nexafed andNexafed Sinus Pressure + Pain tablets are offered in 24-count blister packaged cartons. MainPointe Agreement covering Nexafed Products On March 16, 2017, we and MainPointe entered into a License, Commercialization and Option Agreement, or the MainPointe Agreement, pursuantto which we granted MainPointe an exclusive license to our Impede technology to commercialize our Nexafed products in the U.S. and Canada. We alsoconveyed 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. On signing the MainPointe Agreement, MainPointe paid us an upfront licensing fee of $2.5 million plus approximately $425 thousand for inventoryand equipment being transferred. The MainPointe Agreement also provides for our receipt of a 7.5% royalty on net sales of licensed products. The royaltypayment 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 theAgreement in such country. 12  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 theMainPointe Agreement certain additional products, or Option Products, containing PSE and utilizing the Impede technology for a fee of $500 thousand perproduct (for all product strengths), including the product candidate Loratadine with pseudoephedrine (following termination of the Bayer Agreement). If theterritory 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 isexpanded 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 interestedin developing or licensing rights to an Option Product, MainPointe must exercise its option for that product or its option rights for such product willterminate. The MainPointe Agreement may be terminated by either party for a material breach of the other party, or by Acura if MainPointe challenges certainof its patents. Upon early termination of the MainPointe Agreement, MainPointe’s licenses to the Impede technology and all products will terminate. Upontermination, at Acura’s request the parties will use commercially reasonable efforts to transition the Nexafed® and Nexafed® Sinus Pressure + Pain productsback to Acura. Impede Technology Products in Development Given the fragmented nature of the PSE market with products containing multiple active ingredients, we are developing additional products for ourNexafed franchise: Impede Technology Product Status Nexafed 30mg with Impede 2.0 Technology Manufacturing validation complete. We believe MainPointe launchedcommercial shipments in third quarter of 2017 Immediate-release pseudoephedrine HCl in combination withother cold and allergy active ingredients Nexafed Sinus Pressure + Pain launched and licensed to MainPointe Extended-release formulation utilizing Impede 2.0 Technology Pilot pharmacokinetic testing demonstrated bioequivalence to Sudafed® 12-hour Tablets. Pre-IND meeting held with the FDANo imminent development planned Extended-release combination products No imminent development planned Loratadine with pseudoephedrine Final formulation development in process In July 2015, we had a pre-IND meeting with the FDA to discuss the results from our pharmacokinetic and meth-resistance testing studies todetermine 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 releasepseudoephedrine 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. Asrecommended by the FDA, we have submitted additional “meth-resistant” testing information to the FDA for review prior to submitting an IND. In October2016, we received FDA recommendations on our meth-resistant testing protocols for our Nexafed extended release tablets. We can now scale-up ourmanufacture batch size at a contract manufacturer which allows us to submit an IND to the FDA for our Nexafed extended release tablets, however, we havenot yet committed to that level of development. In March 2017, we completed a pilot pharmacokinetic study for the PSE and loratadine combination product using our Impede 1.0 technology. Thestudy in 24 healthy adult subjects demonstrated sufficient, but not bioequivalent blood levels of PSE to the comparator while the second active ingredientachieved 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 intends to upgrade this formulation with its Impede 2.0 technology before determining any advancement in development. 13  Our objective is to establish, either directly or through third-party licensees, the Nexafed franchise in the United States with multiple productofferings, including both immediate and extended release products utilizing both single and combinations of active ingredients. We aim to make meth-resistant PSE product the standard of care in all U.S. pharmacies. In addition to the MainPointe Agreement, we may license our Impede technology tocommercial partners to extend our internal development resources to develop difficult to formulate products, such as extended-release. Bayer Agreement On June 15, 2015, we and Bayer entered into a License and Development Agreement, or the Bayer Agreement, pursuant to which we granted Bayeran exclusive worldwide license to our Impede® Technology for use in an undisclosed methamphetamine resistant pseudoephedrine-containing product andproviding for the joint development of such product using our Impede Technology for the U.S. market. We received reimbursement of certain ourdevelopment expenses, and were entitled to success-based development and regulatory milestone payments, and low mid-single digit royalties on the netsales of the developed product. On June 28, 2017, we received Bayer’s written notice terminating the Bayer Agreement. Bayer exercised its conveniencetermination right prior to the completion of our development obligations under the Bayer Agreement, which we believe is as a result of Bayer’s de-prioritization of development of the methamphetamine resistant PSE-containing product contemplated in the Agreement. As a result of the termination,MainPointe has the option to license such product in the U.S. and Canada upon payment to us of $500 thousand (additional amounts would be due forexpansion of the territory – See “–MainPointe Agreement covering Nexafed Products”, above), together with royalty of 7.5% of net sales of such product,under the MainPointe Agreement. 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 inproducts as the only active ingredient in both immediate and extended-release products. In addition, PSE is combined with other cold, sinus and allergyingredients such as pain relievers, cough suppressants and antihistamines. PSE also competes against phenylephrine, an alternate nasal decongestantavailable in non-prescription products. In 2014, a data service reported approximately $0.7 billion in retail sales of non-prescription products containingPSE. The top retail selling PSE OTC cold/allergy products in 2014 were: Reference Brand1 Brand Company ActiveIngredient(s) 2014 Retail Sales($ 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 1Branded product only. Does not include store brand sales.2Extended 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. Prior to theMainPointe Agreement, we priced Nexafed at $4.39 for a box of 24 tablets and Nexafed Sinus Pressure + Pain at $7.95 for a box of 24 tablets. MainPointecontrols 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 somecases, prescription drug heritage. Category leading brands are often supported by national mass marketing and promotional efforts. Consumers often have achoice to purchase a less expensive store brand. Store brands contain the same active ingredients as the more popular national brands but are not supportedby large marketing campaigns and are offered at a lower price. Non-prescription products are typically distributed through retail outlets including drug storechains, food store chains, independent pharmacies and mass merchandisers. The distribution outlets for PSE products are highly consolidated. According toChain Drug Review, the top 50 drug, food and mass merchandising chains operate approximately 40,000 pharmacies in the U.S., of which 58% are operatedby the four largest chains. Stocking decisions and pharmacists recommendations for these chain pharmacies are often centralized at the corporateheadquarters. 14  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 ourproduct have labeling as specified in the regulations. Marketing for the Nexafed products includes advertising the extraction characteristics andmethamphetamine-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 bythe 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 abuseliability studies in the FDA approved product label, although there can be no assurance that this will be the case. 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 fastestgrowing drug problem. During 2017, the US Government declared opioid abuse as an epidemic and national health emergency. According to the 2017Centers on Disease Control Drug Surveillance Report, 11.8 million Americans aged 12 and over abused or misused prescription opioids in 2016. Further, thisReport 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 aprescription for the opioid hydrocodone annually. For many pain sufferers, opioid analgesics provide their only pain relief. As a result, opioid analgesics areamong the largest prescription drug classes in the United States with over 214 million tablet and capsule prescriptions dispensed in 2016 of whichapproximately 194 million were for IR opioid products and 204 million were for ER opioid products. However, physicians and other health care providers attimes 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 opioidanalgesic market. Because IR opioid products are used for both acute and chronic pain, a prescription, on average, contains 66 tablets or capsules. Accordingto 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 tofewer identified competitors and the significantly larger market for dispensed prescriptions for IR opioid products compared to ER opioid products, we haveinitially focused on developing IR opioid products utilizing our Aversion and Limitx Technologies. A summary of the IR opioid product prescription datafor 2016 is provided below: 15  IR Opioid Products(1) 2016 USPrescriptions(Millions)(2) % of Total Hydrocodone 90 43%Oxycodone 55 26%Tramadol 43 21%Codeine 15 7%4 Others 5 3%Total 208 100%1Includes all salts and esters of the opioid and opioids in combination with other active ingredients such asacetaminophen.2IMS Health, 2016 Despite considerable publicity regarding the abuse of OxyContin® extended-release tablets and other ER opioid products, U.S. governmentstatistics suggest that far more people have used IR opioid products non-medically than ER opioid products. These statistics estimate that nearly four times asmany people have misused the IR opioid products Vicodin®, Lortab® and Lorcet® (hydrocodone bitartrate/acetaminophen brands and generics) thanOxyContin®. Product Labeling for Abuse-Deterrent Opioid Products In April 2015, the FDA published guidance for industry on the evaluation and labeling of abuse-deterrent opioids. While the 2015 FDA Guidance isnon-binding on the FDA, it outlines FDA’s current thinking on the development and labeling of abuse-deterrent products. The 2015 FDA Guidance providesfor three distinct levels of pre-marketing studies that are potentially eligible for inclusion in the labeling: (1) laboratory-based in vitro manipulation andextraction studies, (2) pharmacokinetic studies, and (3) clinical abuse potential studies. The 2015 FDA Guidance further prescribes additional post-approvalor epidemiology studies to determine whether the marketing of a product with abuse-deterrent properties results in meaningful reductions in abuse, misuse,and related adverse clinical outcomes, including addiction, overdose, and death in the post-approval setting, which can also be included in the labeling. FDAnotes “the science of abuse deterrence is relatively new. Both the technologies involved and the analytical, clinical, and statistical methods for evaluatingthose technologies are rapidly evolving. For these reasons, FDA will take a flexible, adaptive approach to the evaluation and labeling of potentially abuse-deterrent opioid products”. We or our licensee may seek to include descriptions of studies that characterize the abuse-deterrent properties in the label for our Aversion andLimitx Technology products in development. Although the FDA approved label for Oxaydo contains limitations on exposing Oxaydo tablets to water andother solvents and administration through feeding tubes, the FDA approved Oxaydo label does not contain a description of the I.V. injection studies weperformed to characterize the abuse deterrent properties of Oxaydo. Egalet has committed to the FDA to undertake epidemiological studies to assess theactual consequences of abuse of Oxaydo in the market. Under the terms of the Egalet Agreement, we share a minority portion of the fees and expenses relatingto such FDA required epidemiological studies, provided Egalet complies with the sections of the agreement relating thereto. The extent to which adescription of the abuse-deterrent properties or results of epidemiological or other studies will be added to or included in the FDA approved product label forour products in development will be the subject of our discussions with the FDA as part of the NDA review process, even after having obtained approval ofOxaydo. Further, because the FDA closely regulates promotional materials, even if FDA initially approves labeling that includes a description of the abusedeterrent properties of the product, the FDA’s Office of Prescription Drug Promotion, or OPDP, will continue to review the acceptability of promotionallabeling claims and product advertising campaigns for our marketed products. 16  Patents and Patent Applications We have the following issued patents covering, among other things, our Limitx Technology: Patent No. (Jurisdiction) Subject matter Issued Expires 9,101,636 (US) Abuse deterrent products wherein the release of active ingredient is retarded when3 or more doses are consumed Aug. 2015 Nov. 2033 9,320,796 (US) Abuse deterrent products wherein the release of active ingredient is retarded when3 or more doses are consumed Apr. 2016 Nov. 2033 9,662,393 (US) Abuse deterrent products wherein the release of active ingredient is retarded when3 or more doses are consumed May 2017 Nov. 2033 2,892,908 (CAN) Abuse deterrent products wherein the release of active ingredient is retarded whenexcessive doses are consumed Apr. 2016 Nov. 2033 5,922,851 (JAPAN) Abuse deterrent products wherein the release of active ingredient is retarded whenexcessive doses are consumed Apr. 2016 Nov. 2033 We have the following issued patents covering, among other things, Oxaydo and our Aversion Technology: Patent No. (Jurisdiction) Subject Matter Issued Expires 7,201,920 (US) Pharmaceutical compositions including a mixture of functional inactiveingredients and specific opioid analgesics Apr. 2007 Mar. 2025 7,510,726 (US) A wider range of compositions than those described in the 7,201,920 Patent Mar. 2009 Nov. 2023 7,981,439 (US) Pharmaceutical compositions including any water soluble drug susceptible toabuse Jul. 2011 Aug. 2024 8,409,616 (US) Pharmaceutical compositions of immediate-release abuse deterrent dosage forms Apr. 2013 Nov. 2023 8,637,540 (US) Pharmaceutical compositions of immediate-release abuse deterrent opioid products Jan. 2014 Nov. 2023 9,492,443 (US) Pharmaceutical compositions of immediate-release abuse deterrent opioid products Nov. 2016 Nov. 2023 We have the following additional issued patents relating to our Aversion Technology: Patent No. (Jurisdiction) Subject Matter Issued Expires 7,476,402 (US) Pharmaceutical compositions of certain combinations of kappa and mu opioidreceptor agonists and other ingredients intended to deter opioid analgesic productmisuse and abuse Jan. 2009 Nov. 2023 8,822,489 (US) Pharmaceutical compositions of certain abuse deterrent products that containpolymers, surfactant and polysorb 80 Jul. 2014 Nov. 2023 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 17  We have the following issued patents covering, among other things, our Nexafed product line and Impede 1.0 and 2.0 technologies: Patent No. (Jurisdiction) Subject Matter Issued Expires 8,901,113 (US) Pharmaceutical compositions suitable for reducing the chemical conversion ofprecursor compounds Dec. 2014 Feb. 2032 9,757,466 (US) Pharmaceutical compositions suitable for reducing the chemical conversion ofprecursor compounds Sep. 2017 Feb. 2032 2010300641 (AUS) Pharmaceutical compositions suitable for reducing the chemical conversion ofprecursor compounds Jun. 2016 Sep. 2030 2,775,890 (CAN) Pharmaceutical compositions suitable for reducing the chemical conversion ofprecursor compounds Jun. 2016 Sep. 2030 2,488,029 (EUR) Pharmaceutical compositions suitable for reducing the chemical conversion ofprecursor compounds Mar. 2016 Sep. 2030 218533 (ISR) Pharmaceutical compositions suitable for reducing the chemical conversion ofprecursor compounds Jan. 2016 Sep. 2030 In addition to our issued patents listed above and additional unlisted issued patents, we have filed multiple U.S. patent applications andinternational patent applications relating to compositions containing abusable active pharmaceutical ingredients as well as applications covering our Impede1.0 and 2.0 Technologies and filed U.S. patent applications for our Limitx Technology. Except for the rights granted in the Egalet Agreement, the KemPharmAgreement, and the MainPointe Agreement and in the patent infringement settlement agreements described below, we have retained all intellectual propertyrights to our Aversion Technology, Impede Technology, Limitx Technology and related product candidates. In 2012 and 2013, we received Paragraph IV Certification Notices from five generic sponsors of ANDAs for a generic drug listing our Oxaydoproduct as the reference listed drug. The Paragraph IV Notices referred to our 920, 726 and 439 Patents, which cover our Aversion® Technology and ourOxaydo product. We filed suit against each of such generic sponsors, Watson Laboratories, Inc., Par Pharmaceutical, Inc., Impax Laboratories, Inc., SandozInc. and Ranbaxy Inc., in the United States District Court for the District of Delaware alleging infringement of our 726 Patent listed in the FDA’s OrangeBook. Our litigation against Watson Laboratories was dismissed by us following Watson Laboratories’ change of its Paragraph IV Certification to a ParagraphIII Certification, indicating it would not launch its generic product until the expiry of our applicable Patents. Our litigation against each of the remaininggeneric sponsors was settled during the period October 2013 through May 2014 on an individual basis, upon mutual agreement between us and such genericsponsors. None of such settlements impacted the validity or enforceability of our Patents. See “Item 1A. Risk Factors – Generic manufacturers are usinglitigation and regulatory means to seek approval for generic versions of Oxaydo, which could cause Egalet’s sales to suffer and adversely impact our royaltyrevenue” for a discussion of the settlements and license grants relating to such patent litigation. Notwithstanding the settlement of these prior infringementactions, it is possible that other generic manufacturers may also seek to launch a generic version of Oxaydo and challenge our patents. Any determination insuch infringement actions that our patents covering our Aversion Technology and Oxaydo are invalid or unenforceable, in whole or in part, or that theproducts covered by generic sponsors’ ANDAs do not infringe our patents could have a material adverse effect on our operations and financial condition. In April, 2015, Purdue Pharma L.P., Purdue Pharmaceuticals L.P. and The P.F. Laboratories, Inc., or collectively Purdue, commenced a patentinfringement lawsuit against us and our Oxaydo product licensee Egalet in the United States District Court for the District of Delaware alleging our Oxaydoproduct infringes Purdue’s U.S. Patent No. 8,389,007, or the 007 Patent. In April 2016, Purdue commenced a second patent infringement lawsuit against usand Egalet in the United States District Court for the District of Delaware alleging our Oxaydo product infringes Purdue’s newly issued U.S. Patent No.9,308,171, or the 171 Patent. The actions regarding the 007 Patent and the 171 Patent are collectively referred to as the “Actions”. On April 6, 2016, we fileda petition for Inter Parties Review, or IPR Review, with the USPTO seeking to invalidate Purdue’s 007 Patent. On May 20, 2016, we, Purdue and Egalet entered into a settlement agreement to settle the Actions and the IPR Review. Under the SettlementAgreement the parties dismissed or withdrew the Actions, requested that the USPTO terminate the IPR Review and exchanged mutual releases. No paymentswere made by the parties under the Settlement Agreement. See the discussion under “Item 3. Legal Proceedings” below for a summary of the settlementagreement with Purdue. The Settlement Agreement specifically excludes our patents related to our Impede and Limitx technologies from the scope of ourpatents subject to the Settlement Agreement. 18  Reference is made to the Risk Factors contained in this Report for a discussion, among other things, of patent applications and patents owned bythird parties, including claims that may encompass our Aversion Technology and Oxaydo tablets, and the risk of infringement, interference or oppositionproceedings that we may be subject to arising from such patents and patent applications. Research and Manufacturing We conduct research, development, manufacture of laboratory clinical trial supplies, and warehousing activities at our operations facility in Culver,Indiana and lease an administrative office in Palatine, Illinois. The 25,000 square foot Culver facility is registered with the DEA to perform research,development and manufacture of certain DEA-scheduled active pharmaceutical ingredients and finished dosage form products. We have obtained quotas forsupply of DEA-scheduled active pharmaceutical ingredients from the DEA and develop finished dosage forms in our Culver facility. We manufacture clinicaltrial supplies of drug products in our Culver facility. In addition to internal capabilities and activities, we engage numerous clinical research organizations, orCROs, with expertise in regulatory affairs, clinical trial design and monitoring, clinical data management, biostatistics, medical writing, laboratory testingand related services. Egalet is responsible for commercial manufacture of Oxaydo under the Egalet Agreement. We expect that future opioid productcandidates developed and licensed by us will be commercially manufactured by our licensees or other qualified third party contract manufacturers. Prior to our entering into the MainPointe Agreement, we relied on two contract manufacturers to manufacture, package and supply our commercialquantities of Nexafed and Nexafed Sinus Pressure + Pain products. We assigned our existing supply agreement to MainPointe in accordance with the terms ofthe MainPointe Agreement. Although we believe there are alternate sources of supply that can satisfy MainPointe’s anticipated commercial requirements,replacing or adding a contract manufacturer may cause an interruption in supply and could adversely impact our royalties from MainPointe on the net salesof the Nexafed products. Competition Our products and technologies will, if marketed, compete to varying degrees against both brand and generic products offering similar therapeuticbenefits and being developed and marketed by small and large pharmaceutical (for prescription products) and consumer packaged goods (for OTC products)companies. Many of our competitors have substantially greater financial and other resources and are able to expend more funds and effort than us and ourlicensees in research, development and commercialization of their competitive technologies and products. Prescription generic products and OTC store brandproducts will offer cost savings to third party payers and/or consumers that will create pricing pressure on our or our licensed products. Also, thesecompetitors may have a substantial sales volume advantage over our products, which may result in our costs of manufacturing being higher than ourcompetitors’ costs. We believe potential competitors may be developing opioid abuse deterrent technologies and products. Such potential competitors include, butmay not be limited to, Pain Therapeutics, Pfizer Inc., Purdue Pharma, Atlantic Pharmaceuticals, Egalet Corporation, KemPharm, Shionogi, NektarTherapeutics, Signature Therapeutics, QRx Pharma, Tris Pharma, Pisgah Labs, Teva Pharmaceuticals, Sun Pharmaceuticals, Ensysce Biopharma, InspirionDelivery Sciences and Collegium Pharmaceuticals. Egalet, our partner for Oxaydo, has developed and is marketing at least one other analgesic product and isdeveloping other analgesic products, all of which compete for development and commercialization resources for Oxaydo, which may adversely impact thesales of Oxaydo. Our Impede Technology products containing PSE will compete in the highly competitive market for cold, sinus and allergy products generallyavailable to the consumer without a prescription. Some of our competitors will have multiple consumer product offerings both within and outside the cold,allergy and sinus category providing them with substantial leverage in dealing with a highly consolidated pharmacy distribution network. The competingproducts may have well established brand names and may be supported by national or regional advertising. Nexafed will compete primarily with Johnson &Johnson’s Sudafed® brand and Nexafed Sinus Pressure + Pain with Pfizer’s Advil® Cold and Sinus, as well as generic/store brand formulations of suchproducts manufactured by Perrigo Company and others. A competing product from Perrigo is being marketed with claims of methamphetamine-resistance. 19  We are also aware that some large pharmaceutical companies in the past have sought to develop PSE technologies or products that resist conversioninto methamphetamine. In addition to our license agreement with MainPointe, we may consider licensing our Impede Technology or products utilizing such technology forcommercialization. Government Regulation All pharmaceutical firms, including us, are subject to extensive regulation by the federal government, principally by the FDA under the FederalFood, Drug and Cosmetic Act, or the FD&C Act, and, to a lesser extent, by state and local governments. Before our prescription products and some OTCproducts may be marketed in the U.S., they must be approved by the FDA for commercial distribution. Certain OTC products must comply with applicableFDA regulations, known as OTC Monographs, in order to be marketed, but do not require FDA review and approval before marketing. Additionally, we aresubject to extensive regulation by the DEA under the Controlled Substances Act, the Combat Methamphetamine Act of 2005, and related laws andregulations for research, development, manufacturing, marketing and distribution of controlled substances and certain other pharmaceutical activeingredients that are regulated as Listed Chemicals. Extensive FDA, DEA, and state regulation of our products and commercial operations continues after drugproduct approvals, and the requirements for our continued marketing of our products may change even after initial approval. We are also subject toregulation under federal, state and local laws, including requirements regarding occupational safety, laboratory practices, environmental protection andhazardous substance control, and may be subject to other present and future local, state, federal and foreign regulations, including possible future regulationsof the pharmaceutical industry. We cannot predict the extent to which we may be affected by legislative and other regulatory developments concerning ourproducts and the healthcare industry in general. The FD&C Act, the Controlled Substances Act and other federal statutes and regulations govern the testing, manufacture, quality control, export andimport, labeling, storage, record keeping, approval, pricing, advertising, promotion, sale and distribution of pharmaceutical products. Noncompliance withapplicable requirements both before and after approval, can subject us, our third party manufacturers and other collaborative partners to administrative andjudicial sanctions, such as, among other things, warning letters, fines and other monetary payments, recall or seizure of products, criminal proceedings,suspension or withdrawal of regulatory approvals, interruption or cessation of clinical trials, total or partial suspension of production or distribution,injunctions, limitations on or the limitation of claims we can make for our products, and refusal of the government to enter into supply contracts fordistribution directly by governmental agencies, or delay in approving or refusal to approve new drug applications. The FDA also has the authority to revokeor withhold approvals of new drug applications. FDA approval is required before any “new drug,” can be marketed. A “new drug” is one not generally recognized, by experts qualified by scientifictraining and experience, as safe and effective for its intended use. Our products not subject to and in compliance with an OTC Monograph are new drugs andrequire prior FDA approval. Such approval must be based on extensive information and data submitted in a NDA, including but not limited to adequate andwell controlled laboratory and clinical investigations to demonstrate the safety and effectiveness of the drug product for its intended use(s). In addition toproviding required safety and effectiveness data for FDA approval, a drug manufacturer’s practices and procedures must comply with current GoodManufacturing Practices (“cGMPs”), which apply to manufacturing, receiving, holding and shipping. Accordingly, manufacturers must continue to expendtime, money and effort in all applicable areas relating to quality assurance and regulatory compliance, including production and quality control to complywith cGMPs. Failure to so comply risks delays in approval of drug products and possible FDA enforcement actions, such as an injunction against shipment ofproducts, the seizure of non-complying products, criminal prosecution and/or any of the other possible consequences described above. We are subject toperiodic inspection by the FDA and DEA, which inspections may or may not be announced in advance. 20  The FDA Drug Approval Process The process of drug development is complex and lengthy. The activities undertaken before a new pharmaceutical product may be marketed in theU.S. generally include, but are not limited to, preclinical studies; submission to the FDA of an Investigational New Drug application, or IND, which mustbecome active before human clinical trials may commence; adequate and well-controlled human clinical trials to establish the safety and efficacy of theproduct; submission to the FDA of an NDA; acceptance for filing of the NDA by FDA; satisfactory completion of an FDA pre-approval inspection of theclinical trial sites and manufacturing facility or facilities at which both the active ingredients and finished drug product are produced to assess compliancewith, among other things, patient informed consent requirements, the clinical trial protocols, current Good Clinical Practices, or GCP, and cGMPs; and FDAreview and approval of the NDA prior to any commercial sale and distribution of the product in the U.S. Preclinical studies include laboratory evaluation of product chemistry and formulation, and in some cases, animal studies and other studies topreliminarily assess the potential safety and efficacy of the product candidate. The results of preclinical studies together with manufacturing information,analytical data, and detailed information including protocols for proposed human clinical trials are then submitted to the FDA as a part of an IND. An INDmust become effective, and approval must be obtained from an Institutional Review Board, or IRB, prior to the commencement of human clinical trials. TheIND becomes effective 30 days following its receipt by the FDA unless the FDA objects to, or otherwise raises concerns or questions and imposes a clinicalhold. We, the FDA or the IRB may suspend or terminate a clinical trial at any time after it has commenced due to safety or efficacy concerns or for commercialreasons. In the event that FDA objects to the IND and imposes a clinical hold, the IND sponsor must address any outstanding FDA concerns or questions tothe satisfaction of the FDA before clinical trials can proceed or resume. There can be no assurance that submission of an IND will result in FDA authorizationto commence clinical trials. Human clinical trials are typically conducted in three phases that may sometimes overlap or be combined: Phase 1: This phase is typically the first involving human participants, and involves the smallest number of human participants (typically, 20-50).The investigational drug is initially introduced into healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism,distribution and excretion. In addition, it is sometimes possible to gain a preliminary indication of efficacy. Phase 2: Once the preliminary safety and tolerability of the drug in humans is confirmed during phase 1, phase 2 involves studies in a somewhatlarger group of study subjects. Unlike phase 1 studies, which typically involve healthy subjects, participants in phase 2 studies may be affected by thedisease or condition for which the product candidate is being developed. Phase 2 studies are intended to identify possible adverse effects and safety risks, toevaluate the efficacy of the product for specific targeted diseases, and to determine appropriate dosage and tolerance. Phase 3: Phase 3 trials typically involve a large numbers of patients affected by the disease or condition for which the product candidate is beingdeveloped. Phase 3 clinical trials are undertaken to evaluate clinical efficacy and safety under conditions resembling those for which the product will be usedin actual clinical practice after FDA approval of the NDA. Phase 3 trials are typically the most costly and time-consuming of the clinical phases. Phase 4 or Post-Marketing Requirements: Phase 4 trials may be required by FDA after the approval of the NDA for the product, as a condition ofthe approval, or may be undertaken voluntarily by the sponsor of the trial. The purpose of phase 4 trials is to continue to evaluate the safety and efficacy ofthe drug on a long-term basis and in a much larger and more diverse patient population than was included in the prior phases of clinical investigation. After clinical trials have been completed, and if they were considered successful, the sponsor may submit a NDA or Abbreviated New DrugApplication, or ANDA, to the FDA including the results of the preclinical and clinical testing, together with, among other things, detailed information on thechemistry, manufacturing, quality controls, and proposed product labeling. There are two types of NDAs; a 505(b)(1) NDA and a 505(b)(2) NDA. A 505(b)(1)NDA is also known as a “full NDA” and is described by section 505(b)(1) of the FD&C Act as an application containing full reports of investigations of safetyand effectiveness, in addition to other information. The data in a full NDA is either owned by the applicant or are data for which the applicant has obtained aright of reference. A 505(b)(2) application is one described under section 505(b)(2) of the FD&C Act as an application for which information, or one or moreof the investigations relied upon by the applicant for approval, “were not conducted by or for the applicant and for which the applicant has not obtained aright of reference or use from the person by or for whom the investigations were conducted”. This provision permits the FDA to rely for approval of an NDAon data not developed by the applicant, such as published literature or the FDA’s finding of safety and effectiveness of a previously approved drug. 505(b)(2)applications are submitted under section 505(b)(1) of the FD&C Act and are therefore subject to the same statutory provisions that govern 505(b)(1)applications that require among other things, “full reports” of safety and effectiveness. 21  505(b)(2) NDAs must include one of several different types of patent certifications to each patent that is listed in the FDA publication known as theOrange Book in connection with any previously approved drug, the approval of which is relied upon for approval of the 505(b)(2) NDA. Depending on thetype of certification made, the approval of the 505(b)(2) NDA may be delayed until the relevant patent(s) expire, or in the case of a Paragraph IV Certificationmay lead to patent litigation against the applicant and a potential automatic approval delay of 30 months or more. Under the Prescription Drug User Fee Amendments of 2017, PDUFA VI, the FDA collects two types of fees associated with NDAs – (i) a fee collectedat the time applications are submitted, and (ii) prescription drug program fees (accounting for 80% of the total), which are collected annually for certainprescription drugs. Exceptions to the application fee include previously filed applications and applications for drugs designated as orphan drugs for a raredisease. According to FDA’s fee schedule, posted on September 25, 2017, for the 2018 fiscal year, the user fee for an application fee requiring clinical data,such as an NDA is $2,421,495. The FDA adjusts PDUFA user fees on an annual basis. A written request can be submitted for a waiver of the application fee forthe first human drug application that is filed by a small business. Where we are subject to these fees, they are significant expenditures that may be incurred inthe future and must be paid at the time of submission of each application to FDA. After an NDA is submitted by an applicant, and if it is accepted for filing by the FDA, the FDA will then review the NDA and, if and when itdetermines that the data submitted are adequate to show that the product is safe and effective for its intended use, the FDA will approve the product forcommercial distribution in the U.S. There can be no assurance that any of our products in development will receive FDA approval or that even if approved,they will be approved with labeling that includes descriptions of its abuse deterrent features. Moreover, even if our products in development are approvedwith labeling that includes descriptions of the abuse deterrent features of our products, advertising and promotion for the products will be limited to thespecific claims and descriptions in the FDA approved product labeling. In terms of program fees, subject to certain exceptions, each sponsor is required to pay the annual fee for each new prescription drug approved as of 1October of each fiscal year (for 2018 such fee is $304,162 per product strength), but applicants may not be assessed more than five prescription drug programfees for a fiscal year, for prescription drugs identified in a single application. For example, an applicant that has 10 drug products identified in an approvedNDA for 10 different strengths of tablet dosage form products is eligible for an assessment for a maximum of 5 program fees. PDUFA VI also eliminated feesfor drug application supplements and, establishment fees. The FDA requires drug manufacturers to establish and maintain quality control procedures for manufacturing, processing and holding drugs andinvestigational products, and products must be manufactured in accordance with defined specifications. Before approving an NDA, the FDA usually willinspect the facility(ies) at which the active pharmaceutical ingredients and finished drug product is manufactured, and will not approve the product unless itfinds that cGMP compliance at those facility(ies) are satisfactory. If the FDA determines the NDA is not acceptable, the FDA may outline the deficiencies inthe NDA and often will request additional information, thus delaying the approval of a product. Notwithstanding the submission of any requested additionaltesting or information, the FDA ultimately may decide that the application does not satisfy the criteria for approval. After a product is approved, changes tothe approved product, such as adding new indications, manufacturing changes, or changes in or additions to the approved labeling for the product, mayrequire submission of a new NDA or, in some instances, an NDA amendment, for further FDA review. Post-approval marketing of products in larger ordifferent patient populations than those that were studied during development can lead to new findings about the safety or efficacy of the products. Thisinformation can lead to a product sponsor’s requesting approval for and/or the FDA requiring changes in the labeling of the product or even the withdrawal ofthe product from the market. 22  The Best Pharmaceuticals for Children Act, or BPCA, became law in 2002 and was subsequently reauthorized and amended by FDAAA. Thereauthorization of BPCA provides an additional six months of market exclusivity beyond the expiration date of existing market exclusivities or eligiblepatents to NDA applicants that conduct acceptable pediatric studies of new and currently-marketed drug products for which pediatric information would bebeneficial, as identified by FDA in a Pediatric Written Request. The FD&C Act, as amended by the Pediatric Research Equity Act, or PREA, requires that mostapplications for drugs and biologics include a pediatric assessment (unless waived or deferred) to ensure the drugs’ and biologics’ safety and effectiveness inchildren. Such pediatric assessment must contain data, gathered using appropriate formulations for each age group for which the assessment is required, thatare adequate to assess the safety and effectiveness of the drug or the biological product for the claimed indications in all relevant pediatric subpopulations,and to support dosing and administration for each pediatric subpopulation for which the drug or the biological product is safe and effective. The pediatricassessments can only be deferred provided there is a timeline for the completion of such studies. FDA may waive (partially or fully) the pediatric assessmentrequirement for several reasons, including if the applicant can demonstrate that reasonable attempts to produce a pediatric formulation necessary for that agegroup have failed. The FDA has indicated our Oxaydo product is exempt from the pediatric studies requirement of the PREA. The terms of approval of any NDA for our product candidates, including the indication and product labeling (and, consequently permissibleadvertising and promotional claims we can make) may be more restrictive than what is sought in the NDA or what is desired by us. Additionally, the FDAconditioned approval of our Oxaydo product on our commitment to conduct Phase 4 epidemiological studies to assess the actual abuse levels of Oxaydo inthe market. The testing and FDA approval process for our product candidates requires substantial time, effort, and financial resources, and we cannot be surethat any approval will be granted on a timely basis, if at all. Further, drug products approved by FDA may be subject to continuing obligations intended to assure safe use of the products. Specifically, underthe FD&C Act, as amended by the Food and Drug Administration Amendments Act of 2007, or FDAAA, FDA may require Risk Evaluation and MitigationStrategies, or REMS, to manage known or potential serious risks associated with drugs or biological products. If FDA finds, at the time of approval orafterward, that a REMS is necessary to ensure that the benefits of our products outweigh the risks associated with the products, FDA will require a REMS and,consequently, that we take additional measures to ensure safe use of the product. Components of a REMS may include, but are not limited to, a MedicationGuide and/or Patient Package Insert, a marketing and sales communication plan for patients or healthcare providers concerning the drug, Elements To AssureSafe Use, or ETASUs such as, but not limited to, patient, prescriber, and pharmacy registries, and restrictions on the extent or methods of distribution, a REMSimplementation system, and a timetable for assessment of the effectiveness of the REMS. Currently, all extended-release or long-acting (ERLA) opioidproducts approved by the FDA are subject to a class-wide REMS program. The FDA has determined that a REMS is necessary for immediate release opioidanalgesics and has begun the process of incorporating immediate-release opioids into this class-wide REMS program. In addition, we, our suppliers and our licensees are required to comply with extensive FDA requirements both before and after approval. Forexample, we or our licensees are required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with certainrequirements concerning the advertising and promotion of our products, which, as discussed above, may significantly affect the extent to which we caninclude statements or claims referencing our abuse deterrent technology in product labeling and advertising. Also, quality control and manufacturingprocedures must continue to conform to cGMP after approval to avoid the product being rendered misbranded and/or adulterated under the FD&C Act as aresult of manufacturing problems. In addition, discovery of any material safety issues may result in changes to product labeling or restrictions on a productmanufacturer, potentially including removal of the product from the market. Whether or not FDA NDA approval in the U.S. has been obtained, approvals from comparable governmental regulatory authorities in foreigncountries must be obtained prior to the commencement of commercialization of our drug products in those countries. The approval procedure varies incomplexity from country to country, and the time required may be longer or shorter than that required for FDA approval. 23  FDA’s OTC Monograph Process The FDA regulates certain non-prescription drugs using an OTC Monograph which, when final, is published in the Code of Federal Regulations at21 C.F.R. Parts 330-358. For example, 21 C.F.R. Part 341 sets forth the products, such as pseudoephedrine hydrochloride, that may be marketed as an OTCcold, cough, allergy, bronchodilator, or antiasthmatic drug product in a form suitable for oral, inhalant, or topical administration and is generally recognizedas safe and effective and is not misbranded. Such products that meet each of the conditions established in the OTC Monograph regulations and the otherapplicable regulations may be marketed without prior approval by the FDA. The general conditions set forth for OTC Monograph products include, among other things: ·the product is manufactured at FDA registered establishments and in accordance with cGMPs; ·the product label meets applicable format and content requirements including permissible “Indications” and all required dosing instructions andlimitations, warnings, precautions and contraindications that have been established in an applicable OTC Monograph; ·the product contains only permissible active ingredients in permissible strengths and dosage forms; ·the product contains only suitable inactive ingredients which are safe in the amounts administered and do not interfere with the effectiveness of thepreparation; and ·the product container and container components meet FDA’s requirements. The advertising for OTC drug products is regulated by the Federal Trade Commission, or FTC, which generally requires that advertising claims betruthful, not misleading, and substantiated by adequate and reliable scientific evidence. False, misleading, or unsubstantiated OTC drug advertising may besubject to FTC enforcement action and may also be challenged in court by competitors or others under the federal Lanham Act or similar state laws. Penaltiesfor false or misleading advertising may include monetary fines or judgments as well as injunctions against further dissemination of such advertising claims. A product marketed pursuant to an OTC Monograph must be registered with the FDA and have a National Drug Code listing which is required for allmarketed drug products. After marketing, the FDA may test the product or otherwise investigate the manufacturing and development of the product to ensurecompliance with the OTC Monograph. Should the FDA determine that a product is not marketed in compliance with the OTC Monograph or is advertisedoutside of its regulations, the FDA may require corrective action up to and including market withdrawal and market recall. DEA Regulation Our Oxaydo product is, and several of our products in development, if approved and marketed, will be, regulated as “controlled substances” asdefined in the CSA, which establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA.The DEA is concerned with the loss and diversion of potentially abused drugs into illicit channels of commerce and closely monitors and regulates handlersof controlled substances, and the equipment and raw materials used in their manufacture and packaging. The DEA designates controlled substances as Schedule I, II, III, IV or V or as List I Chemicals. Schedule I substances by definition have noestablished medicinal use, and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, withSchedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.List I Chemicals are used to regulate potentially abused raw materials, such as pseudoephedrine HCl. We believe all of our products will receive DEAScheduling consistent with current DEA Scheduling standards. For example, Oxaydo Tablets are listed as a Schedule II controlled substances under the CSA,the same as all other oxycodone HCl products. Consequently, their manufacture, shipment, storage, sale and use will be subject to a high degree ofregulation. For example, generally, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not berefilled without a new prescription. 24  Annual DEA registration is required for any facility that manufactures, tests, distributes, dispenses, imports or exports any controlled substance orList I Chemical. Except for certain DEA defined co-incidental activities, each registration is specific to a particular location and activity. For example,separate registrations are needed for import and manufacturing, and each registration must specify which schedules of controlled substances are authorized. The DEA typically inspects a facility to review its security measures prior to issuing a registration and, thereafter, on a periodic basis. Securityrequirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Requiredsecurity measures include, among other things, background checks on employees and physical control of inventory through measures such as vaults, cages,surveillance cameras and inventory reconciliations. Records must be maintained for the handling of all controlled substances and List I Chemicals, andperiodic reports made to the DEA, for example distribution reports for Schedule I and II controlled substances, Schedule III substances that are narcotics, andother designated substances. Reports must also be made for thefts or significant losses of any controlled substance and List I Chemicals, and to obtainauthorization to destroy any controlled substance and List I Chemicals. In addition, special authorization, notification and permit requirements apply toimports and exports. In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II and List I Chemicals.Distributions of any Schedule I or II controlled substance must also be accomplished using special order forms, with copies provided to the DEA. BecauseOxaydo Tablets are Schedule II they are subject to the DEA’s production and procurement quota scheme. The DEA establishes annually an aggregate quotafor how much oxycodone active ingredient may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meetlegitimate scientific and medicinal needs. This limited aggregate amount of oxycodone that the DEA allows to be produced in the United States each year isallocated among individual companies, who must submit applications annually to the DEA for individual production and procurement quotas. We or ourlicensees must receive an annual quota from the DEA in order to produce or procure any Schedule I or Schedule II substance and List I Chemicals. The DEAmay adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA hassubstantial discretion in whether or not to make such adjustments. Our or our licensees’ quota of an active ingredient may not be sufficient to meetcommercial demand or complete the manufacture or purchase of material required for clinical trials. Any delay or refusal by the DEA in establishing our orour licensees’ quota for controlled substances or List I Chemicals could delay or stop our clinical trials or product launches, or interrupt commercial sales ofour products which could have a material adverse effect on our business, financial position and results of operations. The DEA also regulates Listed Chemicals, which are chemicals that may be susceptible to abuse, diversion, and use in the illicit manufacture ofcontrolled substances. Some Listed Chemicals, including pseudoephedrine, are used in various prescription and OTC drug products. DEA and state laws andregulations impose extensive recordkeeping, security, distribution, and reporting requirements for companies that handle, manufacture, or distribute ListedChemicals, including lawful drug products containing Listed Chemicals. In particular, OTC drug products containing certain Listed Chemicals, includingpseudoephedrine, are required to be secured behind the pharmacy counter and dispensed to customers directly by a pharmacist only in limited quantities.Pharmacists must obtain proof of identity from customers, and must keep detailed records and make reports to the DEA regarding sales of such products.Individual states may, and in some cases have, imposed stricter requirements on the sale of drug products containing Listed Chemicals, including requiring adoctor’s prescription prior to dispensing such products to a customer. The DEA conducts periodic inspections of registered establishments that handle controlled substances and Listed Chemicals. Failure to maintaincompliance with applicable requirements, particularly as manifested in loss or diversion, can result in enforcement action that could have a material adverseeffect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiateproceedings to revoke those registrations. In certain circumstances, violations could lead to criminal prosecution. 25  Individual states also regulate controlled substances and List I Chemicals, and we or our licensees are subject to such regulation by several stateswith respect to the manufacture and future distribution of these products. Pharmaceutical Coverage, Pricing and Reimbursement In the United States, the commercial success of our product candidates will depend, in part, upon the availability of coverage and reimbursementfrom third-party payers at the federal, state and private levels. Government payer programs, including Medicare and Medicaid, private health care insurancecompanies and managed care plans may deny coverage or reimbursement for a product or therapy in whole or in part if they determine that the product ortherapy is not medically appropriate or necessary. Also, third-party payers have attempted to control costs by limiting coverage and the amount ofreimbursement for particular procedures or drug treatments. The United States Congress and state legislatures from time to time propose and adopt initiativesaimed at cost containment, which could impact our ability to sell our products profitably. For example, in March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care andEducation Reconciliation Act, which we refer to collectively as the Health Care Reform Law, a sweeping law intended to broaden access to health insurance,reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare andhealth insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Among other cost containmentmeasures, the Healthcare Reform Law establishes: ·An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents;·A new Medicare Part D coverage gap discount program, in which pharmaceutical manufacturers who wish to have their drugs covered underPart D must offer discounts to eligible beneficiaries during their coverage gap period (the “donut hole”); and·A new formula that increases the rebates a manufacturer must pay under the Medicaid Drug Rebate Program. Many of the Healthcare Reform Law’s most significant reforms were implemented in 2014, with others thereafter, and their details will be shapedsignificantly by implementing regulations, some of which have yet to be finalized. If such reforms result in an increase in the proportion of uninsured patientswho are prescribed products resulting from our proprietary or partnered programs, this could adversely impact future sales of our products and our businessand results of operations. Where patients receive insurance coverage under any of the new options made available through the Healthcare Reform Law, thepossibility exists that manufacturers may be required to pay Medicaid rebates on that resulting drug utilization, a decision that could impact manufacturerrevenues. In addition, the Administration has also announced delays in the implementation of key provisions of the Healthcare Reform Law. Theimplications of these delays for our sales, business and financial condition, if any, are not yet clear. Although it is too early to determine the effect of the Health Care Reform Law, the new law appears likely to continue the pressure onpharmaceutical pricing, especially under government programs, and may also increase our or our licensees’ regulatory burdens and operating costs.Moreover, in the coming years, additional changes could be made to governmental healthcare programs that could significantly impact the success of ourproducts. The cost of pharmaceuticals continues to generate substantial governmental and third-party payer interest. We expect that the pharmaceuticalindustry will experience pricing pressures due to the trend toward managed healthcare, the increasing influence of managed care organizations and additionallegislative proposals. In addition to the Healthcare Reform Law, there will continue to be proposals by legislators at both the federal and state levels,regulators and third-party payers to keep healthcare costs down while expanding individual healthcare benefits. Economic pressure on state budgets mayresult in states increasingly seeking to achieve budget savings through mechanisms that limit coverage or payment for drugs. State Medicaid programs areincreasingly requesting manufacturers to pay supplemental rebates and requiring prior authorization by the state program for use of any drug for whichsupplemental rebates are not being paid. Managed care organizations continue to seek price discounts and, in some cases, to impose restrictions on thecoverage of particular drugs. Government efforts to reduce Medicaid expenses may lead to increased use of managed care organizations by Medicaidprograms. This may result in managed care organizations influencing prescription decisions for a larger segment of the population and a correspondingconstraint on prices and reimbursement for our products. Certain of these changes could limit the prices that can be charged for drugs we develop or theamounts of reimbursement available for these products from governmental agencies or third-party payers, or may increase the tax obligations onpharmaceutical companies, or may facilitate the introduction of generic competition with respect to products we are able to commercialize. In short, our orour licensees’ results of operations could be adversely affected by current and future healthcare reforms. 26  Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Healthcare Reform Law, and we expect therewill be additional challenges and amendments to the Healthcare Reform Law in the future. The Trump administration and members of the U.S. Congress haveindicated that they may continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Healthcare Reform Law. Most recently, theTax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance.It is uncertain the extent to which any such changes may impact our business or financial condition. In addition, we cannot predict the likelihood, nature orextent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. Forexample, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executiveactions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability toengage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance and review and approval ofmarketing applications. Notably, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA,that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existingregulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes abudget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be nogreater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offsetany incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interimguidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget, or OMB, on February 2, 2017, theadministration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. Inaddition, on February 24, 2017, President Trump issued an executive order directing each affected agency to designate an agency official as a “RegulatoryReform Officer” and establish a “Regulatory Reform Task Force” to implement the two-for-one provisions and other previously issued executive ordersrelating to the review of federal regulations, however it is difficult to predict how these requirements will be implemented, and the extent to which they willimpact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight andimplementation activities in the normal course, our business may be negatively impacted. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted priceceilings on specific products and therapies. There can be no assurance that our products will be considered medically reasonable and necessary for a specificindication, that our products will be considered cost-effective by third-party payers, that an adequate level of coverage or payment will be available so thatthe third-party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably. Other Healthcare Laws and Compliance Requirements We and our licensees that commercialize our products are subject to various federal and state laws targeting fraud and abuse in the healthcareindustry. For example, the federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering or payingremuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, forwhich payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs. The reach of the Anti-Kickback Statute wasbroadened by the Health Care Reform Law, which, among other things, amends the intent requirement of the statute so that a person or entity no longer needsto have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. The Healthcare Reform Law also provides thatthe government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false orfraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. The civil False Claims Act imposes liability on any personwho, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The “quitam” provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant hassubmitted a false claim to the federal government, and to share in any monetary recovery. Violations of these laws or any other federal or state fraud andabuse laws may subject our licensees to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcareprograms, which could harm the commercial success of our products and materially affect our business, financial condition and results of operations. 27  Segment Reporting We operate in one business segment; the research, development and manufacture of innovative abuse deterrent, orally administered pharmaceuticalproducts. Environmental Compliance We are subject to regulation under federal, state and local environmental laws and believe we are in material compliance with such laws. We incurthe usual waste disposal cost associated with a pharmaceutical research, development and manufacturing operation. Employees We have 14 full-time employees, 9 of whom are engaged in the research, development and manufacture of product candidates utilizing ourproprietary Aversion, Impede, and Limitx Technologies. The remaining employees are engaged in administrative legal, accounting, finance, marketing,market research, and business development activities. All of our senior management and most of our other employees have had prior experience inpharmaceutical or biotechnology companies. None of our employees are covered by collective bargaining agreements. We believe that our relations with ouremployees are good. ITEM 1A. RISK FACTORS Our future operating results may vary substantially from anticipated results due to a number of factors, many of which are beyond our control. Thefollowing discussion highlights some of these factors and the possible impact of these factors on future results of operations. If any of the following factorsactually occur, our business, financial condition or results of operations could be materially harmed. In that case, the value of our common stock coulddecline substantially and you may lose all or part of your investment. Risks Related to Our Business and Industry We have a history of operating losses and may not achieve profitability sufficient to generate a positive return on shareholders’ investment; our auditorshave included in their 2017 audit report an explanatory paragraph as to substantial doubt as to our ability to continue as a going concern. We had a net loss of $5.7 million, $7.4 million, and $5.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of June 6, 2018 wehad approximately $0.5 million of cash, cash equivalents, and refundable deposits and expect such amounts will only be sufficient to fund operations intolate June 2018. Our auditors have included in their report relating to our 2017 financial statements a “going concern” explanatory paragraph as to substantialdoubt of our ability to continue as a going concern that assumes the realization of our assets and the satisfaction of our liabilities and commitments in thenormal course of business. Our future profitability will depend on several factors, including: ·our receipt of royalties relating to Egalet’s sale of Oxaydo; 28  ·MainPointe’s successful marketing and sale of our Nexafed products and other products utilizing our Impede Technology, and marketacceptance, increased demand for and sales of our Nexafed products; ·our receipt of milestone payments and royalties relating to our Limitx Technology products in development from future licensees, of which noassurance can be given; and ·the receipt of FDA approval and the successful commercialization by future licensees (if any) of products utilizing our Limitx Technology andour ability to commercialize our Impede Technology without infringing the patents and other intellectual property rights of third parties. We are currently focused primarily on the development of our lead Limitx product candidate, LTX-03, as well as our other Limitx programs, which webelieve will result in our continued incurrence of significant research, development and other expenses related to those programs. If preclinical studies or theclinical trials for any of our Limitx drug candidates fail or produce unsuccessful results and those drug candidates do not gain regulatory approval, or if anyof our Limitx drug candidates, if approved, fail to achieve market acceptance, we may never become profitable. We cannot assure you that Oxaydo or our Nexafed products will be successfully commercialized or our Limitx Technology or Impede Technology productsin development will be successfully developed or be approved for commercialization by the FDA. Even if Egalet succeeds in commercializing Oxaydo, if MainPointe is successful in commercializing our Nexafed products, or if we or a licensee succeed indeveloping and commercializing one or more of our pipeline Limitx or Impede Technology products, we expect to continue using cash reserves for theforeseeable future. Our expenses may increase in the foreseeable future as a result of continued research and development of our product candidates,maintaining and expanding the scope of our intellectual property, and hiring of additional research and development staff. We will need to generate revenues from royalties on sales to achieve and maintain profitability. If Egalet does not successfully commercialize Oxaydo, ifMainPointe does not successfully commercialize the Nexafed products, or if we or our licensee (if any) cannot successfully develop, obtain regulatoryapproval and commercialize our products in development, including our Limitx product candidates, we will not be able to generate such royalty revenues orachieve future profitability. Our failure to achieve or maintain profitability would have a material adverse impact on our operations, financial condition andon the market price of our common stock. We will be required to raise additional funds to finance our operations and remain a going concern; we may not be able to do so when necessary, and/orthe terms of any financings may not be advantageous to us; if we fail to raise additional funding we will cease operations and/or seek protection underapplicable bankruptcy laws. Our operations to date have consumed substantial amounts of cash. Negative cash flows from our operations are expected to continue over at least the nextseveral years. Our cash utilization amount is highly dependent on the progress of our product development programs, particularly, the results of ourpreclinical and clinical studies of our Limitx product candidates and the cost, timing and outcomes of regulatory approval for our Limitx product candidates.In addition, the further development of our ongoing clinical trials will depend on upcoming analysis and results of those studies and our financial resourcesat that time. As of June 6, 2018 we had approximately $0.5 million of cash, cash equivalents, and refundable deposits and expect such amounts will only besufficient to fund operations into late June 2018. We will require future additional capital infusions including public or private financing, strategic partnerships or other arrangements with organizations thathave capabilities and/or products that are complementary to our own capabilities and/or products, in order to continue the development of our productcandidates. However, there can be no assurances that we will complete any financings, strategic alliances or collaborative development agreements, and theterms of such arrangements may not be advantageous to us. Any additional equity financing will be dilutive to our current stockholders and debt financing, ifavailable, may involve restrictive covenants. If we raise funds through collaborative or licensing arrangements, we may be required to relinquish, on termsthat are not favorable to us, rights to some of our technologies or product candidates that we would otherwise seek to develop or commercialize. Our failure toraise capital when needed could materially harm our business, financial condition and results of operations. In the absence of the receipt of additionalfinancing or payments under third-party license or collaborative agreements during June 2018, we will be required to scale back or terminate operationsand/or seek protection under applicable bankruptcy laws. This could result in a complete loss of shareholder value of the Company. Even assuming we aresuccessful in securing additional sources of financing to fund continued operations, there can be no assurance that the proceeds of such financing will besufficient to fund operations until such time, if at all, that we generate sufficient revenue from our products and product candidate to sustain and grow ouroperations. 29  Our ongoing capital requirements will depend on numerous factors, including: the progress and results of preclinical testing and clinical trials of our Limitxproduct candidates under development; the costs of complying with the FDA and other domestic regulatory agency requirements, the progress of our researchand development programs and those of our partners; the time and costs expended and required to obtain any necessary or desired regulatory approvals; ourability to enter into licensing arrangements, including any unanticipated licensing arrangements that may be necessary to enable us to continue ourdevelopment and clinical trial programs; the costs and expenses of filing, prosecuting and, if necessary, enforcing our patent claims, or defending againstpossible claims of infringement by third-party patent or other technology rights; the cost of commercialization activities and arrangements that we undertake;and the demand for our products, which demand depends in turn on circumstances and uncertainties that cannot be fully known, understood or quantifiedunless and until the time of approval, including the FDA approved label for any product. If we fail to comply with the covenants and other obligations under our term loan, the lender may be able to accelerate amounts owed under the facilityand may foreclose upon the assets securing our obligations. In December 2013, we (including our wholly-owned subsidiary Acura Pharmaceutical Technologies, Inc. (“APT”), entered into a loan and security agreementwith Oxford Finance LLC, or Oxford, pursuant to which we borrowed $10 million from Oxford. Our loan and security agreement with Oxford was amended onJanuary 7, 2015 in connection with our collaboration and license agreement with Egalet, on October 13, 2016 in connection with our license agreement withKemPharm, on March 16, 2017 in connection with our license agreement with MainPointe, and in the second quarter 2018 in connection with an aggregateloan of $1.0 million extended to us by John Schutte, a principal of MainPointe and our largest shareholder. Under the Oxford loan agreement, as amended, weare subject to a variety of affirmative and negative covenants. These covenants include required financial reporting, providing an unqualified auditor’sopinion together with our annual financial statements within 120 days of the end of our fiscal year (the unqualified audit opinion covenant), limitations oncertain dispositions and licensing of assets and limitations on the incurrence of additional debt. To secure our performance of our obligations under this loanand security agreement, we granted Oxford a security interest in all of our assets, and pledged to Oxford the stock of APT. Our failure to comply with theterms of the loan and security agreement, including the unqualified audit opinion covenant, the occurrence of a material adverse change in our business,operations or condition (financial or otherwise) or prospects, if we are not solvent, the material impairment in our prospect of repayment, a materialimpairment in the perfection or priority of the Oxford’s lien on our assets or the value of Oxford’s collateral, or the occurrence of certain other specifiedevents could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our loan, coupled withprepayment penalties, an additional interest payment of $795 thousand, potential foreclosure on our assets, and other adverse results. Pursuant to the amendment to the loan and security agreement with Oxford entered into in connection with the MainPointe license agreement, among otherthings, Oxford waived compliance with the unqualified audit opinion covenant for our 2016 financial statements, in exchange for which we granted Oxford alien on our intellectual property. In connection with an $1.0 million loan extended to us by Mr. Schutte in the second quarter of 2018, which is subordinatedto our obligations to Oxford under the Loan Agreement, pursuant to the fourth amendment to the Loan Agreement, Oxford granted a similar waiver ofcompliance with the unqualified audit opinion covenant for our 2017 financial statements and extended the period in which we could deliver financialstatements for 2017 to 160 days after year’s end (instead of 120 days). We are required to make equal monthly installments of principal and accrued interestof $260 thousand sufficient to amortize the term loan through the maturity date of December 1, 2018, when an additional one-time interest payment of $795thousand (which is not included in the amortization payments), will be due and payable. There is no assurance that we will have sufficient funds to make therequisite amortization and interest payments when due, including at maturity. 30  If Oxford were to declare an event of default, including as result of our failure to make a required amortization payment, Oxford would have the option,among other things, of accelerating the debt under our loan and security agreement and in such event, and in the event we do not make the additional interestpayment of $795 thousand required on the maturity date of December 1, 2018, foreclosing on the Company’s assets pledged as collateral for the term loan.Any declaration of an event of default by Oxford, or our failure to pay all principal and interest on or before the maturity date, would significantly harm ourbusiness and would likely cause the price of our common stock to decline. In our most recent amendment of the Loan Agreement, Oxford made nocommitment not to declare an Event of Default on account of our financial condition and there is no assurance Oxford will not attempt to do so at any time. We are largely dependent on our successful development of our Limitx product candidates and on the commercial success of Oxaydo. We anticipate that, for at least fiscal 2018 and 2019, our ability to generate revenues and become profitable will depend in large part on our successfuldevelopment of our Limitx product candidates and on the commercial success of our only FDA approved product, Oxaydo. We expect that a substantialportion of our efforts and expenditures over the next few years will be devoted to our lead Limitx product candidate, LTX-03, and other Limitx productcandidates in development. We completed our first two Phase I clinical studies for LTX-04, an opioid hydromorphone HCI, in mid-2016. We have changedour primary development focus from immediate-release hydromorphone products (i.e., LTX-04, described above) to immediate-release hydrocodone products(i.e., LTX-03) because hydrocodone bitartrate is more likely to be abused in oral excessive tablet abuse, or ETA, and completed two pharmokinetic studies forLTX-03 during 2017 and the first week of 2018. We are also engaged in formulation development or early preclinical development for other Limitx productcandidates. Accordingly, our business is currently substantially dependent on the successful development, clinical testing, regulatory approval andcommercialization of our Limitx product candidates, which may never occur. If our clinical studies for LTX-03 are not successful we may determine thatfurther clinical development of LTX-03 or other Limitx product candidates should be discontinued. If clinical studies for these product candidates produceunsuccessful results and we are forced or elect to cease their development, our business and prospects would be substantially harmed. We expect that anyrevenues from our Limitx product candidates will be derived from upfront payments, milestone payments and royalties under license agreements with one ormore pharmaceutical company partners, of which no assurance can be given. The commercial success of Oxaydo will depend on many factors, including our and our licensee Egalet’s ability to: ·obtain and increase market demand for, and sales of, Oxaydo; ·obtain acceptance of Oxaydo by physicians and patients; ·obtain and maintain adequate levels of coverage and reimbursement for Oxaydo from commercial health plans and government healthprograms, which we refer to collectively as third-party payors, particularly in light of the availability of other branded and generic competitiveproducts; ·maintain compliance with regulatory requirements; ·price Oxaydo competitively and enter into price discounting contracts with third-party payors; ·establish and maintain agreements with wholesalers and distributors on commercially reasonable terms; ·manufacture and supply Oxaydo to meet commercial demand, including obtaining sufficient quota from the DEA; ·maintain intellectual property protection for Oxaydo and obtain favorable drug listing treatment by the FDA to minimize generic competition;and ·obtain approval for additional dosage strengths of Oxaydo. 31  There can be no assurance that Egalet will devote sufficient resources to the further development, marketing and commercialization of Oxaydo. Egalet’smarketing of Oxaydo may result in low market acceptance and insufficient demand for, and sales of, the product. To date we have only minimal royaltiesfrom the sale of Oxaydo. In addition, Egalet has filed a prior approval supplement for OXAYDO® 10 mg and 15 mg dosage strengths, but received a completeresponse letter from the FDA, and according to a recent filing is working to determine next steps to respond to such filing. Egalet has advised that the FDA isrequesting more information regarding the effect of food on Oxaydo 15mg and the intranasal abuse-deterrent properties of Oxaydo 10mg and 15mg. If Egaletfails to successfully commercialize Oxaydo and increase sales, we may be unable to generate sufficient revenues to sustain or grow our business and we maynever become profitable, and our business, financial condition and results of operations will be materially adversely affected. If MainPointe is not successful in commercializing our Nexafed Products, our revenues and business will suffer. We commenced the launch and commercial distribution of Nexafed in mid-December 2012 and launched our Nexafed Sinus Pressure + Pain product inFebruary 2015. Our Nexafed products compete in the highly competitive market for cold, sinus and allergy products generally available to the consumerwithout a prescription. Many of our competitors have substantially greater financial and other resources and are able to expend more funds and effort thanMainPointe in marketing their competing products. Category leading brands are often supported by regional and national advertising and promotionalefforts. Our Nexafed products will compete with national brands as well as pharmacy store brands that are offered at a lower price. There can be no assurancethat MainPointe will succeed in commercializing our Nexafed products, or that the pricing of our Nexafed products will allow us to generate significantroyalty revenues. Regulations have been enacted in several state or local jurisdictions requiring a doctor’s prescription to obtain pseudoephedrine products.An expansion of such restrictions to other jurisdictions or even nationally will adversely impact MainPointe’s ability to market our Nexafed products as over-the-counter, or OTC, products and negatively impact royalty payments to us from Nexafed products sales. There can be no assurance that MainPointe willdevote sufficient resources to marketing and commercialization of our Nexafed products. MainPointe’s failure to successfully commercialize our Nexafed®products will have a material adverse effect on our business and financial condition. If Egalet is not successful in commercializing Oxaydo, our revenues and our business will suffer. Pursuant to our Collaboration and License Agreement with Egalet, or the Egalet Agreement, Egalet is responsible for manufacturing, marketing, pricing,promotion, selling and distribution of Oxaydo. If the Egalet Agreement is terminated in accordance with its terms, including due to a party’s failure toperform its obligations or responsibilities under the Agreement, then we would need to commercialize Oxaydo ourselves, for which we currently have noinfrastructure, or alternatively enter into a new agreement with another pharmaceutical company, of which no assurance can be given. If we are unable tobuild the necessary infrastructure to commercialize Oxaydo ourselves, which would substantially increase our expenses and capital requirements, which weare currently unable to fund, or are unable to find a suitable replacement commercialization partner, we would be unable to generate any revenue fromOxaydo. Even if we are successful at replacing the commercialization capabilities of Egalet, our revenues and/or royalties from Oxaydo could be adverselyimpacted. Egalet’s third party manufacturing facility currently is the sole commercial source of supply of Oxaydo. If Egalet’s manufacturing facility fails to obtainsufficient DEA quotas for oxycodone, fails to source adequate quantities of active and inactive ingredients, fails to comply with regulatory requirements, orotherwise experiences disruptions in commercial supply of Oxaydo, product revenue and our royalties could be adversely impacted. Egalet has various products in development and also markets other products, for which Oxaydo will vie for such licensee’s development, promotional,marketing, and selling resources. If Egalet fails to commit sufficient promotional, marketing and selling resources to Oxaydo, our expected royalties could beadversely impacted. Additionally, there can be no assurance that Egalet will commit the resources required for the successful commercialization of Oxaydo. The market for our opioid product candidates is highly competitive with many marketed non-abuse deterrent brand and generic products and other abusedeterrent product candidates in development. If Egalet prices Oxaydo inappropriately, fails to position Oxaydo properly, targets inappropriate physicianspecialties, or otherwise does not provide sufficient promotional support, product revenue and our royalties could be materially adversely impacted. 32  Egalet’s promotional, marketing and sales activities in connection with Oxaydo are subject to various federal and state fraud and abuse laws, including,without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. The federal Anti-Kickback Statute prohibits persons from knowinglyand willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of anitem or service reimbursable under a federal healthcare program. The federal False Claims Act imposes liability on any person who, among other things,knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. If Egalet’s activities are found to be inviolation of these laws or any other federal and state fraud and abuse laws, Egalet may be subject to penalties, including civil and criminal penalties,damages, fines and the curtailment or restructuring of its activities with regard to the commercialization of Oxaydo, which could harm the commercial successof Oxaydo and have a material adverse effect on our business, financial condition and results of operations. Our failure to continue the development of our Limitx opioid product candidates including hydrocodone/acetaminophen, or to successfully establish alicense agreement with a pharmaceutical company for the development and commercialization of such products, will adversely impact our ability todevelop, market and sell our Limitx technology products and our revenues and business will be materially adversely affected. We are engaged in the development of product candidates utilizing or Limitx technology, including planning Phase 1 studies for ourhydrocodone/acetaminophen lead product candidate. Our plan for developing, manufacturing and commercializing our Limitx opioid products includesentering into an agreement similar to the Egalet Agreement with a strategically focused pharmaceutical company. There can be no assurance, however, thatour early-stage development of our Limitx product candidates will be successful, or even if successful, that we will be successful in entering into such anagreement. Pending any such agreement, and subject to available funding, we expect to continue the development of our Limitx product candidates on ourown. The continued development of our Limitx product candidates will likely require additional financing, which may not be available on acceptable terms,or at all. In the absence of available financing, or our failure to successfully enter into a license agreement with a pharmaceutical company to develop andcommercialize our Limitx products, we may have to limit the size or scope of, or delay or abandon, the development of some or all of our product candidates,which would adversely impact our financial condition and results of operations. We must rely on current cash reserves, royalties from Egalet on Egalet’s sales of Oxaydo, royalties from MainPointe on its sales of Nexafed products tofund operations. To fund our continued operations, we expect to rely on our current cash resources, capital raising, royalty payments under the Egalet Agreement relating toOxaydo, and royalty payments under the MainPointe Agreement relating to our Nexafed products, and milestones and royalty payments that may be madeunder future license agreements with other pharmaceutical company partners for our product candidates in development, of which no assurances can begiven. No assurance can be given that current cash reserves, royalties from Egalet on Oxaydo net sales, or royalties from MainPointe on Nexafed products netsales will be sufficient to fund continued operations and the development of our product candidates until such time as we generate revenues from any of ourproducts in development. Moreover, no assurance can be given that we will be successful in raising additional financing or, if financing is obtained, that suchfinancing will be sufficient to fund operations until we generate sufficient revenues from Oxaydo and Nexafed products, or until product candidates utilizingour Limitx or Impede Technologies may be commercialized. In the event our cash reserves are insufficient to fund continued operations, we may need tosuspend some or all of our product development efforts or possibly discontinue operations. Since the termination of the Bayer Agreement in June 2017(which we believe is as a result of Bayer’s de-prioritization of development of the methamphetamine resistant pseudoephedrine-containing productcontemplated in the Agreement), which was a potential source of milestones and royalties, the MainPointe Agreement and the Egalet Agreement haveincreased in importance as potential sources of revenue, 33  Our and our licensees’ ability to market and promote Oxaydo and Limitx technology products by describing the abuse deterrent features of such productswill be determined by the FDA approved label for such products. The commercial success of Oxaydo and our Limitx Technology products in development will depend upon our and our licensees’ ability to obtain FDAapproved labeling describing such products’ abuse deterrent features or benefits. Our or our licensees’ failure to achieve FDA approval of product labelingcontaining such information will prevent or substantially limit our and our licensees’ advertising and promotion of such abuse deterrent features in order todifferentiate our products from other immediate release opioid products containing the same active ingredients, and would have a material adverse impact onour business and results of operations. In April 2015, the FDA published guidance for industry on the evaluation and labeling of abuse-deterrent opioids.While the 2015 FDA Guidance is non-binding on the FDA, it outlines FDA’s current thinking on the development and labeling of abuse-deterrent products.The 2015 FDA Guidance provides for three distinct levels of pre-marketing studies that are potentially eligible for inclusion in the labeling: (1) laboratory-based in vitro manipulation and extraction studies, (2) pharmacokinetic studies, and (3) clinical abuse potential studies. The 2015 FDA Guidance furtherprescribes additional post-approval or epidemiology studies to determine whether the marketing of a product with abuse-deterrent properties results inmeaningful reductions in abuse, misuse, and related adverse clinical outcomes, including addiction, overdose, and death in the post-approval setting, whichcan also be included in the labeling. FDA notes “the science of abuse deterrence is relatively new. Both the technologies involved and the analytical,clinical, and statistical methods for evaluating those technologies are rapidly evolving. For these reasons, FDA will take a flexible, adaptive approach to theevaluation and labeling of potentially abuse-deterrent opioid products”. We or our licensee may seek to include descriptions of studies that characterize the abuse-deterrent properties in the label for our Aversion and LimitxTechnology products in development. We have committed to the FDA to undertake epidemiological studies to assess the actual consequences of abuse ofOxaydo in the market. However, the extent to which a description of the abuse deterrent properties or results of epidemiological or other studies will be addedto or included in the FDA approved product label for our products in development will be the subject of our and our licensees’ discussions with, andagreement by, the FDA as part of the new drug application, or NDA, review process for each of our product candidates. The outcome of those discussions withthe FDA will determine whether we or our licensees will be able to market our products with labeling that sufficiently differentiates them from other productsthat have comparable therapeutic profiles. While the FDA approved label for Oxaydo includes the results from a clinical study which evaluated the effects ofnasally snorting crushed Oxaydo and commercially available oxycodone tablets and limitations on wetting or dissolving Oxaydo, it does not, however,include the results of our laboratory studies intended to evaluate Oxaydo’s potential to limit extraction of oxycodone HCl from dissolved Oxaydo Tabletsand resist conversion into an injectable, or IV solution. According to filings made by Egalet, a supplemental new drug application (“sNDA”) was submittedby Egalet in December 2016 for Oxaydo to support an abuse-deterrent label claim for the intravenous route of abuse, and in February 2017, Egalet filed aprior approval supplement (“PAS”) with data on new dosage strengths of 10 mg and 15 mg of Oxaydo. Egalet reported they received a complete responseletter from the FDA in June of 2017 where the FDA requested more information regarding the effect of food on Oxaydo 15 mg and the intranasal abusedeterrent properties of Oxaydo 10 and 15 mg. Egalet reported that based on discussions with the FDA regarding the sNDA, Egalet believed a contemporaryintranasal human abuse potential study would be needed to complete the sNDA, and given that the issues involved in the sNDA and PAS are intertwined,Egalet disclosed that they are evaluating their options and the costs associated to proceed on the abuse deterrent label and/or the additional dosage strengths.The absence of the results of these extraction and syringe studies in the FDA approved label for Oxaydo may substantially limit our licensee’s ability todifferentiate Oxaydo from other immediate release oxycodone products, which would have a material adverse effect on market acceptance of Oxaydo and onour business and results of operations. Notwithstanding the FDA approved labeling for Oxaydo, there can be no assurance that our Limitx Technology products in development will receive FDAapproved labeling that describes the abuse deterrent features of such products. If the FDA does not approve labeling containing such information, we or ourlicensees will not be able to promote such products based on their abuse deterrent features, may not be able to differentiate such products from otherimmediate release opioid products containing the same active ingredients, and may not be able to charge a premium above the price of such other products,which could materially adversely affect our business and results of operations. Further, because the FDA closely regulates promotional materials and other promotional activities, even if the FDA initially approves product labeling thatincludes a description of the abuse deterrent characteristics of our product, as in the case of Oxaydo, the FDA’s Office of Prescription Drug Promotion, orOPDP, will continue to review the acceptability of promotional claims and product advertising campaigns for our marketed products. This could lead to theissuance of warning letters or untitled letters, suspension or withdrawal of Oxaydo from the market, recalls, fines, disgorgement of money, operatingrestrictions, injunctions or criminal prosecution, which could harm the commercial success of our product and materially affect our business, financialcondition and results of operations. 34  Our product candidates are unproven and may not be approved by the FDA. We are committing a majority of our resources to the development of product candidates utilizing our Limitx and Impede Technologies. Notwithstanding thereceipt of FDA approval of Oxaydo and our marketing of our Nexafed products, there can be no assurance that any product candidate utilizing our Impede orLimitx Technologies will meet FDA’s standards for commercial distribution. Further, there can be no assurance that other product candidates that may bedeveloped using Limitx, Impede or Aversion Technologies will achieve the targeted end points in the required clinical studies or perform as intended inother pre-clinical and clinical studies or lead to an NDA submission or filing acceptance. Our failure to successfully develop and achieve final FDA approvalof our product candidates in development will have a material adverse affect on our financial condition. If the FDA disagrees with our determination that certain of our products meet the over-the-counter, or OTC, Monograph requirements, once those productsare commercialized, they may be removed from the market; the FDA or the U.S. Federal Trade Commission, or FTC, may object to our advertisement andpromotion of the extraction characteristics and benefits of our Nexafed products. Drugs that have been deemed safe and effective by the FDA for use by the general public without a prescription are classified as OTC drug products. CertainOTC drug products may be commercialized without premarket review by the FDA if the standards set forth in the applicable regulatory monograph are met.An OTC monograph provides the marketing conditions for the applicable OTC drug product, including active ingredients, labeling, and other generalrequirements, such as compliance with current Good Manufacturing Practices, or cGMP and establishment registration. Any product which fails to conform toeach of the general conditions in a monograph is subject to regulatory action. Further, although the FDA regulates OTC drug product labeling, the FTCregulates the advertising and marketing of OTC drug products. We believe that our Nexafed products licensed to MainPointe are classified for OTC saleunder an FDA OTC monograph, which will allow for their commercialization without submitting an NDA or abbreviated new drug application, or ANDA tothe FDA. We have also determined that, provided MainPointe adheres to the FDA’s requirements for OTC monograph products, including product labeling,we can advertise and promote the extraction characteristics and benefits of our Nexafed products which are supported by our research studies. No assurancecan be given, however, that the FDA will agree that our Nexafed products may be sold under the FDA’s OTC monograph product regulations or that the FDAor FTC will not object to MainPointe’s advertisement and promotion of our Nexafed products’ extraction characteristics and benefits. If the FDA determinesthat our Nexafed products do not conform to the OTC monograph or if MainPointe fails to meet the general conditions, once commercialized, the productsmay be removed from the market and we and MainPointe may face various actions including, but not limited to, restrictions on the marketing or distributionof such products, warning letters, fines, product seizure, or injunctions or the imposition of civil or criminal penalties. Any of these actions may materiallyand adversely affect our financial condition and operations. Additionally, the FDA has announced that it is considering material changes to how it regulatesOTC drug products and held a hearing in late March 2014 for public comment. Changes to the existing OTC regulations could result in a requirement that anNDA or ANDA be filed for our Nexafed products or other Impede Technology products in order to commercialize such products. If the FDA requires thesubmission of a NDA or ANDA to obtain marketing approval for our Nexafed® products or other Impede Technology products, this would result insubstantial additional costs, suspend the commercialization of our Nexafed products and require FDA approval prior to sale, of which no assurance can beprovided. In such case, the label for our Nexafed products or other Impede Technology products would be subject to FDA review and approval and there canbe no assurance that we or our licensees will be able to market Nexafed or other Impede Technology products with labeling sufficient to differentiate it fromproducts that have comparable therapeutic profiles. If we or our licensees are unable to advertise and promote the extraction characteristics of Nexafed orother Impede Technology products, we or our licensees may be unable to compete with national brands and pharmacy chain store brands. 35  Our Limitx, Impede and Aversion Technology products may not be successful in limiting or impeding abuse or misuse upon commercialization. We are committing a majority of our resources to the development of products utilizing our Limitx and Impede Technologies. Notwithstanding the receipt ofFDA approval of Oxaydo and the results of our numerous clinical and laboratory studies for Oxaydo, our Nexafed products, and our Limitx and ImpedeTechnology products in development, there can be no assurance that Oxaydo, our Nexafed products or any other product utilizing our Limitx, Impede orAversion Technologies will perform as tested and limit or impede the actual abuse or misuse of such products in commercial settings. Moreover, there can beno assurance that the post-approval epidemiological study required by the FDA as a condition of approval of Oxaydo will show a reduction in theconsequences of abuse and misuse by patients for whom Oxaydo is prescribed. To date, Egalet has not achieved sufficient market share for Oxaydo to supporta full epidemiological study. The failure of Oxaydo, our Nexafed products or other products utilizing our Limitx and Impede Technologies to limit or impedeactual abuse or misuse in practice will have a material adverse impact on market acceptance for such products and on our financial condition and results ofoperations. Relying on third party contract research organizations, or CROs may result in delays in our pre-clinical, clinical or laboratory testing. If pre-clinical,clinical or laboratory testing for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development andcommercialization timelines. To obtain FDA approval to commercially sell and distribute in the United States any of our prescription product candidates, we or our licensees must submitto the FDA a NDA demonstrating, among other things, that the product candidate is safe and effective for its intended use. As we do not possess the resourcesor employ all the personnel necessary to conduct such testing, we rely on CROs for the majority of this testing with our product candidates. As a result, wehave less control over our development program than if we performed the testing entirely on our own. Third parties may not perform their responsibilities onour anticipated schedule. Delays in our development programs could significantly increase our product development costs and delay productcommercialization. The commencement of clinical trials with our product candidates may be delayed for several reasons, including, but not limited to, delays in demonstratingsufficient pre-clinical safety required to obtain regulatory approval to commence a clinical trial, reaching agreements on acceptable terms with prospectiveCROs, clinical trial sites and licensees, manufacturing and quality assurance release of a sufficient supply of a product candidate for use in our clinical trialsand/or obtaining institutional review board approval to conduct a clinical trial at a prospective clinical site. Once a clinical trial has begun, it may bedelayed, suspended or terminated by us or regulatory authorities due to several factors, including ongoing discussions with regulatory authorities regardingthe scope or design of our clinical trials, a determination by us or regulatory authorities that continuing a trial presents an unreasonable health risk toparticipants, failure to conduct clinical trials in accordance with regulatory requirements, lower than anticipated recruitment or retention rate of patients inclinical trials, inspection of the clinical trial operations or trial sites by regulatory authorities, the imposition of a clinical hold by FDA, lack of adequatefunding to continue clinical trials, and/or negative or unanticipated results of clinical trials. Clinical trials required by the FDA for commercial approval may not demonstrate safety or efficacy of our product candidates. Success in pre-clinical testingand early clinical trials does not assure that later clinical trials will be successful. Results of later clinical trials may not replicate the results of prior clinicaltrials and pre-clinical testing. Even if the results of our or our licensee’s pivotal phase III clinical trials are positive, we and our licensees may have to commitsubstantial time and additional resources to conduct further pre-clinical and clinical studies before we or our licensees can submit NDAs or obtain regulatoryapproval for our product candidates. Clinical trials are expensive and at times, difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Further, ifparticipating subjects or patients in clinical studies suffer drug-related adverse reactions during the course of such trials, or if we, our licensees or the FDAbelieves that participating patients are being exposed to unacceptable health risks, we or our licensees may suspend the clinical trials. Failure can occur atany stage of the trials, and we or our licensees could encounter problems causing the abandonment of clinical trials or the need to conduct additional clinicalstudies, relating to a product candidate. Even if our clinical trials and laboratory testing are completed as planned, their results may not support commercially viable product label claims. Theclinical trial process may fail to demonstrate that our product candidates are safe and effective for their intended use. Such failure may cause us or ourlicensees to abandon a product candidate and may delay the development of other product candidates. 36  We have no commercial manufacturing capacity and rely on third-party contract manufacturers to produce commercial quantities of our products. We do not have the facilities, equipment or personnel to manufacture commercial quantities of our products and therefore must rely on our licensees or otherqualified third-party contract manufactures with appropriate facilities and equipment to contract manufacture commercial quantities of products utilizing ourLimitx and Impede Technologies. These licensees and third- party contract manufacturers are also subject to cGMP regulations, which impose extensiveprocedural and documentation requirements. Any performance failure on the part of our licensees or contract manufacturers could delay commercialization ofany approved products, depriving us of potential product revenue. Our drug products, including our licensed Nexafed products, require precise, high quality manufacturing. Failure by our contract manufacturers to achieveand maintain high manufacturing standards could result in patient injury or death, product recalls or withdrawals, delays or failures in testing or delivery, costoverruns, or other problems that could materially adversely affect our business. Contract manufacturers may encounter difficulties involving productionyields, quality control, and quality assurance. These manufacturers are subject to ongoing periodic unannounced inspection by the FDA and correspondingstate and foreign agencies to ensure strict compliance with cGMP and other applicable government regulations; however, beyond contractual remedies thatmay be available to us, we do not have control over third-party manufacturers’ compliance with these regulations and standards. If for some reason our contract manufacturers cannot perform as agreed, or if we are unable to reach agreement with our contract manufacturers on the terms ofcontinued supply of our products, we may be required to replace them. Although we believe there are a number of potential replacements, we will incur addedcosts and delays in identifying and qualifying any such replacements. In addition, a new manufacturer would have to be educated in, or develop substantiallyequivalent processes for, production of our products or drug candidates, which could adversely impact the continued supply of our products or drugcandidates. We or our licensees may not obtain required FDA approval; the FDA approval process is time-consuming and expensive. The development, testing, manufacturing, marketing and sale of pharmaceutical products are subject to extensive federal, state and local regulation in theUnited States and other countries. Satisfaction of all regulatory requirements typically takes years, is dependent upon the type, complexity and novelty of theproduct candidate, and requires the expenditure of substantial resources for research, development and testing. Substantially all of our operations are subjectto compliance with FDA regulations. Failure to adhere to applicable FDA regulations by us or our licensees would have a material adverse effect on ouroperations and financial condition. In addition, in the event we are successful in developing product candidates for distribution and sale in other countries,we would become subject to regulation in such countries. Such foreign regulations and product approval requirements are expected to be time consumingand expensive. In addition, we cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation oradministrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our businessand industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that couldimpose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementingstatutes through rulemaking, issuance of guidance and review and approval of marketing applications. If these executive actions impose constraints on theFDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted. 37  We or our licensees may encounter delays or rejections during any stage of the regulatory review and approval process based upon the failure of clinical orlaboratory data to demonstrate compliance with, or upon the failure of the product candidates to meet, the FDA’s requirements for safety, efficacy andquality; and those requirements may become more stringent due to changes in regulatory agency policy or the adoption of new regulations. After submissionof a NDA, the FDA may refuse to file the application, deny approval of the application, require additional testing or data and/or require post-marketingtesting and surveillance to monitor the safety or efficacy of a product. For instance, the FDA’s approval of Oxaydo is conditioned on us or Egalet conductinga post-approval epidemiological study to assess the actual abuse levels and consequences of Oxaydo in the market. The Prescription Drug User Fee Act, orPDUFA, sets time standards for the FDA’s review of NDAs. The FDA's timelines described in the PDUFA guidance are flexible and subject to change based onworkload and other potential review issues and may delay the FDA’s review of an NDA. Further, the terms of approval of any NDA, including the productlabeling, may be more restrictive than we or our licensees desire and could affect the marketability of our products. Even if we comply with all the FDA regulatory requirements, we or our licensees may not obtain regulatory approval for any of our product candidates indevelopment. For example, we previously submitted a NDA to the FDA for an Aversion Technology product containing niacin, intended to provideimpediments to over-ingesting the product. Such niacin containing product was not approved by the FDA. If we or our licensees fail to obtain regulatoryapproval for any of our product candidates in development, we will have fewer commercialized products and correspondingly lower revenues. Even if regulatory approval of our products in development is received, such approval may involve limitations on the indicated uses or promotional claimswe or our licensees may make for our products, or otherwise not permit labeling that sufficiently differentiates our product candidates from competitiveproducts with comparable therapeutic profiles but without abuse deterrent features (see risk factor above entitled “Our and our licensees ability to market andpromote Oxaydo and Limitx Technology products by describing the abuse deterrent features of such products will be determined by the FDA approved labelfor such products”). Such events would have a material adverse effect on our operations and financial condition. We may market certain of our productswithout the prior application to and approval by the FDA. The FDA may subsequently require us to withdraw such products and submit NDA’s for approvalprior to re-marketing. The FDA also has the authority to revoke or suspend approvals of previously approved products for cause, to debar companies and individuals fromparticipating in the drug-approval process, to request recalls of allegedly violative products, to seize allegedly violative products, to obtain injunctions toclose manufacturing plants allegedly not operating in conformity with current cGMP and to stop shipments of allegedly violative products. In the event theFDA takes any such action relating to our products, such actions would have a material adverse effect on our operations and financial condition. We must maintain FDA approval to manufacture clinical supplies of our product candidates at our facility; failure to maintain compliance with FDArequirements may prevent or delay the manufacture of our product candidates and costs of manufacture may be higher than expected. We have installed the equipment necessary to manufacture clinical trial supplies of our Limitx and Impede Technology product candidates in tabletformulations at our Culver, Indiana facility. To be used in clinical trials, all of our product candidates must be manufactured in conformity with cGMPregulations. All such product candidates must be manufactured, packaged, and labeled and stored in accordance with cGMPs. Modifications, enhancementsor changes in manufacturing sites of marketed products are, in many circumstances, subject to FDA approval, which may be subject to a lengthy applicationprocess or which we may be unable to obtain. Our Culver, Indiana facility, and those of any third-party manufacturers that we or our licensees may use, areperiodically subject to inspection by the FDA and other governmental agencies, and operations at these facilities could be interrupted or halted if the FDAdeems such inspections are unsatisfactory. Failure to comply with FDA or other governmental regulations can result in fines, unanticipated complianceexpenditures, recall or seizure of products, total or partial suspension of production or distribution, suspension of FDA review of our product candidates,termination of ongoing research, disqualification of data for submission to regulatory authorities, enforcement actions, injunctions and criminal prosecution. We develop our products, and manufacture clinical supplies, at a single location. Any disruption at this facility could adversely affect our business andresults of operations. We rely on our Culver, Indiana facility for developing our product candidates and the manufacture of clinical supplies of our product candidates. If theCulver, Indiana facility were damaged or destroyed, or otherwise subject to disruption, it would require substantial lead-time to repair or replace. If our Culverfacility were affected by a disaster, we would be forced to rely entirely on CROs and third-party contract manufacturers for an indefinite period of time.Although we believe we possess adequate insurance for damage to our property and for the disruption of our business from casualties, such insurance may notbe sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. Moreover, any disruptions or delaysat our Culver, Indiana facility could impair our ability to develop our product candidates utilizing the Impede or Limitx Technologies, which couldadversely affect our business and results of operations. 38  Our operations are subject to environmental, health and safety, and other laws and regulations, with which compliance is costly and which exposes us topenalties for non-compliance. Our business, properties and product candidates are subject to federal, state and local laws and regulations relating to the protection of the environment,natural resources and worker health and safety and the use, management, storage and disposal of hazardous substances, waste and other regulated materials.Because we own and operate real property, various environmental laws also may impose liability on us for the costs of cleaning up and responding tohazardous substances that may have been released on our property, including releases unknown to us. These environmental laws and regulations also couldrequire us to pay for environmental remediation and response costs at third-party locations where we dispose of or recycle hazardous substances. The costs ofcomplying with these various environmental requirements, as they now exist or may be altered in the future, could adversely affect our financial conditionand results of operations. Our failure to successfully establish new license agreements with pharmaceutical companies for the development and commercialization of our otherproducts in development may adversely impair our ability to develop, market and sell such products. The Egalet Agreement grants Egalet an exclusive worldwide license to develop and commercialize Oxaydo. Our license agreement with KemPharm Inc., orthe KemPharm Agreement, grants exclusive worldwide rights to KemPharm to utilize our Aversion technology in certain of KemPharm’s prodrug products.Our license agreement with MainPointe grants exclusive rights in the U.S. and Canada (with option rights to expand the licensed territory) to our Nexafedproducts with option rights to certain other pseudoephedrine-containing products utilizing our Impede technology. We believe that opportunities exist toenter into license agreements similar to the Egalet Agreement, the KemPharm Agreement and the MainPointe Agreement with other pharmaceutical companypartners for the development and commercialization of our Limitx, Impede and Aversion Technologies in the United States and worldwide. However, therecan be no assurance that we will be successful in entering into such license agreements in the future. If we are unable to enter into such agreements, ourability to develop and commercialize our product candidates, and our financial condition and results of operations, would be materially adversely affected. If our licensees do not satisfy their obligations, we will be unable to develop our licensed product candidates. As part of the Egalet Agreement, the KemPharm Agreement, the MainPointe Agreement, or any license agreement we may enter into relating to any of ourLimitx or Impede Technology products in development or our Aversion technology, we will not have day-to-day control over the activities of our licenseeswith respect to any product candidate. If a licensee fails to fulfill its obligations under an agreement with us, we may be unable to assume the developmentand/or commercialization of the product covered by that agreement or to enter into alternative arrangements with another third party. In addition, we mayencounter delays in the commercialization of the products that are the subject of a license agreement. Accordingly, our ability to receive any revenue fromthe products covered by such agreements will be dependent on the efforts of our licensee. We could be involved in disputes with a licensee, which could leadto delays in or termination of, our development and/or commercialization programs and result in time consuming and expensive litigation or arbitration. Inaddition, any such dispute could diminish our licensee’s commitment to us and reduce the resources they devote to developing and/or commercializing ourproducts. If any licensee terminates or breaches its agreement, or otherwise fails to complete its obligations in a timely manner, our chances of successfullydeveloping and/or commercializing our product candidates would be materially adversely effected. Additionally, due to the nature of the market for Oxaydoand our Limitx and Impede product candidates, it may be necessary for us to license a significant portion of our product candidates to a single company,thereby eliminating our opportunity to commercialize other product candidates with other licensees. 39  If we fail to maintain our license agreement with Egalet, we may have to commercialize Oxaydo on our own and if we fail to maintain the licenseagreement with MainPointe we may have to commercialize Nexafed Products on our own. Our plan for manufacturing and commercializing Oxaydo currently requires us to maintain our license agreement with Egalet. In addition to other customarytermination provisions, the Egalet Agreement provides that Egalet may terminate the Egalet Agreement upon certain notice periods. If Egalet elects toterminate the Egalet Agreement, or if we are otherwise unable to maintain our existing relationship with Egalet, we would have to commercialize Oxaydoourselves for which we currently have no infrastructure, or alternatively enter into a new agreement with another pharmaceutical company, of which noassurance can be given. Our ability to commercialize Oxaydo on our own may require additional financing, which may not be available on acceptable terms,or at all. While, there is no provision for MainPointe to elect to terminate its license agreement without cause, if it should fail to perform thereunder and weterminated the agreement, then we would have to commercialize the Nexafed Products on our own. Although prior to entering into the MainPointe agreementwe had been commercializing certain Nexafed Products on our own, we would have to reestablish our capabilities, which will require additional financingwhich may not be available on acceptable terms, if at all. The market may not be receptive to products incorporating our Aversion, Impede or Limitx Technologies. The commercial success of our products will depend on acceptance by health care providers and others that such products are clinically useful, cost-effectiveand safe. There can be no assurance given that our products utilizing the Aversion, Impede or Limitx Technologies would be accepted by health careproviders and others. Factors that may materially affect market acceptance of our product candidates include but are not limited to: ·the relative advantages and disadvantages of our products compared to competitive products;·the relative timing to commercial launch of our products compared to competitive products;·the relative safety and efficacy of our products compared to competitive products;·the product labeling approved by the FDA for our products;·the perception of health care providers of their role in helping to prevent abuse and their willingness to prescribe abuse-deterrent products to do so;·the willingness of third party payers to reimburse for our prescription products;·the willingness of pharmacy chains to stock our products;·the willingness of pharmacists to recommend our Nexafed products to their customers; and·the willingness of consumers to pay for our products. Oxaydo and our Nexafed Products compete, and our other product candidates, if successfully developed and commercially launched will compete, with bothcurrently marketed and new products launched in the future by other companies. Physicians and other prescribers may not be inclined to prescribe ourprescription products unless our products demonstrate commercially viable advantages over other products currently marketed for the same indications.Pharmacy chains may not be willing to stock any of our products and pharmacists may not recommend Nexafed products to consumers. Further, consumersmay not be willing to purchase our products. If our products do not achieve market acceptance, we may not be able to generate significant revenues orbecome profitable. If we, our licensees or others identify serious adverse events or deaths relating to any of our products once on the market, we may be required to withdrawour products from the market, which would hinder or preclude our ability to generate revenues. We or our licensees are required to report to relevant regulatory authorities all serious adverse events or deaths involving our product candidates or approvedproducts. If we, our licensees, or others identify such events, regulatory authorities may withdraw their approvals of such products; we or our licensees may berequired to reformulate our products; we or our licensees may have to recall the affected products from the market and may not be able to reintroduce themonto the market; our reputation in the marketplace may suffer; and we may become the target of lawsuits, including class actions suits. Any of these eventscould harm or prevent sales of the affected products and could materially adversely affect our business and financial condition. 40  Our revenues may be adversely affected if we fail to obtain insurance coverage or adequate reimbursement for our products from third-party payers. The ability of our licensees to successfully commercialize our products may depend in part on the availability of reimbursement for our prescription productsfrom government health administration authorities, private health insurers, and other third-party payers and administrators, including Medicaid andMedicare. We cannot predict the availability of reimbursement for newly-approved products utilizing our Aversion, Impede or Limitx Technologies. Third-party payers and administrators, including state Medicaid programs and Medicare, are challenging the prices charged for pharmaceutical products.Government and other third-party payers increasingly are limiting both coverage and the level of reimbursement for new drugs. Third-party insurancecoverage may not be available to patients for any of our product candidates. The continuing efforts of government and third-party payers to contain or reducethe costs of health care may limit our commercial opportunity. If government and other third-party payers do not provide adequate coverage andreimbursement for any product utilizing our technologies, health care providers may not prescribe them or patients may ask their health care providers toprescribe competing products with more favorable reimbursement. In some foreign markets, pricing and profitability of pharmaceutical products are subjectto government control. In the United States, we expect there may be federal and state proposals for similar controls. In addition, we expect that increasingemphasis on managed care in the United States will continue to put pressure on the pricing of pharmaceutical products. Cost control initiatives coulddecrease the price that we or our licensees charge for any of our products in the future. Further, cost control initiatives could impair our ability or the abilityof our licensees to commercialize our products and our ability to earn revenues from commercialization In both the United States and certain foreign jurisdictions, there have been and we expect there will continue to be a number of legislative and regulatorychanges to the health care system that could impact our or our licensees’ ability to sell our products profitably. In particular, in 2010, the Patient ProtectionAffordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the Healthcare Reform Law, was enacted. TheHealthcare Reform Law substantially changes the way healthcare is financed by both governmental and private insurers and significantly affects thepharmaceutical industry. Among the provisions of the Healthcare Reform Law of greatest importance to the pharmaceutical industry are the following: ·An annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents; ·An increase in the minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; ·A new Medicare Part D coverage gap discount program, under which manufacturers must agree to offer 50 percent point-of-sale discounts offnegotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatientdrugs to be covered under Medicare Part D; ·Extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed careorganizations; ·A new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research; ·A revision to the definition of “average manufacturer price” for reporting purposes; and ·Encouragement for the development of comparative effectiveness research, which may reduce the extent of reimbursement for our products if suchresearch results in any adverse findings. At this time, it remains uncertain what the full impact of these provisions will be on the pharmaceutical industry generally or our business in particular. Thefull effects of these provisions will become apparent as these laws are implemented and the Centers for Medicare & Medicaid Services and other agenciesissue applicable regulations or guidance as required by the Healthcare Reform Law. Moreover, in the coming years, additional changes could be made togovernmental healthcare programs that could significantly impact the success of our products. 41  In addition, since its enactment, there have been judicial and Congressional challenges to certain aspects of the Healthcare Reform Law, and we expect therewill be additional challenges and amendments to the Affordable Care Act in the future. The Trump administration and members of the U.S. Congress haveindicated that they may continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Healthcare Reform Law. Most recently, theTax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance.It is uncertain the extent to which any such changes may impact our business or financial condition. If we are unable to establish sales and marketing capabilities for our products that are not licensed to third parties, our revenues and our business willsuffer. We do not currently have an extensive organization for the sales, marketing and distribution of pharmaceutical products and the cost of establishing andmaintaining such an organization may exceed the cost-effectiveness of doing so. If we do not license the commercialization of a product, we may have tobuild our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. If we are unableto establish or fund adequate sales, marketing and distribution capabilities, whether independently or with third parties, it will impair our ability to sellproducts and have a material adverse effect on our operations. Consolidation in the healthcare industry could lead to demands for price concessions or for the exclusion of some suppliers from certain of our markets,which could have an adverse effect on our business, financial condition or results of operations. Because healthcare costs have risen significantly, numerous initiatives and reforms by legislatures, regulators and third-party payers to curb these costincreases have resulted in a trend in the healthcare industry to consolidate product suppliers and purchasers. As the healthcare industry consolidates,competition among suppliers to provide products to purchasers has become more intense. This in turn has resulted, and will likely continue to result, ingreater pricing pressures and the exclusion of certain suppliers from important market segments as group purchasing organizations, and large single accountscontinue to use their market power to influence product pricing and purchasing decisions. We expect that market demand, government regulation, third-partyreimbursement policies and societal pressures will continue to influence the worldwide healthcare industry, resulting in further business consolidations,which may exert further downward pressure on the prices of our anticipated products. This downward pricing pressure may adversely impact our business,financial condition or results of operations. Under each of the Egalet Agreement, the KemPharm Agreement and the MainPointe Agreement, our licenseescontrol the price of the licensed products, and we expect that our licensees, if any, of our products in development, will control the price of such products andmay provide price discounts and price reductions in its discretion. Such price discounts and reductions will reduce the net sales of our licensed products and,correspondingly, our royalty payments under such license agreements. In addition, if any of our large customers is acquired or merged with another providerof similar products, we may lose that customer’s business Our success depends on our ability to protect our intellectual property. Our success depends on our ability to obtain and maintain patent protection for products developed utilizing our technologies, in the United States and inother countries, and to enforce these patents. The patent positions of pharmaceutical firms, including us, are generally uncertain and involve complex legaland factual questions. Notwithstanding our receipt of U.S. patents covering our Aversion, Impede and Limitx Technologies, there is no assurance that any ofour patent claims in our other pending non-provisional and provisional patent applications relating to our technologies will issue or if issued, that any of ourexisting and future patent claims will be held valid and enforceable against third-party infringement or that our products will not infringe any third-partypatent or intellectual property. Moreover, any patent claims relating to our technologies may not be sufficiently broad to protect our products. In addition,issued patent claims may be challenged, potentially invalidated or potentially circumvented. Our patent claims may not afford us protection againstcompetitors with similar technology or permit the commercialization of our products without infringing third-party patents or other intellectual propertyrights. 42  Our success also depends on our not infringing patents issued to others. We may become aware of patents belonging to competitors and others that couldrequire us to obtain licenses to such patents or alter our technologies. Obtaining such licenses or altering our technology could be time consuming andcostly. We may not be able to obtain a license to any technology owned by or licensed to a third party that we or our licensees require to manufacture ormarket one or more of our products. Even if we can obtain a license, the financial and other terms may be disadvantageous. Our success also depends on maintaining the confidentiality of our trade secrets and know-how. We seek to protect such information by entering intoconfidentiality agreements with employees, potential licensees, raw material suppliers, contract research organizations, contract manufacturers, consultantsand other parties. These agreements may be breached by such parties. We may not be able to obtain an adequate, or perhaps any, remedy to such a breach. Inaddition, our trade secrets may otherwise become known or be independently developed by our competitors. Our inability to protect our intellectual propertyor to commercialize our products without infringing third-party patents or other intellectual property rights would have a material adverse effect on ouroperations and financial condition. We also rely on or intend to rely on our or our licensees’ trademarks, trade names and brand names to distinguish our products from the products of ourcompetitors, and have registered or applied to register many of these trademarks. However, our trademark applications may not be approved. Third partiesmay also oppose our or our licensees’ trademark applications or otherwise challenge our use of the trademarks. In the event that our or our licensees’trademarks are successfully challenged, we or our licensees could be forced to rebrand our product, which could result in loss of brand recognition and couldrequire us or our licensees to devote resources to advertising and marketing these new brands. Further, our competitors may infringe our trademarks, or wemay not have adequate resources to enforce our trademarks. We may become involved in patent litigation or other intellectual property proceedings relating to our Aversion, Impede or Limitx Technologies orproduct candidates, which could result in liability for damages or delay or stop our development and commercialization efforts. The pharmaceutical industry has been characterized by significant litigation and other proceedings regarding patents, patent applications and otherintellectual property rights. The situations in which we may become parties to such litigation or proceedings may include: ·litigation or other proceedings we or our licensee(s) may initiate against third parties to enforce our patent rights or other intellectual propertyrights, including the Paragraph IV Proceedings described below in the next risk factor;·litigation or other proceedings we or our licensee(s) may initiate against third parties seeking to invalidate the patents held by such third partiesor to obtain a judgment that our products do not infringe such third parties’ patents;·litigation or other proceedings third parties may initiate against us or our licensee(s) to seek to invalidate our patents or to obtain a judgmentthat third party products do not infringe our patents;·if our competitors file patent applications that claim technology also claimed by us, we may be forced to participate in interference, inter partesor opposition proceedings to determine the priority of invention and whether we are entitled to patent rights on such invention; and·if third parties initiate litigation claiming that our products infringe their patent or other intellectual property rights, we will need to defendagainst such proceedings. The costs of resolving any patent litigation, including the Paragraph IV Proceedings, or other intellectual property proceeding, even if resolved in our favor,could be substantial. Many of our potential competitors will be able to sustain the cost of such litigation and proceedings more effectively than we canbecause of their substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual propertyproceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation, including the Paragraph IV Proceedings, andother intellectual property proceedings may also consume significant management time. 43  In the event that a competitor infringes upon our patent or other intellectual property rights, enforcing those rights may be costly, difficult and timeconsuming. Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time-consuming and could divert our management’s attention. We may not have sufficient resources to enforce our intellectual property rights or to defend ourpatent or other intellectual property rights against a challenge. If we are unsuccessful in enforcing and protecting our intellectual property rights andprotecting our products, it could harm our business. In certain circumstances, we expect that our licensees will have first right to control the enforcement ofcertain of our patents against third party infringers. Our licensees may not put adequate resources or effort into such enforcement actions or otherwise fail torestrain infringing products. In addition, in an infringement proceeding, including the Paragraph IV Proceedings, a court may decide that a patent of ours isinvalid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover thetechnology in question. An adverse result in any litigation, including the Paragraph IV Proceedings, or defense proceedings could put one or more of ourpatents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing. Our technologies or products may be found to infringe claims of patents owned by others. If we determine that we are, or if we are found to be infringing apatent held by another party, we, our suppliers or our licensees might have to seek a license to make, use, and sell the patented technologies and products. Inthat case, we, our suppliers or our licensees might not be able to obtain such license on acceptable terms, or at all. The failure to obtain a license to any thirdparty technology that may be required would materially harm our business, financial condition and results of operations. If a legal action is brought againstus or our licensees, we could incur substantial defense costs, and any such action might not be resolved in our favor. If such a dispute is resolved against us,we may have to pay the other party large sums of money and use of our technology and the testing, manufacturing, marketing or sale of one or more of ourproducts could be restricted or prohibited. Even prior to resolution of such a dispute, use of our technology and the testing, manufacturing, marketing or saleof one or more of our products could be restricted or prohibited. We are aware of certain United States and international pending patent applications owned by third parties with claims potentially encompassing Oxaydoand our other products. If such patent applications result in valid and enforceable issued patents, containing claims in their current form or otherwiseencompassing our products we or our licensees may be required to obtain a license to such patents, should one be available, or alternatively, alter ourproducts so as to avoid infringing such third-party patents. If we or our licensees are unable to obtain a license on commercially reasonable terms, or at all, weor our licensees could be restricted or prevented from commercializing our products. Additionally, any alterations to our products or our technologies couldbe time consuming and costly and may not result in technologies or products that are non-infringing or commercially viable. We are aware of an issued United States patent owned by a third party having claims encompassing the use of one of our Aversion inactive ingredients. Weare also aware of an issued United States patent owned by a third party having claims encompassing a pharmaceutical preparation containing viscosityproducing ingredients that can be drawn into a syringe when dissolved in 10mL’s or less of aqueous solution. While we believe that our Aversion productsdo not infringe these patents, or that such patents are otherwise invalid, there can be no assurance that we or our licensees will not be sued for infringing thesepatents, and if sued, there can be no assurance that we or our licensees will prevail in any such litigation. If we or our licensees are found to infringe either orboth of these patents, we or our licensees may seek a license to use the patented technology. If we are unable to obtain such a license, of which no assurancecan be given, we or our licensees may be restricted or prevented from commercializing our Aversion products. We are aware of certain issued United States patents owned by a third party having claims encompassing a process used to manufacture oxycodone HCl ofhigh purity and pharmaceutical products resulting therefrom. As required by the FDA, Oxaydo contains a similar high purity oxycodone HCl manufacturedby a supplier that is not the owner or licensee of such patents. The owner of these patents has filed patent infringement actions relating to these patentsagainst companies that have filed abbreviated new drug applications with the FDA for extended-release versions of oxycodone HCl. To our knowledge, thepatent owner has not initiated any patent infringement actions against the sellers of immediate-release oxycodone HCl products or their suppliers ofoxycodone HCl, however, we cannot be certain that these immediate-release products actually utilize a high purity oxycodone. We cannot provide assurancethat our licensee or its oxycodone HCl supplier will not be sued for infringing these patents. In the event of an infringement action, our licensee and theiroxycodone HCl supplier would have to either: (a) demonstrate that the manufacture of the oxycodone HCl used in Oxaydo does not infringe the patentclaims, (b) demonstrate the patents are invalid or unenforceable, or (c) enter into a license with the patent owner. If our licensee or their oxycodone HClsupplier is unable to demonstrate the foregoing, or obtain a license to these patients, our licensee may be required or choose to withdraw Oxaydo from themarket. 44  We are aware of a certain issued United States patent owned by a third party having claims similar to our second generation Impede Technology directed toingredient amounts that are generally more than the amounts used in our technology. While we believe our technology does not infringe this patent, wecannot provide assurance that we will not be sued under such patent or if sued, that we will prevail in any such suit. We cannot assure you that our technologies, products and/or actions in developing our products will not infringe third-party patents. Our failure to avoidinfringing third-party patents and intellectual property rights in the development and commercialization of our products would have a material adverse effecton our operations and financial condition. Generic manufacturers are using litigation and regulatory means to seek approval for generic versions of Oxaydo, which could cause Egalet’s sales tosuffer and adversely impact our royalty revenue. Under the Hatch-Waxman Act, the FDA can approve an ANDA for a generic version of a branded drug and what is referred to as a Section 505(b)(2) NDA, fora branded variation of an existing branded drug, without requiring such applicant to undertake the full clinical testing necessary to obtain approval to marketa new drug. In November 2017 the FDA issued guidance for the industry on obtaining approval for generic versions of opioids that reference products whoselabeling describes abuse-deterrent properties. An ANDA applicant usually needs to only submit data demonstrating that its product has the same activeingredient(s) and is bioequivalent to the branded product, in addition to any data necessary to establish that any difference in strength, dosage form, inactiveingredients, or delivery mechanism does not result in different safety or efficacy profiles, as compared to the reference drug. Under the 2017 FDA guidancewhen a potential ANDA applicant develops a generic solid oral opioid drug product, the potential ANDA applicant should evaluate its proposed generic drugto show that it is no less abuse deterrent than the reference drug with respect to all of the potential routes of abuse. The Hatch-Waxman Act requires an applicant for a drug that references one of our branded drugs to notify us of their application if they assert in theirapplication that the patents we have listed in the Orange Book will not be infringed or otherwise are invalid or unenforceable (a Paragraph IV Certification).Upon receipt of this notice, we or our licensee will have 45 days to bring a patent infringement suit known as a Paragraph IV Proceeding in federal districtcourt against such applicant. If such a suit is commenced, the FDA is generally prohibited from granting approval of the ANDA or Section 505(b)(2) NDAuntil the earliest of 30 months from the date the FDA accepted the application for filing, the conclusion of litigation in the generic applicant’s favor orexpiration of the patent(s). If the litigation is resolved in favor of the applicant or the challenged patent expires during the 30-month stay period, the stay islifted and the FDA may thereafter approve the application based on the standards for approval of ANDAs and Section 505(b)(2) NDAs. Frequently, theunpredictable nature and significant costs of patent litigation leads the parties to settle to remove this uncertainty. Settlement agreements between brandedcompanies and generic applicants may allow, among other things, a generic product to enter the market prior to the expiration of any or all of the applicablepatents covering the branded product, either through the introduction of an authorized generic or by providing a license to the applicant for the patentssubject to the litigation. On September 20, 2012, we announced that we had received a Paragraph IV Certification Notice under 21 U.S.C. 355(j) (a Paragraph IV Notice) from ageneric sponsor of an ANDA for a generic drug listing Oxaydo (formerly known as Oxecta) as the reference listed drug. Since such date, we have receivedsimilar Paragraph IV Notices from four other generic pharmaceutical companies that have filed ANDAs listing Oxaydo as the reference drug. The ParagraphIV Notices refer to our U.S. Patent Numbers 7,201,920, 7,510,726 and 7,981,439, which cover our Aversion Technology and Oxaydo. The Paragraph IVNotices state that each generic sponsor believes that such patents are invalid, unenforceable or not infringed. On October 31, 2012, we initiated suit againsteach of Watson Laboratories, Inc. – Florida (Watson), Par Pharmaceutical, Inc., Impax Laboratories, Inc. and Sandoz Inc., and on April 29, 2013, we initiatedsuit against Ranbaxy, Inc., each in the United States District Court for the District of Delaware alleging infringement of our U.S. Patent No. 7,510,726 listed inthe FDA’s Orange Book. The commencement of such litigation prohibits the FDA from granting approval of the filed ANDAs until the earliest of 30 monthsfrom the date the FDA accepted the application for filing, or the conclusion of litigation. In January 2013, we dismissed our suit against Watson on thegrounds that Watson had amended its ANDA from a Paragraph IV Certification to a Paragraph III Certification, which indicated its intent not to market itsgeneric Oxaydo product in advance of our patent expiring. 45  On October 9, 2013, we announced that we had entered into distinct Settlement Agreements with each of Par and Impax, to settle our patent infringementaction pending against them in the United States District Court for the District of Delaware. In the suit, we alleged that a generic Oxaydo product for whicheach of Par and Impax is separately seeking approval to market in the United States pursuant to an ANDA filing with the FDA infringes a U.S. patent ownedby us. Par is the first filer of an ANDA for a generic Oxaydo product and is entitled to the 180-day first filer exclusivity under applicable law and FDAregulations. Under the terms of the Settlement Agreement with Par, Par may launch its generic Oxaydo product in the U.S., through the grant of a non-exclusive, royalty-bearing license from us that would trigger on January 1, 2022. We currently have Orange Book patents that are due to expire between November 2023 andMarch 2025. In certain limited circumstances, our license to Par would become effective prior to January 1, 2022. Par is required to pay us royalties in therange of 10% to 15% of Par’s net profits from the sale of its generic Oxaydo product. Under the Settlement Agreement with Impax, Impax may launch its generic Oxaydo product in the U.S., through the grant of a non-exclusive, royalty-freelicense from us that would trigger 180 days following the first sale of a generic Oxaydo product in the U.S. by an entity that is entitled to the 180 day first-filer exclusivity under applicable law and FDA regulations (or if no entity is entitled to such 180 day exclusivity period, the date on which a generic Oxaydoproduct is first sold in the U.S. or November 27, 2021, whichever date occurs first). In certain circumstances, our license to Impax would become effectiveprior to such time. On May 8, 2014, we announced that we had entered into a Settlement Agreement with Ranbaxy Inc. to settle our patent infringement action pending in theUnited States District Court for the District of Delaware. In the suit, we alleged that a generic of our Oxaydo product for which Ranbaxy is seeking approvalto market in the United States pursuant to an ANDA filed with the FDA infringes U.S. patents owned by us. The Settlement Agreement provides thatRanbaxy’s current generic of our Oxaydo product that is the subject of its ANDA filing does not infringe our Orange Book listed patents with the FDA. Wehave not provided Ranbaxy a license to our patents and we may re-commence patent infringement litigation against Ranbaxy if Ranbaxy changes theformulation of its current generic Oxaydo product. On May 21, 2014, we announced that we had entered into a Settlement Agreement with Sandoz Inc. to settle our patent infringement action pending againstSandoz in the United States District Court for the District of Delaware. In the suit, we alleged that a generic of our Oxaydo product for which Sandoz isseeking approval to market in the United States pursuant to an ANDA filed with the FDA infringes a U.S. patent owned by us. Under the SettlementAgreement, Sandoz may launch its generic to the Oxaydo product in the U.S., through the grant of a non-exclusive license from us that would trigger 180days following the first sale of a generic to the Oxaydo product in the U.S. by an entity that is entitled to the 180 day first-filer exclusivity under applicablelaw and FDA regulations (or if no entity is entitled to such 180 day exclusivity period, the date on which a generic to the Oxaydo product is first sold in theU.S). In certain circumstances, our license to Sandoz would become effective prior to such time. Sandoz is not obligated to pay us a royalty if its currentformulation of its generic to the Oxaydo product is approved by the FDA. In the event Sandoz changes or modifies the structure of its generic Oxaydoproduct, or materially changes or modifies the amounts or type of any excipient used in the Sandoz formulation disclosed in its ANDA filing with the FDA asof July 30, 2013, Sandoz is required to pay us a royalty based upon the Net Profits (as defined in the Settlement Agreement) derived from the net sales of suchchanged or modified Sandoz generic Oxaydo product in the United States. It is possible that other generic manufacturers may also seek to launch a generic version of Oxaydo and challenge our patents. Any determination in any suchinfringement actions that our patents covering our Aversion Technology and Oxaydo are invalid or unenforceable, in whole or in part, or that the productscovered by generic sponsors’ ANDAs do not infringe our patents could have a material adverse effect on our operations and financial condition. 46  We may be exposed to product liability claims and claims regarding marketing of products and may not be able to obtain or maintain adequate productliability insurance and some claims may not be covered by insurance. Our business exposes us to potential product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products,and in particular opioid products. Manufacturers and distributors of prescription opioid medications, are the subject of lawsuits and have received subpoenasand other requests for information from various state and local government agencies regarding the sales and marketing of opioid medications. While wewould not expect to be implicated in any such action or investigations, since our business is focused on abuse deterrence, there can be no assurance that wewill not be so implicated. Product liability claims or marketing related claims might be made by patients, health care providers or others that sell or consumeour products or insurance companies that insure those affected by our products. These claims may be made even with respect to those products that possessregulatory approval for commercial sale. We currently have clinical trial product liability insurance on a claims-made basis for our subject clinical trials andhave product liability insurance for the Nexafed and Oxaydo products. This coverage may not be adequate to cover any product liability claims. Productliability coverage and other insurance is expensive. In the future, we may not be able to maintain such product liability insurance or other insurance at areasonable cost or in sufficient amounts to protect us against losses due to product liability claims or other claims. In addition our insurance may not covercertain marketing related claims and excludes certain products from product liability coverage. See litigation discussed below under “Item 3. LegalProceedings” of this Report. Any claims that are not covered by product liability insurance or other insurance could have a material adverse effect on ourbusiness, financial condition and results of operations. The pharmaceutical industry is characterized by frequent litigation. Those companies with significant financial resources will be better able to bring anddefend any such litigation. No assurance can be given that we would not become involved in future litigation, in addition to the ongoingReglan/Metoclopramide mass tort litigation and DES (diethylstilbestrol) litigation discussed below under “Item 3. Legal Proceedings” of this Report,including litigation relating to products we manufactured or distributed several years and decades ago when we manufactured and sold a broad range ofprescription and over the counter products. Such litigation may have material adverse consequences to our financial condition and results of operations. We face significant competition, which may result in others developing or commercializing products before or more successfully than we do. Our products and technologies compete to varying degrees against both brand and generic products offering similar therapeutic benefits and beingdeveloped and marketed by small and large pharmaceutical (for prescription products) and consumer packaged goods (for OTC products) companies. Manyof our competitors have substantially greater financial and other resources and are able to expend more funds and effort than us and our licensees in research,development and commercialization of their competitive technologies and products. Prescription generic products and OTC store brand products will offercost savings to third party payers and/or consumers that will create pricing pressure on our products. Also, these competitors may have a substantial salesvolume advantage over our products, which may result in our licensee’s costs of manufacturing being higher than our competitors’ costs. If our products areunable to capture and maintain market share, we or our licensees may not achieve significant product revenues and our financial condition and results ofoperations will be materially adversely affected. We believe potential competitors may be developing opioid abuse deterrent technologies and products. Such potential competitors include, but may not belimited to, Pain Therapeutics, Pfizer Inc., Purdue Pharma, Atlantic Pharmaceuticals, Egalet Corporation, KemPharm, Shionogi, Nektar Therapeutics, SignatureTherapeutics, QRx Pharma, Tris Pharma, Pisgah Labs, Teva Pharmaceuticals, Sun Pharmaceuticals, Inspirion Delivery Sciences, and CollegiumPharmaceuticals, Inc. These companies appear to be focusing their development efforts on ER Opioid Products, except for Atlantic Pharmaceuticals, PisgahLabs, Inspirion and KemPharm. Our Impede Technology products containing PSE, including our licensed Nexafed products, will compete in the highly competitive market for cold, sinusand allergy products generally available to the consumer without a prescription. Some of our competitors will have multiple consumer product offerings bothwithin and outside the cold, allergy and sinus category providing them with substantial leverage in dealing with a highly consolidated pharmacy distributionnetwork. The competing products may have well established brand names and may be supported by national or regional advertising. Our Nexafed productscompete directly with Johnson & Johnson’s Sudafed® brand as well as generic formulations manufactured by Perrigo Company and others. 47  We are concentrating a substantial majority of our efforts and resources on developing product candidates utilizing our Limitx and Impede Technologies.The commercial success of products utilizing such technologies will depend, in large part, on the intensity of competition, FDA approved product labelingfor our products compared to competitive products, and the relative timing and sequence for commercial launch of new products by other companiesdeveloping, marketing, selling and distributing products that compete with the products utilizing our Limitx and Impede Technologies. Alternativetechnologies and non-opioid products are being developed to improve or replace the use of opioid analgesics. In the event that such alternatives to opioidanalgesics are widely adopted, then the market for products utilizing our Limitx and Impede Technologies may be substantially decreased, thus reducing ourability to generate future revenues and adversely affecting our ability to generate a profit Key personnel are critical to our business and our success depends on our ability to retain them. We are dependent on our management and scientific team, including Robert Jones, our President and Chief Executive Officer, Peter A. Clemens, our ChiefFinancial Officer, and Albert W. Brzeczko, Ph.D., our Vice President of Technical Affairs. We may not be able to attract and retain personnel on acceptableterms given the competition for such personnel among biotechnology, pharmaceutical and healthcare companies, universities and non-profit researchinstitutions. While we have employment agreements with our CEO and CFO, all of our other employees are at-will employees who may terminate theiremployment at any time. We do not have key personnel insurance on any of our officers or employees. The loss of any of our key personnel, or the inabilityto attract and retain such personnel, may significantly delay or prevent the achievement of our product and technology development and business objectivesand could materially adversely affect our business, financial condition and results of operations. Our products are subject to regulation by the U.S. Drug Enforcement Administration, or DEA, and such regulation may affect the development and sale ofour products. The DEA regulates certain finished drug products and active pharmaceutical ingredients, including certain opioid active pharmaceutical ingredients andpseudoephedrine HCl that are contained in our products. Consequently, their manufacture, research, shipment, storage, sale and use are subject to a highdegree of regulation. Furthermore, the amount of active ingredients we can obtain for our clinical trials is limited by the DEA and our quota may not besufficient to complete clinical trials. There is a risk that DEA regulations may interfere with the supply of the products used in our clinical trials. In addition, we and our licensees and contract manufacturers are subject to ongoing DEA regulatory obligations, including, among other things, annualregistration renewal, security, recordkeeping, theft and loss reporting, periodic inspection and annual quota allotments for the raw material for commercialproduction of our products. The DEA, and some states, conduct periodic inspections of registered establishments that handle controlled substances. Facilitiesthat conduct research, manufacture, store, distribute, import or export controlled substances must be registered to perform these activities and have thesecurity, control and inventory mechanisms required by the DEA to prevent drug loss and diversion. Failure to maintain compliance, particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect on our business, results of operations,financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke thoseregistrations. In certain circumstances, violations could lead to criminal proceedings. Individual states also have controlled substances laws. Though state controlled substances laws often mirror federal law, because the states are separatejurisdictions, they may separately schedule drugs, as well. While some states automatically schedule a drug when the DEA does so, in other states there has tobe a rulemaking or a legislative action. State scheduling may delay commercial sale of any controlled substance drug product for which we obtain FDAapproval and adverse scheduling could have a material adverse effect on the attractiveness of such product. We or our licensees must also obtain separatestate registrations in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meetapplicable regulatory requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising underfederal law. 48  Social issues around the abuse of opioids, including law enforcement concerns over diversion of opioid and regulatory efforts to combat abuse, coulddecrease the potential market for Oxaydo, and, if approved, our Limitx product candidates. Media stories regarding prescription drug abuse and the diversion of opioids and other controlled substances are commonplace. Law enforcement andregulatory agencies may apply policies that seek to limit the availability of opioids. Such efforts may inhibit Egalet’s ability to commercialize Oxaydo and,if approved, our Limitx product candidate. Aggressive enforcement and unfavorable publicity regarding, for example, the use or misuse of oxycodone orother opioid drugs, the limitations of abuse resistant formulations, public inquiries and investigations into prescription drug abuse, litigation or regulatoryactivity, sales, marketing, distribution or storage of our drug products could harm our reputation. Such negative publicity could reduce the potential size ofthe market for our product candidates and Oxaydo and decrease the revenues and royalties we are able to generate from their sale. Similarly, to the extentopioid abuse becomes less prevalent or a less urgent public health issue, regulators and third-party payers may not be willing to pay a premium for abusedeterrent formulations of opioids. In addition, efforts by the FDA and other regulatory bodies to combat abuse of opioids may negatively impact the market for our product candidates. Forexample, in February 2016, as part of a broader initiative led by U.S. Department of Health and Human Services to address opioid-related overdose, death anddependence, the FDA released an action plan to address the opioid abuse epidemic and reassess the FDA’s approach to opioid medications. The planidentifies the FDA’s focus on implementing policies to reverse the opioid abuse epidemic, while maintaining access to effective treatments. The actions setforth in the FDA’s plan include strengthening post marketing study requirements to evaluate the benefit of long-term opioid use, changing the REMSrequirements to provide additional funding for physician education courses, releasing a draft guidance setting forth approval standards for generic abuse-deterrent opioid formulations, and seeking input from the FDA’s Scientific Board to broaden the understanding of the public risks of opioid abuse. Many ofthese changes could require our licensing partner and us to expend additional resources in developing and commercializing Oxaydo and our productcandidates to meet additional requirements. In October 2017, the acting director of HHS under the directive of President Trump, declared the opioid crisis anational health emergency and initiated a five point plan including (i) improving access to prevention, treatment, and recovery support services; (ii) targetingthe availability and distribution of overdose-reversing drugs; (iii) strengthening public health data reporting and collection; (iv) supporting cutting-edgeresearch on addiction and pain; and (v) advancing the practice of pain management. The impact that this five point plan will have on us and our licensingpartners is unclear at this time. We are increasingly dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity and data storagerisks. Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary courseof business, we collect, store and transmit confidential information, and it is critical that we do so in a secure manner in order to maintain the confidentialityand integrity of such confidential information. Our information technology systems are potentially vulnerable to service interruptions and security breachesfrom inadvertent or intentional actions by our employees, partners, vendors, or from attacks by malicious third parties. Maintaining the secrecy of thisconfidential, proprietary, and/or trade secret information is important to our competitive business position. While we have taken steps to protect suchinformation and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in oursystems or the unauthorized or inadvertent wrongful access or disclosure of confidential information that could adversely affect our business operations orresult in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidental loss, inadvertent disclosure,unapproved dissemination or misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result oftheft, hacking, or other forms of deception, or for any other cause, could enable others to produce competing products, use our proprietary technology and/oradversely affect our business position. Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial,legal, business, and reputational harm to us and could have a material effect on our business, financial position, results of operations and/or cash flow. 49  Prior ownership changes limit our ability to use our tax net operating loss carryforwards. Significant equity restructuring often results in an Internal Revenue Section 382 ownership change that limits the future use of Net Operating Loss (“NOL”),carryforwards and other tax attributes. In addition, under the Tax Cuts and Jobs Act of 2017, NOL usage in any given year will be limited to 80% of taxableincome, without regard to the NOL deduction, and losses incurred in 2018 and forward may not be carried back but can be carried forward indefinitely, butlosses incurred prior to 2018 can only be carried forward for 20 years. We have determined that we have undergone ownership changes in both 2004 and2017 (as defined by Section 382 of the Internal Revenue Code) and as a result, our use of NOL carryforwards on an annual basis will be very limited. Neitherthe amount of our NOL carryforwards nor the amount of limitation of such carryforwards claimed by us have been audited or otherwise validated by theInternal Revenue Service, which could challenge the amount we have calculated. The recognition and measurement of our tax benefit includes estimates andjudgment by our management, which includes subjectivity. Changes in estimates may create volatility in our tax rate in future periods based on newinformation about particular tax positions that may cause management to change its estimates. Risks Relating to our Common Stock Our quarterly results of operations will fluctuate, and these fluctuations could cause our stock price to decline. Our quarterly and annual operating results are likely to fluctuate in the future. These fluctuations could cause our stock price to decline. The nature of ourbusiness involves variable factors, such as the timing of any license agreement, the timing of launch and market acceptance of our products, and the timing ofthe research, development and regulatory submissions of our products in development that could cause our operating results to fluctuate. The forecasting ofthe timing and amount of sales of our products is difficult due to market uncertainty and the uncertainty inherent in seeking FDA and other necessaryapprovals for our product candidates. As a result, in some future quarters or years, our clinical, financial or operating results may not meet the expectations ofsecurities analysts and investors, which could result in a decline in the price of our stock. Our stock price has been and may continue to be volatile, and the value of an investment in our common stock may decline. During 2017, our stock traded as high as $1.40 per share and as low as $0.29 per share. The trading price of our common stock is likely to continue to behighly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors could include: ·results from our pre-clinical and clinical development programs, including our Limitx product candidates;·FDA actions related to our products in development;·FDA actions related to any of our potential products;·announcements regarding the sales of Oxaydo;·announcements regarding the progress of sales of Oxaydo;·announcements regarding the progress of our preclinical and clinical programs;·our licensee’s success in the commercialization of our Nexafed products;·announcements regarding the sales of our Nexafed products;·announcements regarding the execution of license agreements with third parties for our products or product candidates;·failure of any of our products in development, if approved, to achieve commercial success;·quarterly variations in our results of operations or those of our competitors;·our ability to develop and market new and enhanced products on a timely basis;·announcements by us or our competitors of acquisitions, regulatory approvals, clinical milestones, new products, significant contracts,commercial relationships or capital commitments;·third-party coverage and reimbursement policies;·additions or departures of key personnel;·commencement of, or our involvement in, litigation; 50  ·the inability of our contract manufacturers to provide us with adequate commercial supplies of our products;·changes in governmental regulations or in the status of our regulatory approvals;·changes in earnings estimates or recommendations by securities analysts;·any major change in our board or management;·general economic conditions and slow or negative growth of our market; and·political instability, natural disasters, war and/or events of terrorism. From time to time, we estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development goals ormilestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings.Also, from time to time, we expect that we will publicly announce the anticipated timing of some of these milestones. All of these milestones are based on avariety of assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control.If we do not meet these milestones as publicly announced, our stock price may decline and the commercialization of our products and potential products maybe delayed. In addition, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operatingperformance of publicly traded companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours,regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock. In addition, in the past,following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often beeninstituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention andresources. We do not have a history of paying dividends on our common stock. Historically, we have not declared and paid any cash dividends on our common stock. In addition, our Loan and Security Agreement with Oxford FinanceLLC restricts our ability to pay dividends during the term of such Agreement. We intend to retain all of our earnings for the foreseeable future to finance theoperation and expansion of our business. As a result, you may only receive a return on your investment in our common stock if the market price of ourcommon stock increases. Any future sale of a substantial number of shares in a capital raising transaction could depress the trading price of our stock. In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable forour common stock at prices that may not be the same as the then current trading price of our common stock. The price per share at which we sell additionalshares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the then currenttrading price of our common stock. As of March 30, 2018, our two largest shareholders own an aggregate of approximately 12,651,543 shares (including 1,782,531 shares underlying warrants)(representing approximately 56% of our outstanding shares). If some or all of such shares are sold by such stockholders, it may have the effect of depressingthe trading price of our common stock. In addition, such sales could make it more difficult for us to raise capital if needed in the future. 51  Approximately 47.5% of our common stock is owned by a single individual, who is also a principal of MainPointe Pharmaceuticals LLC, and thatindividual is also party to our Second Amended and Restated Voting Agreement. A significant amount of our common stock is owned by a single individual, John Schutte. On July 24, 2017, we completed a $4.0 million private placementwith him for the sale of 8,912,655 shares and warrants to purchase 1,782,531 shares at an exercise price of $0.528 and expiring on July 24, 2022. In thesecond quarter of 2018, Mr. Schutte lent us an aggregate of $1.0 million on an unsecured basis until our obligations to Oxford have been satisfied in full, andthereafter on a secured basis with a security interest in all of our assets. Mr. Schutte is a principal of MainPointe. In March 2017, we granted MainPointe anexclusive license to our Impede technology to commercialize our Nexafed® and Nexafed® Sinus Pressure + Pain Products in the United States and Canada.MainPointe also has options to expand the territory and products covered for additional sums following the termination of the Bayer Agreement. Further, aspart of the closing of the Transaction, we, Essex Woodlands Health Ventures V, L.P. (“Essex”) and Galen Partners III, L.P. (“Galen”), which has subsequentlysold its shares, amended and restated the existing Voting Agreement between the parties to provide for Mr. Schutte to join as a party so that he can designatea director (he has not done so). The combination of Mr. Schutte’s share ownership, control of one of our key licensing partners, and the right to designate adirector to oversee the long-term affairs of our company, and right to have a security interest in all of our assets after the Oxford obligations have beensatisfied in full, gives him the potential to have considerable influence over our business and affairs. As a result, Mr. Schutte, in view of his ownershippercentage of our common stock, will as a practical matter be able to control all matters requiring approval by our shareholders, including the approval orrejection of mergers, sales or licenses of all or substantially all of our assets, or other business combination transactions. The interests of Mr. Schutte as ashareholder and creditor may not always coincide with the interests of our other shareholders and as such we may take action to advance his interests to thedetriment of our other shareholders. Accordingly, you may not be able to influence any action we take or consider taking, even if it requires a shareholderholder vote. Our common stock is deemed a “penny stock,” which would make it more difficult for our investors to sell their shares. Our common stock is subject to the “penny stock” rules adopted under the Exchange Act. The penny stock rules generally apply to companies whosecommon stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share, other than companiesthat have had average revenue of at least $6,000,000 for the last three years or that have net tangible assets of at least $5,000,000 ($2,000,000 if the company(such as Acura) has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than“established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerningtrading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to tradepenny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in suchsecurities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for oursecurities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities. At times, our shares of common stock have been thinly traded, so you may be unable to sell at or near ask prices or even at all if you need to sell yourshares to raise money or otherwise desire to liquidate your shares. Our common stock is quoted on the OTC Markets OTC Pink tier (after being removed from the OTCQB where it was previously quoted). Our common stockexperiences periods when it could be considered “thinly-traded.” This situation may be attributable to a number of factors, including the fact that we are asmall company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate orinfluence sales volume, and that even if we came to the attention of such persons, they tend to be risk averse and would be reluctant to follow an unprovencompany such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, theremay be periods of several days, weeks or months when trading activity in our shares is minimal, as compared to a seasoned issuer which has a large and steadyvolume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that abroader or more active public trading market for our common stock will be sustained, or that current trading levels will be sustained or not diminish. We are a smaller reporting company, and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies willmake our common stock less attractive to investors. We are currently a “smaller reporting company,” meaning that we are not an investment company, an asset- backed issuer, or a majority-owned subsidiary of aparent company that is not a smaller reporting company and have a public float of less than $75 million, or in the absence of any public float had annualrevenues of less than $50 million during the most recently completed fiscal year. “Smaller reporting companies” are able to provide simplified executivecompensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registeredpublic accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreaseddisclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annualreports and in certain registration statements. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harderfor investors to analyze our results of operations and financial prospects. 52  ITEM 1B. UNRESOLVED STAFF COMMENTS The Company has received no written comments regarding periodic or current reports from the staff of the SEC that were issued 180 days or morepreceding the end of its 2017 fiscal year that remain unresolved. ITEM 2. PROPERTIES We lease from an unaffiliated Lessor, approximately 1,600 square feet of administrative office space at 616 N. North Court, Suite 120, Palatine,Illinois 60067. The lease agreement expired on March 31, 2017; effective April 1, 2017, the office space is leased on a month-to-month basis. The leaseagreement provides for rent, property taxes, common area maintenance, and janitorial services on a monthly basis of approximately $2 thousand per month.We utilize this lease space for our administrative and business development functions. We conduct research, development, laboratory, development scale and NDA submission batch scale manufacturing and other activities relating todeveloping product candidates using Aversion, Impede and Limitx Technologies at the facility we own located at 16235 State Road 17, Culver, Indiana. Atthis location, our wholly-owned subsidiary APT, is a 25,000 square foot facility with 7,000 square feet of warehouse, 8,000 square feet of manufacturingspace, 4,000 square feet of research and development labs and 6,000 square feet of administrative and storage space. The facility is located on 28 acres ofland. ITEM 3. LEGAL PROCEEDINGS Purdue Pharma Settlement In April 2015, Purdue Pharma L.P., Purdue Pharmaceuticals L.P. and The P.F. Laboratories, Inc., or collectively Purdue, commenced a patent infringementlawsuit against us and our Oxaydo product licensee Egalet US, Inc. and its parent Egalet Corporation in the United States District Court for the District ofDelaware alleging our Oxaydo product infringes Purdue’s U.S. Patent No. 8,389,007, or the 007 Patent. In April 2016, Purdue commenced a second patentinfringement lawsuit against us and Egalet in the United States District Court for the District of Delaware alleging our Oxaydo product infringes Purdue’snewly issued U.S. Patent No. 9,308,171, or the 171 Patent. The actions regarding the 007 Patent and the 171 Patent are collectively referred to as the“Actions”. On April 6, 2016, we filed a petition for Inter Partes Review, or IPR Review, with the U.S. Patent and Trademark Office, or USPTO, seeking toinvalidate Purdue’s 007 Patent. On May 20, 2016, Purdue on behalf of themselves and certain affiliates, Egalet Corporation, on behalf of itself and its affiliates and we, on behalf of ourselvesand our affiliates entered into a settlement agreement, or the Settlement Agreement, to settle the Actions and the IPR Review. Under the SettlementAgreement the parties dismissed or withdrew the Actions, requested that the USPTO terminate the IPR Review and exchanged mutual releases. No paymentswere made under the Settlement Agreement. The Settlement Agreement also provides that Purdue will not, in the future, assert certain Purdue U.S. patents, including the 007 Patent, the 171 Patent andrelated technologies, or collectively the Purdue Patents, against any Acura Settlement Product or Egalet Settlement Product (except generally in an action orinterference by Acura or Egalet challenging a Purdue Patent). Acura Settlement Products and Egalet Settlement Products are certain immediate-release andextended-release products, including Oxaydo. In addition, the Settlement Agreement provides that Purdue will not challenge, with certain exceptions, theAcura/Egalet Patents with respect to the Purdue Settlement Products (as defined below) and that Purdue provides Acura and/or Egalet certain waivers of non-patent marketing exclusivity with respect to Purdue Settlement Products. 53  The Settlement Agreement also provides that Acura and Egalet will not, in the future, assert certain Acura and/or Egalet U.S. patents, or collectively theAcura/Egalet Patents, including Acura’s Aversion® Technology patents, against any Purdue Settlement Products (except generally in an action orinterference by Purdue challenging an Acura/Egalet Patent). Purdue Settlement Products are certain immediate-release and extended-release products. Inaddition, the Settlement Agreement provides that Acura and Egalet will not challenge, with certain exceptions, the Purdue Patents with respect to the AcuraSettlement Products and Egalet Settlement Products and that Acura and Egalet provide Purdue certain waivers of non-patent marketing exclusivity withrespect to the Acura Settlement Products and Egalet Settlement Products. In addition, Purdue has certain rights to negotiate to exclusively distribute anauthorized generic version of certain Egalet Settlement Products, including, in some circumstances, Oxaydo® and other products using Acura’s Aversion®Technology if licensed to Egalet. The Settlement Agreement specifically excludes our patents related to our Impede® and Limitx™ technologies from the scope of the Acura/Egalet Patentsunder the Settlement Agreement. In December 2014, we entered into an agreement with Purdue Pharma L.P. to settle a patent interference action regarding certain intellectual property held byAcura (U.S. Patent No. 8,101,630). The dispute centered upon the issue of which company has priority in developing the invention. The parties agreed toforgo protracted litigation and the uncertainties arising therefrom by entering an agreement whereby we conceded Purdue Pharma’s claim of priority inexchange for certain financial consideration to us including an immediate non-refundable payment of $500 thousand. In June 2015, we received anadditional $250 thousand payment from Purdue Pharma relating to the December 2014 agreement. Reglan®/Metoclopramide Litigation Halsey Drug Company, as predecessor to us, was named along with numerous other companies as a defendant in cases filed in three separate state coordinatedlitigations pending in Pennsylvania, New Jersey and California, respectively captioned In re: Reglan®/Metoclopramide Mass Tort Litigation, PhiladelphiaCounty Court of Common Pleas, January Term, 2010, No. 01997; In re: Reglan Litigation, Superior Court of New Jersey, Law Division, Atlantic County,Case No. 289, Master Docket No. ATL-L-3865-10; and Reglan/Metoclopramide Cases, Superior Court of California, San Francisco County, Judicial CouncilCoordination Proceeding No. 4631, Superior Court No.: CJC-10-004631. In addition, we were served with a similar complaint by two individual plaintiffs inNebraska federal court, which plaintiffs voluntarily dismissed in December 2014. In this product liability litigation against numerous pharmaceuticalproduct manufacturers and distributors, including Acura, plaintiffs claim injuries from their use of the Reglan brand of metoclopramide and genericmetoclopramide. In the lawsuits filed to date, plaintiffs have not confirmed they ingested any of the generic metoclopramide manufactured by us. We discontinuedmanufacture and distribution of generic metoclopramide more than 20 years ago. In addition, we believe the June 23, 2011 decision by the U.S. SupremeCourt in PLIVA v. Mensing (“Mensing decision”) holding that state tort law failure to warn claims against generic drug companies are pre-empted by the1984 Hatch-Waxman Act Amendments and federal drug regulations will assist us in favorably resolving these cases. In New Jersey, Generic Defendants, including Acura, filed dispositive motions based on the Mensing decision, which the Court granted with a limitedexception. In June 2012, the New Jersey trial court dismissed all of the New Jersey cases pending against us with prejudice. In Pennsylvania, the trial court proceedings were stayed on January 12, 2017. On June 15, 2017, the Court entered an Order approving a stipulation whichdismisses nearly all of the individual cases against us based upon lack of product identification without prejudice and provides for these cases to bedismissed finally, with prejudice, on June 15, 2018, or at an earlier date in each individual case, if all parties are dismissed. Acura is in the process of seekingvoluntary dismissal without prejudice of the de minimis number of remaining Pennsylvania cases pending against Acura on the basis of lack of productidentification. We expect that these remaining few cases will be dismissed based on lack of product identification and the Court will finally dismiss thePennsylvania-based litigation against us with prejudice in 2018. Legal fees related to this matter are currently covered by our insurance carrier. 54  In California, on May 24, 2016, the Court entered an Order approving a stipulation which stays the individual cases against us and provides for an agreedupon dismissal protocol for all cases where is a lack of product identification. On January 13, 2017, the Court also entered a general stay of this entirelitigation. To date, none of these plaintiffs have confirmed they ingested any of the generic metoclopramide manufactured by us. Therefore, we expect thatthe lawsuits filed against us will be dismissed voluntarily with prejudice in 2018. Legal fees related to this matter are currently covered by our insurancecarrier. As any potential loss is neither probable nor estimable, we have not accrued for any potential loss related to these matters as of December 31, 2017 and we arepresently unable to determine if any potential loss would be covered by our insurance carrier. DES Litigation On April 12, 2018, an action was commenced against the Company and over twenty-five other pharmaceutical manufacturers in New York State SupremeCourt, New York County, captioned Cotto et al. v. Abbott Laboratories, Inc., et al (index 153339/2018). The Complaint contains seven causes of action,including negligence, strict liability, and breach of warranty, wrongful death, among others, in connection with the alleged exposure of the deceased plaintiffin utero to diethylstilbestrol (DES) in the 1950s as the result of the ingestion of the drug by her mother or grandmother. The plaintiffs are the personalrepresentative of the deceased and her two daughters. The plaintiffs were unable to determine which of the defendants produced the DES used by thedeceased, but regardless seeks to hold all defendants jointly and severally liable. The Complaint seeks $10.0 million in compensatory and $10.0 million inpunitive damages on each of five counts and damages in an amount to be determined for wrongful death and additional punitive damages in an unstatedamount. As any potential loss is neither probable nor estimable, we have not accrued for any potential loss related to these matters as of December 31, 2017.We are presently unable to determine if any potential loss would be covered by any of our current or former insurance carriers. ITEM 4. MINE SAFETY DISLCOSURES Not Applicable. 55  PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES Market and Market Prices of Common Stock During our 2016 fiscal year and through February 22, 2017, our common stock was traded on the Nasdaq Capital Market under the symbol “ACUR”.On February 23, 2017, our common stock was delisted from the Nasdaq Capital Market due to our failure to comply with Nasdaq’s Listing Rule 5550(b)(1),which requires that we maintain $2.5 million in stockholders’ equity for continued listing (or meet the alternatives of market value of listed securities of $35million or net income from continuing operations). NASDAQ had granted us a grace period through February 10, 2017, to regain compliance with ListingRule 5550(b)(1), but we were unable to regain compliance within such period. Commencing on February 23, 2017, our common stock is quoted on the OTCQB under the symbol “ACUR”, however commencing June 4, 2018 itis quoted on the OTC Markets OTC Pink tier. The downgrade was a result of the late filing of this Annual Report on Form 10-K beyond any applicable graceperiods. Set forth below for the periods indicated are the high and low sales prices for trading in our common stock on the NASDAQ Capital Market asreported by the NASDAQ Capital Market. Period Sale Prices High Low 2016 Fiscal Year First Quarter $2.83 $1.61 Second Quarter 3.52 1.71 Third Quarter 2.18 1.40 Fourth Quarter 1.65 0.71 2017 Fiscal Year First Quarter (through February 22, 2017) $1.40 $0.50 Set forth below for the period indicated are the high and low sales prices for our common stock in the OTC Market of OTCQB. Period Sales Prices High Low 2017 Fiscal Year First Quarter (from February 23, 2017) $0.75 $0.46 Second Quarter 0.65 0.40 Third Quarter 0.57 0.40 Fourth Quarter 0.51 0.29 2018 Fiscal Year First Quarter (through March 29, 2018) $0.87 $0.36 On March 29, 2018, the closing sales price of our common stock was $0.51. Holders There were approximately 301 holders of record of our common stock as of March 29, 2018 including approximately 82 holders whoare nominees for an undetermined number of beneficial owners based upon a review of a securities position listing provided by our transfer agent inSeptember 2017. This number, however, does not reflect the ultimate number of beneficial holders of our common stock. 56  Dividend Policy The payment of cash dividends is subject to the discretion of our Board of Directors and is dependent upon many factors, including our earnings, ourcapital needs and our general financial condition. Historically, we have not paid any cash dividends. In addition, our Loan and Security Agreement withOxford Finance LLC restricts our ability to pay dividends during the term of such Agreement. ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial data presented below for the years ended December 31, 2017, 2016, 2015, 2014, and 2013 are derived from ouraudited Consolidated Financial Statements. The Consolidated Financial Statements as of December 31, 2017 and 2016 and for each of the years in the two-year period ended December 31, 2017, and the reports thereon, are included elsewhere in this Report. The selected financial information presented for our2015, 2014 and 2013 operations and for our 2015, 2014 and 2013 balance sheets are derived from our audited Consolidated Financial Statements notpresented in this Report. The information set forth below has been retroactively adjusted to reflect a one-for-five reverse stock split effected by us on August 27, 2015, isqualified by reference to, and should be read in conjunction with, the Consolidated Financial Statements and related notes thereto included elsewhere in thisReport and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. OPERATING DATA (in thousands) except per share data 2017 2016 2015 2014 2013 Revenues, net $2,966 $4,464 $8,587 $751 $123 Cost and expenses: Cost of sales 128 477 986 428 364 Research and development (1) 3,721 4,028 2,608 4,582 4,923 Selling, marketing, general and administrative (2) 4,342 6,516 8,994 7,940 8,926 Interest expense 596 893 1,157 1,212 9 Interest and investment income 4 60 166 198 194 Other income - 2 3 4 4 Loss before provision for income taxes (5,817) (7,388) (4,989) (13,209) (13,901)Provision (benefit) for income taxes (135) - - - - Net loss applicable to common stockholders $(5,682) $(7,388) $(4,989) $(13,209) $(13,901) Loss per share of common stock: Basic $(0.36) $(0.62) $(0.46) $(1.35) $(1.45)Loss per share of common stock: Diluted $(0.36) $(0.62) $(0.46) $(1.35) $(1.45) Weighted average shares outstanding used in computing net loss pershare: Basic 15,903 11,870 10,796 9,779 9,553 Weighted average shares outstanding used in computing net loss pershare: Diluted 15,903 11,870 10,796 9,779 9,553 (1) Includes stock-based compensation expense from all types of awards of approximately $140, $170, $160, $220, and $315 for years 2017, 2016, 2015,2014 and 2013, respectively.(2) Includes stock-based compensation expense from all types of awards of approximately $360, $450, $480, $700 and $900 for years 2017, 2016, 2015,2014 and 2013, respectively. 57  BALANCE SHEET DATA(in thousands) 2017 2016 2015 2014 2013 Working capital (deficit) (3) $(2,065) $(700) $8,391 $10,239 $26,346 Total assets 4,604 8,208 16,961 16,195 28,630 Total liabilities 4,631 7,025 9,061 11,143 10,707 Accumulated deficit (380,380) (374,698) (367,310) (362,321) (349,112)Stockholders’ (deficit) equity $(27) $1,183 $7,900 $5,052 $17,923 (3) Excludes cash compensating balance requirement of $2,500 at December 31, 2016 and 2015. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included elsewhere in thisReport. Operating results are not necessarily indicative of results that may occur in the future periods. Certain statements in this Report under this Item 7, Item1, “Business”, Item 1A, “Risk Factors” and elsewhere in this Report constitute “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause ouractual results, performance or achievements or industry results, to be materially different from any future results, performance, or achievements expressed orimplied by such forward-looking statements. See page 1 of this Report under the caption “Forward-Looking Statements” for a description of the mostsignificant of such factors. Company Overview We are a specialty pharmaceutical company engaged in the research, development and commercialization of technologies and products intended toaddress medication abuse and misuse. We have discovered and developed three proprietary platform technologies which can be used to develop multipleproducts. Our Aversion® and Limitx™ Technologies are 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.On January 7, 2015, we entered into a Collaboration and License Agreement with Egalet US, Inc. and Egalet Ltd., each a subsidiary of Egalet Corporation, orcollectively Egalet, pursuant to which we exclusively licensed to Egalet worldwide rights to manufacture and commercialize Oxaydo. Oxaydo is currentlyapproved by the U. S. Food and Drug Administration, or FDA, for marketing in the United States in 5mg and 7.5mg strengths. Egalet launched Oxaydo in theUnited States late in the third quarter of 2015. We launched our first Impede Technology product, Nexafed, into the United States market in December 2012 and launched our Nexafed SinusPressure + Pain product in the United States in February 2015. We have a third pseudoephedrine product in development utilizing our Impede Technology.On March 16, 2017, we and MainPointe Pharmaceuticals, LLC, or MainPointe, entered into a License, Commercialization and Option Agreement, or theMainPointe Agreement, pursuant to which we granted MainPointe an exclusive license to our Impede technology in the U.S. and Canada to commercializeour Nexafed products (MainPointe has an option to license other Impede Technology following termination of the Bayer Agreement). The MainPointeAgreement also grants MainPointe the option to expand the licensed territory to the European Union, Japan and South Korea and to add additionalpseudoephedrine-containing products utilizing our Impede technology. MainPointe is controlled by John Schutte, who became our largest shareholderpursuant to a private placement completed in July 2017 and became a creditor in May 2018. On June 28, 2017, Bayer Healthcare LLC, or Bayer, terminated a 2015 License and Development Agreement in which we granted Bayer an exclusiveworldwide license to our Impede technology for use in an undisclosed methamphetamine resistant product. As a result of the termination, MainPointe has theoption to license our Impede technology with respect to such product in the United States and Canada upon payment of a fee. MainPointe has not yetexercised this option. 58  Our third abuse deterrent technology, Limitx, is designed to retard the release of active drug ingredients when too many tablets are accidently orpurposefully ingested by neutralizing stomach acid with buffer ingredients but deliver efficacious amounts of drug when taken as a single tablet with anominal buffer dose. We have completed four clinical studies of various product formulations utilizing the Limitx technology which have demonstratedproof-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 drugconcentration, or Cmax, was reduced in healthy fasted adult subjects by 50% to 65% when excessive buffer levels were ingested, or a situation consistentwith the over-ingestion of tablets. Study AP-LTX-301, or Study 301, the results for which were announced in January 2018, demonstrated drug Cmax fromLTX-03, a Limitx hydrocodone bitartrate and acetaminophen combination product, in healthy adult fasted subjects trended toward bioequivalence in testformulations A through E while showed an increasing reduction in Cmax for formulations F through H; in which formulations A though H had increasingincremental amounts of buffer starting with no buffer in formulation A. We believe the results of Study 301 demonstrated that LTX-03 is a formulation thatoptimizes the balance between effective blood levels of drug for pain relief at a single tablet dose while retarding bioavailability of drug when multipletablets are ingested. Study AP-LTX-300, or Study 300, was inconclusive in its results due to observed issues with drug release from over-encapsulated testproduct. We submitted an Investigational New Drug Application, or IND, for LTX-03 to the FDA in the first quarter of 2018 in order to advance to NDAdevelopment, which became effective in April 2018. The FDA has designated the development program for LTX-04 as Fast Track, which is designed tofacilitate 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 toits larger market size and its known prevalence of oral excessive tablet abuse. We have voluntarily placed the IND for LTX-04 on inactive status We are actively seeking a licensing partner for our Limitx product candidates. Company’s Present Financial Condition At December 31, 2017, we had cash and cash equivalents of $2.2 million compared to $2.7 million of unrestricted cash and cash equivalents atDecember 31, 2016. Under our term loan with Oxford Finance LLC, we were required to maintain a $2.5 million compensating balance until such time as weraise an additional $6.0 million (excluding payments under our KemPharm Agreement) through the issuance of equity securities and from upfront paymentsunder license, joint venture, collaboration or other partnering transactions. We satisfied such condition on July 24, 2017, when we received a $4.0 millionequity investment. We had an accumulated deficit of approximately $380.4 million and $367.3 million at December 31, 2017 and December 31, 2016,respectively. We had a loss from operations of $5.2 million and a net loss of $5.7 million for the year ended December 31, 2017, compared to a net loss fromoperations of $6.6 million and net loss of $7.4 million for the year ended December 31, 2016. As of June 6, 2018 after giving effect to a $1.0 million loanfrom John Schutte, our cash, cash equivalents, and refundable deposits was approximately $0.5 million and expect such amounts will only be able to fundoperations into late June 2018. We expect to continue to incur substantial losses for the foreseeable future as we continue to develop our clinical and preclinical productcandidates. To fund further operations and product development activities, we must raise additional financing or enter into license or collaborationagreements with third parties relating to our technologies. No assurance can be given that we will be successful in obtaining any such financing or insecuring license or collaboration agreements with third parties on acceptable terms, if at all, or if secured, that such financing or license or collaborationagreements will provide payments to the Company sufficient to fund continued operations. In the absence of such financing or third-party license orcollaboration agreements, the Company will be required to scale back or terminate operations and/or seek protection under applicable bankruptcy laws. Anextended delay or cessation of the Company’s continuing product development efforts will have a material adverse effect on the Company’s financialcondition and results of operations. 59  Our losses have resulted principally from costs incurred in connection with research and development activities, salaries and other personnel-relatedcosts and sales, marketing and general corporate expenses. Research and development activities include costs of pre-clinical studies, clinical trials, andclinical trial product supplies associated with our product candidates as well as cost sharing expenses of line extension studies and post-marketing studiesunder the Egalet Agreement. Sales and marketing expenses include costs associated with the Nexafed product line advertising incurred prior to our enteringinto the MainPointe Agreement on March 16, 2017, salaries and other personnel-related costs include the stock-based compensation associated with stockoptions and restricted stock units granted to employees and non-employee directors. Results of Operations for the Years Ended December 31, 2017 and 2016. December 31 2017 2016 Change $000’s $000’s Percent Revenues: License fee revenue $2,500 $3,500 $(1,000) (29)%Collaboration revenue 59 392 (333) (85)Royalty revenue 300 149 151 101 Product sales, net 107 423 (316) (75)Total revenues, net 2,966 4,464 (1,498) (34) Cost and expenses: Cost of sales 128 451 (323) (72)Inventory reserve expense for write-downs - 26 (26) (100)Research and development 3,721 4,028 (307) (8)Selling, marketing, general and administrative 4,342 6,516 (2,174) (33)Total cost and expenses 8,191 11,021 (2,830) (26)Operating loss (5,225) (6,557) (1,322) (20) Non-Operating income (expense): Interest and investment income 4 60 (56) (93)Interest expense (596) (893) (297) (33)Other income - 2 (2) (100)Total other expense, net (592) (831) (239) (29) Loss before provision for income taxes (5,817) (7,388) (1,571) (21)Provision (benefit) for income taxes (135) - 135 100 Net loss (5,682) $(7,388) (1,706) (23)% Revenue License Fees In March 2017, MainPointe Pharmaceuticals LLC paid us a licensing fee of $2.5 million under our collaboration and license agreement with itpursuant to which we granted MainPointe an exclusive license to our Impede Technology to commercialize our Nexafed products in the U.S. and Canada. In October 2016, KemPharm, Inc. paid us a licensing fee of $3.5 million under our worldwide license agreement pursuant to which we licensed ourAversion® Technology to KemPharm, Inc. for its use in the development and commercialization of three products using two of KemPharm’s prodrugcandidates. 60  Collaboration Revenue Collaboration revenue is derived from research and development services we perform under various license and development agreements. Werecognized $59 thousand and $392 thousand of collaboration revenue during the years ended 2017 and 2016, respectively. We are not currently providingresearch and development services under any of our license agreements. Royalty Revenue In connection with our license agreement with Egalet for Oxaydo Tablets, we earn a royalty based on product net sales. Egalet’s first commercial saleof Oxaydo occurred in October 2015. We recognized $281 thousand and $149 thousand of royalty revenue from Oxaydo during the years ended 2017 and2016, respectively. In connection with our license agreement with MainPointe for our Nexafed product line, we earn a royalty based on product net sales. MainPointe’sfirst commercial sale of Nexafed occurred in March 2017. We recognized $19 thousand of royalty revenue from Nexafed during 2017. Net Product Sales Nexafed® was launched by us in December 2012. Nexafed® Sinus Pressure + Pain was launched by us in February 2015. In March 2017, we licensedthe Nexafed product line to MainPointe. We recorded $107 thousand and $423 thousand of net product sales during the years 2017 (through March 16,2017) and 2016, respectively. Cost and Expenses Cost of Sales Our cost of sales on the Nexafed product line includes third-party manufacturing costs, third-party warehousing and product distribution charges.Our cost of sales for 2017 (through March 16, 2017) and 2016 were $128 thousand and $451 thousand, respectively. In March 2017 we licensed the Nexafedproduct line to MainPointe. Inventory reserve expense for the year ended 2016 was $26 thousand. We did not incur any reserve expense on our inventory during the year ended2017. We have no inventories on hand at December 31, 2017. Research and Development Research and development expense (“R&D”) for 2017 was primarily for our Limitx Technology and Impede Technology development activity andmay include, among other items, costs of preclinical and non-clinical internal and external activities, clinical study trials, clinical supplies and its relatedformulation and design costs, salaries and other personnel related expenses of our employees, our facility costs, and a percentage share of selected costsharing expenses under the license agreement with Egalet. For the years ended 2017 and 2016, there is $86 thousand and $186 thousand, respectively of costsharing expenses from clinical studies for product line extensions (additional strengths) on Oxaydo and $118 thousand and $140 thousand, respectively ofpotential cost sharing expenses for a FDA required post-marketing study on Oxaydo. Also included in each of 2017 and 2016 year end results are non-cashshare-based compensation expenses of $139 thousand and $166 thousand, respectively. Excluding the share-based compensation expense, our R&Dexpenses decreased approximately $300 thousand between reporting periods. During 2016 we completed Study AP-LTX-400 while we substantiallycompleted our project to integrate Impede 2.0 Technology into our Nexafed 30mg tablet while moving supply to an alternate contract manufacturer. During2017 we completed Study AP-LTX-401 and Study AP-LTX-300 and substantially completed our Study AP-LTX-301 by the end of 2017. General, Administrative, Selling and Marketing We had limited selling and marketing expenses for 2017 associated with advertising and marketing activities on the Nexafed product line, whichwas licensed to MainPointe in March 2017. Our general and administrative expenses primarily consisted of legal, audit and other professional services,corporate insurance, and payroll. Included in each of the 2017 and 2016 results are non-cash share-based compensation expenses of $324 thousand and $420thousand, respectively. Excluding the share-based compensation expense our selling, marketing, general and administrative expenses decreased byapproximately $2.1 million between reporting periods, resulting primarily from the elimination of advertising and marketing activities on the Nexafedproduct line as well as decreases in patent and general legal activities, including the elimination of ongoing legal and litigation expenses incurred withrespect to our litigation with Purdue Pharma which was settled in May 2016. 61  Non-Operating Expense During the years ended 2017 and 2016, non-operating expense consisted principally of interest expense on our term loan. Income Taxes Our results for 2017 and 2016 include no federal or state income tax benefit provisions due to 100% allowances placed against our deferred taxassets for the uncertainty of their future utilization. As a result of the Tax Cuts and Jobs Act of 2017, the $135 thousand Federal alternative minimum taxeswe paid in a prior year is refundable to the Company in prescribed percentages and time periods and therefore, we recorded a non-current receivable for a likeamount. Liquidity and Capital Resources At December 31, 2017, we had cash and cash equivalents of $2.2 million. As of June 6, 2018 we had approximately $0.5 million of cash, cashequivalents, and refundable deposits and expect such amounts will only be sufficient to fund operations into late June 2018. To fund further operations beyond June 2018, we must raise additional financing or enter into license or collaboration agreements with third partiesrelating to our technologies. The Company is exploring a variety of capital raising and other transactions to provide additional funding to continueoperations. These include potential private offerings of common stock to institutional investors. The Company is also actively seeking a licensing partner forits Limitx Technology, with the objective of receiving an upfront license fee, development milestone payments and royalties on the net sales of productsutilizing the Limitx Technology, similar to the Egalet Agreement and the now terminated Bayer Agreement. The Company is also exploring licensing orselling select assets and intellectual property in an effort to raise capital and reduce operating expenses. Finally, the Company is evaluating the potential fora strategic transaction which may involve the Company being acquired in a merger or asset purchase transaction. No assurance can be given that we will besuccessful 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. Our auditors haveincluded in their report relating to our 2017 financial statements a “going concern” explanatory paragraph as to substantial doubt of our ability to continueas a going concern. In the absence of such financing or third-party license or collaboration agreements, there will be substantial doubt about the Company’sability to continue as a going concern and the Company will be required to scale back or terminate operations and/or seek protection under applicablebankruptcy laws. An extended delay or cessation of the Company’s continuing product development efforts will have a material adverse effect on theCompany’s financial condition and results of operations. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the Company’s accompanyingbalance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financingrequirements on a continuous basis, to maintain existing financing and to succeed in its future operations. The Company’s financial statements do notinclude any adjustment relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessaryshould the Company be unable to continue in existence. Our future sources of revenue, if any, will be derived from milestone payments and royalties under the Egalet Agreement, the KemPharm Agreement,the MainPointe Agreement and similar agreements which we may enter into for our Limitx products in development with other pharmaceutical companypartners, for which there can be no assurance. 62  The amount and timing of our future cash requirements will depend on regulatory and market acceptance of our product candidates and theresources we devote to the development and commercialization of our product candidates. Cash Flows Comparison of Years Ended December 31, 2017 and 2016 The following table summarizes our cash flows for the years ended December 31, 2017 and 2016 (in thousands): Year Ended December 31, 2017 2016 Net cash (used in) provided by: Operating activities $(4,510) $(5,563)Investing activities 309 10,798 Financing activities 1,240 (2,539)Net (decrease) increase in cash $(2,961) $2,696 Cash Flows from Operating Activities Net cash used in operating activities was $4.5 million for the year ended December 31, 2017 and consisted primarily of a net loss of $5.7 million.This net loss was partially offset by $464 thousand in noncash share-based compensation expense, $306 thousand of noncash debt discount and debt issuecost amortization expense, $87 thousand of noncash depreciation expense, $49 thousand provision expense for sales returns and approximately $270thousand in net cash inflows from changes in operating assets and liabilities. Cash inflows from changes in operating assets and liabilities were primarily dueto a net increase of $226 between accounts payable, accrued expenses, accrued interest, and other liabilities primarily driven by our commercial operations,clinical studies and interest obligations, a net decrease between trade receivables, collaboration and royalty receivables of $81 thousand, and a decrease ininventory of $103 thousand. These inflows were partially offset by cash outflows due to increases in deposits and other assets of $142 thousand. Net cash used in operating activities was $5.6 million for the year ended December 31, 2016 and consisted primarily of a net loss of $7.4 million.This net loss was partially offset by $588 thousand in noncash share-based compensation expense, $352 thousand of noncash debt discount and debt issuecost amortization expense, $138 thousand of noncash depreciation expense, $99 thousand sales returns provision expense, $108 thousand inventory andfixed assets impairment provision expenses, $31 thousand marketable securities bond premium amortization expense and approximately $510 thousand innet cash inflows from changes in operating assets and liabilities. Cash inflows from changes in operating assets and liabilities were primarily due to a netincrease of $277 thousand between accounts payable, accrued expenses, accrued interest and other liabilities primarily driven by our commercial operations,clinical studies and interest obligations, as well as net decrease of $324 thousand in prepaid expenses and other assets. These inflows were partially offset bycash outflows due to a net increase between trade receivables, accrued investment income, and collaboration and royalty receivables of $32 thousand and anincrease in inventory of $59 thousand. Cash Flows from Investing Activities Net cash provided by investing activities for the year ended December 31, 2017 was 309 thousand and consisted of $103 thousand and $206thousand from the transfer of equipment and inventory, respectively, under Nexafed license agreement we completed in March 2017. Net cash provided by investing activities for the year ended December 31, 2016 was $10.8 million and consisted primarily of $10.9 million from thesales and maturities of marketable securities. The cash inflows were partially offset by $75 thousand in purchases of capital equipment. 63  Cash Flows from Financing Activities Net cash provided by financing activities was $1.2 million for the year ended December 31, 2017 and consisted of the $4.0 million net proceedsfrom the issuance of Common Stock to John Schutte in July 2017, partially offset by $2.8 million of repayments against the loan maturing December 1, 2018we have with Oxford. Net cash used in financing activities for the year ended December 31, 2016 was $2.5 million of repayments against the loan maturing December 1,2018 we have with Oxford. Contractual Obligations and Commitments The following table presents our expected cash payments on contractual obligations outstanding as of December 31, 2017: Payments due by period (in thousands) Total Less than1 year 1-3years 3-5years More than5 years Employment agreements $679 $679 $- $- $- Service agreements 279 279 - - - Severance agreement 10 10 - - - RSU awards 10 10 - - - Debt interest 911 911 - - - Debt principal 2,740 2,740 - - - Total $4,629 $4,629 $- $- $- Term Loan with Oxford Finance On December 27, 2013, we and our subsidiary, APT entered into a Loan and Security Agreement, or the Loan Agreement, with Oxford Finance LLC,or Oxford, as collateral agent and as a lender, pursuant to which the Oxford made a term loan to us in the principal amount of $10.0 million, or the Term Loan,subject to the terms and conditions set forth in the Loan Agreement. We used the proceeds of the Loan Agreement for general working capital and to fund ourbusiness requirements. The full principal amount of the Term Loan was funded on December 27, 2013. The Term Loan accrues interest at a fixed rate of 8.35% per annum(with a default rate of 13.35% per annum). We were required to make monthly interest−only payments until April 1, 2015 and starting on April 1, 2015, weare required to make payments of principal and accrued interest in equal monthly installments sufficient to amortize the Term Loan through the maturity dateof December 1, 2018. As of December 31, 2017, the outstanding principal balance of the Term Loan was $2.7 million. All unpaid principal and accrued andunpaid interest with respect to the Term Loan is due and payable in full on December 1, 2018. As security for our obligations under the Loan Agreement, wegranted Oxford a security interest in substantially all of our existing and after−acquired assets, exclusive of intellectual property assets. Pursuant to the LoanAgreement, we are not allowed to pledge our intellectual property assets to others. On January 7, 2015, we and Oxford entered into an amendment, or the First Amendment, to the Loan Agreement. Pursuant to the First Amendment,(i) the exercise price of the warrants issued to Oxford on the date of funding the Term Loan to purchase 59,561 shares of our common stock was lowered from$7.98 to $2.52 per share (such reduced amount being equal to the average closing price of our common stock on Nasdaq for the 10 trading days preceding thedate of the First Amendment and after giving effect to our one-for-five reverse stock split), (ii) we agreed to maintain a $2.5 million cash balance until suchtime as we have repaid $5.0 million in principal of the Term Loan, and (iii) Oxford consented to the terms of our Collaboration and License Agreement withEgalet relating to our Oxaydo product. On October 13, 2016, we and Oxford entered into a second amendment to the Loan Agreement, or the Second Amendment. Pursuant to the SecondAmendment, (i) the requirement that we maintain a $2.5 million cash balance reserve until such time as $5 million in principal was repaid under the TermLoan, has been modified so that the $2.5 million cash balance reserve remains in place until we raise an additional $6.0 million (excluding paymentsreceived under the KemPharm Agreement) through the issuance of equity securities and from upfront payments under license, joint venture, collaboration orother partnering transactions, provided that at least $3.0 million of such amount must be raised through the issuance and sale of our equity securities, and (ii)Oxford consented to the terms of our Agreement with KemPharm. 64  On March 16, 2017, we and Oxford entered into a third amendment to the Loan Agreement, or the Third Amendment. Pursuant to the ThirdAmendment (i) we granted Oxford a lien on our intellectual property, (ii) Oxford provided a waiver of compliance with the unqualified audit opinioncovenant in connection with our receipt of our auditor’s opinion with a going concern explanatory paragraph for our 2016 financial statements and (iii)Oxford consented to the terms of the MainPointe Agreement. In the second quarter of 2018, in connection with the total of a $1.0 million loan extended to us by John Schutte, we and Oxford entered into afourth amendment to the Loan Agreement, or the Fourth Amendment. Pursuant to the Fourth Amendment, Oxford provided a waiver of compliance with theunqualified audit opinion covenant in connection with our receipt of our auditor’s opinion with a going concern explanatory paragraph for our 2017financial statements and allowed us to deliver financial statements up to 160 days after year end, instead of 120 days after year end. We may voluntarily prepay the Term Loan in full, but not in part, and any prepayment is subject to a prepayment premium equal to 1% of theprincipal prepaid. In addition, at the maturity, termination or upon voluntary or mandatory prepayment of the Term Loan, we must pay Oxford an additionalone-time interest payment of $795 thousand. We are accruing additional monthly interest expense over the term of the loan for this additional one-timeinterest payment using the loan’s effective cash interest rate. As of December 31, 2017 and December 31, 2016, we have accumulated and accrued $700thousand and $559 thousand, respectively, of this additional interest. The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, amongothers, limits or restrictions on our ability to incur liens, incur indebtedness, pay dividends, redeem stock, and merge or consolidate and dispose of assets. Inaddition, we must submit on an annual basis to Oxford, within 120 days after the end of its fiscal year, audited consolidated financial statements, togetherwith an unqualified audit opinion from an independent registered public accounting firm, or the unqualified audit opinion covenant. Failure to comply withthe unqualified audit opinion covenant is a breach of the Loan Agreement and unless such covenant or breach is waived, Oxford would have the option ofdeclaring an event of default, accelerating our indebtedness under the Loan Agreement and initiating enforcement collection actions, foreclosing oncollateral (which includes most assets of the Company) and, among other things, preventing the Company from using any funds in its bank or securitiesaccounts. Per the term loan agreement an audit opinion with an explanatory paragraph noting substantial doubt about the Company’s ability to continue inbusiness (the “going concern opinion”) is deemed to violate the unqualified audit opinion covenant. Oxford provided a waiver of compliance with theunqualified audit opinion covenant in connection with our receipt of our auditor’s going concern opinion for our 2016 and 2017 financial statements andextended the period in which we could deliver financial statements for 2017 to 160 days after year’s end (instead of 120 days). Separately, we had a covenantto have $2.5 million in cash reserves per the terms of the Oxford loan, but that was extinguished by our July 2017 private placement to Mr. Schutte of8,912,655 shares and warrants to purchase 1,782,531 shares exercisable at $0.528 per share and expiring in July 23, 2022 for $4 million. The Loan Agreement contains other customary events of default (some of which are subject to applicable grace or cure periods) that entitle Oxford tocause our indebtedness under the Loan Agreement to become immediately due and payable. These include, among others, non−payment defaults, covenantdefaults, a material adverse change affecting us or our operations, bankruptcy and insolvency defaults and material judgment defaults. The warrants to purchase 59,561 shares of our common stock we issued to Oxford in connection with the Term Loan, having an exercise price of$2.52 per share (as adjusted pursuant to the First Amendment and after giving effect to our one-for-five reverse stock split), are immediately exercisable forcash or by net exercise and will expire December 27, 2020. 65  Loan from John Schutte In the second quarter of 2018, we borrowed a total of $1.0 million from John Schutte and issued a promissory note, or the Schutte Note, in thatprincipal amount to him. The Schutte Note bears interest at prime plus 2.0%, and matures on January 2, 2020, at which time all principal and interest is dueand is unsecured until all of our obligations to Oxford are satisfied, at which time we are required to grant Mr. Schutte a security interest in all of our assets.Events of Default under the Schutte Note are limited to bankruptcy defaults and failure to pay interest and principal when due on January 2, 2020. Inaddition, Mr. Schutte and Oxford entered into a subordination agreement, approved by us and APT pursuant to which Mr. Schutte subordinated the SchutteNote to our obligations to Oxford under the Loan Agreement. The Schutte Note may be prepaid at any time in whole or in part, however while Oxford’s loanis outstanding such prepayment will require Oxford’s consent. Off-Balance Sheet Arrangements We do not engage in transactions or arrangements with unconsolidated or other special purpose entities. Critical Accounting Policies The preparation of our financial statements in accordance with United States generally accepted accounting principles requires us to make estimatesand assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in our financial statements and accompanying notes. Weevaluate our estimates on an ongoing basis, including those estimates related to contract agreements, research collaborations and investments. We base ourestimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basisfor making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions. The following items in our financial statements require significant estimates and judgments: Going Concern In connection with the preparation of the consolidated financial statements for the years ended December 31, 2016 and December 31, 2017, theCompany conducted an evaluation as to whether there were conditions and events, considered in the aggregate, which raised substantial doubt as to theentity’s ability to continue as a going concern within one year after the date of the issuance, or the date of availability, of the financial statements to beissued, noting that there did appear to be evidence of substantial doubt of the entity’s ability to continue as a going concern as further discussed in Note 1 tothe consolidated financial statements. Revenue Recognition We may generate license fee revenue, milestone revenue, collaboration revenue, and royalty revenue from license, commercialization and researchand development agreements. As of March 16, 2017, we no longer manufacture Nexafed as we granted MainPointe an exclusive license to our Impedetechnology to commercialize our Nexafed products in the U.S. and Canada; prior to such date we generated revenue from our product sales of our Nexafedproduct line that we marketed and distributed ourselves. Revenue is generally realized or realizable and earned when there is persuasive evidence an arrangement exists, delivery has occurred or servicesrendered, the price is fixed and determinable, and collection is reasonably assured. The Company had recorded revenue from its Nexafed product line sales,prior to entering into the MainPointe Agreement on March 16, 2017, when the price was fixed and determinable at the date of sale, title and risk of ownershiphad been transferred to the customer, and returns could be reasonably estimated. License fee revenue can be derived from the licensing of our technologies, such as pursuant to which we licensed our Aversion® technology toKemPharm in 2016 for its use in the development and commercialization of three products using two of KemPharm’s prodrug candidates or to which welicensed our Nexafed product line using our Impede Technology to MainPointe. The license fee payments received under the agreements were non-refundable and non-creditable when made and we had no further requirements to earn the payment. The amounts were recognized as revenue when received. 66  Collaboration revenue can be derived from research and development services we provide from time to time and are recognized when those servicesare incurred pursuant to the agreements. The research and development services provided under the collaboration were priced at fair value at our service’shourly labor rates pursuant to the collaboration agreement. We are not currently providing research and development services under any of our licenseagreements. Royalty revenue can be derived from our licensing agreements, such as under our Collaboration and License Agreement with Egalet tocommercialize Oxaydo based on Oxaydo net sales, and our License Agreement with MainPointe Pharmaceuticals LLC to commercialize our Nexafed productline, during each calendar year over the term of the agreements. We recognize royalty revenue each calendar quarter based on net sales reported to us inaccordance with the agreement. Research and Development Research and Development (“R&D”) costs include internal R&D activities, external Contract Research Organization (“CRO”) services and theirclinical research and investigative sites, and other activities. Internal R&D activity costs include facility overhead, equipment and facility maintenance andrepairs, laboratory supplies, pre-clinical laboratory experiments, formulation work, depreciation, salaries, benefits, insurance and share-based compensationexpenses. CRO activity costs include preclinical laboratory experiments and clinical trial studies. Other activity costs include regulatory consulting,regulatory legal counsel, cost of acquiring, developing and manufacturing pre-clinical trial materials, and the costs of manufacturing scale-up. Internal R&Dcost and other activity costs are charged to expense as incurred. We make payments to the CRO's based on agreed upon terms and may include payments inadvance of a study starting date. Payments in advance will be reflected in the consolidated financial statements as prepaid expenses. We review and charge toexpense accrued CRO costs and clinical trial study costs based on services performed and rely on estimates of those costs applicable to the stage ofcompletion of a study as provided by the CRO. Our accrued CRO costs are subject to revisions as such studies progress towards completion. Revisions arecharged to expense in the period in which the facts that give rise to the revision become known. Income Taxes We account for income taxes under the liability method. Under this method, deferred income tax assets and liabilities are determined based ondifferences between financial reporting and income tax basis of assets and liabilities and are measured using the enacted income tax rates and laws that willbe in effect when the differences are expected to reverse. Additionally, net operating loss and tax credit carryforwards are reported as deferred income taxassets. The realization of deferred income tax assets is dependent upon future earnings. A valuation allowance against deferred income tax assets is requiredif, based on the weight of available evidence, it is more likely than not that some or all of the deferred income tax assets may not be realized. At December 31,2017, 100% of the remaining deferred income tax assets are offset by a valuation allowance due to uncertainties with respect to future utilization of netoperating loss carryforwards. If in the future it is determined that amounts of our deferred income tax assets would likely be realized, the valuation allowancewould be reduced in the period in which such determination is made and a benefit from income taxes in such period would be recognized. Share-based Compensation Expense Compensation cost related to stock-based payment transactions is measured based on fair value of the equity or liability instrument issued. Forpurposes of estimating the fair value of each stock option unit on the date of grant, we utilized the Black-Scholes option-pricing model. The Black-Scholesoption valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Inaddition, option valuation models require the input of highly subjective assumptions including the expected volatility factor of the market price of ourcommon stock (as determined by reviewing its historical public market closing prices). Our accounting for stock-based compensation for restricted stockunits, or RSUs, is based on the fair-value method. The fair value of the RSUs is the market price of our common stock on the date of grant, less its exercisecost. In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (ASC 718) - Scope of Modification Accounting. Theamendments provide guidance as to how an entity should apply modified accounting in Topic 718 when changing the terms and conditions of its share-based payment awards. The guidance clarifies that modification accounting will be applied if the value, vesting conditions or classification of the awardchanges. The ASU is effective for annual reporting periods, including interim periods within those annual periods, beginning after December 15, 2017 butearly adoption is permitted. We did not elect to adopt the standard early and do not anticipate that the standard will have a material effect, if any, on ourconsolidated financial statements and related disclosures. 67  Recent Accounting Pronouncements See Note 2 Summary of Significant Accounting Policies - Recent Accounting Pronouncements of the Notes to Financial Statements (Part II, Item 8 ofthis Form 10-K) for further discussion. Capital Expenditures We did not have any capital expenditures during 2017. Our capital expenditures during 2016 were approximately $75 thousand and were primarilyattributable to the purchase of machinery and equipment for the Nexafed product line. Impact of Inflation We believe that inflation did not have a material impact on our operations for the periods reported. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Some of the securities that we may invest in may be subject to market risk. Our primary objective in our cash management activities is to preserveprincipal while at the same time maximizing income we receive from our investments. A change in the prevailing interest rates may cause the principalamount of our investments to fluctuate. We have no holdings of derivative financial and commodity instruments. As of December 31, 2017, we had noinvestments in marketable securities. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of Acura Pharmaceuticals, Inc. and Subsidiary and the Report of the Independent Registered PublicAccounting Firm thereon, to be filed pursuant to Item 8 are included in Item 15. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 68  ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. We have conducted an evaluation, under the supervision and with the participation of ourmanagement, including our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controlsand procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concludedthat our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including our subsidiary)required to be included in our periodic Securities and Exchange Commission filings. Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequateinternal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the ExchangeAct as a process designated by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors,management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: ·Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of our assets;·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations ofour management and directors; and·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets thatcould have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systemsdetermined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – IntegratedFramework (2013 Framework). Based on our assessment, our Chief Executive Officer and our Chief Financial Officer both believe that, as of December 31,2017, our internal control over financial reporting is effective based on those criteria. The Company’s independent registered public accounting firm was not required to and did not express an opinion on the effectiveness of theCompany’s internal control over financial reporting. Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting that occurred duringthe Fourth Quarter 2017 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not Applicable. 69  PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The name, age and position of our directors, executive officers and key employees as of March 30, 2018 are as follows: Name Age PositionRobert B. Jones 59 President, Chief Executive Officer and DirectorPeter A. Clemens 65 Senior Vice President, Chief Financial Officer and SecretaryAlbert W. Brzeczko, Ph.D. 61 Vice President, Technical AffairsRobert A. Seiser 54 Vice President, Treasurer, and Corporate ControllerJames F. Emigh 62 Vice President of Corporate DevelopmentBruce F. Wesson(1) (2) (3) 75 DirectorWilliam G. Skelly(1)(2) (3) 67 DirectorImmanuel Thangaraj(2) 47 DirectorGeorge K. Ross(1) (3) 76 Director (1)Member of audit committee.(2)Member of compensation committee.(3)Member of strategic transaction committee. Robert B. Jones has been our President and Chief Executive Officer since July 7, 2011. From April 2011 through July 6, 2011, Mr. Jones was ourInterim President and Chief Executive Officer. Mr. Jones was our Senior Vice President and Chief Operating Officer from April 2008 to April 2011. FromMay, 2003 to March, 2008, Mr. Jones served first as the Vice President, Finance and then as Vice President, Strategy and Business Analysis of AdolorCorporation. From November 2000 to May 2003 he served as Vice President, Finance and then as Chief Operating Officer of Opt-E-Script, Inc., a privatelyheld personalized medicine company, where Mr. Jones was responsible for all commercialization activities. Prior to that, Mr. Jones was Vice President, Salesand Marketing for Purepac Pharmaceutical Company. Mr. Jones received his M.B.A. from the University of North Carolina and a B.S. from CornellUniversity. Mr. Jones was appointed a director of the Company in July 2011. Peter A. Clemens has been Senior Vice President, Chief Financial Officer and Secretary since April 2004. Mr. Clemens was our Vice President, ChiefFinancial Officer and Secretary from February 1998 to March 2004 and a member of our Board of Directors from June, 1998 to August, 2004. Mr. Clemens isa Certified Public Accountant and earned a Bachelor of Business Administration degree from the University of Notre Dame and a Masters of BusinessAdministration from Indiana University. Albert W. Brzeczko, Ph.D., has been Vice President, Technical Affairs of APT since February 2009. From 1999 through 2009, Dr. Brzeczko wasVice President, Global Pharma New Product Development and Pharma Technologies for International Specialty Products, Inc., a contract services groupspecializing in the development of technologies for the bioenhancement of poorly soluble drugs. Prior to 1999, Dr. Brzeczko held various positions ofincreasing responsibility in pharmaceutical product development with UPM Pharmaceuticals, Banner Pharmacaps, Mylan Laboratories, and DuPont Merck.Dr. Brzeczko received a Bachelor of Science degree in biochemistry and a Ph.D. in pharmaceutical sciences from the University of Maryland. Robert A. Seiser has been a Vice President, Treasurer and Corporate Controller since April 2004. Mr. Seiser joined us in March 1998 as ourTreasurer and Corporate Controller. Mr. Seiser is a Certified Public Accountant and earned a Bachelor of Business Administration degree from LoyolaUniversity of Chicago. James F. Emigh has been Vice President of Corporate Development since October 2011. From April 2004 to October 2011, Mr. Emigh was our VicePresident of Marketing and Administration. Prior to such time, Mr. Emigh was our Vice President of Sales and Marketing. Mr. Emigh joined us in May, 1998,serving first as Executive Director of Customer Relations and then as Vice President of Operations. Mr. Emigh holds a Bachelor of Pharmacy degree fromWashington State University and a Masters of Business Administration from George Mason University. 70  Bruce F. Wesson has been a member of our Board of Directors since March 1998. From January 1991 until June 30, 2011, Mr. Wesson was a Partnerof Galen Associates, a health care venture firm, and a General Partner of Galen Partners III, L.P. Prior to January 1991, he was Senior Vice President andManaging Director of Smith Barney, Harris Upham & Co. Inc., an investment banking firm. From May 2006 until June 2016 he served on the Board of DermaSciences, Inc. From June 1999 until January 2016 he served as director of the Board of MedAssets, Inc. and for over eight years until January 2016 served asVice Chairman of MedAssets, Inc. Mr. Wesson earned a Bachelor of Arts degree from Colgate University and a Masters of Business Administration fromColumbia University. William G. Skelly has been a member of our Board of Directors since May 1996 and served as our Chairman from October 1996 through June 2000.Since 1990, Mr. Skelly has served as Chairman, President and Chief Executive Officer of Central Biomedia, Inc. and its subsidiary SERA, Inc. From 1985 to1990, Mr. Skelly served as President of Martec Pharmaceutical, Inc. Mr. Skelly earned a Bachelor of Arts degree from Michigan State University and aMasters of Business Administration from the University of Missouri-Kansas City. Immanuel Thangaraj has been a member of our Board of Directors since December, 2002. Mr. Thangaraj has been a Managing Director of EssexWoodlands Health Ventures, a venture capital firm specializing in the healthcare industry, since 1997. Prior to joining Essex Woodlands Health Ventures, hehelped establish a telecommunication services company, for which he served as its CEO. Mr. Thangaraj holds a Bachelor of Arts and a Masters in BusinessAdministration from the University of Chicago. George K. Ross has been a member of our Board of Directors since January, 2008. Since April 2002, Mr. Ross has been a consultant to early stagebusinesses and a financial investor. From April 1, 2015 until its sale in March 2017, Mr. Ross was an advisor to GP Shopper LLC, a provider of mobilesolutions for retail and brands. From July 2005 through December 2010 he served as Executive Director, Foundations and Partnerships for World Vision U.S.in New York City. His business career has included senior financial officer and board member positions with both public and private companies in diverseindustries. Mr. Ross was Executive Vice President and Chief Financial Officer and a board member of Tier Technologies Inc. from February 1997 to January2000, which became a public company during this period. Mr. Ross is a Certified Public Accountant and earned a Bachelor of Arts degree from OhioWesleyan University and a Masters of Business Administration from Ohio State University. The term of office of each director will continue until the next annual meeting of shareholders and until such person’s successor has been electedand qualified. Officers are appointed by the Board of Directors and serve at the discretion of the Board, although the employment of Robert B. Jones, ourPresident and Chief Executive Officer and Peter A. Clemens, our Senior Vice President and Chief Financial Officer are subject to the provisions of theirrespective Employment Agreements. Director Independence Our shares of common stock were listed on The NASDAQ Capital Market until February 22, 2017 and were quoted on the OTCQB market until June4, 2018. Our stock is currently quoted on the OTC Markets OTC pink tier. In 2016 we were subject to the Nasdaq Stock Market independence standards andwe continue to follow those standards in determining whether a director is independent for Board or Committee purposes. Under the rules of The NASDAQStock Market, which we were subject to until February 22, 2017, independent directors must comprise a majority of our Board of Directors. In addition, therules of The NASDAQ Stock Market require that, subject to specified exceptions, each member of the Audit and Compensation Committees of our Board ofDirectors be independent. Audit Committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of1934, as amended, or Exchange Act. Under the rules of The Nasdaq Stock Market, a director will only qualify as an “independent director” if, in the opinionof our Board of Directors, that person does have a relationship that would interfere with the exercise of independent judgment in carrying out theresponsibilities of a director. 71  In order to be considered to be independent for purposes of Rule 10A-3, a member of the Audit Committee of our Board of Directors may not, otherthan in his or her capacity as a member of the Audit Committee, the Board of Directors or any other committee of our Board of Directors: ·accept, directly or indirectly, any consulting, advisory, or other compensatory fee from us or any of our subsidiaries; or ·be an affiliated person of us or any of our subsidiaries. Our Board of Directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Inconnection with this review, our Board of Directors determined that each of Messrs. Wesson, Skelly, Thangaraj and Ross, representing four of our fivedirectors, satisfies the independence requirements of The NASDAQ Stock Market and Rule 10A-3 of the Exchange Act. In making this determination, ourBoard of Directors considered the relationships that each non-employee director has with us and all other facts and circumstances our Board of Directorsdeemed relevant in determining their independence, including the beneficial ownership of our share capital by each non-employee director and theiraffiliates. In addition, our Board of Directors considered information that was provided by each director concerning his or her background, employment andaffiliations, including relationships with our stockholders. Corporate Governance Our Board of Directors has established an Audit Committee, a Compensation Committee and a Strategic Transaction Committee. Currently, ourentire Board serves as our Nominating Committee. Our Audit Committee and our Compensation Committee operate under written charters approved by ourBoard of Directors, copies of which are available on our website and will be made available in print to any shareholder who requests it. A brief description ofthese committees is provided below. Audit Committee The Audit Committee is composed of George K. Ross, Chairman, Bruce F. Wesson and William G. Skelly. The Audit Committee is responsible forselecting the Company’s registered independent public accounting firm, approving the audit fee payable to the auditors, working with independent auditorsand other corporate officials, reviewing the scope and results of the audit by, and the recommendations of, our independent auditors, approving the servicesprovided by the auditors, reviewing our financial statements and reporting on the results of the audits to the Board, reviewing our insurance coverage,financial controls and filings with the SEC, including, meeting quarterly prior to the filing of our quarterly and annual reports containing financial statementsfiled with the SEC, and submitting to the Board its recommendations relating to our financial reporting, accounting practices and policies and financial,accounting and operational controls. In assessing the independence of the Audit Committee in 2017, our Board reviewed and analyzed the standards for independence provided inNASDAQ Marketplace Rule 5605 and applicable SEC regulations. Based on this analysis, our Board has determined that each of Messrs. Ross, Wesson andSkelly satisfies such standards for independence. Our Board also determined that Mr. Ross is a “financial expert” as provided in NASDAQ Marketplace Rule5605(c)(3) and SEC regulations. Compensation Committee The Compensation Committee is composed of William Skelly, Chairman, Bruce F. Wesson and Immanuel Thangaraj. This committee is responsiblefor consulting with and making recommendations to the Board of Directors about executive and director compensation and compensation of employees. In2016 the Compensation Committee retained the Hay Group, an independent compensation consulting firm, to assist in evaluating stock option and otherincentives for our executive officers and other employees. The retention of the Hay Group was not recommended by management. Our Board determined that each of Messrs. Skelly, Wesson and Thangaraj were independent directors under the Nasdaq Marketplace Rules. TheBoard has also determined that each of Messrs. Skelly, Thangaraj and Wesson meet the more stringent independence standards for compensation committeesimposed under NASDAQ Rule 5605(d)(2)(A). 72  Strategic Transaction Committee The Strategic Transaction Committee is composed of George K. Ross, Bruce F. Wesson and William G. Skelly. The Strategic Transaction Committeereviews, evaluates and recommends to the Board, for the Board’s evaluation and determination, potential acquisitions, divestitures, capital raisingtransactions, joint ventures and strategic alliances, and licensing and collaboration transactions. All members of this Committee are considered by our Boardas independent directors. The Strategic Transaction Committee does not have a Chair. Nominating Committee Currently our entire Board of Directors functions as our nominating committee. As needed, the Board will perform the functions typical of anominating committee, including the identification, recruitment and selection of nominees for election to our Board. Our Board determined that all membersof the Board were independent other than Mr. Jones, our CEO. We believe that a nominating committee separate from the Board is not necessary at this timegiven our relative size, the size of our Board, and our opinion that an additional committee of the Board would not add to the effectiveness of the evaluationand nomination process. The Board’s process for recruiting and selecting nominees for Board members, if required, would be to identify individuals who arethought to have the business background and experience, industry specific knowledge and general reputation and expertise allowing them to contribute aseffective directors to our governance, and who would be willing to serve as directors of a public company. To date, we have not engaged any third party toassist in identifying or evaluating potential nominees. If a possible candidate is identified, the individual will meet with each member of the Board and besounded out concerning his/her possible interest and willingness to serve, and Board members would discuss amongst themselves the individual’s potentialto be an effective Board member. If the discussions and evaluation are positive, the individual would be invited to serve on the Board. To date, noshareholder has presented any candidate for Board membership for consideration, and we do not have a specific policy on shareholder-recommended directorcandidates. The Board believes its process for evaluation of nominees proposed by shareholders would be no different than the process of evaluating anyother candidate, and therefore the Board believes it is appropriate to not have a policy on shareholder-recommended director candidates. The Board ofDirectors does not have a policy regarding diversity in identifying nominees for director. The experience, qualifications, attributes or skills that led the Board to conclude that the current board members should serve are: (i) theirpharmaceutical industry and senior level management experience in the case of Messrs. Jones, Skelly, and Wesson; (ii) financial and senior levelmanagement expertise in the case of Mr. Ross, and (iii) their experience in overseeing management as principals of private equity firms in the case of Messrs.Wesson, and Thangaraj. Although our Certificate of Incorporation provides for a maximum of 11 directors, in accordance with the terms of a SecondAmended and Restated Voting Agreement dated as of July 24, 2017 executed by us, John Schutte (“Schutte”), Essex Woodlands Health Ventures V, L.P.(“Essex”) and Galen Partners III, L.P. (“Galen”), (the “Second Amended and Restated Voting Agreement”), we have agreed that the Board of Directors shall becomprised of not more than seven members (or such greater number that is required to assure that we have a majority of independent directors after givingeffect to the various designation rights described herein), one of whom shall be the designee of Schutte, one of whom shall be the designee of Essex, and oneof whom shall be the designee of Galen, one of whom is our Chief Executive Officer and three of whom are independent directors. Mr. Thangaraj serves as thedesignee of Essex. The Second Amended and Restated Voting Agreement provides that each of Schutte’s, Essex’s and Galen’s right to designate one directorwill terminate when it or its affiliates (determined separately for each of Schutte, Essex and Galen) fail to hold at least 600,000 shares of our common stock (orwarrants exercisable for such shares). The Board is required to nominate an independent director upon forfeiture of a designation right. Galen has notdesignated a nominee since the resignation of its director designee effective December 31, 2012 and lost its right to designate a director at the end ofDecember, 2017 upon the disposition of its shares. Mr. Schutte has not designated a nominee. 73  Compensation Committee Interlocks and Insider Participation No member of the Compensation Committee was or currently is, an officer or employee of the Company, and no member of the CompensationCommittee had any relationship with us requiring disclosure under Item 404 of SEC Regulation S-K. None of our executive officers has served on the Boardof Directors or Compensation Committee of any other entity that has or had one or more executive officers who served as a member of our Board of Directors. Separation of Roles of Chairman and CEO Mr. Jones serves as Chief Executive Officer. Our Chairman of our Board of Directors resigned on March 11, 2013. A replacement Chairman has notbeen elected to date. We believe the separation of offices is beneficial because a separate chairman (i) can provide the Chief Executive Officer with guidanceand feedback on his performance, (ii) provides a more effective channel for the Board to express its views on management, (iii) allows the chairman to focuson shareholder interests and corporate governance while the Chief Executive Officer leads the Company’s strategy development and implementation. It is ourintention to seek to add to our Board additional members having significant senior level pharmaceutical experience, and that one of such additional Boardmembers will be entrusted by the Board to serve as Chairman. Board’s Role in Risk Assessment The Board as a whole engages in risk oversight as part of its functions. As an emerging pharmaceutical development company we face numerousrisks identified in this Annual Report on Form 10-K, many of which are outside of our control. In addition, the Audit Committee reviews our insurancecoverage and the Board and Audit Committee regularly monitor our liquidity position and operating expenses and review our capital-funding needs. TheCompany believes the Board leadership structure effectively enables it to oversee risk management. Shareholder Communications to the Board Shareholders who wish to send communications to our Board of Directors may do so by sending them in care of our Secretary at AcuraPharmaceuticals, Inc., 616 N. North Court, Suite 120 Palatine, Illinois 60067. The envelope containing such communication must contain a clear notationindicating that the enclosed letter is a “Shareholder-Board Communication” or “Shareholder-Director Communication” or similar statement that clearly andunmistakably indicates the communication is intended for the Board. All such communications must clearly indicate the author as a shareholder and statewhether the intended recipients are all members of the Board or just certain specified directors. Our Secretary will have the discretion to screen and notforward to Directors communications which the Secretary determines in his or her discretion are communications unrelated to our business or our governance,commercial solicitations, or communications that are offensive, obscene, or otherwise inappropriate. The Secretary will, however, compile all shareholdercommunications which are not forwarded and such communications will be available to any Director. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our Directors and executive officers, and persons who own beneficiallymore than ten percent (10%) of our common stock, to file reports of ownership and changes of ownership with the SEC. Copies of all filed reports are requiredto be furnished to us pursuant to Section 16(a). Based solely on the reports received by us and on written representations from reporting persons, we believethat our Directors, executive officers and greater than ten percent (10%) beneficial owners of our common stock complied with all Section 16(a) filingrequirements during the year ended December 31, 2017, except that Galen Partners III, LP filed a late Form 4 on January 2, 2018, reflecting the sale of itsshares on or about 12/14/2017. Code of Ethics Our Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer and all of our otheremployees is available on our website, www.acurapharm.com, by clicking on “Corporate Governance” under the “Investors” tab. 74  ITEM 11. EXECUTIVE COMPENSATION Summary Compensation Table and Discussion of Employment and Incentive Arrangements The following table sets forth a summary of the compensation paid by us for services rendered in all capacities to us during each of the two fiscalyears ended December 31, 2017, to our Chief Executive Officer, and the two most highly compensated executive officers other than the Chief ExecutiveOfficer who were serving as executive officers at the end of the last completed fiscal year (collectively, the “2017 named executive officers”) whose totalannual compensation for 2017 exceeded $100,000: Name and PrincipalPosition Year BaseSalary($) Bonus($) StockAwards1($) OptionAwards2($) Non-equityincentive plancompensation($) Total($) Robert B. Jones, 2016 393,000 — — 36,237 — 429,237 President and CEO 2017 393,000 — 13,530 14,617 — 421,147 Peter A. Clemens 2016 286,000 — — 26,214 — 312,214 SVP & CFO 2017 286,000 20,000 9,240 10,574 — 325,814 Albert W. Brzeczko 2016 291,000 — — 26,985 — 317,985 VP, Technical Affairs of Acura PharmaceuticalTechnologies, Inc. 2017 291,000 — 9,240 10,885 — 311,125 (1) Grant date fair values are computed in accordance with FASB ASC Topic 718. Values represent (A) our last sale price of $0.34 on 12/11/2017less $.01 par value multiplied by (B) the number of shares underlying RSUs (41,000, 28,000 and 28,000, in the case of Messrs. Jones, Clemens and Brzeczko,respectively). (2) The 2016 entries reflect the grant date fair value of options with respect to 47,000, 34,000, and 35,000 underlying shares to Messrs. Jones,Clemens and Brzeczko, respectively. The 2017 entries reflect the grant date fair value of options with respect to 47,000, 34,000, and 35,000 underlyingshares to Messrs. Jones, Clemens and Brzeczko, respectively. Grant date fair values are computed in accordance with FASB ASC Topic 718. To calculategrant date fair value, we consider an assumed risk free interest rate and a historical volatility percentage for our common stock, with an expected dividedyield of 0% and an expected term of 10 years, with respect to option granted in 2016 and an expected term of 5 years with respect to options granted in 2017.For options issued in 2016 we used a risk free interest rate of 2.34% and historical volatility of 85.27%. For options issued in 2017 we used a risk free interestrate of 1.8% and historical volatility of 88%. In all cases we excluded the possibility of forfeiture. We calculated values based on 10 year option terms foroptions issued in 2016 and 5 year option terms for options issued in 2017. 75  Other Compensatory Arrangements Our executive officers participate in medical, dental, life and disability insurance plans provided to all of our employees. Bonus/Non-Equity Incentive Plan Each of Messrs. Jones, Clemens and Brzeczko are eligible for annual bonuses. Each of Mr. Jones’ and Mr. Clemens’ bonuses are weighted 100% toachievement of organizational goals, while the bonuses for other employees, including for Dr. Brzeczko are weighted 50% to the achievement oforganizational goals and 50% to the achievement of individual goals. Amounts paid are reflected in the “Non-equity Incentive Compensation” column of theSummary Compensation Table. Material organizational goals for 2016 were advancing the success of Nexafed on the U.S. market, developing Impede Technology products, thecontinued development of our Limitx technology product candidates, executing partnerships around our Aversion or Impede technologies, executingpartnerships/transactions around our Limitx technology, compliance with SOX, successfully managing our intellectual property, the execution oftransactions to further build our cash, and meeting year-end cash targets. The Compensation Committee determined that 20% of the organizational goalswere met in 2016. However because of our desire to preserve cash, no bonuses were paid in 2016 to Messrs. Jones, Clemens or Brzeczko. Material organizational goals for 2017 were advancing Limitx reformulations and at Board’s discretion executing certain clinical studies,successfully completing ongoing development using Impede technology for a third party and receiving the associated milestone, engaging in a strategictransaction for Nexafed and Nexafed Sinus (so as to maintain the products’ sales and distribution levels), executing strategic transaction, partnership orfinancings to maximize value to our shareholders and debt holder, compliance with SOX and successfully managing our intellectual property. The receipt ofa milestone to successfully complete ongoing development work using Impede technology was not achieved as the Bayer agreement was terminated. Themilestone for engaging in a strategic transaction for Nexafed and Nexafed sinus products was achieved through our transaction with MainPointePharmaceuticals, LLC. In addition, we engaged in one $4 million financing, which at least partially met the goal of engaging in financings. See “CertainRelationships and Related Transactions, and Director Independence” for a description of the transaction with MainPointe Pharmaceuticals, LLC and the $4million financing. The Board concluded that 36% of organizational goals were met. Our 2017 named executive officers did not receive any payments underour non-equity incentive plan, except that Mr. Clemens received a $20,000 bonus outside of such plan. Material organizational goals for 2018 include conducting clinical trials on our LTX-03 compound, complete ongoing development using Impedetechnology, executing strategic transaction, partnership or financings to maximize value to the Company’s shareholders and debt holder, compliance withSOX and successfully managing our intellectual property. No compensation will be earned with respect to a performance measure unless a performance “floor” for that measure is exceeded; the incentiveopportunity with respect to a measure will be earned if the target is achieved; achievement between the floor and the target results in a lower amount of awardwith respect to that performance measure. An amount larger than the incentive opportunity for each performance measure can be earned, up to and possiblyexceeding a specified limit, for exceeding the target for that measure. Depending on market conditions and other circumstances, performance criteria may bemodified during the course of the year, and other performance criteria reweighted. 76  In ascertaining the achieved level of performance against the targets, the effects of certain extraordinary events, as determined by the CompensationCommittee, such as (i) major acquisitions and divestitures, (ii) significant one-time charges, and (iii) changes in accounting principles required by theFinancial Accounting Standards Board, are “compensation neutral” for the year in which they occurred; that is, they are not taken into account indetermining the degree to which the targets are met in that year. The Compensation Committee may, after a review of an executive’s performance, recommend to the Board that a bonus award be made to suchexecutives based upon other non-enumerated performance targets (whether or not they are parties to employment agreements). This could result in the awardof salary increases or bonuses above a targeted range amount. Employment Agreements Robert B. Jones commenced employment with us on April 7, 2008 pursuant to an Employment Agreement dated March 18, 2008 as our Senior VicePresident and Chief Operating Officer. On April 28, 2011, Mr. Jones was appointed our Interim President and Chief Executive Officer. On July 7, 2011, Mr.Jones was named President and Chief Executive Officer. Mr. Jones’ salary was increased from $392,000 to $393,000 commencing January 1, 2016. The termof the Employment Agreement is currently scheduled to expire December 31, 2018, and provides for automatic one year renewals in the absence of writtennotice to the contrary from us (which would give Mr. Jones the right to terminate his employment for Good Reason) or Mr. Jones at least ninety days prior tothe expiration of the initial term or any subsequent renewal period. Pursuant to the Employment Agreement Mr. Jones is eligible for annual bonuses of up to100% of his base salary on the achievement of such targets, conditions, or parameters as may be set from time to time by the Board of Directors or theCompensation Committee of the Board of Directors. In 2016, Mr. Jones did not receive a bonus. On December 11, 2014, December 10, 2015, December 8,2016, and August 9, 2017 we granted Mr. Jones stock options to purchase 50,400 shares, 70,000, 47,000 and 47,000 shares of our common stock,respectively, in each case exercisable at the fair market value of our common stock at the date of grant and vesting in equal installments over 24 months,except that the August 9, 2017 grant vests in one installment on August 9, 2018 (in each case, subject to earlier exercisability as set forth in the table belowentitled “Events Affecting Stock Option Vesting and Exercise”). On December 11, 2017, we granted Mr. Jones 41,000 Restricted Stock Units exchangeablefor 41,000 shares of the Company on a 1-for-1 basis after payment of $.01 par value per share. The Restricted Stock Units vest on December 11, 2018 orearlier if Mr. Jones’ service as an employee is terminated by us without Cause (as defined in the 2017 Restricted Stock Unit Award Plan) or due to his death orDisability (as defined in the 2017 Restricted Stock Unit Award Plan) or a qualifying change of control occurs. Distributions in respect of such vestedRestricted Stock Units will be made in three equal installments on the first business day of each of January 2020, 2021, and 2022 or earlier upon a qualifyingchange of control which also meets certain criteria of Section 409A of the Internal Revenue Code. The Employment Agreement contains standard terminationprovisions, including upon death, disability, for Cause, for Good Reason and without Cause. In the event that we terminate the Employment Agreementwithout Cause or Mr. Jones terminates the Employment Agreement for Good Reason, we are required to pay Mr. Jones an amount equal to the bonus for suchyear, calculated on a pro-rata basis assuming full achievement of the bonus criteria for such year (to the extent it has not already been paid), as well as Mr.Jones’ base salary for one year (such salary amount being the “Severance Pay”). Pursuant to an amendment to Mr. Jones’ Employment Agreement entered intoin 2012, in case of termination without Cause and for Good Reason or for voluntary termination more than two years after a Change of Control, suchSeverance Pay and bonus is payable in equal monthly installments over a period of twelve months, with the first six installments payable six months and oneday after termination, if mandated by applicable law, which requires certain payments to certain officers of a public company (“specified employees”) to bemade commencing six months after termination. However, if such termination is without Cause, for Good Reason or for voluntary termination within twoyears of a qualifying Change of Control, then the Severance Pay and bonus is payable in a lump sum six months and one day after termination (unless a sixmonth delay is not required by applicable law in which case it is payable 31 days after termination). In addition, upon a termination without Cause or forGood Reason or voluntarily after a Change of Control, any shares remaining unvested under stock options and restricted stock units granted to Mr. Jones willvest in full and Mr. Jones will be entitled to continued coverage under our then-existing benefit plans, including medical and life insurance, for twelvemonths from the date of termination. 77  The Employment Agreement restricts Mr. Jones from disclosing, disseminating or using for his personal benefit or for the benefit of others,confidential or proprietary information (as defined in the Employment Agreement) and, provided we have not breached the terms of the EmploymentAgreement, from competing with us at any time prior to one year after the termination of his employment with us. In addition, Mr. Jones has agreed not to(and not to cause or direct any person to) hire or solicit for employment any of our employees or those of our subsidiaries or affiliates (i) for six monthsfollowing the termination of his employment by us without Cause or by him for Good Reason, prior to a Change of Control, (ii) for twelve months followingthe termination of his employment for Cause, prior to a Change of Control, or (iii) twenty-four months following a Change of Control. The table entitled“Events Affecting Stock Option Vesting and Exercise,” below, summarizes the vesting and exercisability of Mr. Jones’ options following a number oftermination scenarios or a Change of Control. Peter A. Clemens is employed pursuant to an Employment Agreement effective as of March 10, 1998, as amended, which provides that Mr. Clemenswill serve as our Senior Vice President and Chief Financial Officer for a term currently scheduled to expire December 31, 2018, and provides for automaticone year renewals in the absence of written notice to the contrary from the Company or Mr. Clemens at least ninety (90) days prior to the expiration of anyrenewal period. Pursuant to a 2008 amendment to the Employment Agreement, our non-renewal of the Employment Agreement is considered as a terminationwithout Cause for all purposes under the Employment Agreement. Mr. Clemens current base salary under the Employment Agreement is $286,000 (increasedfrom $285,000 effective January 1, 2016). His maximum bonus under our bonus plan is 70% of base salary. Mr. Clemens’ bonus is based on the achievementof such targets, conditions, or parameters as may be set from time to time by the Board of Directors or the Compensation Committee of the Board of Directors.On August 9, 2017 we granted Mr. Clemens a special bonus outside the bonus plan of $20,000 for his efforts in the negotiation and closing of our July 2017private equity financing. On December 11, 2014, December 10, 2015, December 8, 2016 and August 9, 2017 we granted Mr. Clemens options to purchase36,000 shares, 50,000 shares, 34,000 shares and 34,000 shares of our common stock, respectively, in each case at an exercise price equal to the fair marketvalue of our common stock at the date of grant and vesting in equal installments over 24 months, except that the August 9, 2017 grant vests in oneinstallment on August 9, 2018 (in each case, subject to earlier exercisability as set forth in the table below entitled “Events Affecting Stock Option Vestingand Exercise”). On December 11, 2017, we granted Mr. Clemens 28,000 Restricted Stock Units exchangeable for 28,000 shares of the Company on a 1-for-1basis after payment of $.01 par value per share. The Restricted Stock Units vest on December 11, 2018 or earlier if Mr. Clemens’ service as an employee isterminated by us without Cause (as defined in the 2017 Restricted Stock Unit Award Plan) or due to his death or Disability (as defined in the 2017 RestrictedStock Unit Award Plan) or a qualifying change of control occurs. Distributions in respect of such vested Restricted Stock Units will be made in three equalinstallments on the first business day of each of January 2020, 2021, and 2022 or earlier upon a qualifying change of control which also meets certain criteriaof Section 409A of the Internal Revenue Code. The Employment Agreement contains standard termination provisions, including upon death, disability, for Cause, for Good Reason and withoutCause. In the event the Employment Agreement is terminated by us without Cause or by Mr. Clemens for Good Reason, we are required to pay Mr. Clemensan amount equal to twice his then base salary, payable in the case of termination without Cause or for Good Reason six months and one day after termination(unless he is not a specified employee at termination in which case payment is in a lump sum within 30 days following termination) and to continue toprovide Mr. Clemens coverage under our then existing benefit plans, including medical and life insurance, for a term of 24 months. The EmploymentAgreement permits Mr. Clemens to terminate the Employment Agreement in the event of a Change in Control (as defined in the Employment Agreement), inwhich case he would receive the same payments on the same schedule as on a termination for Good Reason. In addition, Mr. Clemens’ estate is entitled to sixmonth’s salary upon his death as well as a pro rata bonus for the number of months he worked in the year of his death. The Employment Agreement alsorestricts Mr. Clemens from disclosing, disseminating or using for his personal benefit or for the benefit of others confidential or proprietary information (asdefined in the Employment Agreement) and, provided we have not breached the terms of the Employment Agreement, from competing with us at any timeprior to two years after the earlier to occur of the expiration of the term and the termination of his employment. In addition, for a period of two years from andafter the effective date of the termination of his employment with us (for any reason whatsoever), (i) induce or attempt to influence any employee of theCorporation or any of its subsidiaries or affiliates to leave its employ, or (ii) aid any person, business, or firm, including a supplier, a competitor, licensor orcustomer of or our manufacturer for the Corporation, in any attempt to hire any person who shall have been employed by us or any of our subsidiaries oraffiliates within the period of one year of the date of any such requested aid. The table entitled “Events Affecting Stock Option Vesting and Exercise,” below,summarizes the vesting and exercisability of Mr. Clemens’ options following a number of termination scenarios or a Change of Control. 78  For purposes of Mr. Jones and Mr. Clemens severance pay, a Change of Control is generally defined, with certain exceptions, as ·acquisition by a person or group of more than 50% of our outstanding shares ·a merger, reorganization, consolidation of exchange, other than one in which current holders of our voting securities hold more than 50%of our voting securities ·a merger in which we are not the surviving corporation ·a sale or license of substantially all of our assets ·Acura going private (i.e. no longer files reports under the Exchange Act), unless the relevant employee (e.g., Jones, in the case of Jones’severance and Clemens in the case of Clemens’ severance) “participates” in such transaction Events Affecting Stock Option Vesting and Exercise (For Messrs. Jones and Clemens) Event Vesting of AllOptions (Optionsare exercisableupon vesting) Exercisability of Options Termination due to Death Options vest for onemonth after death; afterthat no additionalvesting Vested options immediately exercisable for oneyear following termination Termination by Company WithoutCause or by Employee for Good Reasonor termination by Employee followingChange of Control All options fully vest. Vested options immediately exercisable for oneyear following termination Vested optionsexercisable for 12 months for Mr. Jones (twentyfour months in the case of Mr. Clemens) Termination due to Disability No additional vesting Vested options immediately exercisable for oneyear following termination Termination by the Company for Causeor by executive other than for GoodReason No additional vesting Vested options immediately exercisable for 40 daysfollowing termination Change of Control Options fully vest forMr. Jones and Mr.Clemens. Vested options immediately exercisable 79  Dr. Brzeczko is not party to an employment agreement. Dr. Brzeczko was hired pursuant to an offer letter pursuant to which he received a $40,000signing bonus and commencing 2016 and thereafter, is eligible for annual bonuses of up to 50% of his base salary (increased from 35% in effect during2015). Dr. Brzeczko’s bonus is based on the achievement of such targets, conditions, or parameters as may be set from time to time by the Board of Directorsor the Compensation Committee of the Board of Directors. In 2017 he received no bonus. Upon commencement of his employment on February 9, 2009, hereceived 4,800 RSUs vesting in equal installments over 24 months, and stock options exercisable for 19,200 shares of common stock vesting in equalinstallments over 24 months. Dr. Brzeczko’s annual salary is $291,000 (increased from $290,000 effective January 1, 2016). Dr. Brzeczko is eligible for andover the years of his employment, Dr. Brzeczko has received annual option grants. On December 8, 2016, Dr. Brzeczko was granted stock options exercisableat the fair market value on date of grant for 35,000 shares of common stock, vesting in equal installments over 24 months and on August 9, 2017 Dr.Brzeczko was granted stock options exercisable at the fair market value on date of grant for 35,000 shares of common stock, vesting in one installment in 12months from grant and expiring five years from issuance. If a change of control occurs (which constitutes a change of control under the stock optionagreements) previously unvested options vest and become exercisable with respect to all underlying shares held by Dr. Brzeczko. On December 11, 2017, wegranted Dr. Brzeczko 28,000 Restricted Stock Units exchangeable for 28,000 shares of the Company on a 1-for-1 basis after payment of $.01 par value pershare. The Restricted Stock Units vest on December 11, 2018 or earlier if Dr. Brzeczko’s service as an employee is terminated by us without Cause (as definedin the 2017 Restricted Stock Unit Award Plan) or due to his death or Disability (as defined in the 2017 Restricted Stock Unit Award Plan) or a qualifyingchange of control occurs. Distributions in respect of such vested Restricted Stock Units will be made in three equal installments on the first business day ofeach of January 2020, 2021, and 2022 or earlier upon a qualifying change of control which also meets certain criteria of Section 409A of the InternalRevenue Code. Stock Option Plans We maintain three stock option plans adopted in 1998, 2008 and 2016, respectively. Our option plans are administered by the Board of Directors.The Board of Directors selects the employees, directors and consultants to be granted options under the plans and, subject to the provisions of each plan,determines the terms and conditions and number of shares subject to each option. Any of our employees or employees of our subsidiary are eligible to receiveincentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, or the Code (“ISOs”). Non-qualified stock options may begranted to employees as well as non-employee directors and consultants under the plans as determined by the Board. Any person who has been granted anoption may, if they are otherwise eligible, be granted an additional option or options. Each grant of an option is evidenced by an option agreement, and each option agreement specifies whether the option is an ISO or a non-qualifiedstock option and incorporates such other terms and conditions as the Board of Directors acting in its absolute discretion deems consistent with the terms ofthe plan, including, without limitation, a restriction on the number of shares of Common Stock subject to the option which first become exercisable duringany calendar year. To the extent that the aggregate fair market value of the common stock of the Company underlying a grant of ISOs (determined as of the date suchan ISO is granted), which first become exercisable in any calendar year, exceeds $100,000, such Options shall be treated as non-qualified stock options. This$100,000 limitation shall be administered in accordance with the rules under Section 422(d) of the Code. Upon the grant of an option to an employee, director or consultant the Board will fix the number of shares of common stock that the optionee maypurchase upon exercise of the option and the price at which the shares may be purchased. The option exercise price for ISOs shall not be less than the fairmarket value of the common stock at the time the option is granted, except that the option exercise price shall be at least 110% of the fair market value wherethe option is granted to an employee who owns more than 10% of the voting power of all of our classes of stock or any parent or subsidiary. The optionexercise price for non-qualified stock options granted under the plans may be less than the fair market value of our common stock (“Discounted Options”).“Fair market value” is the closing price for a share of the common stock on the exchange or quotation system which reports or quotes the closing prices for ashare of the common stock (or alternate methodologies if no such quote is available). All options available to be granted under each plan must be granted within ten years after shareholder approval of the applicable plan. The Boardwill determine the actual term of the options but no option will be exercisable after the expiration of 10 years from the date of grant. No ISO granted to anemployee who owns more than 10% of the combined voting power of all of our outstanding classes of stock may be exercised after five years from the date ofgrant. Historically, our grants to employees generally vest 1/24th each month, although under the plans any vesting schedule is permissible as determined bythe Compensation Committee or the Board. However on August 9, 2017 we made a special option grant to employees which generally vests 12 months fromissuance instead of ratably over 24 months. Our grants to director generally vest in equal quarterly installments over the calendar year. Since 2015 our optionagreements include vesting upon a change of control (as defined in the 2016 Stock Option Plan). In addition, the plans provide options may be acceleratedby the Board of Directors in their discretion, including, upon a change of control, a proposed dissolution or liquidation of the Company, in the event of aproposed sale of all or substantially all of the assets of the Company, or a merger of the Company. 80  All of our option plans allow the participant to elect to exercise options on a net exercise basis by allowing shares subject to the option to bewithheld by the Company in satisfaction of the option exercise price, and to satisfy the participant’s withholding tax payment obligations relating to theoption exercise. Options granted to employees, directors or consultants under the plans may be exercised during the optionee’s lifetime only by the optionee duringhis employment or service with us or for a period not exceeding one year if the optionee ceased employment or service as a director or consultant because ofpermanent or total disability within the meaning of Section 22(e)(3) of the Code. Options may be exercised by the optionee’s estate, or by any person whoacquired the right to exercise such option by bequest or inheritance from the optionee for a period of twelve months from the date of the optionee’s death. Ifsuch option shall by its terms expire sooner, such option shall not be extended as a result of the optionee’s death. The 1998 Stock Option Plan The 1998 Stock Option Plan was adopted by the Board of Directors in April 1998 and approved by our shareholders in June 1998. The 1998 StockOption Plan, as amended, provided for the grant of stock options to purchase up to 400,000 shares of our common stock. As of December 31, 2017, stockoptions to purchase 18,000 shares of common stock are outstanding under the 1998 Stock Option Plan. Of such option grants 6,000 are ISO’s and 12,000 arenon-qualified options. No exercise price of an ISO was set at less than 100% of the fair market value of the underlying common stock. In April 2008 the 1998 Stock Option Plan expired and the remaining 4,382 unissued shares allocated to the Plan were terminated. The average pershare exercise price for all outstanding options under the 1998 Stock Option Plan as of December 31, 2017 was $36.07. The 2008 Stock Option Plan The 2008 Stock Option Plan was adopted by the Board of Directors on March 14, 2008 and approved by our shareholders on April 30, 2008. OnJune 25, 2009, the 2008 Stock Option Plan was amended to allow participants to require us to withhold common stock upon exercise of options for paymentof exercise price and statutory minimum withholding taxes. The 2008 Stock Option Plan permits the grant of ISO’s and non-qualified stock options topurchase in the aggregate up to 1,200,000 shares of our common stock. As of December 31, 2017, stock options to purchase 1,122,593 shares of commonstock had been granted (and not forfeited) under the 2008 Stock Option Plan. Of such option grants, 715,631 are ISOs and 406,962 are non-qualified options.The average per share exercise price for all outstanding options under the 2008 Stock Option Plan as of December 31, 2017 was $15.61. The 2016 Stock Option Plan The 2016 Stock Option Plan, as amended, was adopted by the Board of Directors and approved by our shareholders in April 2016. The 2016 StockOption Plan permits the grant of ISO’s and non-qualified stock options to purchase in the aggregate up to 600,000 shares of our common stock. As ofDecember 31, 2017, stock options to purchase 353,356 shares of common stock had been granted (and were not forfeited) under the 2016 Stock Option Plan.Of such option grants, all are ISOs. Up to 60,000 shares underlying options may be granted to any participant in a calendar year under the 2016 Stock OptionPlan. The average per share exercise price for all outstanding options under the 2016 Stock Option Plan as of December 31, 2017 was $0.67. 81  Restricted Stock Unit Award Plan The 2014 Restricted Stock Unit Award Plan The Company’s 2014 Restricted Stock Unit Award Plan (the “2014 RSU Plan”) was approved by the Company’s Board of Directors in February2014 and by our shareholders in May 2014. Under the 2014 RSU Plan, a Restricted Stock Unit (“RSU”) represents the right to receive (upon payment of$0.01 par value per share) a share of the Company’s common stock (or under certain circumstances, cash in lieu thereof (“Cash Settled RSUs”)) at adesignated time or upon designated events. The maximum aggregate number of shares which may be subject to RSUs granted under the 2014 RSU Plan is 400,000 shares of authorized, butunissued or reacquired common stock. Payment of Cash Settled RSUs will reduce such limit. If an RSU should expire or become forfeited for any reasonwithout the underlying shares of common stock or cash subject to such RSU having been distributed, the underlying shares shall, unless the 2014 RSU Planshall have been terminated, become available for further grant under the 2014 RSU Plan. Unless terminated earlier by the Board of Directors, the RSUs maybe distributed under the 2014 RSU Plan until April 30, 2024. As of March 30, 2018 we had granted RSUs under the 2014 RSU Plan providing for our issuance of up to an aggregate of 396,844 shares of ourcommon stock. At March 30, 2018, no RSU awards were outstanding under our 2014 RSU Plan. To date we have only issued RSUs under the 2014 RSU Planto our Non-Employee Directors. Because there were less than 4,000 shares available for issuance under the 2014 RSU Plan, in November 2017, ourshareholders approved the 2017 Restricted Stock Unit Award Plan. We do not intend to issue any more RSUs under the 2014 RSU Plan. The description of the 2017 Restricted Stock Unit Award Plan, under the captions, “Terms”, “Administration”, “Amendment and Termination”, and“Adjustment upon Capitalization and Merger”, below are similar to the provisions of the 2014 RSU Plan, with the significant differences noted under suchcaptions. The 2017 Restricted Stock Unit Award Plan The Company’s 2017 Restricted Stock Unit Award Plan (the “2017 RSU Plan”) was approved by the Company’s Board of Directors on September 8,2017 and approved by shareholders on November 8, 2017. Under the 2017 RSU Plan, a Restricted Stock Unit (“RSU”) represents the right to receive (uponpayment of $0.01 par value per share) a share of the Company’s common stock (or under certain circumstances, cash in lieu thereof (“Cash Settled RSUs”)) ata designated time or upon designated events. Number of RSUs that may be granted. The maximum aggregate number of shares which may be subject to RSUs granted under the 2017 RSU Plan is1,500,000 shares of authorized, but unissued, or reacquired common stock. (See “Adjustments Upon Changes in Capitalization or Merger” below.) If an RSUshould expire or become forfeited for any reason without the underlying shares of common stock or cash subject to such RSU having been distributed, theunderlying shares shall, unless the 2017 RSU Plan shall have been terminated, become available for further grant under the 2017 RSU Plan. The 2017 RSUPlan has no limit on the number of RSUs that may be granted to an individual employee, consultant or director in any calendar year. Payment of Cash SettledRSUs (as hereinafter defined) will reduce such limit. As of March 30, 2018 approximately 467,000 RSUs have been granted under the 2017 RSU Plan. Unlessterminated earlier by the Board of Directors, the RSUs may be distributed under the 2017 RSU Plan until November 7, 2027, however we expect that RSUsavailable under the Plan will have been distributed within the next four years. The 2017 RSU Plan allows for amendment by the Board of Directors, providedshareholder approval for the amendment is not required under the rules of an exchange on which our stock is listed or applicable law. Purpose. The 2017 RSU Plan is intended to assist the Company in securing and retaining employees, consultants and directors by allowing them toparticipate in the ownership and growth of the Company through the RSUs. The granting of RSUs serves as partial consideration for and gives keyemployees, directors and consultants an additional inducement to, remain in the service of the Company and will provide them with an increased incentive towork for the Company’s success. Cash Settled RSUs give Non-Employee Directors the ability to pay tax on their other RSUs distributed simultaneouslytherewith. Employees have a separate right to have stock withheld in payment of withholding taxes. 82  Administration The 2017 RSU Plan is administered by the Company’s Board of Directors, or, except with respect to matters involving non-employee Directors(“Non-Employee Directors”), the Compensation Committee, provided it is comprised of not less than two members of the Board, each of whom must be Non-Employee Directors as that term is defined in Rule 16b-3(b)(3)(i) of the Exchange Act (the “Committee”). Powers of the Board/Committee. The Board/Committee has the authority, subject to the provisions of the 2017 RSU Plan, to establish, adopt andrevise such rules, regulations and forms and agreements and to interpret the 2017 RSU Plan and make all determinations relating to the 2017 RSU Plan as itmay deem necessary or advisable. The Board/Committee also has the authority, subject to the provisions of the 2017 RSU Plan, to delegate ministerial, day-to-day administrative details and non-discretionary duties and functions to officers and employees of the Company. In the administration of the 2017 RSUPlan with respect to Non-Employee Directors, the Board has all of the authority and discretion otherwise granted to the Committee with respect to theadministration of the 2017 RSU Plan. All decisions, determinations and interpretations of the Board/Committee are binding and conclusive on participants inthe 2017 RSU Plan and on their legal representatives and beneficiaries. Director Participation in the RSU Plan. Non-Employee Directors are eligible to receive RSU grants under the 2017 RSU Plan, and it is expected thatRSU awards under the 2017 RSU Plan will represent the annual equity compensation component of Non-Employee Directors’ compensation. RSU Plan Eligibility. RSUs may be granted to any of the Company’s Non-Employee Directors, any of the Company’s employees or consultants, orany employees or consultants of any of the Company’s subsidiary corporations, including officers (collectively, “Eligible Participants”). For purposes of the2017 RSU Plan employees or consultants of the Company also mean employees or consultants of the Company’s subsidiary. As of March 30, 2018 all of theCompany’s 14 full-time employees and four Non-Employee Directors of the Company will be eligible participants (“Participants”) in the 2017 RSU Plan.Any Eligible Participant who has been granted an RSU may be granted additional RSUs. The RSU Plan does not confer any rights upon any Participant withrespect to continuation of employment or service as an employee, consultant or a Non-Employee Director. Terms. RSU Award Agreement. Each RSU granted under the 2017 RSU Plan is evidenced by a written award agreement (“RSU Award Agreement”), whichcontains the terms and conditions of the specific RSU granted. Vesting of RSUs. RSUs generally vest as set forth in the RSU Award Agreement. In addition, unless expressly provided otherwise in the RSU AwardAgreement, each RSU immediately vests and is nonforfeitable to the Participant upon the occurrence of any of the following events: (1) a Participant’s service as an employee of the Company is terminated by the Company without Cause (as defined) or due to the Participant’s deathor disability (as defined), or in the case of a Non-Employee Director, upon the Participant’s death or Disability or if the Participant is not renominated as adirector (other than for “Cause” or refusal to stand for re-election) or is not elected by the Company’s stockholders, if nominated; or (2) a qualifying change of control, referred to as a Change in Control-Plan (as defined in the 2017 RSU Plan) Accelerated vesting does not directly translate into accelerated distribution of shares subject to an RSU Award. For instance if the Companyterminates an employee’s employment without Cause, such employee’s RSUs will immediately vest (unless otherwise provided in the RSU AwardAgreement) but, absent a qualifying change of control the employee will not commence to receive the shares underlying his RSU award until the scheduleddistribution date. 83  Distribution of Shares Underlying RSUs. Under the 2017 RSU Plan, (unless an award provides otherwise, vesting is accelerated as provided aboveunder “Vesting of RSUs” or a Change of Control-Plan occurs as described below), stock underlying vested RSUs is generally distributed on the first businessday of the year after they vest. Hence, if an award to a Non-Employee Director vests as scheduled in full over four quarters during 2018, it will be generally bedistributed the first business day of January 2019. However, the Company may set other distribution dates, with respect to awards to Participants, includingNon-Employee Directors. Under the 2014 RSU Plan Non-Employee Directors (but not other Participants) could designate the length of the deferrals. This isnot the case with the 2017 RSU Plan, where only the Company can set the distribution dates for all Participants. Non-Employee-Directors may elect to takepayment in cash instead of stock for up to 40% of the RSUs in an award (rendering such RSUs as “Cash Settled RSUs”). With respect to Participants for whomthe Company is required to withhold taxes (generally employees) the Company may mandate such Participants or such Participants may elect that theCompany withhold stock otherwise payable on exchange of an RSU to pay withholding taxes (this differs from the 2014 RSU Plan where the Company couldnot mandate withholding stock to pay withholding taxes). The cash payment election or withholding election may be made at anytime before distribution,but any such cash payment or withholding is subject to any limits on redemption under any preferred stock, loan or other financing agreement. Under theCompany’s current loan agreement with Oxford Finance LLC, there is an annual limit of $350,000 (“Redemption Limit”) on the amount of redemptions theCompany may make (which includes payment on Cash Settled RSUs, withholding of stock for taxes and par value). The Company has the option ofestablishing a RSU award that defers distributions to a Participant, including in installments (e.g., 25% of RSUs to be paid in 2019, 2020, 2021 and 2022). Ifa Change of Control-Plan which is also a Change in Control-409A occurs, all vested shares of common stock underlying an RSU (after payment orwithholding of $0.01 per share par value) will be distributed by the Company to the holder of the RSU at or about the time of the Change in Control-Plan. Nodividends accrue on shares of common stock underlying RSUs prior to distribution. Participants need not be employees, consultants or directors of theCompany on a distribution date. A Change in Control-409A for distribution purposes is generally the same as a Change in Control-Plan for vesting purposes,except that in order to have a Change in Control-409A for distribution purposes, a change in control qualifying under Section 409A of the Code must occur.In lieu of requiring cash payment of par value, the Company may, in its discretion or shall at the Participant’s request, accept payment of any such par valueby withholding from stock payments a number of whole shares of stock whose value is equal to the amount of such par value, provided the same does notcause the Redemption Limit to be exceeded. Non Transferability of RSUs. RSUs may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner by the Participantother than by will or by the laws of descent or distribution and the Committee may, in its discretion, authorize all or a portion of the RSUs to be granted to aParticipant to be on terms which permit transfer by such Participant to (i) the spouse, children or grandchildren of the awardee (the “Immediate FamilyMembers”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, or (iii) a partnership in which such Immediate Family Membersare the only partners, provided that (x) there may be no consideration for any such transfer, (y) subsequent transfers of transferred RSUs shall be prohibitedexcept those made by will or by the laws of descent or distribution, and (z) such transfer is approved in advance by the Committee (or Board in absence of aCommittee). A married Participant may generally designate only a spouse as a beneficiary unless spousal consent is obtained. Termination of Status as an Employee or Non-Employee Director. See “Vesting of RSUs”, above for a discussion of vesting upon termination ofemployment or service as a Non-Employee Director. Dividend and Voting Rights. Unless other provided in an RSU Award Agreement, Participants have no dividend rights and no voting rights withrespect to the shares underlying RSUs until the RSUs settle in shares of common stock. Amendment and Termination of the RSU Plan The Board may terminate and, without shareholder approval, unless the same is required by the rules of the exchange where the Company’s stocktrades, or applicable law, amend the 2017 RSU Plan. Adjustments upon Changes in Capitalization or Merger Upon or in contemplation of any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reversestock split; any merger, combination, consolidation or other reorganization; any split-up; spin-off, or similar extraordinary dividend distribution with respectto the common stock (whether in the form of securities or property); any exchange of stock or other securities of the Company, or any similar, unusual orextraordinary corporate transaction with respect to the common stock; or a sale of substantially all the assets of the Company as an entirety; then the Boardshall proportionately adjust any or all of (a) the number and type of shares of common stock (or other securities or property) that thereafter may be made thesubject of RSUs, (b) the number, amount and type of shares of common stock (or other securities or property) payable with respect to RSUs, and (c) and thenumber and type of RSUs (both credited and vested) under the 2017 RSU Plan. 84  Outstanding Equity Awards at 2017 Year End The following table presents information regarding outstanding restricted stock unit and stock option awards at December 31, 2017 for each of the2017 named executive officers. Stock Option Awards Stock Awards(in Form of RestrictedStock Units) Name Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable OptionExercisePrice($) OptionExpirationDate Number ofRestrictedStock Unitsthat have notvested(3) Market valueof shares ofunits of stockthat have notvested(4) Robert B. Jones 6,000 — $43.20 04/06/2018 41,000 16,148 32,000 — $49.35 05/23/2018 32,000 — $31.45 04/23/2019 50,000 — $15.10 12/15/2020 16,000 — $18.60 12/14/2021 18,000 — $13.05 12/13/2022 27,500 — $7.75 12/11/2023 50,400 — $2.60 12/10/2024 70,000 — $2.01 12/09/2025 25,458(1) 21,542(1) $0.915 12/09/2026 — 47,000(2) $0.45 08/08/2022 Peter A. Clemens 20,000 — $49.35 05/23/2018 28,000 10,898 24,000 — $31.45 04/23/2019 8,000 — $15.10 12/15/2020 7,000 — $18.60 12/14/2021 10,000 — $13.05 12/13/2022 15,000 — $7.75 12/11/2023 36,000 — $2.60 12/10/2024 50,000 — $2.01 12/09/2025 18,417(1) 15,558(1) $0.915 12/09/2026 — 34,000(2) $0.45 08/08/2022 Albert W. Brzeczko 19,200 — $28.50 02/08/2019 28,000 10,898 6,400 — $15.10 12/15/2020 7,000 — $18.60 12/14/2021 14,000 — $13.05 12/13/2022 15,000 — $7.75 12/11/2023 28,800 — $2.60 12/10/2024 50,000 16,041(1) $2.01 12/09/2025 18,958(1) 35,000(2) $0.915 12/09/2026 — $0.45 08/08/2022 (1)1/24th of total option issuance (vested and unvested) becomes exercisable on the last day of each month after issuance, and under certain othercircumstances.(2)Options vest on August 9, 2018.(3)Restricted Stock Units vest on December 11, 2018 or earlier under certain circumstances. Distributions in respect of vested Restricted StockUnits will be made in three equal installments on the first business day of each of January 2020, 2021, and 2022 or earlier upon a qualifyingchange of control which also meets certain criteria of Section 409A of the Internal Revenue Code.(4)Based on market price of $0.40 at December 29, 2017, less $0.01 par value, multiplied by number of units. 85  Director Compensation The following table sets forth a summary of the compensation paid by us to our Directors (other than Robert Jones, whose compensation, is reflectedin the Summary Compensation Table) for services rendered in all capacities to us during the fiscal year ended December 31, 2017: 2017 DIRECTOR COMPENSATION Director Fees Earned or Paid inCash ($) Stock Awards(in form ofRestricted StockUnits)($)(1) Option Awards ($)(2) Total ($) William G. Skelly $47,500 $50,000 — $97,500 Bruce F. Wesson $42,500 $50,000 — $92,500 Immanuel Thangaraj $28,750(3)(4) $50,000 — $78,750 George K. Ross $52,500 $50,000 — $102,500 (1)Represents the grant date fair value of restricted stock units, or RSUs with respect to the 59,523 RSUs granted to Messrs. Skelly, Wesson,Thangaraj and Ross under our 2014 RSU Plan based on a closing price of $0.84 on January 3, 2017. Each director realized $8,800 on March 31, 2017, $8,184 on June 30, 2017, $6,547 on September 30, 2017 and $5,803 on December 31, 2017as a result of the vesting of 14,880.75 RSUs on each of such dates (based on closing prices of our common stock of $0.60 on March 31, 2017,$0.56 on June 30, 2017, $0.45 on September 29, 2017 and $0.40 on December 29, 2017). Additionally, in January 2017, Mr. Skelly exchanged 13,216 RSUs at $0.01 par value per share, for 13,216 shares of common stock andexchanged 8,810 RSUs for approximately $6,800 in cash. In January 2017, Mr. Wesson exchanged 22,026 RSUs at $0.01 par value per share,for 22,026 shares of common stock. In January 2017, Mr. Thangaraj exchanged 13,216 RSUs at $0.01 par value per share, for 13,216 shares ofcommon stock and exchanged 8,810 RSUs for approximately $6,800 in cash. In January 2017, Mr. Ross exchanged 735 RSUs at $0.01 parvalue per share, for 735 shares of common stock and exchanged 490 RSUs for approximately $400 in cash. As of December 31, 2017, Messrs. Skelly and Wesson, Thangaraj each held 59,523 fully vested RSUs and Mr. Ross held 82,774 fully vestedRSUs. (2) Each of Messrs. Skelly, Wesson, Thangaraj and Ross held vested options with respect to 18,000 underlying shares as of December 31, 2017. (3)Committee and board meeting attendance fees waived. (4)Directors fees paid to Mr. Thangaraj are remitted to Essex Woodlands. 86  Our Director compensation program is as follows: ·the annual retainer for each non-employee director of $30,000;·there are no separate Board meeting fees;·an additional retainer for the Chairman of the Board (unfilled at present) of $20,000;·Audit Committee members receive a retainer of $7,500 per year (with no separate per meeting fee);·Audit Committee Chairperson receives an additional annual retainer of $10,000 (in addition to the $7,500 retainer as an Audit Committeemember);·Compensation Committee members receive an annual retainer of $5,000 with no separate per meeting fee;·Compensation Committee Chairperson receives a $5,000 annual retainer (in addition to the $5,000 retainer for Compensation Committeemembers); and·Strategic Transaction Committee Members receive a $250 per meeting fee. The annual retainer fees are payable in four equal installments at the end of each calendar quarter during the year. In addition, commencing in 2014 Directors receive annual equity awards valued at $50,000 in the form of stock options or RSUs. For RSUs this isdetermined by dividing $50,000 by the (i) greater of the Company’s closing stock price on the date of grant, and (ii) the minimum stock price (if any)imposed by the Board. For the 2014 and 2016 award there was no minimum stock price. For the 2015 award the minimum stock price was set at $4.85, and asa result Directors received less than $50,000 of value. For the 2017 award, in which each director received 59,523 RSUs, the minimum stock price was set at$0.83, but as the closing price of the stock on the date of grant was higher, and the directors received the full $50,000 of value. For 2018, the Board hasdecided there will be a minimum stock price or floor of $0.75 and as a result each nonemployee director received 66,666 Restricted Stock Units on January 2,2018. For 2019 and beyond the floor will be $1.00, in each case, subject to reevaluation by the Board. Directors who are also our employees receive noadditional or special remuneration for their services as Directors. We also reimburse Directors for travel and lodging expenses, if any, incurred in connectionwith attendance at Board meetings. ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Security Ownership of Certain Beneficial Owners and Management The following table sets forth information regarding the beneficial ownership of the common stock, as of March 15, 2018, for individuals or entitiesin the following categories: (i) each of the Company’s Directors; (ii) the Company’s principal executive officer, and the next two highest paid executiveofficers of the Company whose total annual compensation for 2017 exceeded $100,000 (the “2017 named executive officers”); (iii) all Directors andexecutive officers as a group; and (iv) each person known by the Company to be a beneficial owner of more than 5% of the common stock. Unless indicatedotherwise, each of the shareholders has sole voting and investment power with respect to the shares beneficially owned. At March 30, 2018, there were21,033,528 shares of our common stock outstanding. Shares of common stock issuable pursuant to stock options, warrants and restricted stock unitsexercisable or exchangeable within 60 days are deemed outstanding and held by the holder of such options warrants or restricted stock units for computingthe percentage of the person holding such options, warrants or restricted stock units, but are not deemed outstanding for computing the percentage of anyother person. There were no restricted stock units exchangeable within 60 days of March 15, 2018. 87  Name of Beneficial Owner Amount Owned Percent of Class (1) John Schutte c/o MainPointe Pharmaceuticals, LLC 333 E. Main Street Louisville, KY 40202 10,695,186(2) 47.5%Essex Woodlands Health Ventures Fund V, L.P. 21 Waterway Avenue, Suite 225 Woodlands, TX 77380 1,956,357(3) 9.4%Robert B. Jones 747,746(4) 3.5%William G. Skelly 202,868(5) 1.0%Bruce F. Wesson 468,927(6) 2.2%Peter A. Clemens 549,215(7) 2.6%Immanuel Thangaraj 74,526(8) *%Albert W. Brzeczko 481,191(9) 2.3%George K. Ross 159,339(10) *%All Officers and Directors as a Group (9 persons) 3,652,397(11) 16.7% * Represents less than 1% of the outstanding shares of the Company’s common stock. (1)Shows percentage ownership assuming (i) such party converts all of its currently convertible securities or securities convertible within 60days of March 15, 2018 into the Company’s common stock, and (ii) no other Company security holder converts any of its convertiblesecurities. No shares held by any Director or 2017 named executive officer has been pledged as collateral security. (2)Includes warrants to purchase 1,782,531shares held by Mr. Schutte. (3)Mr. Thangaraj is the Board designee of Essex Woodlands Health Ventures Fund V, L.P. (“Essex”). Essex Woodlands Health Ventures V,L.L.C., a Delaware limited liability company is the general partner of Essex. Martin P. Sutter and Immanuel Thangaraj may be deemed tohave shared dispositive power and voting power with respect to the securities held by the Essex. Messrs. Sutter and Thangaraj disclaimbeneficial ownership of such securities except to the extent of their respective pecuniary interests therein. (4)Includes 335,191 shares subject to stock options exercisable within 60 days of March 15, 2018. Does not include RSUs. (5)Includes 18,000 shares subject to stock options exercisable within 60 days of March 15, 2018. Does not include RSUs. (6)Includes 18,000 shares subject to stock options exercisable within 60 days of March 15, 2018. Does not include RSUs. (7)Includes 194,082 shares subject to stock options exercisable within 60 days of March 15, 2018. Does not include RSUs. (8)Includes 18,000 shares subject to stock options exercisable within 60 days of March 15, 2018. Mr. Thangaraj’s holdings do not includesecurities held by Essex. Mr. Thangaraj disclaims beneficial ownership in securities held by Essex except to the extent of his pecuniaryinterest therein. Does not include RSUs. (9)Includes 165,191 shares subject to stock options exercisable within 60 days of March 15, 2018. Does not include RSUs. 88  (10)Includes 18,000 shares subject to stock options exercisable within 60 days of March 15, 2018. Does not include RSUs. (11)Includes 972,899 shares which Directors and executive officers have the right to acquire within 60 days of March 15, 2018 through exerciseof outstanding stock options. Does not include RSUs. Securities Authorized For Issuance under Equity Compensation Plans The following table includes information as of December 31, 2017 relating to our 1998 Stock Option Plan, our 2008 Stock Option Plan, our 2016Stock Option Plan, our 2014 Restricted Stock Unit Award Plan, and our 2017 Restricted Stock Award Plan, which comprise all of our equity compensationplans. The table provides the number of securities to be issued upon the exercise of outstanding options and distributions under outstanding Restricted StockUnit Awards under such plans, the weighted-average exercise price of outstanding options and the number of securities remaining available for futureissuance under such equity compensation plans: Plan Category Number Of Securitiesto Be Issued UponExercise ofOutstanding Options,Warrants and Rights(Column a) Weighted-AverageExercise Price ofOutstanding Options,Warrants and Rights(Column b) Number of SecuritiesRemaining Available forFuture Issuance UnderEquity Compensation Plans(Excluding SecuritiesReflected in Column a(Column c) Stock Option Equity Compensation Plans Approved by SecurityHolders 1,493,949 $12.33 245,478 Stock Option Equity Compensation Plans Not Approved by SecurityHolders — — — Restricted Stock Unit Equity Compensation Plans Approved bySecurity Holders 461,343 $0.01 1,061,908 Restricted Stock Unit Equity Compensation Plans Not Approved bySecurity Holders — — — TOTAL 1,955,292 $9.42 1,307,386 89  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Certain Relationships and Related Transactions The Company and certain investors are party to a Voting Agreement. As amended in October 2012 (but prior to the 2017 amendment), the VotingAgreement provided our Board of Directors will be comprised of not more than seven (7) members one of whom shall be the CEO, three of whom would beindependent under Nasdaq standards, and that each of Galen, Care Capital Investments II, LP (“Care Capital”) and Essex had the right to designate onedirector as a member of our Board of Directors as long as such shareholder held 600,000 shares of our common stock (including warrants to purchase shares),provided that once such shareholder no longer held such securities, the additional forfeited seat would become a seat for an independent director to thereafterbe nominated and elected to the Board of Directors from time to time by the then current directors and, as applicable to be elected by the directors to fill thevacancy created by the forfeited seat or submitted to the Company’s shareholders at the next annual meeting. The Voting Agreement provided that if themajority of the Board of Directors were not independent under Nasdaq Marketplace Rules then, the Board would be expanded so that additional independentdirectors would be added. At the time of the October 2012 amendment, Messrs. Azad, Markham and Thangaraj, became the designees of Galen, Care Capitaland Essex, respectively, as successors to GCE Holdings, LLC (an entity controlled by Galen, Care and Essex). Mr. Azad resigned effective December 31, 2012and has not been replaced by Galen. Mr. Markham resigned effective March 11, 2013 and was never replaced by Care Capital. Neither Care Capital nor Galenis currently entitled to designate a director as they no longer hold the requisite amount of our equity. In addition, Essex has (and Galen and Care Capital had)the right to designate a member to any committee of our Board of Directors, provided that in the case of the Audit and Compensation committees they areindependent under applicable NASDAQ rules. Mr. Schutte is chief executive officer and owner of MainPointe Pharmaceuticals, LLC. (“MainPointe”), a Kentucky limited liability company. InMarch 2017, prior to Mr. Schutte becoming a shareholder, we entered into a License, Commercialization and Option Agreement (the “MainPointeAgreement”) with MainPointe to commercialize Nexafed® and Nexafed® Sinus Pressure + Pain in the United States and Canada. Nexafed® and Nexafed®Sinus Pressure + Pain utilize our Impede technology and were previously marketed by us in the United States. Our Impede technology is directed atminimizing the extraction and conversion of pseudoephedrine, or PSE, into methamphetamine. Under the terms of the Agreement we transferred existinginventory and equipment relating to such products to MainPointe and licensed our Impede technology intellectual property rights to MainPointe for suchproducts as well as certain future PSE-containing products. MainPointe is responsible for all development, manufacturing and commercialization activitieswith respect to products covered by the Agreement. On signing, MainPointe paid us an upfront licensing fee of $2.5 million plus approximately $425,000 for inventory and equipment beingtransferred. We will receive a 7.5% royalty on sales of licensed products. The royalty payment for each product will expire on a country-by-country basiswhen 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 theroyalty 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 retainsa royalty free license to our Impede® technology for products covered by the Agreement in such country. MainPointe has the option to expand the territory beyond the United States and Canada to the European Union (and the United Kingdom), Japanand South Korea for payments of $1.0 million, $500,000 and $250,000, respectively. In addition, MainPointe has the option to add to the Agreement certainadditional products, or Option Products, containing PSE and utilizing the Impede technology for a fee of $500,000 per product (for all such productstrengths). If the territory has been expanded prior to the exercise of a product option, the option fee will be increased to $750,000 per product. If the territoryis expanded after the payment of the $500,000 product option fee, a one-time $250,000 fee will be due for each product. If a third party is interested indeveloping or licensing rights to an Option Product, MainPointe must exercise its option for that product or its option rights for such product will terminate. 90  On July 24, 2017 we completed the sale to Mr. Schutte of 8,912,655 shares and warrants to purchase 1,782,531 shares exercisable at $0.528 per shareand expiring in July 23, 2022 for $4 million and amended the Voting Agreement described above (as so amended the “Second Amended and Restated VotingAgreement”) in connection with that purchase The Second Amended and Restated Voting Agreement was entered into following Care Capital’s no longerholding 600,000 shares but prior to Galen’s no longer holding 600,000 shares. The Second Amended and Restated Voting Agreement provides that ourBoard of Directors will be comprised of not more than seven (7) members , one of whom shall be the CEO, three of whom would be independent under Nasdaqstandards, and that each of Galen, John Schutte and Essex had the right to designate one director as a member of our Board of Directors as long as suchshareholder continues to hold 600,000 shares of our common stock (including warrants to purchase shares), provided that once such shareholder no longerholds such securities, the additional forfeited seat would become a seat for an independent director to thereafter be nominated to the Board of Directors fromtime to time by the then current directors and as applicable, to be elected by the directors to fill the vacancy created by the forfeited seat or submitted to thevote of shareholders at the Company’s next annual meeting. The Second Amended and Restated Voting Agreement provides that in the event the majority ofthe Board of Directors were not independent under Nasdaq Marketplace Rules then, the Board would be expanded so that additional independent directorswould be added. In addition, each of Galen, Essex and John Schutte has the right to designate a member to any committee of our Board of Directors, providedthat in the case of the Audit and Compensation committees they are independent under applicable NASDAQ rules. As of late December, 2017, Galen nolonger held the requisite amount of shares (when it completed the sale of 2,195,734 shares, at a price of $0.10 per share, severally to various officers,employees and non-employee directors of the Company) to designate a director to the Board or a Committee, a right which it had not recently exercised. In the second quarter of 2018, we borrowed a total of $1.0 million from John Schutte and issued a promissory note, or the Schutte Note, in thatprincipal amount to him. The Schutte Note bears interest at prime plus 2.0%, and matures on January 2, 2020, at which time all principal and interest is due,and is unsecured until all of our obligations to Oxford are satisfied, at which time we are required to grant Mr. Schutte a security interest in all of our assets.Events of Default under the Schutte Note are limited to bankruptcy defaults and failure to pay interest and principal when due on January 2, 2020. Inaddition, Mr. Schutte and Oxford Finance, LLC, or Oxford, entered into a subordination agreement, approved by us and APT pursuant to which Mr. Schuttesubordinated the Schutte Note to our obligations to Oxford under our loan and security agreement with Oxford, or the Loan Agreement. The Schutte Notemay be prepaid at any time in whole or in part at any time, however while Oxford’s loan is outstanding such prepayment will require Oxford’s consent. Also,in connection with the loan, we and Oxford entered into a fourth amendment to the Loan Agreement, or the Fourth Amendment. Pursuant to the FourthAmendment, Oxford provided a waiver of compliance with the unqualified audit opinion covenant in connection with our receipt of our auditor’s opinionwith a going concern explanatory paragraph for our 2017 financial statements and allowed us to deliver financial statements up to 160 days after year end,instead of up to 120 days after year end. Our Board has not adopted formalized written policies and procedures for the review or approval of related party transactions. As a matter of practice,however, our Board has required that all related party transactions, be subject to review and approval by a committee of independent directors established bythe Board. The Board’s practice is to evaluate whether a related party (including a director, officer, employee, Galen, Essex or other significant shareholder)will have a direct or indirect interest in a transaction in which we may be a party. Where the Board determines that such proposed transaction involves arelated party, the Board formally establishes a committee comprised solely of independent directors to review and evaluate such proposed transaction, or theIndependent Committee. The Independent Committee is authorized to review any and all information it deems necessary and appropriate to evaluate thefairness of the transaction to us and our shareholders (other than the interested related party to such transaction), including meeting with management,retaining third- party experts (including counsel and financial advisors if determined necessary and appropriate by the Independent Committee) andevaluating alternative transactions, if any. The Independent Committee is also empowered to negotiate the terms of such proposed related party transactionon our behalf. The proposed related party transaction may proceed only following the approval and recommendation of the Independent Committee.Following the Independent Committee’s approval, the related party transaction is subject to final review and approval of the Board as a whole, with anyinterested director abstaining from such action. As the transactions described above with MainPointe and Mr. Schutte did not involve a related party at thetime such transactions were entered into, the Board determined that an Independent Committee was not necessary and such transactions were reviewed andapproved solely by the Board as a whole. With respect to the $1.0 million loan provided by Mr. Schutte, an independent committee reviewed and approvedthe transaction. 91  Director Independence In assessing the independence of our Board members, our Board has reviewed and analyzed the standards for independence required under theNASDAQ Capital Market, including NASDAQ Marketplace Rule 5605 and applicable SEC regulations. Based on this analysis, our Board has determinedthat during 2017, each of Messrs. Bruce F. Wesson, Immanuel Thangaraj, William Skelly and George Ross met the standards for independence provided inthe listing requirements of the NASDAQ Capital Market and SEC regulations. Our Board has determined that during 2017 with respect to our Compensation Committee that Messrs. Skelly, Wesson, and Thangaraj meet thestandards for independence described above and that Messrs. Skelly, Wesson and Thangaraj meet the additional independence standards of NASDAQ Rule5605 relating to Compensation Committees. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Our registered independent public accounting firm is BDO USA, LLP. The fees billed by this firm in 2017 and 2016 were as follows: 2017 2016 Audit Fees $149,898 $173,558 Audit-Related Fees - - Total Audit and Audit-Related Fees 149,898 173,558 Tax Fees 41,090 63,990 All Other Fees - - Total for BDO USA, LLP $190,988 $237,548 Audit Fees include professional services rendered in connection with the annual audit of our financial statements, and the review of the financialstatements included in our Form 10-Qs for the related periods. Additionally, Audit Fees include other services that only an independent registered publicaccounting firm can reasonably provide, such as services associated with our SEC registration statements or other documents filed with the SEC or used inconnection with financing activities. We had no Audit-Related Fees which would include accounting consultations related to accounting, financial reportingor disclosure matters not classified as Audit Fees.Tax Fees include tax compliance, tax advice and tax planning services. These services related to the preparation of various state income tax returns, ourfederal income tax return, and reviews of IRC Section 382. Audit Committee’s Pre-Approval Policies and Procedures Consistent with policies of the SEC regarding auditor independence and the Audit Committee Charter, the Audit Committee has the responsibilityfor appointing, setting compensation and overseeing the work of the registered independent public accounting firm (the “Firm”). The Audit Committee’spolicy is to pre-approve all audit and permissible non-audit services provided by the Firm. Pre-approval is detailed as to the particular service or category ofservices and is generally subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. In assessingrequests for services by the Firm, the Audit Committee considers whether such services are consistent with the Firm’s independence, whether the Firm islikely to provide the most effective and efficient service based upon their familiarity with the Company, and whether the service could enhance theCompany’s ability to manage or control risk or improve audit quality. All of the audit-related, tax and other services provided by BDO USA, LLP in 2017 and 2016 and related fees (as described in the captions above)were approved in advance by the Audit Committee. 92  PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1.Financial Statements: See Index to Consolidated Financial Statements on page F-1.2.Financial Statement Schedules: None3.Exhibits: See Exhibits Index on page E-1. ITEM 16. FORM 10-K SUMMARY None. 93  SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Date: June 7, 2018ACURA PHARMACEUTICALS, INC. By:/s/ Robert B. Jones Robert B. JonesPresident and Chief Executive Officer(Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantand in the capacities and on the dates indicated. Signature Title(s) Date /s/ Robert B. JonesRobert B. Jones President, Chief Executive Officer and Director(Principal Executive Officer) June 7, 2018 /s/ Peter A. ClemensPeter A. Clemens Senior Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) June 7, 2018 /s/ William G. SkellyWilliam G. Skelly Director June 7, 2018 /s/ Bruce F WessonBruce F. Wesson Director June 7, 2018 /s/ George K. RossGeorge K. Ross Director June 7, 2018 94  ACURA PHARMACEUTICALS, INCINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting FirmF-2 Consolidated Balance Sheets as of December 31, 2017 and 2016F-3 Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2017 and 2016F-4 Consolidated Statements of Stockholders' Equity (Deficit) for the Years ended December 31, 2017 and 2016F-5 Consolidated Statements of Cash Flows for the Years ended December 31, 2017 and 2016F-6 Notes to Consolidated Financial StatementsF-8 Supplementary Data - Quarterly Results of Operation (Unaudited)F-30 F-1  Report Of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Acura Pharmaceuticals, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Acura Pharmaceuticals Inc. (the “Company”) and subsidiary as of December 31, 2017 and2016, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for the years then ended, andthe related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, inall material respects, the financial position of the Company and subsidiary at December 31, 2017 and 2016, and the results of their operations and their cashflows for the years then ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America. Going Concern Uncertainty The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note1 to the consolidated financial statements, the Company has suffered recurring losses from operations, deficiencies in working capital and equity and has notgenerated positive cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard tothese matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of thisuncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sconsolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required tohave, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain anunderstanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internalcontrol over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud,and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresin the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, LLP We have served as the Company's auditor since 2004. Chicago, Illinois June 7, 2018 F-2  ACURA PHARMACEUTICALS, INC.CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2017 and 2016(in thousands, except par value) 2017 2016 Assets: Cash and cash equivalents $2,220 $2,681 Restricted cash equivalents (Note 7) - 2,500 Trade accounts receivable (net of allowances of $- and $7) - 23 Collaboration revenue receivable - 79 Royalty receivable 71 50 Inventories (net of allowances of $- and $32) (Note 4) - 309 Prepaid expenses and other current assets 275 268 Total current assets 2,566 5,910 Income tax receivable 135 - Property, plant and equipment, net (Note 5) 679 867 Intangible asset (net of accumulated amortization of $776 and $569) (Note 3) 1,224 1,431 Total assets $4,604 $8,208 Liabilities: Accounts payable $3 $77 Accrued expenses (Note 6) 939 703 Accrued interest - current 700 - Other current liabilities 41 27 Sales returns liability 254 304 Debt – current portion (net of discounts) (Note 7) 2,694 2,376 Total current liabilities 4,631 3,487 Debt – non-current portion (net of discounts) (Note 7) - 2,979 Accrued interest – non-current portion - 559 Total liabilities 4,631 7,025 Commitments and contingencies (Note 14) Stockholders’ (deficit) equity: Common stock - $.01 par value per share; 100,000 shares authorized, 20,796 and 11,834 shares issuedand outstanding at 2017 and 2016, respectively 208 118 Additional paid-in capital 380,145 375,763 Accumulated deficit (380,380) (374,698) Total stockholders’ (deficit) equity (27) 1,183 Total liabilities and stockholders’ (deficit) equity $4,604 $8,208 See accompanying Notes to Consolidated Financial Statements. F-3  ACURA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSSYEARS ENDED DECEMBER 31, 2017 and 2016(in thousands, except per share amounts) 2017 2016 Revenues: License fee revenue $2,500 $3,500 Collaboration revenue 59 392 Royalty revenue 300 149 Product sales, net 107 423 Total revenues, net 2,966 4,464 Cost and expenses: Cost of sales (excluding inventory provisions) 128 451 Inventory provisions (Note 4) - 26 Research and development 3,721 4,028 Selling, marketing, general and administrative 4,342 6,516 Total costs and expenses 8,191 11,021 Operating loss (5,225) (6,557) Non-operating income (expense): Interest and investment income 4 60 Interest expense (Note 7) (596) (893)Other income - 2 Total other expense, net (592) (831) Loss before income taxes (5,817) (7,388)Provision (benefit) for income taxes (135) - Net loss $(5,682) $(7,388) Other comprehensive income: Unrealized gains on marketable securities - 65 Comprehensive loss $(5,682) $(7,323) Net loss per share: Basic $(0.36) $(0.62)Diluted $(0.36) $(0.62)Weighted average number of shares outstanding: Basic 15,903 11,870 Diluted 15,903 11,870 See accompanying Notes to Consolidated Financial Statements. F-4  ACURA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CHANGES IN ACCUMULATED STOCKHOLDERS' EQUITY (DEFICIT)YEARS ENDED DECEMBER 31, 2017 and 2016(in thousands) Common Stock AdditionalPaid-in Accumulated AccumulatedOtherComprehensive Shares $ Amount Capital Deficit Income (Loss) Total Balance at January 1, 2016 11,801 $118 $375,157 $(367,310) $(65) $7,900 Net loss - - - (7,388) - (7,388)Other comprehensive income - - - - 65 65 Noncash share-based compensation - - 588 - - 588 Net distribution of common stock pursuant to restrictedstock unit award plan 33 - 18 - - 18 Balance at December 31, 2016 11,834 $118 $375,763 $(374,698) $- $1,183 Net loss - - - (5,682) - (5,682)Noncash share-based compensation - - 464 - - 464 Issuance of shares and warrants under private placement 8,913 89 3,911 - - 4,000 Net distribution of common stock pursuant to restrictedstock unit award plan 49 1 7 - - 8 Balance at December 31, 2017 20,796 $208 $380,145 $(380,380) $- $(27) See accompanying Notes to Consolidated Financial Statements. F-5  ACURA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2017 and 2016(in thousands) 2017 2016 Cash Flows from Operating Activities: Net loss $(5,682) $(7,388)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 87 138 Provision to reduce inventory to net realizable value - 26 Provision for sales returns 49 99 Provision for fixed asset impairment - 82 Noncash share-based compensation 464 588 Amortization of debt discount and deferred debt issue costs 99 145 Amortization of bond premium in marketable securities - 31 Amortization of intangible asset 207 207 (Gain) loss on disposals of property, plant and equipment (2) 1 (Gain) on sales of marketable securities - (2)Changes in assets and liabilities: Trade accounts receivable, net 23 19 Collaboration revenue receivable 79 (43)Royalty receivable (21) (45)Accrued investment income - 37 Inventories 103 (59)Prepaid expenses and other current assets (7) 149 Income tax receivable (135) - Other assets - 175 Accounts payable (74) (33)Accrued expenses 236 139 Accrued interest – current and long term 141 172 Other current liabilities 22 (1)Sales returns liability (99) - Net cash used in operating activities (4,510) (5,563)Cash Flows from Investing Activities: Proceeds from sales and maturities of marketable securities - 10,873 Proceeds from transfer of equipment to licensee 103 - Proceeds from transfer of inventory to licensee 206 - Capital expenditures - (75)Net cash provided by investing activities 309 10,798 Cash Flows from Financing Activities: Proceeds from distribution of restricted stock units - 1 Principal payments on loan maturing December 1, 2018 (2,760) (2,540)Issuance of common stock 4,000 - Net cash provided by (used in) financing activities 1,240 (2,539)Net (decrease) increase in cash and cash equivalents (2,961) 2,696 Cash and cash equivalents at beginning of year 5,181 2,485 Cash and cash equivalents at end of year $2,220 $5,181 Supplemental Disclosures of Cash Flow Information: Cash paid during the year for: Interest on loan maturing December 1, 2018 $355 $576 Income taxes, net of refunds $- $- See accompanying Notes to Consolidated Financial Statements. F-6  ACURA PHARMACEUTICALS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)YEARS ENDED DECEMBER 31, 2017 and 2016 Supplemental disclosures of noncash investing and financing activities (amounts presented are rounded to the nearest thousand): Year Ended December 31, 2017 1.There are no supplemental disclosure activities. Year Ended December 31, 2016 2.There are no supplemental disclosure activities. See accompanying Notes to Consolidated Financial Statements. F-7  ACURA PHARMACEUTICALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2017 and 2016 NOTE 1 – OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principal Operations Acura Pharmaceuticals, Inc., a New York corporation, and its subsidiary (the “Company”, “Acura”, “We”, or “Our”) is a specialty pharmaceutical companyengaged in the research and development of technologies and products intended to address medication abuse and misuse. We have discovered anddeveloped three proprietary platform technologies which can be used to develop multiple products. Our Limitx™ Technology is intended to addressmethods of product tampering associated with opioid abuse by retarding the release of active drug ingredients when too many tablets are accidently orpurposefully ingested. Our Aversion® Technology is intended to address methods of product tampering associated with opioid abuse by incorporatinggelling ingredients and irritants into tablets to discourage abuse by snorting and provide barriers to abuse by injection. Our Impede® Technology is directedat minimizing the extraction and conversion of pseudoephedrine into methamphetamine. ·Our Limitx Technology is in development with the immediate-release hydrocodone bitartrate and acetaminophen as a lead Limitx productcandidate due to its larger market size than our prior lead product and its known prevalence of oral excessive tablet abuse. ·Our Aversion Technology has been licensed to Egalet Corporation for use in Oxaydo® Tablets (oxycodone HCl, CII), and is the first approvedimmediate-release oxycodone product in the United States with abuse deterrent labeling. Oxaydo is currently approved by the FDA for marketing inthe United States in 5mg and 7.5mg strengths. Egalet launched Oxaydo in the United States late in the third quarter of 2015. (see Note 3). ·Our Impede Technology is used in Nexafed® Tablets (30mg pseudoephedrine HCl) and Nexafed® Sinus Pressure + Pain Tablets (30/325mgpseudoephedrine HCl and acetaminophen). We have licensed to MainPointe Pharmaceuticals, LLC, or MainPointe, our Impede Technology in theUnited States and Canada to commercialize our Nexafed products (with options to acquire other Impede Technology Products and other territories),pursuant to a License, Commercialization and Option Agreement, or the MainPointe Agreement, entered into on March 16, 2017. (see Note 3). Basis of Presentation and Substantial Doubt in Going Concern The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern and inaccordance with generally accepted accounting principles in the United States of America. The going concern basis of presentation assumes that we willcontinue in operation one year after the date these financial statements are issued and we will be able to realize our assets and discharge our liabilities andcommitments in the normal course of business. As of December 31, 2017, we had cash and cash equivalents of $2.2 million, working capital deficit of $2.1million and an accumulated deficit of $380.4 million. We had a loss from operations of $5.2 million and a net loss of $5.7 million for the year endedDecember 31, 2017. We have suffered recurring losses from operations and have not generated positive cash flows from operations. We anticipate operatinglosses to continue for the foreseeable future. We have a term loan with Oxford Finance LLC (“Oxford” or the “Lender”) and as of December 31, 2017 and May 14, 2018, the outstanding principal balanceis $2.7 million and $1.8 million, respectively. A $795 thousand balloon interest payment is due to Oxford on December 1, 2018. Our term loan agreementwith Oxford contains customary affirmative and negative covenants. One such covenant is that the Company must submit on an annual basis to Oxford,within 120 days after the end of its fiscal year, audited consolidated financial statements, together with an unqualified audit opinion from an independentregistered public accounting firm, or the Unqualified Audit Opinion Covenant. Per the term loan agreement an audit opinion with an explanatory paragraphnoting substantial doubt about the Company’s ability to continue in business (the “going concern opinion”) is deemed to violate the Unqualified AuditOpinion Covenant. Failure to comply with the Unqualified Audit Opinion Covenant is a breach of the term loan agreement and unless such covenant orbreach is waived, Oxford would have the option of accelerating the debt under the term loan agreement and initiating enforcement collection actions,foreclosing on collateral (which includes most assets of the Company) and, among other things, preventing the Company from using any funds in its bank orsecurities accounts. On March 16, 2017, we and Oxford entered into a third amendment to the Loan Agreement, or the Third Amendment. Pursuant to theThird Amendment (i) we granted Oxford a lien on our intellectual property, (ii) Oxford provided a waiver of compliance with the Unqualified Audit OpinionCovenant in connection with our receipt of our auditor’s going concern opinion for our 2016 financial statements and (iii) Oxford consented to the terms ofthe MainPointe Agreement. F-8  During the second quarter of 2018, we borrowed a a total of $1.0 million from John Schutte, a principal of MainPointe and our largest shareholder, and inconjunction with such loan, we entered into of a fourth amendment to our term loan agreement with Oxford, pursuant to which Oxford granted a similarwaiver of compliance with the Unqualified Audit Opinion Covenant for our 2017 financial statements and extended the period in which we could deliverfinancial statements for 2017 to 160 days after year’s end (instead of 120 days). (see Notes 7 and 15). With the net proceeds of approximately $1.0 million tothe Company resulting from the loan from Mr. Schutte, we expect our cash will only be sufficient to fund operations into late June 2018. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. We must seek sources to raise additionalfinancing and seek to enter into license or collaboration agreements with third parties relating to our technologies. The Company is exploring a variety ofcapital raising and other transactions to provide additional funding to continue operations. These include potential private offerings of common stock toaccredited and/or institutional investors and licensing transactions with pharmaceutical company partners for our proprietary technologies, including Limitx.We are actively seeking a licensing partner for our Limitx technology, with the objective of receiving an upfront license fee, development milestonepayments and royalties on the net sales of products utilizing the Limitx technology, similar to the Egalet Agreement. We are also exploring licensing orselling select assets and intellectual property in an effort to raise capital and reduce operating expenses. Finally, the Company continues to evaluate thepotential for a strategic transaction which may involve the Company being acquired in a merger or asset purchase transaction. No assurance can be given thatwe will be successful in completing any one or more of such transactions on acceptable terms, if at all, or if completed, that such transactions will providepayments to the Company sufficient to fund continued operations. In the absence of the Company’s completion of one or more of such transactions, therewill be substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued, andthe Company will be required to scale back or terminate operations and/or seek protection under applicable bankruptcy laws. An extended delay or cessationof the Company’s continuing product development efforts will have a material adverse effect on the Company’s financial condition and results of operations. 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 goingconcern within one year after the date the financial statements are issued. The recoverability of a major portion of the recorded asset amounts shown in theCompany’s accompanying balance sheets is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s abilityto meet its funding requirements on a continuous basis, to maintain existing financing and to succeed in its future operations. The Company’s financialstatements do not include any adjustment relating to the recoverability and classification of recorded asset amounts and classification of liabilities that mightbe necessary should the Company be unable to continue in existence. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The consolidated financial statements include the accounts of our wholly-owned subsidiary, Acura Pharmaceutical Technologies Inc., after elimination ofintercompany accounts and transactions. Amounts presented have been rounded to the nearest thousand, where indicated, except share and per share data. F-9  Reclassifications Certain reclassifications have been made to the prior year’s amounts to conform to the current year's presentation. Use of Estimates Management is required to make certain estimates and assumptions in order to prepare consolidated financial statements in conformity with GAAP. Suchestimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities in theconsolidated financial statements and accompanying notes. Actual results could differ from those estimates. Management periodically evaluates estimatesused in the preparation of the consolidated financial statements for continued reasonableness. Appropriate adjustments, if any, to the estimates used are madeprospectively based on such periodic evaluations. Concentration of Credit Risk Financial instruments that potentially subject the Company to a significant concentration of credit risk consist primarily of cash and cash equivalents andaccounts receivable. The Company maintains deposits in federally insured financial institutions which are in excess of federally insured limits. However,management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which thosedeposits are held. Cash and Cash Equivalents The Company considers cash and cash equivalents to include cash in financial institutions and money market funds, and considers all highly liquidinvestments with an original maturity of three months or less to be cash equivalents. Our cash and cash equivalents are governed by our investment policy asapproved by our Board of Directors. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature. Fair Value Measurements The Company’s financial instruments consist primarily of cash and cash equivalents, receivables from trade, royalties and collaboration, trade accountspayable, and our long-term debt. The carrying amounts of these financial instruments are representative of their respective fair values due to their relativelyshort maturities. Share-based Compensation Expense We have several share-based compensation plans covering stock options and RSUs for our employees and directors, which are described more fully in Note11. We measure our compensation cost related to share-based payment transactions based on fair value of the equity or liability instrument issued. For purposesof estimating the fair value of each stock option unit on the date of grant, we utilize the Black-Scholes option-pricing model. Option valuation modelsrequire the input of highly subjective assumptions including the expected volatility factor of the market price of our common stock (as determined byreviewing our historical public market closing prices). Our accounting for share-based compensation for RSUs is based on the market price of our commonstock on the date of grant, less its exercise cost. Our share-based compensation expense recognized in the Company’s results of operations from all types of noncash and cash-portioned instruments issuedcomprised the following (in thousands): Year EndedDecember 31, 2017 2016 Research and development expense: Stock option awards $136 $167 RSU awards 3 - $139 $167 Selling, marketing, general and administrative expense: Stock option awards 203 301 RSU awards 156 143 $359 $444 Total share-based compensation expense $498 $611 F-10  Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. We have no leasehold improvements. Betterments are capitalized andmaintenance and repairs are charged to operations as incurred. When a depreciable asset is retired from service, the cost and accumulated depreciation isremoved from the respective accounts. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of the related assets. The estimated useful lives of the majorclassification of depreciable assets are: Building and improvements 10 - 40 yearsLand and improvements 20 - 40 yearsMachinery and equipment 7 - 10 yearsScientific equipment 5 - 10 yearsComputer hardware and software 3 - 10 years Intangible and Long-Lived Assets Long-lived assets such as the intangible asset and property, plant and equipment are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying value of an asset may not be recoverable. Recoverability of the assets to be held and used is measured by a comparison of thecarrying amount of the asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds itsestimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.We recorded an impairment charge of $82 thousand in the fourth quarter of 2016 on equipment having a net book value of a like amount. We had noimpairment charges during the year 2017. License Fee Revenue On signing the MainPointe Agreement in March 2017, MainPointe paid us an upfront licensing fee of $2.5 million. The payment was non-refundable andnon-creditable when made and we had no further requirements to earn the payment. The amount was recognized as revenue when received. (see Note 3). In October 2016, the Company entered into a worldwide License Agreement (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 two of KemPharm’s prodrug candidates. KemPharmhas also been granted an option to extend the KemPharm Agreement to cover two additional prodrug candidates. KemPharm paid us $3.5 million uponsigning the KemPharm Agreement. The payment was non-refundable and non-creditable when made and we had no further requirements to earn the payment.The amount was recognized as revenue when received. (see Note 3). Collaboration Revenue Collaboration revenue is derived from reimbursement of development expenses, such as under our agreement with Bayer, and are recognized when costs areincurred pursuant to the agreements. The ongoing research and development services being provided under the collaboration are priced at fair value basedupon the reimbursement of expenses incurred pursuant to the collaboration agreements. We recognized $59 thousand and $392 thousand of collaborationrevenue during the year 2017 and 2016, respectively. F-11  Royalty Revenue We recognize revenue from royalties based on our licensees' sales of our products or products using our technologies. Royalties are recognized as earned inaccordance with the contract terms when royalties from licensees can be reasonably estimated and collectability is reasonably assured. If royalties cannot bereasonably estimated or collectability of a royalty amount is not reasonably assured, royalties are recognized as revenue when the cash is received. In connection with our Collaboration and License Agreement with Egalet to commercialize Oxaydo tablets we will receive a stepped royalty at percentagerates ranging from mid-single digits to double-digits based on Oxaydo net sales during each calendar year over the term of the agreement (excluding net salesresulting from any co-promotion efforts by us). We recognize royalty revenue each calendar quarter based on net sales reported to us by Egalet in accordancewith the agreement. Egalet’s first commercial sale of Oxaydo occurred in October 2015 and we have recorded royalties of $281 thousand and $149 thousandon net sales for the years 2017 and 2016, respectively. (see Note 3). In connection with the MainPointe Agreement, which occurred on March 16, 2017, we are receiving a royalty of 7.5% on net sales of the licensed productsover the term of the agreement. Such royalty shall be payable for sales made during each calendar quarter and payment will be remitted within forty-five (45)days after the end of the quarter to which it relates. We have recorded royalties of $19 thousand for the year 2017. (see Note 3). Net Product Sales Nexafed was launched in mid-December 2012 and Nexafed Sinus Pressure + Pain was launched in February 2015. Prior to entering into the MainPointeAgreement, we sold our Nexafed products in the United States to wholesale pharmaceutical distributors as well as directly to chain drug stores. Our Nexafedproducts were sold subject to the right of return usually for a period of up to twelve months after the product expiration. Both products had an initial shelf lifeof twenty-four months from the date of manufacture, which shelf life had been extended to thirty-six months for Nexafed product supplied to us during 2016from one of the Company’s contract manufacturers. Prior to entering into the MainPointe Agreement, we recognized revenue from our Nexafed product linesales when the price was fixed and determinable at the date of sale, title and risk of ownership were transferred to the customer, and returns could bereasonably estimated, which generally occurred at the time of product shipment. Advertising and Shipping/Handling Costs The Company records the cost of its advertising efforts in marketing expenses when services are performed or goods are delivered. We record shipping andhandling costs in selling expenses. As of mid-March 2017 we no longer manufacture, distribute or sell the Nexafed product line as the Company grantedMainPointe an exclusive license to our Impede technology to commercialize our Nexafed products in the U.S. and Canada. The amounts recorded as sellingexpenses from the shipments of the Nexafed product line during each of the years 2017 and 2016 were not material. Deferred Debt Issuance Costs and Debt Discount Deferred debt issuance costs include costs of debt financing undertaken by the Company, including legal fees, placement fees and other direct costs of thefinancing. Debt discount is the value attributable to warrants issued in conjunction with the financing. Debt issuance costs and debt discount are amortizedinto interest expense over the term of the related debt using the effective interest method. Deferred debt issuance costs and debt discount are presented on thebalance sheets as a direct reduction against the debt. F-12  Research and Development Activities Research and Development (“R&D”) costs include internal R&D activities, external Contract Research Organization (“CRO”) services and their clinicalresearch and investigative sites, and other activities. Internal R&D activity costs can include facility overhead, equipment and facility maintenance andrepairs, laboratory supplies, pre-clinical laboratory experiments, formulation work, depreciation, salaries, benefits, insurance and share-based compensationexpenses. CRO activity costs can include preclinical laboratory experiments and clinical trial studies. Other activity costs can include regulatory consulting,regulatory legal counsel, cost of acquiring, developing and manufacturing pre-clinical trial materials, costs of manufacturing scale-up, and cost sharingexpenses under license agreements. Internal R&D costs and other activity costs are charged to expense as incurred. We make payments to the CRO's based onagreed upon terms and may include payments in advance of a study starting date. Payments in advance will be reflected in the consolidated financialstatements as prepaid expenses. We review and charge to expense accrued CRO costs and clinical trial study costs based on services performed and rely onestimates of those costs applicable to the stage of completion of a study as provided by the CRO. Our accrued CRO costs are subject to revisions as suchstudies progress towards completion. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. We did not have prepaid CRO costs nor did we have prepaid clinical trial study expenses at either December 31, 2017 or 2016. We did not have anyobligations under non-cancelable arrangements at December 31, 2017. Income Taxes We account for income taxes under the liability method. Under this method, deferred income tax assets and liabilities are determined based on differencesbetween the financial reporting and the income tax basis of assets and liabilities and are measured using the enacted income tax rates and laws that will be ineffect when the differences are expected to reverse. Additionally, net operating loss and tax credit carryforwards are reported as deferred income tax assets.The realization of deferred income tax assets is dependent upon future earnings. A valuation allowance is required against deferred income tax assets if, basedon the weight of available evidence, it is more likely than not that some or all of the deferred income tax assets may not be realized. At December 31, 2017and 2016, 100% of all remaining net deferred income tax assets were offset by a valuation allowance due to uncertainties with respect to future utilization ofnet operating loss carryforwards. If in the future it is determined that additional amounts of our deferred income tax assets would likely be realized, thevaluation allowance would be reduced in the period in which such determination is made and an additional benefit from income taxes in such period wouldbe recognized. Basic and Diluted Net Loss Per Share Basic net loss per share is computed by dividing net income or loss by the weighted average common shares outstanding during a period, including sharesweighted related to vested Restricted Stock Units (“RSUs”). (see Note 12). Diluted net loss per share is based on the treasury stock method and computedbased on the same number of shares used in the basic share calculation and includes the effect from potential issuance of common stock, such as sharesissuable pursuant to the exercise of stock options and stock warrants, assuming the exercise of all in-the-money stock options and warrants. Common stockequivalents are excluded from the computation where their inclusion would be anti-dilutive. No such adjustments were made for 2017 or 2016 as theCompany reported a net loss for each year and including the effects of common stock equivalents in the diluted net loss per share calculation would havebeen antidilutive. Customer Concentration In March 2017, we licensed our Nexafed product line to MainPointe Pharmaceuticals LLC. Until that time our accounts receivable arose from our sales of ourNexafed product line and represent amounts due from wholesalers in the health care and pharmaceuticals industries and from chain drug stores. The Companyhas performed a credit evaluation of its customers and we have not experienced any losses on uncollectable accounts in 2017 or 2016. F-13  Sales to certain of our customers during 2016 accounting for 10% or more of our annual product sales, whether the product shipment was recognizedimmediately as a sales or as a deferred sale, is presented below. Customer 2016 Rite Aid Corporation 55%Cardinal Health, Inc. 13%McKesson Corporation 10% Trade accounts receivable from certain of our customers at December 31, 2016 accounting for 10% or more of our gross accounts receivable is presentedbelow. Customer 2016 AmerisourceBergen Corporation 35%McKesson Corporation 24%Cardinal Health, Inc. 19%The Kroger Co. 18%Rite Aid Corporation ** Recent Accounting Pronouncements New accounting standards which have been adopted on or before December 31, 2017 Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15 which explicitly requiresmanagement to evaluate, at each annual or interim reporting period, whether there are conditions or events that exist which raise substantial doubt about anentity’s ability to continue as a going concern and to provide related disclosures. The amendments in this update are effective for the first annual periodending after December 15, 2017, and for annual periods and interim periods thereafter. Early application is permitted. The Company early adopted theguidance for its financial statement disclosures in the fourth quarter of 2016. Statements of Cash Flows - Restricted Cash In November 2016, the FASB issued ASU 2016-18 which requires that at statement of cash flows explain the change during the period in the total of cash,cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The new standard will be effective for annual and interimperiods, within those fiscal years beginning after December 15, 2017 but early adoption is permitted. The Company early adopted the guidance in the firstquarter of 2017 which did not have a material impact on the Company’s consolidated financial statements or related footnote disclosures. Business Combinations – Clarifying the Definition of a Business In January 2017, the FASB issued ASU No. 2017-01 which clarifies the definition of a business with the objective of adding guidance to assist entities withevaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update provide ascreen to determine when an integrated set of assets and activities (collectively referred to as a “set”), is not a business. The screen requires that whensubstantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiableassets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. ASU 2017-01 is effective for annual periodsbeginning after December 15, 2017, but early application of the amendments in this update is allowed. The amendments in this update should be appliedprospectively on or after the effective date. The Company early adopted this new standard on January 1, 2017 which did not have a material impact on theCompany’s consolidated financial statements. Simplication of Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09 which provides for simplification of certain aspects of employee share-based payment accounting includingincome taxes, classification of awards as either equity or liabilities, accounting for forfeitures and classification on the statement of cash flows. ASU 2016-09is to be applied either prospectively, retrospectively or using a modified retrospective transition approach depending on the area covered in this update. Thenew standard was effective for annual and interim periods, within those fiscal years, beginning after December 15, 2016. The Company adopted the guidancein the first quarter of 2017 which did not have a material impact on the Company’s consolidated financial statements. F-14  Simplifying the Measurement of Inventory In July 2015, the FASB issued ASU No. 2015-11, which simplifies the measurement of inventory, applying to inventories for which cost is determined bymethods other than last-in first-out (LIFO) and the retail inventory method (RIM), specifying that an entity should measure inventory at the lower of cost andnet realizable value instead of at the lower of cost or market. The amendments in this ASU were effective for annual and interim periods, within those fiscalyears, beginning after December 15, 2016. The Company adopted the guidance of the standard in the first quarter of 2017 which did not have a materialimpact on the Company’s consolidated financial statements. New accounting standards which have not yet been adopted on or before December 31, 2017 Revenue from Contracts with Customers In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which deferred theeffective date of ASU 2014-09 for all entities by one year. This update is effective for public business entities for annual reporting periods beginning afterDecember 15, 2017, including interim periods within those reporting periods. The ASU permits two methods of adoption: retrospectively to each priorreporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the dateof initial application (the modified retrospective method). The ASU also requires expanded disclosures relating to the nature, amount, timing, and uncertaintyof revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required for customer contracts,significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. We have completed the process ofevaluating the effect of the adoption and determined there were no changes required to our reported revenues as a result of the adoption. The majority of ourrevenue arrangements generally consist of performance obligations related to license our drug technologies. Based on our evaluation process and review ofour contracts with customers, the timing and amount of revenue recognized under the new standard is materially consistent with our revenue recognitionpolicy under previous guidance. We adopted the new standard effective January 1, 2018, using the modified retrospective approach, and will expand ourconsolidated financial statement disclosures in order to comply with ASU 2014-09. We have determined the adoption of the new guidance will not have amaterial impact on our results of operations, cash flows, or financial position. Scope of Modification Accounting, Stock Based Compensation In May 2017, the FASB issued ASU No. 2017-09 which provides guidance as to how an entity should apply modified accounting in Topic 718 whenchanging the terms and conditions of its share-based payment awards. The guidance clarifies that modification accounting will be applied if the value,vesting conditions or classification of the award changes. The ASU is effective for annual reporting periods, including interim periods within those annualperiods, beginning after December 15, 2017 but early adoption is permitted. The Company has not adopted the standard and does not anticipate that thestandard will have a material effect, if any, on our consolidated financial statements and related disclosures. Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued ASU 2016-15 which clarifies existing guidance on how companies present and classify certain cash receipts and cashpayments in the statement of cash flows by addressing specific cash flow issues in an effort to reduce diversity in practice, including guidance on debtprepayment or extinguishment costs and contingent consideration payments made after a business combination. This update is effective for annual reportingperiods beginning after December 15, 2017, with early adoption permitted. The Company expects that the standard will not have an impact on theCompany’s consolidated financial statements and related footnote disclosures. F-15  Leases In February 2016, the FASB issued ASU 2016-02 which establishes a comprehensive new lease accounting model. The new standard will require most leases(with the exception of leases with terms of one year or less) to be recognized on the balance sheet as a lease liability with a corresponding right-of-use asset.Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method whereas financing leases willbe treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years,beginning after December 15, 2018 but early adoption is permitted. The new standard must be presented using the modified retrospective transition methodexisting at or entered into after the beginning of the earliest comparative period presented in the financial statements, but it does not require transitionaccounting for leases that expire prior to the date of initial application. Upon adoption, operating leases will be reported on the balance sheet as a gross-up ofassets and liabilities. The Company is currently evaluating the impact that the standard will have on the consolidated financial statements and relatedfootnote disclosures. NOTE 3 – LICENSE, DEVELOPMENT, AND COMMERCIALIZATION AGREEMENTS MainPointe Agreement covering Nexafed Product Line In March 2017, we and MainPointe entered into the MainPointe Agreement, pursuant to which we granted MainPointe an exclusive license to our Impedetechnology to commercialize our Nexafed products in the U.S. and Canada. We also conveyed to MainPointe our existing inventory and equipment relatingto our Nexafed products. MainPointe is responsible for all development, manufacturing and commercialization activities with respect to products covered bythe Agreement. On signing the MainPointe Agreement, MainPointe paid us an upfront licensing fee of $2.5 million plus approximately $309 thousand for inventories andequipment being transferred to them. The MainPointe Agreement also provides for our receipt of a 7.5% royalty on net sales of the licensed products. Theroyalty 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 longervalid; 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 UnitedStates. After the expiration of a royalty term for a country, MainPointe retains a royalty free license to our Impede® technology for products covered by theAgreement 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), Japanand South Korea for payments of $1.0 million, $500 thousand and $250 thousand, respectively. In addition, MainPointe has the option to add to theMainPointe Agreement certain additional products, or Option Products, containing PSE and utilizing the Impede technology for a fee of $500 thousand perproduct (for all product strengths). Such Option Products include the product candidate Loratadine with pseudoephedrine. If the territory has been expandedprior 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 toan Option Product, MainPointe must exercise its option for that product or its option rights for such product will terminate. 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 itspatents. Upon early termination of the MainPointe Agreement, MainPointe’s licenses to the Impede technology and all products will terminate. Upontermination, at Acura’s request the parties will use commercially reasonable efforts to transition the Nexafed® and Nexafed® Sinus Pressure + Pain productsback to Acura. KemPharm Agreement Covering Certain Opioid Prodrugs In October 2016, we and KemPharm Inc. (”KemPharm”) entered into a worldwide License Agreement (the “KemPharm Agreement”) pursuant to which welicensed our Aversion® technology to KemPharm for its use in the development and commercialization of three products using 2 of KemPharm’s prodrugcandidates. KemPharm has also been granted an option to extend the KemPharm Agreement to cover two additional prodrug candidates. KemPharm isresponsible for all development, manufacturing and commercialization activities. F-16  Upon execution of the KemPharm Agreement, KemPharm paid us an upfront payment of $3.5 million. If KemPharm exercises its option to use our Aversiontechnology with more than the two licensed prodrugs, then KemPharm will pay us up to $1.0 million for each additional prodrug license. In addition, we willreceive from KemPharm a low single digit royalty on commercial sales by KemPharm of products developed using our Aversion technology under theKemPharm Agreement. KemPharm’s royalty payment obligations commence on the first commercial sale of a product using our Aversion technology andexpire, 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. The KemPharm Agreement expires upon the expiration of KemPharm’s royalty payment obligations in all countries. Either party may terminate theKemPharm Agreement in its entirety if the other party materially breaches the KemPharm Agreement, subject to applicable cure periods. Acura or KemPharmmay 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 rightsaccrued prior thereto, but there are no stated payments in connection with termination other than payments of obligations previously accrued. For allterminations (but not expiration), the KemPharm Agreement provides for termination of our license grant to KemPharm. Egalet Agreement covering Oxaydo In April 2014, we terminated an agreement with Pfizer and the return to us of Aversion Oxycodone (formerly known as Oxecta®) and all Aversion productrights in exchange for a one-time termination payment of $2.0 million. Our termination payment of $2.0 million has been recorded in our consolidatedfinancial statements as an intangible asset and is being amortized over the remaining useful life of the patent covering Aversion Oxycodone, which was 9.7years as of the date the agreement was terminated. We have recorded annual amortization expense of $208 thousand for each of the years 2017 and 2016.Annual amortization of the patent for the years 2018 through 2021 is expected to approximate $208 thousand each year. In January 2015, we and Egalet US, Inc. and Egalet Ltd., each a subsidiary of Egalet Corporation, or collectively Egalet, entered into a Collaboration andLicense Agreement (the “Egalet Agreement”) to commercialize Aversion Oxycodone (formerly known as Oxecta®) under our tradename Oxaydo. Oxaydo isapproved by the FDA for marketing in the United States in 5 mg and 7.5 mg strengths. Under the terms of the Egalet Agreement, we transferred the approvedNew Drug Application, or NDA, for Oxaydo to Egalet and Egalet is granted an exclusive license under our intellectual property rights for development andcommercialization of Oxaydo worldwide (the “Territory”) in all strengths, subject to our right to co-promote Oxaydo in the United States. Eaglet launchedOxaydo in the United States late in the third quarter of 2015. In accordance with the Egalet Agreement, we and Egalet have formed a joint steering committee to coordinate commercialization strategies and thedevelopment of product line extensions. Egalet is responsible for the fees and expenses relating to the Oxaydo NDA and product line extensions of Oxaydo,provided that Egalet will pay a substantial majority of the fees and expenses and we will pay for the remaining fees and expense relating to (i) annual NDAPDUFA product 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. Egalet will bear all of the expenses of development and regulatory approval of Oxaydo for sale outsidethe United States. Egalet is responsible for all manufacturing and commercialization activities in the Territory for Oxaydo. Subject to certain exceptions,Egalet will have final decision making authority with respect to all development and commercialization activities for Oxaydo, including pricing, subject toour co-promotion right. Egalet may develop Oxaydo for other countries and in additional strengths, in its discretion. F-17  Egalet paid us a $5.0 million license fee upon signing of the Egalet Agreement and on October 9, 2015, paid us a $2.5 million milestone in connection withthe first commercial sale of Oxaydo. We will be entitled to a one-time $12.5 million milestone payment when worldwide Oxaydo net sales reach $150 millionin a calendar year. We are receiving from Egalet a stepped royalty at percentage rates ranging from mid-single digits to double-digits based on Oxaydo netsales during each calendar year (excluding net sales resulting from our co-promotion efforts). In any calendar year of the agreement in which net sales exceeda 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-promotionactivities. Egalet’s royalty payment obligations commence on the first commercial sale of Oxaydo and expire, on a country-by-country basis, upon theexpiration 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 expirationof 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 toOxaydo). Royalties will be reduced upon the entry of generic equivalents, as well as for payments required to be made by Egalet to acquire intellectualproperty rights to commercialize Oxaydo, with an aggregate minimum floor. The Egalet Agreement expires upon the expiration of Egalet’s royalty payment obligations in all countries. Either party may terminate the Egalet Agreementin its entirety if the other party breaches a payment obligation, or otherwise materially breaches the Egalet Agreement, subject to applicable cure periods, orin the event the other party makes an assignment for the benefit of creditors, files a petition in bankruptcy or otherwise seeks relief under applicablebankruptcy laws. We also may terminate the Egalet Agreement with respect to the U.S. and other countries if Egalet materially breaches its commercializationobligations. Egalet may terminate the Egalet Agreement for convenience on 120 days prior written notice, which termination may not occur prior to thesecond anniversary of Egalet’s launch of Oxaydo. Termination does not affect a party’s rights accrued prior thereto, but there are no stated payments inconnection with termination other than payments of obligations previously accrued. For all terminations (but not expiration), the Egalet Agreement providesfor the transition of development and marketing of Oxaydo from Egalet to us, including the conveyance by Egalet to us of the trademarks and all regulatoryfilings and approvals relating to Oxaydo, and for Egalet’s supply of Oxaydo for a transition period. Terminated Bayer Agreement Covering Methamphetamine Resistant Pseudoephedrine-containing Product In June 2015, we and Bayer entered into a License and Development Agreement (the “Bayer Agreement”) granting Bayer an exclusive worldwide license toour Impede Technology for use in an undisclosed methamphetamine resistant pseudoephedrine–containing product (the “Bayer Licensed Product”) andproviding for the joint development of such product utilizing our Impede Technology for the U.S. market. In June 2017, we received Bayer’s notice oftermination of the Bayer Agreement pursuant to its convenience termination right exercised prior to the Company’s completion of its product developmentobligations under the Bayer Agreement. We have received reimbursement of certain of our development costs under the Bayer Agreement. Following Bayer’s termination of the Bayer Agreement the Bayer License Product is now subject to MainPointe’s option rights under the MainPointeAgreement. NOTE 4 – INVENTORIES We did not have inventories at December 31, 2017 as all our inventories were transferred to MainPointe under the MainPointe Agreement in March 2017.(See Note 3). Inventories at December 31, 2016 are stated at the lower of cost (first-in, first-out method) or net realizable value. We write down inventories tonet realizable value based on forecasted demand and market conditions, which may differ from actual results. Our purchases of ingredients and other materials required in our development and clinical trial activities are expensed as incurred. F-18  Inventories at December 31, 2016 are summarized as follows (in thousands): December 31, 2016 Raw and packaging materials $98 Finished goods 243 Total 341 Less: reserve for finished goods (32)Net inventories $309 Inventory reserve activity during the years ended December 31, 2017 and 2016 was as follows (in thousands): 2017 2016 Beginning of year $32 $70 Reserve expense - finished goods - 26 32 96 Inventory write-offs - finished goods (32) (64)End of year $- $32 NOTE 5 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is summarized as follows (in thousands): December 31, 2017 2016 Building and improvements $1,273 $1,273 Scientific equipment 598 598 Computer hardware and software 107 109 Machinery and equipment 275 568 Land and improvements 162 162 Other personal property 70 70 Office equipment 27 27 2,512 2,807 Less: impairment reserve - (82)Less: accumulated depreciation (1,833) (1,858)Total property, plant and equipment, net $679 $867 The impairment reserve of $82 thousand at December 31, 2016 was for specific machinery and other equipment which was used in the production of ourNexafed product line and which was not conveyed to MainPointe under the MainPointe Agreement. During 2017, we applied the reserve against the disposalof these specific assets. We do not have leasehold improvements nor do we have capitalized leases. Costs of betterments are capitalized while maintenancecosts and repair costs are charged to operations as incurred. When a depreciable asset is retired from service, the cost and accumulated depreciation will beremoved from the respective accounts. Depreciation expense was approximately $0.1 million for each of the years ended December 31, 2017 and 2016. NOTE 6 – ACCRUED EXPENSES Accrued expenses are summarized as follows (in thousands): December 31, 2017 2016 Cost sharing expenses under license agreements $328 $150 Other fees and services 36 47 Payroll, payroll taxes and benefits 70 116 Professional services 149 232 Clinical, non-clinical and regulatory services 326 131 Marketing, advertising, and promotion - 10 Property taxes 16 16 Franchise taxes 14 1 Total $939 $703 F-19  NOTE 7 – DEBT Loan due December 1, 2018 In December 2013, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Oxford Finance LLC (“Oxford” or the “Lender”), for a termloan to the Company in the principal amount of $10.0 million (the “Term Loan”). The Term Loan accrues interest at a fixed rate of 8.35% per annum (with adefault rate of 13.35% per annum). The Company was required to make monthly interest−only payments until April 1, 2015 (“Amortization Date”) and on theAmortization Date, the Company began to make payments of principal and accrued interest in equal monthly installments of $260 thousand sufficient toamortize the Term Loan through the maturity date of December 1, 2018. All unpaid principal and accrued and unpaid interest with respect to the Term Loanis due and payable in full on December 1, 2018. As security for its obligations under the initial Loan Agreement (prior to the Third Amendment), theCompany granted Lender a security interest in substantially all of its existing and after−acquired assets, exclusive of its intellectual property assets, which theCompany was prohibited from pledging to others. Upon the execution of the Loan Agreement, we issued to the Lender warrants to purchase an aggregate ofup to 60 thousand shares of our common stock at an exercise price equal to $7.98 per share (after adjustment for our one-for-five reverse stock spliteffectuated in 2015) (the “Warrants”). We recorded $400 thousand as debt discount associated with the relative fair value of the Warrants and are amortizingit to interest expense over the term of the loan using the loan’s effective interest rate. The Warrants are immediately exercisable for cash or by net exercise andwill expire December 27, 2020. In January 2015, we and Oxford entered into an amendment to the Loan Agreement. Pursuant to the amendment, (i) the exercise price of the warrants waslowered from $7.98 to $2.52 per share (the average closing price of our common stock on Nasdaq for the 10 trading days preceding the date of theamendment and after giving effect to our one-for-five reverse stock split) and we recorded additional debt discount of $33 thousand representing the fairvalue of the warrant modification, (ii) we agreed to maintain $2.5 million cash reserves until such time as we have repaid $5.0 million in principal of the TermLoan, and (iii) the Lender consented to the terms of our Collaboration and License Agreement with Egalet relating to our Oxaydo product. In October 2016, we and Oxford entered into a second amendment to the Loan Agreement (the “Second Amendment”). Pursuant to the Second Amendment,(i) the requirement that we maintain a $2.5 million cash balance reserve until such time as $5.0 million in principal was repaid under the Term Loan wasmodified so that the $2.5 million cash balance reserve remains in place until we raise an additional $6.0 million (excluding payments received under theKemPharm Agreement) through the issuance of equity securities and from upfront payments under license, joint venture, collaboration or other partneringtransactions, provided that at least $3.0 million of such amount must be raised through the issuance and sale of our equity securities, and (ii) the Lenderconsented to the terms of our Agreement with KemPharm. In July 2017, the Company completed a private placement of its equity units to an investor, eachunit consisting of one share of common stock and a warrant to purchase one-fifth of a share of common stock. The net proceeds to the Company from theprivate offering was approximately $4.0 million. Giving effect to the $2.5 million upfront payment received from MainPointe pursuant to the MainPointeAgreement and the approximate $4.0 million in net proceeds from the July 2017 private offering, the Company has satisfied the condition in the SecondAmendment to the Oxford Loan Agreement to waive the $2.5 million cash reserve requirement. In March 2017, we and Oxford entered into a third amendment to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment (i) wegranted Oxford a lien on our intellectual property, (ii) Oxford provided a waiver of compliance with the Unqualified Audit Opinion Covenant in connectionwith our receipt of our auditor’s going concern opinion for our 2016 financial statements and (iii) Oxford consented to the terms of the MainPointeAgreement. Under the Loan Agreement, an audit opinion with an explanatory paragraph noting substantial doubt about the Company’s ability to continue inbusiness is deemed to violate the Unqualified Audit Opinion Covenant. In the second quarter of 2018, in connection with a $1.0 million loan extended by John Schutte, we and Oxford entered into a fourth amendment to the LoanAgreement. Pursuant to the fourth amendment, Oxford provided a waiver of compliance with the unqualified audit opinion covenant in connection with ourreceipt of our auditor’s opinion with a going concern explanatory paragraph for our 2017 financial statements and allowed us to deliver financial statementsup to 160 days after year end, instead of 120 days after year end. See Note 15 for a discussion of this transaction. F-20  The Company may voluntarily prepay the Term Loan in full, but not in part, and any prepayment is subject to a prepayment premium equal to 1% of theprincipal prepaid. In addition, at the maturity, termination or upon voluntary or mandatory prepayment of the Term Loan the Company must pay the Lenderan additional one-time interest payment of $795 thousand. We are accruing additional monthly interest expense over the term of the loan for this additionalone-time interest payment using the loan’s effective cash interest rate. As of December 31, 2017 and 2016, we have accumulated and accrued $700 thousandand $559 thousand, respectively, of this additional interest. The Company was obligated to pay customary lender fees and expenses, including a one-time facility fee of $50 thousand and the Lender’s expenses inconnection with the Loan Agreement. Combined with the Company’s own expenses and a $100 thousand consulting placement fee, the Company incurred$231 thousand in deferred debt issue costs. We are amortizing these costs, including debt modification additional costs, into interest expense over the term ofthe loan using the loan’s effective interest rate of 10.16%. The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, limitsor restrictions on the Company’s ability to incur liens, incur indebtedness, pay dividends, redeem stock, and merge or consolidate and dispose of assets. Inaddition, it contains customary events of default that entitles the Lender to cause any or all of the Company’s indebtedness under the Loan Agreement tobecome immediately due and payable. The events of default (some of which are subject to applicable grace or cure periods), include, among other things,non−payment defaults, covenant defaults (including breach of the Unqualified Audit Opinion Covenant), a material adverse change in the Company,bankruptcy and insolvency defaults and material judgment defaults. Our debt activity at December 31, 2017 is summarized below (in thousands): Current Debt Current Long-term Total Balance at Jan. 1, 2017 $2,521 $2,979 $5,500 Principal payments (2,760) - (2,760)Classification 2,979 (2,979) - Balance at Dec. 31, 2017 $2,740 $- $2,740 Debt Discount Current Long-term Total Balance at Jan. 1, 2017 $(98) $- $(98)Amortization expense 66 - 66 Classification - - - Balance at Dec. 31, 2017 $(32) $- $(32) Deferred Debt Issuance Costs Current Long-term Total Balance at Jan. 1, 2017 $(47) $- $(47)Amortization expense 33 - 33 Classification - - - Balance at Dec. 31, 2017 $(14) $- $(14) Current Debt, net at Dec. 31, 2017 $2,694 $- $2,694 Our interest expense consisted of the following (in thousands): Year EndedDecember 31, 2017 2016 Interest expense: Term loan $497 $748 Debt discount 66 95 Debt issue costs 33 50 Total interest expense $596 $893 F-21  NOTE 8 – RELATED PARTY TRANSACTIONS In July 2017, we completed a $4.0 million private placement with John Schutte (sometimes referred to as the “Investor”), consisting of 8,912,655 units(“Units) of the Company, at a price of $0.4488 per Unit (the “Transaction). Each Unit consists of one share of Common Stock and a Warrant to purchase onefifth (0.2) of a share of Common Stock. The issue price of the Units was equal to 85% of the average last sale price of our Common Stock for the five tradingdays prior to completion of the Transaction. The Warrants are immediately exercisable at a price of $0.528 per share (which equals the average last sale priceof the Company’s Common Stock for the five trading days prior to completion of the Transaction) and expire five years after issuance (subject to earlierexpiration in event of certain acquisitions). We have assigned a relative fair value of $495 thousand to the warrants out of the total $4.0 million proceedsfrom the private placement transaction and have accounted these warrants as equity. The Transaction was completed through a private placement to anaccredited investor and was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended and/or Regulation D promulgatedunder the Securities Act of 1933. Investor is a principal of MainPointe, a Kentucky limited liability company. In March 2017, we granted MainPointe an exclusive license to our Impedetechnology to commercialize our Nexafed® and Nexafed® Sinus Pressure + Pain Products in the United States and Canada for an upfront licensing fee of$2.5 million plus approximately $309 thousand for transferred inventory and equipment. The Company will receive a 7.5% royalty on sales of licensedproducts. MainPointe also has options to expand the territory and products covered for additional sums. Included in the reported revenue for the year 2017 is$13 thousand of royalty revenue from MainPointe. (See Note 3). As part of the closing of the Transaction, the Company, Essex Woodlands Health Ventures V, L.P. (“Essex”) and Galen Partners III, L.P. (“Galen”) amendedand restated the existing Voting Agreement including such parties to provide for the Investor to join as a party (as so amended, the “Second Amended andRestated Voting Agreement”). The Second Amended and Restated Voting Agreement provides that our Board of Directors shall remain comprised of no morethan seven members (subject to certain exceptions), (i) one of whom is the Company’s Chief Executive Officer, (ii) three of whom are independent underNasdaq standards, and (iii) one of whom shall be designated by each of Essex, Galen and Investor, and the parties to such agreement would vote for suchpersons. The right of each of Essex, Galen and Investor to designate one director to our Board will continue as long as he or it and their affiliates collectivelyhold at least 600,000 shares of our Common Stock (including warrants exercisable for such shares). Immanuel Thangaraj is the designee of Essex. Galen hasnot designated a director and lost that right in December 2017 when it disposed of its shares. Investor has not designated a director as of the date of filing ofthis Report. Once such shareholder no longer holds such securities, the additional forfeited seat would become a seat for an independent director to thereafterbe nominated to the Board of Directors from time to time by the then current directors and as applicable, to be elected by the directors to fill the vacancycreated by the forfeited seat or submitted to the vote of shareholders at the Company’s next annual meeting. During the second quarter of 2018, we borrowed a total of $1.0 million from John Schutte and issued a promissory note in that principal amount to him. SeeNote 15 for a discussion of this transaction. NOTE 9 – EMPLOYEE BENEFIT PLAN We have a 401(k) and Profit-Sharing Plan (the “Plan”) for our employees. Employees may elect to make a basic contribution of up to 80% of their annualearnings subject to certain regulatory restrictions on their total contribution. The Plan provides that the Company can make discretionary matchingcontributions along with a discretionary profit-sharing contribution. We did not contribute a matching contribution or a profit sharing contribution to thePlan during the years 2017 or 2016. F-22  NOTE 10 – COMMON STOCK WARRANTS Our warrant activity during the years ended December 31, 2017 and 2016 is shown below (in thousands except price data): December 31, 2017 2016 Number WAvgExercisePrice Number WAvgExercisePrice Outstanding, Jan. 1 60 $2.52 60 $2.52 Issued 1,782 0.53 - - Exercised - - - - Expired - - - - Modification - - - - Outstanding, Dec. 31 1,842 $0.59 60 $2.52 In connection with the issuance of the $10.0 million secured promissory notes in December 2013, we issued common stock purchase warrants (“warrants”)exercisable for 60 thousand shares of our common stock having an exercise price of $2.52 per share (after giving effect to our one-for-five reverse stock split)with an expiration date in December 2020. See Note 8 for a discussion of the reduction of the exercise price of these warrants to $2.52 per share. Thesewarrants contain a cashless exercise feature. As part of our July 2017 private placement transaction with John Schutte, we issued warrants to purchase 1,782,531 shares of our common stock. TheWarrants are immediately exercisable at a price of $0.528 per share and expire five years after issuance (see Note 8). We have assigned a relative fair value of$495 thousand to the warrants out of the total $4.0 million proceeds from the private placement transaction and have accounted these warrants as equity. NOTE 11 – SHARE-BASED COMPENSATION EXPENSE Stock Option Plans We maintain various stock option plans. A summary of our stock option plans as of December 31, 2017 and 2016 and for the year then ended consisted of thefollowing (in thousands except exercise price): Year Ended December 31, 2017 2016 NumberofOptions WeightedAverageExercisePrice Number ofOptions WeightedAverageExercisePrice Outstanding, Jan. 1 1,397 $15.67 1,198 $15.67 Granted 185 0.45 199 0.92 Exercised (1) 0.92 - - Forfeited or expired (87) 7.02 - - Outstanding, Dec. 31 1,494 $12.33 1,397 $15.67 Exercisable, Dec. 31 1,224 $14.92 1,062 $17.41 The following table summarizes information about unvested stock options outstanding at December 31, 2017 (in thousands except price data): Number ofOptions NotExercisable WeightedAverage FairValue Outstanding at Jan. 1, 2017 335 $1.18 Granted 185 0.45 Vested (236) 1.34 Forfeited (14) 1.05 Outstanding at Dec. 31, 2017 270 $0.46 We estimate the option’s fair value on the date of grant using the Black-Scholes option-pricing model. Black-Scholes utilizes assumptions related toexpected term, forfeitures, volatility, the risk-free interest rate, the dividend yield (which is assumed to be zero, as we have not paid any cash dividends) andemployee exercise behavior. Expected volatilities utilized in the Black-Scholes model are based on the historical volatility of our common stock price. Therisk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The expected life of the grants is derived from historicalexercise activity. Historically, the majority of our stock options have been held until their expiration date. F-23  The assumptions used in the Black-Scholes model to determine fair value for the 2017 and 2016 stock option grants were: 2017 2016 Expected dividend yield 0.0% 0.0%Risk-free interest rates 1.8% 2.3%Average expected volatility 88% 85%Expected term (years) 5 10 Weighted average grant date fair value $0.31 $0.77 The option awards which are vested and outstanding had an instrinsic value of $0 at December 31, 2017. The total remaining unrecognized compensationcost on unvested option awards outstanding at December 31, 2017 was approximately $100 thousand, and is expected to be recognized in the Company’soperating expense in varying amounts over the next eleven months remaining in the requisite service periods. There were 1 thousand option awards exercisedduring 2017 and there was no option award exercise activity during 2016. Restricted Stock Unit Award Plans We have two Restricted Stock Unit Award Plans for our employees and non-employee directors, a 2017 Restricted Stock Unit Award Plan (the “2017 RSUPlan”) and a 2014 Restricted Stock Unit Award Plan (the “2014 RSU Plan”). Vesting of an RSU entitles the holder to receive a share of our common stock ona distribution date. Our non-employee director awards allow for non-employee directors to receive payment in cash, instead of stock, for up to 40% of eachRSU award. The portion of the RSU awards subject to cash settlement are recorded as a liability in the Company’s balance sheet as they vest and beingmarked-to-market each reporting period until they are distributed. The liability was $41 thousand and $27 thousand at December 31, 2017 and 2016,respectively. The compensation cost to be incurred on a granted RSU without a cash settlement option is the RSU’s fair value, which is the market price of our commonstock on the date of grant, less its exercise cost. The compensation cost is amortized to expense and recorded to additional paid-in capital over the vestingperiod of the RSU award. A summary of the grants under the RSU Plans as of December 31, 2017 and 2016, and for the year then ended consisted of the following (in thousands): Year Ended December 31, 2017 2016 Numberof RSUs Number ofVestedRSUs Number ofRSUs Number ofVestedRSUs Outstanding, Jan. 1 91 91 45 45 Granted 438 - 88 - Distributed (67) (67) (42) (42)Vested - 238 - 88 Forfeited or expired - - - - Outstanding, Dec. 31 462 262 91 91 2017 Restricted Stock Unit Award Plan Our 2017 RSU Plan was approved by shareholders in November 2017 and permits the grant of up to 1.5 million shares of our common stock pursuant toawards under the 2017 RSU Plan. As of December 31, 2017, approximately 1.3 million shares are available for award under the 2017 RSU Plan. Information about the awards under the 2017 RSU Plan is as follows: ·In December 2017, we awarded 200 thousand RSUs to our employees. Such RSU awards will vest 100% after one full year of service. F-24  ·In January 2018, we awarded approximately 67 thousand RSUs to each of our 4 non-employee directors which also allow for them to receivepayment in cash, instead of stock, for up to 40% of each RSU award. Such awards vest 25% at the end of each calendar quarter in 2018. Distributionsof stock under the January 2018 award will be distributed on the first business day of the year after vesting. 2014 Restricted Stock Unit Award Plan Our 2014 RSU Plan was approved by shareholders in May 2014 and permits the grant of up to 400 thousand shares of our common stock pursuant to awardsunder the 2014 RSU Plan. As of December 31, 2017, approximately 3 thousand shares are available for award under the 2014 RSU Plan. Information about the awards under the 2014 RSU Plan during 2016 and 2017 is as follows: ·In January 2016, we awarded approximately 22 thousand RSUs to each of our 4 non-employee directors which also allow for them to receivepayment in cash, instead of stock, for up to 40% of each RSU award. Such awards vest 25% at the end of each calendar quarter in 2016. The portionof the RSU awards which are subject to cash settlement are also subject to marked-to market accounting and the liability recorded in the Company’sbalance sheet as an estimate for such cash settlement was $27 thousand at December 31, 2016. Distributions of stock under this award are generallydistributed on the first business day of the year after vesting, but such distribution can be deferred until a later date at the election of the non-employee director.·In January 2017, we awarded approximately 60 thousand RSUs to each of our 4 non-employee directors which also allow for them to receivepayment in cash, instead of stock, for up to 40% of each RSU award. Such awards vest 25% at the end of each calendar quarter in 2017. Distributionsof stock under this award will be distributed on the first business day of the year after vesting. Information about the distribution of shares under the 2014 RSU Plan is as follows: ·In January 2016, 1 thousand RSUs from the May 2014 award and 42 thousand RSUs from the January 2015 award were distributed. There are 2thousand RSUs from the May 2014 award which remain deferred until a future distribution date. Of the 42 thousand RSUs distributed, 33 thousandRSUs were distributed in common stock and 9 thousand RSUs were settled in cash.·In January 2017, 1 thousand RSUs from the May 2014 award and 66 thousand RSUs from the January 2016 award were distributed. There are 1thousand RSUs from the May 1 2014 award and 22 thousand RSUs from the January 2016 award which remain deferred until a future distributiondate. Of the 67 thousand RSUs distributed, 49 thousand RSUs were distributed in common stock and 18 thousand RSUs were settled in cash.·In January 2018, all outstanding RSUs from the 2014 RSU Plan were distributed. There are no outstanding awards which remain deferred until afuture distribution date. Of the approximately 261 thousand RSUs distributed, 238 thousand RSUs were distributed in common stock and 24thousand RSUs were settled in cash. NOTE 12 – NET LOSS PER SHARE A reconciliation of the numerators and denominators of basic and diluted net loss per share consisted of the following (in thousands, except per share data): Year Ended December 31, 2017 2016 Net loss per share - basic Numerator: net loss $(5,682) $(7,388)Denominator (weighted): Common shares 15,790 11,834 Vested RSUs 113 36 Basic weighted average shares outstanding 15,903 11,870 EPS - basic $(0.36) $(0.62) Net loss per share – assuming dilution Numerator: net loss $(5,682) $(7,388)Denominator (weighted): Common shares 15,790 11,834 Vested RSUs 113 36 Stock options - - Common stock warrants - - Diluted weighted average shares outstanding 15,903 11,870 Net loss per share - diluted $(0.36) $(0.62) Excluded dilutive securities: Common stock issuable (non-weighted): Unvested RSUs 200 - Stock options 1,494 1,397 Common stock warrants 1,842 60 Total excluded potentially dilutive shares 3,536 1,457 F-25  NOTE 13 – INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code.Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 andrequiring adjustment to 2017 deferred taxes. The Company has calculated its best estimate of the impact of the Act in its year-end income tax provision inaccordance with its understanding of the Act and guidance available as of the date of this filing and as a result had no adjustment to record as an additionalincome tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrantdoes not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting forcertain income tax effects of the Act. In accordance with SAB 118, the Company has remeasured its deferred tax assets and liabilities and adjusted its deferredtax balances to reflect the lower enacted U.S. corporate tax rate resulted in an income tax expense of $26.6 million which is included as a discrete item in the2017 income tax provision. Overall, there was no impact to the tax provision as a result of offsetting reduction of the valuation allowance. This deferred taxexpense and valuation allowance were provisional amounts and reasonable estimates at December 31, 2017. Provision for Income Taxes The reconciliation between our provision for income taxes and the amounts computed by multiplying our loss before taxes by the U.S. statutory tax rate is asfollows (in thousands): December 31, 2017 2016 Benefit at U.S. statutory 34% tax rate $(1,978) $(2,512)State taxes (benefit), net of federal effect (203) (254)State research and development tax credits 105 49 Federal research and development tax credits (70) - Share-based compensation 116 159 Federal AMT tax credit (135) - Other (3) 2 Tax Cuts and Jobs Act of 2017 26,603 - Change in valuation allowance (24,570) 2,556 (Benefit) provision for income taxes $(135) $- Deferred Tax Assets and Valuation Allowance Deferred tax assets reflect the tax effects of net operating losses (“NOLs”), tax credit carryovers, and temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The most significant item of our deferred tax assets isderived from our Federal NOLs. We have approximately $167.7 million gross Federal NOLs at December 31, 2017 however we believe the ability for us touse these NOLs to offset any future taxable income is severely limited as prescribed under Internal Revenue Code (“IRC”) Section 382. We have estimatedand recorded an amount for the likely limitation to our deferred tax asset, thereby reducing the aggregate estimated benefit of the Federal NOLs available tous of approximately $1.0 million. We believe the gross Federal NOL benefit we can utilize to offset taxable income is less than $150 thousand annually. Anyunused Federal NOL benefit from the annual limitation can be accumulated and carried forward to the subsequent year and will expire if not used inaccordance with the NOL carried forward term of 20 years or 2037. Future common stock transactions may cause another qualifying event under IRC 382which may further limit our utilization of our NOLs. F-26  The components of our deferred tax assets are as follows (in thousands): December 31, 2017 2016 Deferred tax assets: Estimated future value of NOLs - Federal $1,028 $47,192 - State 1,276 2,135 Research and development tax credits - Federal 1,231 1,161 - State - 159 Share-based compensation 66 57 Other, net 203 332 Total deferred taxes 3,804 51,036 Valuation allowance (3,804) (51,036)Net deferred tax assets $- $- Realization of deferred tax assets is dependent upon future earnings, if any, and the timing and amount of which may be uncertain. Valuation allowances areplaced on deferred tax assets when uncertainty exists on their near term utilization. We make periodic reviews of our valuation allowances and fluctuationscan occur. Those fluctuations may be reflected as income tax expenses or benefits in the period they occur. We continue to maintain full valuation allowanceagainst all of our deferred tax assets at December 31, 2017 due to uncertainties with respect to future utilization of net operating loss carryforwards. If in thefuture it is determined that amounts of our deferred tax assets would likely be realized, the valuation allowance would be reduced in the period in which suchdetermination is made and a benefit from income taxes in such period would be recognized. Uncertainty in Income Taxes We adopted FASB’s statement regarding accounting for uncertainty in income taxes which defined the threshold for recognizing the benefits of tax-returnpositions in the consolidated financial statements as "more-likely-than-not" to be sustained by the taxing authorities. Our adoption of the standard did notresult in establishing a contingent tax liability reserve or a corresponding charge to retained earnings. At each of December 31, 2017 and 2016, we had noliability for income tax associated with uncertain tax positions. If in the future we establish a contingent tax liability reserve related to uncertain taxpositions, our practice will be to recognize the interest in interest expense and the penalties in other non-operating expense. The Company files federal and state income tax returns and in the normal course of business the Company is subject to examination by these taxingauthorities. As of December 31, 2017, the Company’s tax years of 2014, 2015 and 2016 are subject to examination by the taxing authorities. With fewexceptions, we believe the Company is no longer subject to U.S. Federal, State and local examinations by taxing authorities for years before 2014. NOTE 14 – COMMITMENTS AND CONTINGENCIES Reglan®/Metoclopramide Litigation Halsey Drug Company, as predecessor to us, was named along with numerous other companies as a defendant in cases filed in three separate state coordinatedlitigations pending in Pennsylvania, New Jersey and California, respectively captioned In re: Reglan®/Metoclopramide Mass Tort Litigation, PhiladelphiaCounty Court of Common Pleas, January Term, 2010, No. 01997; In re: Reglan Litigation, Superior Court of New Jersey, Law Division, Atlantic County,Case No. 289, Master Docket No. ATL-L-3865-10; and Reglan/Metoclopramide Cases, Superior Court of California, San Francisco County, Judicial CouncilCoordination Proceeding No. 4631, Superior Court No.: CJC-10-004631. In addition, we were served with a similar complaint by two individual plaintiffs inNebraska federal court, which plaintiffs voluntarily dismissed in December 2014. In this product liability litigation against numerous pharmaceuticalproduct manufacturers and distributors, including Acura, plaintiffs claim injuries from their use of the Reglan brand of metoclopramide and genericmetoclopramide. F-27  In the lawsuits filed to date, plaintiffs have not confirmed they ingested any of the generic metoclopramide manufactured by us. We discontinuedmanufacture and distribution of generic metoclopramide more than 20 years ago. In addition, we believe the June 23, 2011 decision by the U.S. SupremeCourt in PLIVA v. Mensing (“Mensing decision”) holding that state tort law failure to warn claims against generic drug companies are pre-empted by the1984 Hatch-Waxman Act Amendments and federal drug regulations will assist us in favorably resolving these cases. In New Jersey, Generic Defendants, including Acura, filed dispositive motions based on the Mensing decision, which the Court granted with a limitedexception. In June 2012, the New Jersey trial court dismissed all of the New Jersey cases pending against us with prejudice. In Pennsylvania, the trial court proceedings were stayed on January 12, 2017. On June 15, 2017, the Court entered an Order approving a stipulation whichdismisses nearly all of the individual cases against us based upon lack of product identification without prejudice and provides for these cases to bedismissed finally, with prejudice, on June 15, 2018, or at an earlier date in each individual case, if all parties are dismissed. Acura is in the process of seekingvoluntary dismissal without prejudice of the de minimis number of remaining Pennsylvania cases pending against Acura on the basis of lack of productidentification. We expect that these remaining few cases will be dismissed based on lack of product identification and the Court will finally dismiss thePennsylvania-based litigation against us with prejudice in 2018. Legal fees related to this matter are currently covered by our insurance carrier. In California, on May 24, 2016, the Court entered an Order approving a stipulation which stays the individual cases against us and provides for an agreedupon dismissal protocol for all cases where is a lack of product identification. On January 13, 2017, the Court also entered a general stay of this entirelitigation. To date, none of these plaintiffs have confirmed they ingested any of the generic metoclopramide manufactured by us. Therefore, we expect thatthe lawsuits filed against us will be dismissed voluntarily with prejudice in 2018. Legal fees related to this matter are currently covered by our insurancecarrier. As any potential loss is neither probable nor estimable, we have not accrued for any potential loss related to these matters as of December 31, 2017 and we arepresently unable to determine if any potential loss would be covered by our insurance carrier. DES Litigation On April 12, 2018, an action was commenced against the Company and over twenty-five other pharmaceutical manufacturers in New York State SupremeCourt, New York County, captioned Cotto et al. v. Abbott Laboratories, Inc., et al (index 153339/2018). The Complaint contains seven causes of action,including negligence, strict liability, and breach of warranty, wrongful death, among others, in connection with the alleged exposure of the deceased plaintiffin utero to diethylstilbestrol (DES) in the 1950s as the result of the ingestion of the drug by her mother or grandmother. The plaintiffs are the personalrepresentative of the deceased and her two daughters. The plaintiffs were unable to determine which of the defendants produced the DES used by thedeceased, but regardless seeks to hold all defendants jointly and severally liable. The Complaint seeks $10.0 million in compensatory and $10.0 million inpunitive damages on each of five counts and damages in an amount to be determined for wrongful death and additional punitive damages in an unstatedamount. As any potential loss is neither probable nor estimable, we have not accrued for any potential loss related to these matters as of December 31, 2017.We are presently unable to determine if any potential loss would be covered by any of our current or former insurance carriers. F-28  Purdue Pharma Settlement In April 2015, Purdue Pharma L.P., Purdue Pharmaceuticals L.P. and The P.F. Laboratories, Inc. (collectively, “Purdue”) commenced a patent infringementlawsuit against us and our Oxaydo product licensee Egalet US, Inc. and its parent Egalet Corporation in the United States District Court for the District ofDelaware alleging our Oxaydo product infringes Purdue’s U.S. Patent No. 8,389,007 (the “ 007 patent”). In April 2016, Purdue commenced a second patentinfringement lawsuit against us and Egalet in the United States District Court for the District of Delaware alleging our Oxaydo product infringes Purdue’snewly issued U.S. Patent No. 9,308,171 (the “171 Patent”). The actions regarding the 007 Patent and the 171 Patent are collectively referred to as the“Actions”. On April 6, 2016, we filed a petition for Inter Partes Review (the “IPR Review”) with the U.S. Patent and Trademark Office (“USPTO”) seeking toinvalidate Purdue’s 007 Patent. On May 20, 2016, Purdue on behalf of themselves and certain affiliates, Egalet Corporation, on behalf of itself and its affiliates and we, on behalf of ourselvesand our affiliates entered into a settlement agreement (the “Settlement Agreement”) to settle the Actions and the IPR Review. Under the SettlementAgreement the parties dismissed or withdrew the Actions, requested that the USPTO terminate the IPR Review and exchanged mutual releases. No paymentswere made under the Settlement Agreement. The Settlement Agreement also provides that Purdue will not, in the future, assert certain Purdue U.S. patents, including the 007 Patent, the 171 Patent andrelated technologies (the “Purdue Patents”) against any Acura Settlement Product or Egalet Settlement Product (except generally in an action or interferenceby Acura or Egalet challenging a Purdue Patent). Acura Settlement Products and Egalet Settlement Products are certain immediate-release and extended-release products, including Oxaydo. In addition, the Settlement Agreement provides that Purdue will not challenge, with certain exceptions, the Acura/EgaletPatents with respect to the Purdue Settlement Products (as defined below) and that Purdue provides Acura and/or Egalet certain waivers of non-patentmarketing exclusivity with respect to Purdue Settlement Products. The Settlement Agreement also provides that Acura and Egalet will not, in the future, assert certain Acura and/or Egalet U.S. patents (the “Acura/EgaletPatents”), including Acura’s Aversion® Technology patents, against any Purdue Settlement Products (except generally in an action or interference by Purduechallenging an Acura/Egalet Patent). Purdue Settlement Products are certain immediate-release and extended-release products. In addition, the SettlementAgreement provides that Acura and Egalet will not challenge, with certain exceptions, the Purdue Patents with respect to the Acura Settlement Products andEgalet Settlement Products and that Acura and Egalet provide Purdue certain waivers of non-patent marketing exclusivity with respect to the AcuraSettlement Products and Egalet Settlement Products. In addition, Purdue has certain rights to negotiate to exclusively distribute an authorized genericversion of certain Egalet Settlement Products, including, in some circumstances, Oxaydo® and other products using Acura’s Aversion® Technology iflicensed to Egalet. The Settlement Agreement specifically excludes our patents related to our Impede® and Limitx™ technologies from the scope of the Acura/Egalet Patentsunder the Settlement Agreement. In December 2014, the Company entered into an agreement with Purdue Pharma L.P. to settle a patent interference action regarding certain intellectualproperty held by Acura (U.S. Patent No. 8,101,630). The dispute centered upon the issue of which company has priority in developing the invention. Theparties agreed to forgo protracted litigation and the uncertainties arising therefrom by entering an agreement whereby the Company conceded PurduePharma’s claim of priority in exchange for certain financial consideration to us including an immediate non-refundable payment of $500 thousand. In June2015, the Company received an additional $250 thousand payment from Purdue Pharma relating to the December 2014 agreement. Egalet Agreement covering Oxaydo On January 7, 2015, we and Egalet entered into a Collaboration and License Agreement (the “Egalet Agreement”) to commercialize Aversion Oxycodone(formerly known as Oxecta®) under our tradename Oxaydo. 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 Egalet Agreement, we transferred the approved New Drug Application, or NDA, for Oxaydo to Egalet and Egalet is granted anexclusive license under our intellectual property rights for development and commercialization of Oxaydo worldwide (the “Territory”) in all strengths,subject to our right to co-promote Oxaydo in the United States. Eaglet launched Oxaydo in the United States late in the third quarter of 2015. F-29  In accordance with the Egalet Agreement, we and Egalet have formed a joint steering committee to coordinate commercialization strategies and thedevelopment of product line extensions. Egalet is responsible for the fees and expenses relating to the Oxaydo NDA and product line extensions of Oxaydo,provided that Egalet will pay a substantial majority of the expenses and we will pay for the remaining fees and expenses relating to (i) annual NDA PDUFAproduct fees, (ii) expenses of the FDA required post-marketing study for Oxaydo and (iii) expenses of clinical studies for product line extensions (additionalstrengths) of Oxaydo for the United States. Egalet will bear all of the expenses of development and regulatory approval of Oxaydo for sale outside the UnitedStates. Egalet is responsible for all manufacturing and commercialization activities in the Territory for Oxaydo. Subject to certain exceptions, Egalet willhave final decision making authority with respect to all development and commercialization activities for Oxaydo, including pricing, subject to our co-promotion right. Egalet may develop Oxaydo for other countries and in additional strengths, in its discretion. At December 31, 2017 and 2016, we haveaccrued approximately $328 thousand and $150 thousand, respectively, of these potential cost sharing reimbursable expenses under the Egalet Agreement. Facility Lease The Company leases administrative office space in Palatine, Illinois on a month to month basis at the rate of approximately 2 thousand per month. NOTE 15 – SUBSEQUENT EVENT Loan Due January 2, 2020 During the second quarter of 2018, we borrowed a total of $1.0 million from John Schutte and issue a promissory note (the Schutte Note), in that principalamount to him. The Schutte Note bears interest at prime plus 2.0%, and matures on January 2, 2020, at which time all principal and interest is due, and isunsecured until all obligations to Oxford are satisfied at which time we are required to grant a security interest to Mr. Schutte in all of our assets. Events ofdefault under the Schutte Note are limited to bankruptcy defaults and failure to pay interest and principal when due on January 2, 2020. In addition, Mr.Schutte and Oxford entered into a subordination agreement, approved by us and our subsidiary, pursuant to which Mr. Schutte subordinated the Schutte Noteto our obligations to Oxford under the Oxford Loan Agreement. The Schutte Note may be prepaid at any time in whole or in part, however while Oxford’sloan is outstanding such prepayment will require Oxford’s consent. Also, in connection with the loan, we and Oxford entered into a fourth amendment to theOxford Loan Agreement. Pursuant to the fourth amendment, Oxford provided a waiver of compliance with the unqualified audit opinion covenant inconnection with our receipt of our auditor’s opinion with a going concern explanatory paragraph for our 2017 financial statements and allowed us to deliverfinancial statements up to 160 days after year end, instead of up to 120 days after year end. SUPPLEMENTARY DATA - QUARTERLY RESULTS OF OPERATION (Unaudited) Selected unaudited quarterly consolidated financial data is shown below (in thousands except per share amounts): For Three Month Periods Ended Mar. 31,2017 June 30,2017 Sept. 30,2017 Dec. 31,2017 Net revenues $2,717 $92 $83 $74 Operating expenses 2,135 2,083 2,145 1,828 Operating income (loss) 582 (1,991) (2,062) (1,754)Net income (loss) $405 $(2,149) $(2,200) $(1,738) Basic income (loss) per share $0.03 $(0.18) $(0.12) $(0.08)Diluted income (loss) per share $0.03 $(0.18) $(0.12) $(0.08) For Three Month Periods Ended Mar. 31,2016 June 30,2016 Sept. 30,2016 Dec. 31,2016 Net revenues $224 $257 $218 $3,765 Operating expenses 3,362 3,336 2,287 2,036 Operating (loss) income (3,138) (3,079) (2,069) 1,729 Net (loss) income $(3,384) $(3,288) $(2,250) $1,534 Basic (loss) income per share $(0.28) $(0.28) $(0.19) $0.13 Diluted (loss) income per share $(0.28) $(0.28) $(0.19) $0.13 (i) Year to date earnings per share may not equal sum of quarters due to rounding. F-30  ACURA PHARMACEUTICALS, INC.EXHIBIT INDEX The following exhibits are included as a part of this Annual Report on Form 10-K or incorporated herein by reference. Exhibit Number Exhibit Description 1.1 Placement Agency Agreement dated June 30, 2015 between Roth Capital Partners LLC and the Registrant (incorporated by reference toExhibit 1.1 to our Form 8-K filed July 1, 2015) 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed onJune 25, 2009). 3.2 Certificate of Amendment Reverse Splitting Common Stock and restating but not changing text of part of Article III of RestatedCertificate of Incorporation (incorporated by Reference to Exhibit 3.1 to the Form 8-K filed December 4, 2007). 3.3 Certificate of Amendment Reverse Splitting Common Stock and restating but not changing text of part of Article III of RestatedCertificate of Incorporation (incorporated by Reference to Exhibit 3.1 to the Form 8-K filed August 27, 2015). 3.4 Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on May 14, 2018). 4.1 Form of Common Stock Certificate (incorporated by Reference to Exhibit 4.1 to the Form S-3 filed on March 9, 2016) 4.2 Amended and Restated Warrant A-1 issued to Oxford Finance LLC on January 7, 2015 (incorporated by reference to Exhibit 10.9 to ourForm 10-K filed March 2, 2015). 4.3 Amended and Restated Warrant A-2 issued to Oxford Finance LLC on January 7, 2015 (incorporated by reference to Exhibit 10.10 toour Form 10-K filed March 2, 2015). 4.4 Amended and Restated Warrant A-3 issued to Oxford Finance LLC on January 7, 2015 (incorporated by reference to Exhibit 10.11 toour Form 10-K filed March 2, 2015). 4.5 Form of Common Stock Warrant issued to John Schutte on July 24, 2017 (incorporated by reference Exhibit 4.1 to our Form 8-K filedJuly 28, 2017) 10.1 Manufacturing Services Agreement dated as of July 19, 2011 between the Registrant and Patheon Pharmaceuticals Inc. (incorporatedby reference to Exhibit 10.1 to our Form 8-K filed July 27, 2011) (confidential treatment has been granted for portions of this Exhibit). 10.2 Securities Purchase Agreement dated as of August 20, 2007 (“PIPE SPA”) among the Registrant, Vivo Ventures Fund VI, L.P., VivoVentures VI Affiliates Fund, L.P., GCE Holdings LLC, and certain other signatories thereto (incorporated by reference to Exhibit 10.1to the Form 8-K filed on August 21, 2007). 10.3 Subscription Agreement dated as of July 24, 2017 between the Registrant and John Schutte (incorporated by reference to Exhibit 10.1to our Form 8-K filed July 28, 2017) E-1  Exhibit Number Exhibit Description 10.4 Loan and Security Agreement dated as of December 27, 2013 between Acura Pharmaceuticals, Inc. APT and Oxford Finance LLC(incorporated by reference to Exhibit 10.6 to the Form 10-K filed March 3, 2014). 10.5 First Amendment to Loan and Security Agreement entered into as of January 7, 2015 between Oxford Finance LLC, the Registrant andAPT (incorporated by reference to Exhibit 10.8 to our Form 10-K filed March 2, 2015). 10.6 Second Amendment to Loan and Security Agreement entered into as of October 13, 2016 between Oxford Finance LLC, the Registrantand APT (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-1 filed February 3, 2017, File No. 333-215885) 10.7 Form of Mortgage dated December 27, 2013 (incorporated by reference to Exhibit 10.8 to the Form 10-K filed March 3, 2014). 10.8 Collaboration and License Agreement entered into as of January 7, 2015 between the Registrant, Egalet US, Inc., Egalet Limited andwith respect to Section 17.21, Egalet Corporation (certain information has been omitted and filed separately with the Securities andExchange Commission and confidential treatment has been granted with respect to the omitted portion) (incorporated by reference toExhibit 10.13 to the Form 10-K for the year ending December 31, 2014, filed March 2, 2015). 10.9 License and Development Agreement dated as of June 5, 2015 between the Registrant and Bayer HealthCare LLC (certain informationhas been omitted and filed separately with the Securities and Exchange Commission and confidential treatment has been granted withrespect to the omitted portion) (incorporated by reference to Exhibit 10.1 to our Form 10-Q/A filed February 16, 2016). 10.10 Amended and Restated Voting Agreement dated as of February 6, 2004 among the Registrant, Care Capital Investments II, LP, EssexWoodlands Health Ventures V, L.P., Galen Partners III, L.P., and others (incorporated by reference to Exhibit 10.5 of the Form 8-K filedon February 10, 2004 (the “February 2004 Form 8-K”)). 10.11 Joinder and Amendment to Amended and Restated Voting Agreement dated November 9, 2005 between the Registrant, GCE Holdings,Essex Woodlands Health Ventures V, L.P., Care Capital Investments II, LP, Galen Partners III, L.P. and others (incorporated by referenceto Exhibit 10.1 to the Form 8-K filed November 10, 2005). 10.12 Second Amendment to Amended and Restated Voting Agreement dated as of January 24, 2008 between the Registrant and GCEHoldings, LLC (incorporated by reference to Exhibit 10.1 to the Form 8-K filed January 28, 2008). 10.13 Third Amendment to Amended and Restated Voting Agreement dated as of October 1, 2012 between the Registrant, Care CapitalInvestments II, LP, Essex Woodlands Health Ventures V, L.P., Galen Partners III, L.P., and others (incorporated by reference to Exhibit10.1 of the Form 8-K filed on October 3, 2012). 10.14 Second Amended and Restated Voting Agreement executed July 2017 and dated as of July 24, 2017 (incorporated by reference toExhibit 10.1 to the 8-K dated filed August 1, 2017) E-2  Exhibit Number Exhibit Description †10.15 Registrant’s 1998 Stock Option Plan, as amended (incorporated by reference to Appendix C to the Registrant’s Proxy Statement filedon May 12, 2009). †10.16 Registrant’s 2005 Restricted Stock Unit Award Plan, as amended (incorporated by reference to Appendix B to the Registrant’s ProxyStatement filed on April 2, 2008). †10.17 Registrant’s 2014 Restricted Stock Unit Award Plan, (incorporated by reference to Appendix A to the Registrant’s Proxy Statementfiled on March 12, 2014). †10.18 Registrant’s 2017 Restricted Stock Unit Award Plan, (incorporated by reference to Exhibit 10.1 to the 8-K filed on November 14,2017). †10.19 Registrant’s 2008 Stock Option Plan, as amended on June 25, 2009 (incorporated by reference to Appendix B to our Proxy Statementfiled on May 12, 2009). †10.20 Registrant’s 2016 Stock Option Plan (incorporated by reference to Exhibit 10.1 to our Form 8-K filed on April 28, 2016). †10.21 Employment Agreement dated as of March 10, 1998 between the Registrant and Peter Clemens (“Clemens”) (incorporated by referenceto Exhibit 10.44 to the Form 10-K for the period ending December 31, 2007, filed on April 15, 1998). †10.22 First Amendment to Employment Agreement made as of June 28, 2000 between the Registrant and Clemens (incorporated by referenceto Exhibit 10.44A to the Registrant’s Form 10-K filed on February 21, 2006). †10.23 Second Amendment to Executive Employment Agreement between Registrant and Clemens, dated as of January 5, 2005 (incorporatedby reference to Exhibit 99.1 to the Registrant's Form 8-K filed January 31, 2005). †10.24 Third Amendment to Executive Employment Agreement dated December 22, 2005 between Registrant and Clemens (incorporated byreference to Exhibit 10.3 to the Registrant’s Form 8-K filed December 23, 2005). †10.25 Fourth Amendment to Executive Employment Agreement dated December 16, 2007 between Registrant and Clemens (incorporated byreference to Exhibit 10.28 to the Form 10-K for the year ending December 31, 2007, filed on March 5, 2008). †10.26 Fifth Amendment to Executive Employment Agreement executed July 9, 2008 between Registrant and Clemens (incorporated byreference to Exhibit 10.4 to our Form 8-K filed on July 10, 2008). †10.27 Sixth Amendment to Executive Employment Agreement executed December 14, 2012 between the Registrant and Clemens(incorporated by reference to Exhibit 10.2 to our Form 8-K filed on December 17, 2012). †10.28 Seventh Amendment to Executive Employment Agreement executed December 12, 2013 between the Registrant and Clemens(incorporated by reference to Exhibit 10.24 to the Form 10-K for the year ending December 31, 2013 filed on March 3, 2014). E-3  Exhibit Number Exhibit Description †10.29 Employment Agreement dated as of March 18, 2008 between the Registrant and Robert B. Jones (incorporated by reference to Exhibit10.1 to our Form 8-K filed on March 24, 2008). †10.30 Amendment to Executive Employment Agreement dated as of April 28, 2011 between the Registrant and Robert B. Jones (incorporatedby reference to Exhibit 10.1 to our Form 10-Q filed July 28, 2011). †10.31 Amendment to Executive Employment Agreement between Registrant and Robert B. Jones made as of July 7, 2011 (incorporated byreference to Exhibit 10.2 to our Form 10-Q filed July 28, 2011). †10.32 Second Amendment to Executive Employment Agreement between Registrant and Robert B. Jones executed December 14, 2012(incorporated by reference to Exhibit 10.1 to our Form 8-K filed December 17, 2012). 10.33 Form of Securities Purchase Agreement entered into between the Registrant and institutional investors on June 30, 2015 (incorporatedby reference to Exhibit 10.1 of our Form 8-K filed July 1, 2015). 10.34* License, Commercialization and Option Agreement is made and entered into as of March 16, 2017 by and between MainPointePharmaceuticals, LLC 14.1 Code of Ethics (incorporated by reference to Exhibit 14.1 of the Form 8-K filed on December 10, 2007). 21 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to the Form 10-K for the fiscal year ended December 31, 2006filed on March 15, 2007). 23.1* Consent of Independent Registered Public Accounting Firm 31.1* Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of1934. 31.2* Certification of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934. 32* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of 2002. E-4  Exhibit Number Exhibit Description 101.INS * XBRL Instance Document 101.SCH * XBRL Taxonomy Extension Schema Document 101.CAL* XBRL Extension Calculation Linkbase 101.LAB * XBRL Extension Label Linkbase 101.PRE * XBRL Extension Presentation Linkbase 101.DEF * XBRL Taxonomy Extension Definition Linkbase *Filed or furnished herewith. † Management contract or compensatory plan or arrangement E-5  Exhibit 10.34 EXECUTION COPY LICENSE, COMMERCIALIZATION AND OPTION AGREEMENT This License, Commercialization and Option Agreement (“Agreement”) is made and entered into as of March 16, 2017 (the “Effective Date”) by andbetween MainPointe Pharmaceuticals, LLC, with offices at 333 East Main Street, Suite 220, Louisville, Kentucky 40202 (“MainPointe”), and AcuraPharmaceuticals, Inc., with offices at 616 N. North Court, Palatine IL 60067 (“Acura”). MainPointe and Acura each are referred to herein as a “Party” andcollectively as the “Parties.” WITNESSETH: WHEREAS, Acura has developed Impede® Technology intended to prevent extraction of pseudoephedrine from tablets and to disrupt the directconversion of pseudoephedrine from tablets into methamphetamine; WHEREAS, MainPointe and its Affiliates have substantial expertise in the distribution, sales and marketing of healthcare products worldwide; WHEREAS, Acura wishes to grant to MainPointe, and MainPointe wishes to obtain, the rights to the Impede® Technology to commercialize theNexafed® Products in the Territory (each as herein defined) and develop, obtain regulatory approval and commercialize the Option Products in the Territory(as herein defined) upon exercise as provided herein; NOW THEREFORE, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement,the Parties agree as follows: ARTICLE I – DEFINITIONS 1.1 “Acquisition” is defined in Section 3.1. 1.2 “Acquisition Payment” means the payment by MainPointe to Acura on the Effective Date for the Acquired Assets, as set forth in Section4.1.1(B). 1.3 “Additional Nexafed Products” means any product having the same active ingredients as a Currently Marketed Nexafed Product exceptthat it contains a dosage of greater than 60mg of PSE. 1.4 “Advertising Materials” is defined in Section 3.2(d). 1.5 “Affiliate” means any corporation or other entity, which directly or indirectly controls, is controlled by or is under common control with aParty. A corporation or other entity shall be regarded as in control of another corporation or entity if it owns or directly or indirectly controls more than FiftyPercent (50%) of the voting stock or other ownership interest of the other corporation or entity, or if it possesses, directly or indirectly, the power to direct orcause the direction of the management and policies of the corporation or other entity or the power to elect or appoint more than Fifty Percent (50%) of themembers of the governing body of the corporation or other entity. Notwithstanding the foregoing, a private equity or venture capital firm with an ownershipinterest in an entity shall not be an Affiliate by reason of such ownership and portfolio companies of a private equity firm or a venture capital firm shall notbe Affiliates or a Party by virtue of the private equity firm or venture capital firm being Affiliates of a Party.  1.6 “Applicable Law” means, with respect to any Person, any domestic or foreign, federal, state or local statute, treaty, law, ordinance, rule,regulation, administrative interpretation, order, writ, injunction, judicial decision, decree or other requirement of any governmental authority, including anyrules, regulations or other requirements of the Regulatory Authorities in the Territory, applicable to such Person or any of such Person’s respective properties,assets, officers, directors, employees, consultants or agents. 1.7 “APT” means Acura Pharmaceutical Technologies, Inc. 1.8 “Assignment of Contracts” means the assignment of contracts in the form of Exhibit A. 1.9 “Assumed Liabilities” is defined in Section 3.3. 1.10 “Assumption Agreement” means the assumption agreement in the form of Exhibit B executed by MainPointe to evidence its assumptionof the Assumed Liabilities. 1.11 “Bayer” means Bayer Healthcare LLC. 1.12 “Bayer Agreement” means that certain License and Development Agreement dated as of June 5, 2015 between Acura and BayerHealthCare LLC, as the same may be amended. 1.13 “Bill of Sale” means a bill of sale and assignment with respect to the Acquired Assets in the form of Exhibit C. 1.14 “Claims” is defined in Section 6.3. 1.15 “Code” is defined in Section 4.9.6. 1.16 “Commercially Reasonable Efforts” means the efforts and resources which would be used (including the promptness in which such effortsand resources would be applied) by MainPointe consistent with its normal business practices and in compliance with Applicable Law and the exercise ofprudent scientific and business judgment, which in no event shall be less than the level of efforts and resources standard in the pharmaceutical industry for acompany similar in size and scope to MainPointe, with respect to a product or potential product at a similar stage in its development and with similar marketpotential or product life cycle taking into account efficacy, safety, commercial value, the competitiveness of alternative products of Third Parties that are inthe marketplace, and the Patent Rights and other proprietary position of such product. 1.17 “Confidential Information” is defined in Section 5.1 below. 2  1.18 “Competing Product” means a prescription or over-the-counter (non-prescription) product that contains PSE and has some effectiveness inreducing the mean total recovery of methamphetamine from a pharmaceutical product, other than a Product. 1.19 “Contracts” is defined in Section 3.2.1. 1.20 “Control” means, with respect to Intellectual Property Rights, ownership or the possession of the ability by license or otherwise to assignor grant a license or sublicense to or disclose such Intellectual Property Rights without violating the terms of any agreement or other arrangement, express orimplied, with any Third Party. 1.21 “Currently Marketed Nexafed Products” means (i) Pseudoephedrine HCl 30 mg (currently marketed as Nexafed®) and (ii)Pseudoephedrine HCl 30 mg and Acetaminophen 325 mg (currently marketed as Nexafed® Sinus Pressure + Pain). 1.22 “Effective Date” has the meaning set forth above. 1.23 “Excluded Liability” is defined in Section 3.4. 1.24 “Excluded Tax Liability” is defined in Section 3.4. 1.25 “FD&C Act” means that federal statute entitled the Federal Food, Drug, and Cosmetic Act and enacted in 1938 as Public Law 75-717, assuch may have been amended, and which is contained in Title 21 of the C.F.R. Section 301 et seq. 1.26 “FDA” means the United States Food and Drug Administration, or any successor thereto. 1.27 “Field” means over-the-counter (non-prescription) (“OTC”) and prescription (“Rx”) products. 1.28 “GAAP” means generally accepted accounting principles in effect in the United States from time to time applied on a consistent basis. 1.29 “Gross Sales” means the U.S. Dollar value (with sales in foreign currency converted as per Section 4.7) of all consideration to whichMainPointe, its Affiliates and licensees is entitled for the sale of Products. In the event MainPointe sells Products for less than fair market value, the fairmarket value of such Products (as if there had been a sale for fair market value to a Third Party) shall be included in Gross Sales. 1.30 “Impede® Patent Rights” means the Patent Rights set forth on Exhibit D, that disclose or claim Acura’s Impede® Technology and that areControlled by Acura or its Affiliates during the Term, including issued patents resulting from such applications, and all divisions, continuations,continuations-in-part, substitutions, reissues, reexaminations, extensions, registrations, patent term extensions and renewals of the foregoing. 3  1.31 “Impede® Technology” means the technology for reducing the recovery of methamphetamine from a pharmaceutical product as reflectedin the Impede Patent® Rights and any related Know-How that is Controlled by Acura as of the Effective Date or at any time during the Term, including (i)Impede 1.0 and Impede 2.0 (as such terms Impede 1.0 and Impede 2.0 are described in Acura’s filings with the Securities and Exchange Commission on orprior to the Effective Date) and (ii) technology for reducing the recovery of methamphetamine from a pharmaceutical product Controlled by Acura during theTerm that would infringe the Impede® Patent Rights if utilized by a third party. 1.32 “Infringing Competing Product” means a prescription or over-the-counter (non-prescription) product that contains loratadine (ordesloratadine) in combination with PSE and infringes the Impede® Patent Rights. 1.33 “Intellectual Property Rights” means Know-How, registered trademarks, trademark applications, unregistered trademarks, trade dress,copyrights, and Patent Rights. 1.34 “Know-How” means information Controlled by Acura and related to minimizing the extraction and conversion of pseudoephedrine intomethamphetamine and encompassing manufacturing techniques, process, quality information, batch records (un-redacted master and executed), formulationcomposition and excipient specifications, formation development reports; batch summaries, and analytical methods and development/validation. 1.35 “Liabilities” is defined in Section 3.3. 1.36 “Losses” is defined in Section 6.3. 1.37 “NDC” is defined in Section 3.3(h). 1.38 “Net Sales” means the “Gross Sales” (as hereinafter defined), reduced by deductions, without duplication, for each of the following to theextent actually incurred, allowed or accrued, and without duplication (a) returns, (b) cash discounts, (c) coupons, (d) listing fees, (e) credits, (f) trade rebates,(g) shipping costs, (h) sales and excise taxes, other consumption taxes, and (i) other governmental charges. Net Sales, as set forth in this definition, shall becalculated applying, in accordance with GAAP, MainPointe's standard accounting practices for selling MainPointe's other products. 1.39 “Nexafed Products” means (i) Pseudoephedrine HCl 30 mg (currently marketed as Nexafed®) and (ii) Pseudoephedrine HCl 30 mg andAcetaminophen 325 mg (currently marketed as Nexafed® Sinus Pressure + Pain), and (iii) any products (other than Additional Nexafed Products) containingthe same active ingredients as the Nexafed Products, and utilizing the Impede Technology, with 60 mg or less of PSE. 1.40 “Option Product” means (a) the Additional Nexafed Products and (b) a prescription or over-the-counter tablet product containing PSE asan active pharmaceutical ingredient, alone or in combination with other active pharmaceutical ingredients and utilizing the Impede Technology, other thanNexafed Products, provided that an Option Product shall cease to be an Option Product if its status as such is terminated under Section 2.3.2. All strengths ofan Option Product shall be considered the same Option Product. An Infringing Competing Product is not an Option Product. 4  1.41 “Option Product Exercise Fee” is defined in Section 2.3. 1.42 “Option Territory Exercise Fee” is defined in Section 2.2. 1.43 “Other Transaction Documents” means the Assumption Agreement, Bill of Sale and the Assignment of Contracts. 1.44 “Paragraph IV Certification” means a certification under and pursuant to 21 U.S.C. Section 355(j)(2)(A)(vii)(IV) of the FD&C Act orpursuant to 21 U.S.C. Section 355(b)(2) (A)(iv) of the FD&C Act. 1.45 “Patent Challenge” is defined in Section 10.3. 1.46 “Patent Rights” means patents and patent applications, and all divisionals, continuations, continuations in part, reissues, extensions,supplementary protection certificates and foreign counterparts thereof. 1.47 “Person” means an individual, a corporation, a general partnership, a limited partnership, a limited liability company, a limited liabilitypartnership, an association, a trust or any other entity or organization. 1.48 “Pre-Closing Tax Period” is defined in Section 4.9. 1.49 “Post-Closing Tax Period” is defined in Section 4.9. 1.50 “Prior Confidentiality Agreement” is defined in Section 5.4. 1.51 “Product” means a Nexafed Product or an Option Product for which MainPointe has exercised an option pursuant to Section 2.3. 1.52 “PSE” means pseudoephedrine or a pharmaceutically acceptable salt thereof. 1.53 “Regulatory Approval” means the license or final FDA, or equivalent foreign governmental authority, marketing approval necessary as aprerequisite for marketing a Product in a country in the Territory. 1.54 “Regulatory Approval Application” means shall mean any filing(s) made with the Regulatory Authority in any country in the Territoryfor Regulatory Approval of the marketing, manufacture and sale (and pricing when applicable) of a Product in such country. 1.55 “Regulatory Authority” means the FDA in the U.S., and any health regulatory authority(ies) in any other country in the Territory that is acounterpart to the FDA and has responsibility for granting regulatory approval for the marketing, manufacture, and sale of a Product in such country,including, but not limited to, pricing and reimbursement approvals, and any successor(s) thereto, as well as any state or local health regulatory authoritieshaving jurisdiction over any activities contemplated by the Parties. 1.56 “Royalty Payment” is defined in Section 4.2.1. 5  1.57 “Royalty Report” is defined in Section 4.3. 1.58 “Royalty Term” shall be on a Product-by-Product and country-by-country basis and, with respect to each country, will begin on theEffective Date and will expire on the later of the date that (i) the Impede® Patent Rights in such country are not Valid; or (ii) is the scheduled expiration ofthe Royalty Term for the United States for a country in which there are not any Impede® Patent Rights, provided that all Royalty Terms shall terminate upontermination of this Agreement pursuant to Section 10.2. 1.59 “Straddle Period” is defined in Section 4.9.5. 1.60 “Tax” or “Taxes” is defined in Section 4.9.6. 1.61 “Term” has the meaning set forth in Section 10.1. 1.62 “Territory” means the United States and Canada, and with respect to each Product, on a Product by Product basis, such additionalregions/countries as may be added pursuant to Section 2.2. 1.63 “Third Party” means any entity other than Acura and its Affiliates and MainPointe and its Affiliates. 1.64 “Transfer Taxes” is defined in Section 3.3(g). 1.65 “Transferred Contracts” is defined in Section 3.2.1. 1.66 “Transferred Advertising Materials” is defined in Section 3.2(d). 1.67 “Transferred Inventory” is defined in Section 3.2.1. 1.68 “Transition Contracts” is defined in Section 4.13. 1.69 “Transition Products” is defined in Section 4.13. 1.70 “Upfront License Payment” is defined in Section 4.1.1. 1.71 “Valid” means, with respect to a Impede® Patent Rights in a particular country, such Impede® Patent Rights have not (A) expired or beencancelled, (B) been declared invalid or unenforceable by a decision of a court or other appropriate body of competent jurisdiction, from which no appeal is orcan be taken, (C) been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or (D) been abandoned or disclaimed eitheraffirmatively or by operation of law. ARTICLE II – LICENSE AND COMMERCIALIZATION 2.1 License. 2.1.1 Acura hereby grants MainPointe an exclusive (even as to Acura), sub-licensable (subject to Section 2.10), royalty-bearing rightand license under the Impede® Technology and to the Nexafed® trademark to develop, manufacture, have manufactured, distribute, have distributed, sell,have sold, market, have marketed, commercialize and have commercialized the Product(s) in the Field in the Territory. 6  2.1.2 Acura hereby licenses to MainPointe, on a non-exclusive basis the use of the mark Impede® in the Field and Territory solely forthe commercialization of a Product, provided that such mark shall be exclusive in the Territory for all Products containing PSE as an active ingredient indosage strengths of 60 mg or less, and utilizing the Impede Technology. 2.1.3 The licenses granted herein shall expire upon termination of this Agreement but shall survive expiration of this Agreement. 2.2 Option to Expand Definition of Territory. At any time during the Royalty Term for the United States, MainPointe, by written notice to Acura may expand the definition of Territory to includea region/country in the table below (one fee for all Nexafed Products) if such notice is accompanied by payment in immediately available funds of the sum ofthe (i) option/exercise fee opposite such region/country in the table below (“Option Territory Exercise Fee”) plus (ii) a $250,000 for each Product that wasformerly an Option Product. The $250,000 payment is a one-time payment for each Product that was formerly an Option Product regardless of the region orcountry added to the Territory. Region/Country Option Territory Exercise Fee European Union and United Kingdom $1,000,000 Japan $500,000 South Korea $250,000 All such fees are non-refundable and non-creditable. 2.3 Option to Expand Definition of Product. 2.3.1 At any time during the Royalty Term for the United States, if MainPointe desires to add an Option Product to this Agreementduring the Royalty Term for the United States, MainPointe shall send written notice to Acura, provided MainPointe shall not have the right to add a productwhose status as an Option Product was previously terminated under Section 2.3.2. Acura shall have thirty (30) days from receipt of such notice to reject theaddition of such Option Product in accordance with the immediately preceding sentence if and only if rights to such Option Product have been granted byAcura to Bayer under the Bayer Agreement, as in effect on the date hereof or if adding the Option Product to this Agreement would be in violation of theBayer Agreement, as in effect on the date hereof (as reasonably determined by Acura). Any rejection shall be accompanied by an explanation and indicatewhen, if ever, it may be possible to add the proposed Option Product. If not rejected by Acura within such thirty (30) day period, in accordance with theimmediately preceding sentence, such Option Product shall be added to this Agreement as a Product provided MainPointe remits to Acura $500,000;provided, however, that if prior to Acura’s acceptance of such Option Product MainPointe had exercised its option right to expand the Territory and had notremitted to Acura the $250,000 payment provided in Section 2.2(ii), MainPointe’s payment to Acura shall be increased from $500,000 to $750,000. Suchpayment shall be in immediately available funds within five (5) days of or the conclusion of such thirty (30) day period (or, if earlier, the date of acceptanceby Acura), provided further that if MainPointe does not remit payment within such time period, MainPointe must repeat the procedure of this Section 2.3.1 toadd such Option Product as a Product under this Agreement. All such fees are non-refundable and non-creditable. 7  2.3.2 During the Royalty Term for the United States, if Acura receives a Third Party expression of interest to develop, license,collaborate or acquire an Option Product, and in each case Acura determines to license to, develop with or for, or collaborate with a Third Party with respectto or sell such Option Product, then it will send MainPointe written notice of same, before offering such Option Product to any Third Party. Acura’s noticeshall contain such information as MainPointe shall reasonably require to evaluate such product (which shall be subject to the protections of Article V(confidentiality) hereof). If MainPointe wishes to add the Option Product as a Product hereunder, MainPointe shall send Acura a written notice exercising itsoption to add such Option Product as a Product hereunder, accompanied by the Option Product Exercise Fee within forty five (45) days of receipt of Acura’snotice and supporting information. If MainPointe does not exercise its option within such forty-five (45) day period then Acura and its Affiliates shall be freeto negotiate with any Third Party and enter into an agreement relating to such Option Product and MainPointe shall have no rights thereto and such OptionProduct shall cease being an Option Product under this Agreement. For the avoidance of doubt, Acura shall not be required to provide any notice toMainPointe under this Section 2.3.2, except as required under Section 11.5, in connection with its undergoing or completing a change of control transaction,or a sale of all or substantially all of its line of business which includes an Option Product. This Section 2.3.2 shall not survive termination or expiration ofthis Agreement. 2.4 No Other Rights and Retained Rights. This Agreement confers no right, license or interest by implication, estoppel, or otherwise under any Patent Rights, Confidential Information, Know-How or other Intellectual Property Rights (including but not limited to trade secrets, formulations, manufacturing processes, data) that was owned by a Partyprior to signing the Agreement except as expressly set forth in this Article II. Each Party hereby expressly retains and reserves all rights and interests withrespect to patents, Confidential Information, technology or other Intellectual Property Rights not expressly granted to the other Party hereunder. 2.5 MainPointe to use CRE. MainPointe shall use Commercially Reasonable Efforts to market and sell the Currently Marketed NexafedProducts in the Territory and to develop, obtain any necessary Regulatory Approval for, and commercialize other Products in the Territory. MainPointe shallcomply with all Applicable Laws in the development, commercialization (including, without limitation, packaging, sale, distribution, advertising,disposition and marketing of the Product and product packaging) and MainPointe shall use all legends, notices, and markings as required by Applicable Law. 8  2.6 MainPointe Responsibility for All Costs and Expenses. During the Term, MainPointe shall have the sole obligation and responsibility, andat its sole cost and expense, for all aspects of development, regulatory activities, manufacturing and commercializing, including without limitation, testingpackaging and labelling Product, and any costs associated with storage, release and Third Party logistics. As part of such responsibilities, MainPointe shallhave the sole responsibility to obtain or to coordinate with and provide to its contract manufacturer such information and materials as shall be reasonablynecessary to obtain sufficient quota for active pharmaceutical ingredients from the Drug Enforcement Administration, and similar foreign agencies. 2.7 Regulatory Approvals and Fees. MainPointe shall be the sole owner of the Product Regulatory Approvals, registration materials, clinicaldocumentation, and any and all country specific dossiers for Products in the Territory other than Currently Marketed Nexafed Products for the United States.Acura shall be sole owner of the Currently Marketed Nexafed Product Regulatory Approvals, registration materials, clinical documentation, and any and allcountry specific dossiers for Currently Marketed Nexafed Products. MainPointe shall be responsible for maintaining Product Regulatory Approvals and payany and all fees and expenses in connection therewith including, without limitation, any filing fees, establishment fees, annual product fees, activepharmaceutical supplier fees, and any fees associated with the amendment of a Regulatory Approval, any costs and expenses associated with regulatorychanges requested by a Regulatory Authority relating to a Product, or the Product Regulatory Approvals. 2.8 Right of Reference. 2.8.1 Acura grants MainPointe a right of reference to preclinical and clinical data and reports, and any adverse event reports regardingthe Products and all other necessary data, reports and information, in each case Controlled by Acura for the purpose of obtaining, and/or maintainingRegulatory Approval of, or commercializing or manufacturing a Product, without any additional compensation. 2.8.2 MainPointe grants Acura a perpetual right of reference to preclinical and clinical data and reports, any adverse event reportsregarding the Products and such other data, reports and information, in each case Controlled by MainPointe for the purpose of obtaining and/or maintainingRegulatory Approval of products utilizing the Impede Technology, without any additional compensation. 2.9 Non-Compete. MainPointe will not develop, file a Regulatory Approval Application or seek Regulatory Approval of or launch, market orsell or assist a Third Party in the development of, launch, market or sale of an Infringing Competing Product or a Competing Product in a country in theTerritory during the Royalty Term for such country. 2.10 Sublicenses. MainPointe may grant sublicenses through multiple tiers, under any or all of the rights granted in Section 2.1, to its Affiliatesand to Third Parties. Each agreement in which MainPointe grants a sublicense under Section 2.1 shall be consistent with the relevant terms and conditions ofthis Agreement. MainPointe shall provide notice to Acura of the proposed sublicense prior to execution thereof which notice shall state the subject of thesublicense (including the portion of the Territory and products being sublicensed) and MainPointe shall provide Acura a copy of such sublicense, withsuitable redaction of confidential information contained therein, within thirty (30) days after execution thereof. MainPointe shall be and remain fullyresponsible for the compliance by sublicensees with the terms and conditions of this Agreement, including without limitation and non-compete provisions ofSection 2.9. 9  2.11 Technology Transfer. Promptly after the Effective Date, Acura shall provide MainPointe with a technology transfer which shall consist ofthe manufacturing Know-How encompassed in the Impede Technology relating to the Currently Marketed Nexafed Products. 2.12 Records. MainPointe shall have the right to copies of all customers’ and suppliers’ lists, other distribution lists of Acura and APT that relateexclusively to the Currently Marketed Nexafed Products, in each case in existence on the Effective Date and within the possession and control of Acura. 2.13 Complaints; Recalls. Each of MainPointe and Acura shall inform the other Party as promptly as practicable of any Product complaints,including Product returns for which the other Party bears financial or regulatory responsibility. All communications relating to the performance or conditionof a Product, and all communications relating to adverse experiences in association with, but not necessarily due to, a Product which are received by Acura orMainPointe shall be forwarded to the other Party. In the event of any recall of or field notification after the Effective Date with respect to any Product, each ofMainPointe and Acura shall make available to the other Party during normal business hours and upon reasonable advance notice such records and otherinformation as reasonably requested by such other Party in connection with any recall of the Products after the Effective Date. MainPointe shall be solelyresponsible at its cost and expense for any recalls or withdrawals of Product sold by it or Transferred Inventory and Acura shall be solely responsible at itscost and expense for any recalls or withdrawals of Product sold by it. MainPointe shall be responsible for all required regulatory activities in the Territory. 2.14 Trademarks; Logos. 2.14.1 MainPointe shall assume full responsibility, at its sole cost and expense, for prosecuting or litigating any infringement of theNexafed trademark and shall be entitled to retain all recoveries in connection therewith except it shall remit to Acura 7.5% of such recoveries after deductionfrom such recoveries of fees and expenses in enforcing such trademark rights. 2.14.2 MainPointe hereby acknowledges the exclusive ownership of Acura of the Nexafed trademark furnished by Acura for use inconnection with the Nexafed Products and Impede trademarks furnished by Acura (or its Affiliates) for use in connection with the Products. MainPointe shallnot, during the Term or thereafter, register, use, or attempt to obtain any right in and to the Nexafed trademark or Impede trademark or in and to any name,logo or trademark confusingly similar thereto, including (i) any mark that begins with the prefix AC or AK and ends with the suffix FED or PHED, (ii)SUDAFED; and (iii) any mark that begins with the prefix SU or CU and ends with the suffix FED or PHED. 2.14.3 Acura shall have the right to exercise quality control over MainPointe's use of the Impede and Nexafed trademarks, asapplicable, to a degree reasonably necessary to maintain the validity of those trademarks, as applicable, and to protect the goodwill associated therewith. 10  2.14.4 MainPointe shall, in its packaging, sale, marketing, advertising, disposition and distribution of any Product and productpackaging adhere to a level of quality regarding the maintenance of the validity of the Impede and Nexafed trademarks, as applicable, and the protection ofthe goodwill associated therewith consistent with the reasonable standards of quality otherwise set by Acura. ARTICLE III – ASSET CONVEYANCE 3.1 Upon the terms and subject to the conditions set forth in this Agreement, on the Effective Date, Acura shall, and shall cause APT to, sell,assign, transfer, convey and deliver to MainPointe, and MainPointe shall purchase from Acura and APT all the right, title and interest of Acura and APT in, toand under the Acquired Assets and MainPointe shall assume the Assumed Liabilities (each as defined below). On the Effective Date each Party shall executethe Other Transaction Documents which calls for its signature. The purchase and sale of the Acquired Assets and the assumption of the Assumed Liabilitiesare referred to in this Agreement collectively as the “Acquisition”. 3.2 Transfer of Assets. 3.2.1 The term “Acquired Assets” means all of Acura’s and APT’s right, title and interest in, to and under those certain assets identifiedbelow: (a)all finished goods, raw materials (including all bulk active pharmaceutical ingredients for each of the Nexafed Products), work-in-progress, components, packaging and labeling material, supplies and other inventories (including items in transit, on consignment,or covered by open purchase orders or in the possession of any Third Party) of the Nexafed Products of Acura and APT on theEffective Date that relate exclusively to the Nexafed Products, in each case listed on Schedule 3.2.1(a) (collectively, the“Transferred Inventory”). (b)the equipment identified on Schedule 3.2.1(b); (c)the written contracts, indentures, licenses, agreements, commitments and all other legally binding arrangements, (“Contracts”)identified on Schedule 3.2.1(c) and (B) the binding purchase orders to which Acura or APT is a party that relate exclusively to theNexafed Products identified on Schedule 3.2.1(c), (collectively, the “Transferred Contracts”); provided, however, thatTransferred Contracts shall not include any contract except those expressly set forth on schedule 3.2.1(c); and (d)all domain names, brochures, promotional and printed materials, tradeshow materials (including displays), videos, advertisingmaterials, marketing materials, package inserts and packaging materials (in all cases, in any form or medium) (“AdvertisingMaterials”), if any, owned by Acura or APT and related exclusively to the commercialization of the Nexafed Products(“Transferred Advertising Materials”), provided Acura’s name shall be deleted therefrom, as provide in Section 9.5. 11  3.3 Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, MainPointe shall assume, effective as of 12:00:01 a.m.on the Effective Date, and from and after the Effective Date, MainPointe shall pay, perform and discharge when due, the following liabilities, obligations andcommitments (“Liabilities”) of Acura and APT, other than such Liabilities that constitute an Excluded Liability (the “Assumed Liabilities”): (a)all Liabilities of Acura and APT under or otherwise arising out of or relating to the Transferred Contracts (including all Liabilitiesarising out of or relating to any termination by or at the request of MainPointe or announcement or notification by or at the requestof MainPointe of an intent to terminate any such contract), to the extent the event, circumstance, condition, action or inactiongiving rise thereto occurs (i) on or after the Effective Date or (ii) relates to the Transferred Inventory or any Product sold by ormanufactured for MainPointe; (b)all accounts payable, accrued expenses and other current liabilities relating to the Acquired Assets or the Products to the extentarising on or after the Effective Date; (c)all Liabilities arising out of or relating to any lawsuits, claims, actions or proceedings relating to the manufacture, production,marketing, commercialization, distribution or sale of the Products or the ownership, sale, lease or use of any of the Acquired Assetsto the extent the same relates to the Transferred Inventory or any Product sold by or manufactured for MainPointe on or after theEffective Date or MainPointe's actions or inactions after the Effective Date; provided, however, that in the case any such Liabilityrelates to Transferred Inventory, subject to Section 2.13, only to the extent such Liability does not arise out of or is otherwiseattributable to Acura’s or APTs, or their respective agent’s manufacture or direct or indirect handling, storage, alteration, treatmentor other use or possession of such Transferred Inventory prior to the Effective Date; (d)all Liabilities for warranty claims and product liability or similar claims, including all suits, actions or proceedings relating to anysuch Liabilities, relating to the Transferred Inventory or any Products sold or marketed on or after the Effective Date orMainPointe's actions or inactions after the Effective Date; provided, however, that in the case any such Liability relates toTransferred Inventory, subject to Section 2.13, only to the extent such Liability does not arise out of or is otherwise attributable toAcura’s or APTs, or their respective agent’s manufacture or direct or indirect handling, storage, alteration, treatment or other use orpossession of such Transferred Inventory prior to the Effective Date; 12  (e)except as otherwise contemplated by Section 4.10, all Liabilities arising out of or relating to the return of, or refund, adjustment,allowance or exchange in respect of, the Products, whether arising before, or on or after the Effective Date; (f)all Liabilities for Taxes arising out of or relating to or in respect of the Products or any Acquired Asset for any Post-Closing TaxPeriod, other than any Excluded Tax Liabilities; (g)all Liabilities for transfer, documentary, sales, use, registration, value-added and other similar Taxes and related amounts(including any penalties, interest and additions to Tax) incurred in connection with this Agreement, any of the Other TransactionDocuments, the Acquisition and the other transactions contemplated hereby and thereby (“Transfer Taxes”); and (h)except as otherwise contemplated by Section 4.10, all Liabilities arising from the sale from and after the Effective Date of theNexafed Products in each case as a result of such Products bearing Acura’s National Drug Code (“NDC”) number. Each of MainPointe's and Acura’s obligations under this Section 3.3 will not be subject to offset or reduction by reason of any actual or allegedbreach of any representation, warranty, covenant or agreement contained in this Agreement or any Other Transaction Document or any right or alleged rightto indemnification hereunder. 3.4 Excluded Liabilities. Notwithstanding any other provision of this Agreement, MainPointe shall not assume any Excluded Liability, each ofwhich shall be retained and paid, performed and discharged when due by Acura and APT. The term “Excluded Liability” shall mean all Liabilities other thanAssumed Liabilities and shall include: (a)any Tax payable with respect to any business, asset, property or operation of Acura or its Affiliates (including any Taxes relating toor arising out of the Acquired Assets) for any Pre-Closing Tax Period, other than any Tax for which MainPointe is responsiblepursuant to Section 4.9 (“Excluded Tax Liability”); (b)all accounts payable, accrued expenses and other current liabilities relating to the Acquired Assets or the Nexafed Products to theextent arising before the Effective Date, except to the extent assumed under the Transferred Contracts; and (c)all Liabilities arising out of or relating to any lawsuits, claims, actions or proceedings relating to the manufacture, production,marketing, commercialization, distribution or sale of the Products or the ownership, sale, lease or use of any of the Acquired Assetsto the extent the event, circumstance, condition, action or inaction giving rise thereto occurs prior to the Effective Date, providedthat lawsuits, claims, actions or proceedings related to infringement of Third Party intellectual property with respect to Productmanufactured by or for MainPointe or marketed, commercialized, distributed, sold or leased by MainPointe shall not be anExcluded Liability and shall be an Assumed Liability; 13  Each of MainPointe's and Acura’s obligations under this Section 3.4 will not be subject to offset or reduction by reason of any actual or allegedbreach of any representation, warranty, covenant or agreement contained in this Agreement or any Other Transaction Document or any right or alleged rightto indemnification hereunder. ARTICLE IV – PAYMENTS AND ROYALTIES 4.1 Payments. MainPointe shall make the following non-refundable, non-creditable payments and provide the following notices, to Acura: 4.1.1 On the Effective Date, MainPointe shall pay Acura the sum of (A) Two Million Five Hundred Thousand Dollars ($2,500,000)(the “Upfront License Payment”) and (B) $425,020, representing the sum of (i) the cost of the Transferred Inventory, plus (ii) Acura’s advance payment toMikart, Inc. relating to Purchase Order 1050 being assumed by MainPointe as a Transferred Contract, plus (iii) the book value of equipment being transferred(the “Acquisition Payment”). 4.1.2 MainPointe shall make the Option Territory Exercise Fee payments as specified in Section 2.2. 4.1.3 MainPointe shall make the Option Product Exercise Fee payments as specified in Section 2.3. 4.2 Royalties. The following payments shall be payable by MainPointe to Acura for sales made during each calendar quarter and payment willbe remitted within forty-five (45) days after the end of the quarter to which it relates. 4.2.1 Royalty Payment. For each Product and for each country in the Territory during the Royalty Term for such country, MainPointeshall pay to Acura a royalty of Seven and One-Half Percent (7.5%) on all Net Sales of Products in such country. Such royalty shall be payable for sales madeduring each calendar quarter and payment will be remitted within forty-five (45) days after the end of the quarter to which it relates. The royalty paymentunder this section 4.2.1 is referred to as the “Royalty Payment.” 4.3 Royalty Reports. MainPointe shall prepare in respect of each calendar quarter a report (“Royalty Report”) that shows for that calendarquarter the Net Sales of Product by country and detailing the calculation of Gross Sales and deductions from Gross Sales in arriving at Net Sales. MainPointeshall submit such statement to Acura within forty-five (45) days of the end of the calendar quarter to which it relates, together with its remittance for RoyaltyPayments in respect of that quarter. The Royalty Report shall be in the form of Exhibit E. 14  4.4 Records. During the Term and for two (2) years thereafter, each Party shall keep all usual and proper records and books of account and allusual and proper entries relating to the Products. MainPointe shall maintain (electronically or otherwise) such records and books of account containing allnecessary data for the calculation of Royalty Payments due under this Agreement. 4.5 Audits. MainPointe and its Affiliates and Sublicensees shall maintain complete and accurate records in reasonably sufficient detail to permitAcura to confirm the accuracy of the calculation of royalty payments. Upon reasonable prior notice, such records shall be available during regular businesshours for a period of three (3) years from the end of the calendar year to which they pertain for examination, not more often than once each calendar year, byan independent certified public accountant selected by Acura and reasonably acceptable to MainPointe, for the sole purpose of verifying the accuracy of thefinancial reports furnished by MainPointe pursuant to this Agreement. Any such auditor shall enter into a confidentiality agreement with MainPointe andshall not disclose MainPointe's Confidential Information, except to the extent such disclosure is necessary to verify the accuracy of the financial reportsfurnished by MainPointe or the amount of payments due from MainPointe to Acura under this Agreement. Any amounts shown to be owed but unpaid shallbe paid, and any amounts showed to be overpaid will be refunded, within forty-five (45) days from the accountant's report. Acura shall bear the full cost ofsuch audit unless such audit discloses an underpayment to Acura of more than $10,000, in which case MainPointe shall bear the full cost of such audit.Amounts shall be deemed due on the original due date (e.g., when Royalty Payment was originally due) and interest shall be applied as set forth in Section4.8. 4.6 Pricing. MainPointe shall have sole discretion to determine the price, terms and conditions of sales of Product(s) to MainPointe's customers.MainPointe shall not price the Product in any country for any transaction as part of a bundle that provides greater discounts for the Product as compared toany other product in the bundle or otherwise disadvantage the selling price of the Product in favor of its products. MainPointe will not allow any Product toserve as a loss leader to induce the sale of other products. 4.7 Currency. All payments required under this Agreement shall be made in U.S. dollars, regardless of the country(ies) in which sales are made orexpenses are incurred, via wire transfer of immediately available funds to an account designated in writing by Acura. Whenever, for the purpose ofcalculating any sums due under this Agreement, conversion from any foreign currency shall be required, such conversion shall be made as follows: theamounts shall be converted into United States dollars using the average rate of exchange for such currencies for the relevant period, such exchange rate shallbe the exchange rate taken from The Wall Street Journal as published on the last day of the relevant period for which payments are due, or such otherpublication as may be agreed between the Parties from time to time. 4.8 Late Payments. All amounts payable under this Agreement and not paid within thirty (30) days of when due in accordance with theprovisions hereof shall bear interest from the due date until paid at the rate equal to the lower of (i) three percent (3%) over the prime rate of interest reportedin the East Coast Addition of The Wall Street Journal for the date such amount was due, per annum and (ii) the maximum rate allowed by law. Unlessotherwise stated all dollar amounts in this Agreement are in United States dollars. 15  4.9 Taxes. 4.9.1 In the event that a Party is mandated under the laws of a country to withhold any tax to the tax or revenue authorities in suchcountry in connection with any payment to the other Party, such amount shall be deducted from the payment to be made by such withholding Party,provided, however, that the withholding Party shall take reasonable and lawful actions, at the other Party’s sole cost, to avoid and minimize such withholdingand promptly notify the other Party so that the other Party may take lawful actions to avoid and minimize such withholding. The withholding Party shallpromptly furnish the other Party with copies of any tax certificate or other documentation evidencing such withholding as necessary to satisfy therequirements of the United States Internal Revenue Service related to any application by such other Party for foreign tax credit for such payment. Each Partyagrees to cooperate with the other Party in claiming exemptions from such deductions or withholdings under any agreement or treaty from time to time ineffect. 4.9.2 All Transfer Taxes and any filing or recording fees applicable to the Acquisition shall be paid by MainPointe. Each Party shalluse reasonable efforts to avail itself of any available exemptions from any such Taxes or fees and to cooperate with the other Party in providing anyinformation and documentation that may be necessary to obtain such exemptions. 4.9.3 The Acquisition Payment shall be allocated among the Acquired Assets in accordance with Exhibit F. Such allocation isintended to comply with the requirements of Section 1060 of the Code. Each of Acura and MainPointe agrees that it shall (i) report the sale and purchase ofthe Acquired Assets for United States Tax purposes in accordance with such allocations and (ii) not take any position inconsistent with such allocations onany of their respective United States Tax returns. 4.9.4 Acura shall be entitled to any refunds or credits of Taxes relating to any Excluded Tax Liability. MainPointe shall be entitled toany refunds or credits of Taxes relating to the Acquired Assets, other than any such refunds or credits of Taxes relating to any Excluded Tax Liability. 4.9.5 Any value-added, goods and services, stamp duties, ad valorem and similar Taxes shall be allocated between portions of a taxperiod that includes (but does not end on) the Effective Date (a “Straddle Period”) in the following manner: (i) in the case of a Tax imposed in respect ofproperty and that applies ratably to a Straddle Period, the amount of Tax allocable to a portion of the Straddle Period shall be the total amount of such Tax forthe period in question multiplied by a fraction, the numerator of which is the total number of days in such portion of such Straddle Period and thedenominator of which is the total number of days in such Straddle Period, and (ii) in the case of sales, value added and similar transaction-based Taxes (otherthan Transfer Taxes), such Taxes shall be allocated to the portion of the Straddle Period in which the relevant transaction occurred. 4.9.6 For purposes of this Agreement, (i) “Tax” or “Taxes” shall mean all United States federal, state, local and foreign taxes andsimilar assessments (other than Transfer Taxes), including all interest, penalties and additions imposed with respect to such amounts; (ii) “Pre-Closing TaxPeriod” shall mean all taxable periods ending on or before the Effective Date and the portion ending on the Effective Date of any taxable period thatincludes (but does not end on) the Effective Date; (iii) “Post-Closing Tax Period” shall mean all taxable periods beginning and ending after the EffectiveDate and the portion beginning on the day after the Effective Date of any Straddle Period; and (iv) “Code” shall mean the U.S. Internal Revenue Code of1986, as amended. 16  4.10 Nexafed Product Returns. Subject to this Section 4.10, MainPointe shall be solely responsible for processing and handling all Productreturns occurring on or after the Effective Date. MainPointe will be responsible for the credit liability associated with all returns of Product sold on or after theEffective Date in the United States, and Acura will be responsible for the credit liability for all returns of Product sold before the Effective Date. Lot numbersof Product sold by Acura before the Effective Date are listed on Schedule 4.10. Notwithstanding the foregoing, in the event Transferred Inventory includesProducts from lots that was sold by Acura prior to the Effective Date (each referred to herein as a “Partial Lot”), MainPointe and Acura will each beresponsible for fifty percent (50%) of the credit liability associated with returns of Product included in such Partial Lot (regardless of who sold such Product).The issuance and determination of all credits and payments for any returns for which Acura may have a credit liability hereunder (including with respect toPartial Lots) shall be made in accordance with Acura’s returns policy applicable to the Products as set forth in Schedule 4.10A, and the issuance anddetermination of all credits and payments for any returns for which MainPointe may have a credit liability hereunder shall be made in accordance withMainPointe's returns policy applicable to the Products as provided to Acura in writing as of the date hereof. If Acura receives returns it shall deliver toMainPointe for processing as set forth above. MainPointe will destroy returned Product in accordance with Applicable Laws. A Party may invoice the otherParty for the actual expenses incurred as a result of destroying Product for which the other Party is responsible, including without limitation, fees paid toThird Parties for receiving and processing such returned Product in accordance with Applicable Laws. MainPointe will pay such invoice within thirty (30)days after the date of the invoice for which it is responsible and with respect to a payment for which Acura is responsible, MainPointe shall, as its sole methodof recovery on such invoice, deduct such amount from current and future Royalty Payments due Acura for such invoiced amounts for which Acura isresponsible. MainPointe will issue a credit to the applicable Third Party in accordance with the returns policy of the Party responsible for the credit liabilityand, if the credit is issued by MainPointe for product for which Acura is responsible for the credit liability with respect to such returned Product, MainPointeshall invoice Acura for the amount of such credit and as its sole method of payment on such invoice, deduct from current and future Royalty Payments dueAcura for such invoiced amounts for which Acura is responsible. The parties shall reconcile and true up their accounting under this provision at the end ofeach calendar quarter after the Effective Date until both Parties agree that such need no longer exists. Each of MainPointe and Acura shall have the rightduring normal business hours and on reasonable advance notice to review the other Party’s books and records and consult with the other Party’s responsibleemployees in respect of performance of this Section 4.10. MainPointe agrees that it will not induce customers to accelerate, and it will not otherwise engagein any activity (including through the granting of financial incentives or otherwise) the effect of which would be the acceleration of, the return of Productssold by Acura or any of its Affiliates to customers prior to the Effective Date. 17  4.11 Change of NDC. MainPointe shall take any and all action necessary, as expeditiously as possible (but in no event later than four (4) monthsafter the Effective Date), to change the NDC number for each Nexafed Product and to apply such new NDC number to each Nexafed Product sold byMainPointe, provided, that the foregoing shall not apply to the Transferred Inventory, as provided in Section 9.5. For the avoidance of doubt, such actionsshall include MainPointe obtaining a new NDC number, if it does not already have one. MainPointe shall communicate to the Centers for Medicare andMedicaid Services (“CMS”), with a copy to Acura, the expiration dates for the last manufactured lots (“Last Lot Expiration Dates”) of each of the NexafedProducts manufactured by or on behalf of MainPointe that bears Acura’s NDC as soon as each such Last Lot Expiration Date is available. Acura shallmaintain with the FDA Acura’s NDC Number for each Product as required for the manufacture and distribution of the Products until the latest expiry of lots ofProducts included in the Transferred Inventory. 4.12 Retroactive Impact. In the event that any pricing change made by MainPointe after the Effective Date has the effect of increasing anyliability or payment obligation owed by Acura to any Third Party to an amount greater than the amount such liability or payment obligation would havebeen in the absence of such pricing change, MainPointe shall reimburse Acura for such increase in liability or payment obligation incurred by Acura. 4.13 Transition Services. 4.13.1 For the contracts listed on Schedule 4.13 (“Transition Contracts”), which are not being assigned to MainPointe, Acura willforward purchase orders to MainPointe and MainPointe will supply the Nexafed Products (“Transition Products”) at the prices called for in such agreementsand otherwise abide by the terms of such agreements. Acura will forward to MainPointe payments received on account of such sales and MainPointe will besolely responsible for all returns (including any payments arising from such returns). 4.13.2 MainPointe will also be responsible for any payments to the counterparty (e.g., fees to wholesalers) arising from such sales.MainPointe will indemnify and hold Acura harmless (including attorneys’ fees) for any actions or inactions relating to such Products as if MainPointe was aparty to such non-assigned agreements, including without limitation, cover damages and damages for late and non-delivery. Acura and MainPointe willcoordinate the termination of such agreements such that MainPointe can enter into agreements directly with such customers without interrupting supply. ARTICLE V – CONFIDENTIALITY AND LIMITATIONS ON USE 5.1 Confidentiality. Each Party agrees that, during the Term and for a period of ten (10) years thereafter it shall keep confidential and shall notpublish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement (which includes the exercise of any rights or theperformance of any obligations hereunder) any Confidential Information furnished to it by the other Party pursuant to this Agreement, except to the extentexpressly authorized by this Agreement or otherwise agreed in writing by the Parties. “Confidential Information” means information that the disclosingParty considers confidential and discloses to the receiving Party for the purpose of this Agreement. Confidential Information must be marked or otherwiseidentified as confidential or proprietary or, under the circumstances surrounding the disclosure, ought in good faith to be treated as confidential orproprietary. Confidential Information may be conveyed in written, graphical, physical or oral form. Confidential Information may include, without limitation,information concerning the study, discovery, design, research, development, manufacture, formulation, extraction, compounding, mixing, processing, testing,control, preservation, storage, finishing, packing, packaging, use, administration, distribution, sale, reimbursement and/or marketing of pharmaceuticalproducts or compounds and potential products or compounds, data from and methodology of pre-clinical and clinical studies, the contents of anysubmissions to the U.S. Food and Drug Administration (together with any successor agency), marketing plans or computer hardware and software systems anddesigns and plans for same. Confidential Information may include confidential or proprietary information of a third party that is in the possession of adisclosing Party. The foregoing confidentiality and non-use obligations shall not apply to any portion of the other Party’s Confidential Information that thereceiving Party can demonstrate by competent written proof: 18  (a)was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosureby the other Party; (b)was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party; (c)became generally available to the public or otherwise part of the public domain after its disclosure and other than through any actor omission of the receiving Party in breach of this Agreement; (d)was disclosed to the receiving Party or its Affiliate by a Third Party who has a legal right to make such disclosure and who did notobtain such information directly or indirectly from the other Party; or (e)was independently discovered or developed by the receiving Party or its Affiliate without access to or aid, application or use of theother Party’s Confidential Information, as evidenced by a contemporaneous writing. 5.2 Authorized Disclosure. Notwithstanding the obligations set forth in Section 5.1, a Party may disclose the other Party’s ConfidentialInformation and the terms of this Agreement to the extent: (a)such disclosure is reasonably necessary to its employees, agents, consultants, contractors, licensees or Sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in eachcase, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in thisAgreement; or (b)such disclosure is reasonably necessary to comply with Applicable Laws, including regulations promulgated by the U.S. Securitiesand Exchange Commission, applicable security exchanges, court order, administrative subpoena or order; provided that the Partysubject to such Applicable Laws shall promptly notify the other Party of such required disclosure and shall use reasonable effortsto obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure. 19  5.3 Publicity (a)The Parties agree that the material terms of this Agreement are the Confidential Information of both Parties, subject to the specialauthorized disclosure provisions set forth in this Section 5.3 or Section 5.2. In addition, a Party may disclose such terms to theextent reasonably necessary to be disclosed to any bona fide potential or actual investor, lender, acquiror, or merger partner for thesole purpose of evaluating an actual or potential investment, acquisition or merger; provided that in connection with suchdisclosure, such Party shall inform each disclosee of the confidential nature of such Confidential Information and ensure that eachsuch disclosee is contractually obligated to treat such Confidential Information as confidential on terms at least as restrictive asthose contained in this Article 5. (b)The Parties shall make a joint public announcement of the execution of this Agreement in the form attached as Exhibit G, whichshall be issued at a mutually agreed time after the Effective Date. (c)After release of such press release, if either Party desires to make a public announcement concerning the material terms of thisAgreement or any activities hereunder, such Party shall give reasonable prior advance notice of the proposed text of suchannouncement to the other Party for its prior review. (d)The Parties acknowledge that either or both Parties may be obligated to file under Applicable Laws a copy of this Agreement withthe U.S. Securities and Exchange Commission or other governmental authorities. Each Party may make such a required filing,provided that it requests confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to theextent such confidential treatment is reasonably available to such Party. In the event of any such filing, each Party will provide theother Party with a copy of this Agreement marked to show provisions for which such Party intends to seek confidential treatmentand shall reasonably consider and incorporate the other Party’s reasonable comments thereon to the extent consistent with thelegal requirements, with respect to the filing Party, governing disclosure of material agreements and material information that mustbe publicly filed. 20  5.4 Prior Confidentiality Agreement. Nothing herein shall relieve any Party of any breach of that certain Confidentiality Agreement, dated as ofNovember 11, 2016 (the “Prior Confidentiality Agreement”), by and between the Parties with respect to the information disclosed between the Parties priorto the date hereof, provided any information disclosed under such agreement shall also be deemed disclosed under this Agreement and such agreement shallnot apply to any information disclosed after the date hereof, which disclosure shall be governed by this Agreement. ARTICLE VI – LIABILITY AND INDEMNIFICATION 6.1 Maximum Liability. Other than a Party’s indemnification obligations, breach of the confidentiality provisions and non-compete provisionsof Section 2.9, each Party’s maximum liability to the other Party for any claim arising from this Agreement for any reason whatsoever (excluding monetaryconsideration for this Agreement, such as Upfront Payments, Option territory Exercise Fees, Option Product Exercise Fees, Royalty Payments, and out-of-pocket costs and expenses) will not exceed the following payments made by MainPointe to Acura during the twelve (12) month period preceding the dateupon which the applicable claim arose: the Upfront License Payment, Royalty Payments, Option Product Exercise Fees and the Option Territory ExerciseFees. 6.2 Indemnification by Acura. Acura shall defend, indemnify, and hold MainPointe and its Affiliates and their respective officers, directors andemployees (the “MainPointe Indemnitees”) harmless from and against any and all damages, losses, liabilities costs or expenses (including reasonableattorneys’ fees) (“Losses”) incurred or sustained by such MainPointe Indemnitees resulting from any claims, suits, proceedings or causes of action brought bya Third Party (collectively, “Claims”) against such MainPointe Indemnitee to the extent arising from or based on or arising from (a) Acura’s sales of NexafedProducts prior to the date hereof (other than as provided in Section 8.7(b)); (b) Acura’s breach of any of its obligations under this Agreement; (c) the grossnegligence or intentional misconduct of Acura; or (d) Acura’s breach of any representation or warranty made or given in this Agreement, in each case exceptfor any Claim which arises from or is based on any activity set forth in Section 6.3 for which MainPointe is obligated to indemnify the Acura Indemniteesunder Section 6.3. 6.3 Indemnification by MainPointe. MainPointe shall defend, indemnify, and hold Acura and its Affiliates and their respective officers, directorsand employees (the “Acura Indemnitees”) harmless from and against any and all Losses incurred or sustained by such Acura Indemnitees resulting from anyClaims against such Acura Indemnitee brought by a Third Party to the extent arising from or based on or arising from (a) MainPointe's breach of any of itsobligations under this Agreement; (b) any claims arising out of the manufacturing or commercialization of Products (including, without limitation, TransitionProducts) on or after the Effective Date; (c) the gross negligence or intentional misconduct of MainPointe; (d) MainPointe's breach of any representation orwarranty made or given by MainPointe in this Agreement; (e) as provided in Article 8; or (f) any actual or alleged infringement of any Third Party copyright,trademark or trade dress rights arising from materials, labeling, marketing or advertising of the Products, in each case except to the extent any Claim arisesfrom or is based on any activity set forth in Section 6.2 for which Acura is obligated to indemnify the MainPointe Indemnitees under Section 6.2. 21  6.4 Indemnification Procedures. (a)The Party claiming indemnity under this Article VI (the “Indemnified Party”) shall give written notice to the Party from whomindemnity is being sought (the “Indemnifying Party”) promptly after learning of such Claim. The failure to give such promptwritten notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extentthat the Indemnifying Party forfeits rights or defenses by reason of such failure. The Indemnifying Party shall have the right toparticipate in, or by giving written notice to the Indemnified Party within 30 days of receipt of written notice of the Claim, toassume the defense of any Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and theIndemnified Party shall cooperate in good faith in such defense; provided, however, that the Indemnifying Party’s right to assumethe defense of any Claim shall be subject to the Indemnifying Party acknowledging in writing to the Indemnified Party that theIndemnifying Party is liable under this Article 6 to provide indemnification. In the event that the Indemnifying Party assumes thedefense of any Claim, subject to Section 6.4(b), it shall have the right to take such action as it deems necessary to avoid, dispute,defend, appeal or make counterclaims pertaining to any such Claim in the name and on behalf of the Indemnified Party; provided,that the Indemnified Party shall have the right, at its own cost and expense, to participate in the defense of any such Claim withcounsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. If the Indemnifying Party elects notto compromise or defend such Claim or fails to notify the Indemnified Party in writing of its election to defend as provided in thisAgreement, the Indemnified Party may, subject to Section 6.4(b), pay, compromise, defend such Claim and seek indemnificationfor any and all Losses based upon, arising from or relating to such Claim. Acura and MainPointe shall cooperate with each other inall reasonable respects in connection with the defense of any Claim for which indemnification is sought under this Article 6,including making available (subject to the provisions of Article 5) records relating to such Claim and furnishing, without expense(other than reimbursement of actual out-of-pocket expenses) to the defending Party, management employees of the non-defendingParty as may be reasonably necessary for the preparation of the defense of such Claim. 22  (b)The Indemnifying Party shall not enter into settlement of any Claim without the prior written consent of the Indemnified Party(which consent shall not be unreasonably withheld or delayed), except as provided in this 6.4(b). If a firm offer is made to settle aClaim without leading to liability or the creation of a financial or other non-financial obligation on the part of the IndemnifiedParty and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligationsin connection with such Claim (a “Qualified Settlement Offer”) and the Indemnifying Party desires to accept and agree to suchQualified Settlement Offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If theIndemnified Party fails to consent to such Qualified Settlement Offer within ten days after its receipt of such notice, theIndemnified Party may continue to contest or defend such Claim and in such event, the maximum liability of the IndemnifyingParty as to such Claim shall not exceed the amount of such settlement Qualified Settlement Offer. If the Indemnified Party fails toconsent to such Qualified Settlement Offer and also fails to assume defense of such Claim, the Indemnifying Party may settle theClaim upon the terms set forth in such Qualified Settlement Offer to settle such Claim. If the Indemnified Party has assumed thedefense pursuant to Section 6.4(b), it shall not agree to any settlement without the written consent of the Indemnifying Party(which consent shall not be unreasonably withheld or delayed). (c)The procedures set forth in Section 8 shall supersede the provisions of this Section 6.4, with respect to matters addressed therein. 6.5 Consequential Damages. Except for breaches of the confidentiality provisions, and breach of the non-compete provision of Section 2.9,under no circumstances whatsoever will either Party be liable to the other in contract, tort, negligence, breach of statutory duty, or otherwise for (i) any (director indirect) loss of profits, of production, of anticipated savings, of business, or goodwill or (ii) for any other liability, damage, costs, or expense of any kindincurred by the other Party of an indirect or consequential nature, regardless of any notice of the possibility of these damages. ARTICLE VII – NOTICES 7.1 Notices. Any notice or request to be given or furnished under this Agreement by any Party to the other shall be in writing and shall bedelivered personally or registered or certified mail, postage prepaid, or by overnight delivery service to the following: TO ACURA:Acura Pharmaceuticals, Inc. 616 N. North Court Palatine, IL 60067 Attn: Robert B. Jones Telephone No. 847-705-7709 Copy To:LeClairRyan 1037 Raymond Blvd. Newark, NJ 07102 Attn: John P. Reilly, Esq. Telephone No. 973-491-3354 23  TO MainPointe: MainPointe Pharmaceuticals, LLC 33 East Main St., Suite 220 Louisville, KY 40202 Attn: John L. Schutte Telephone No. 502-548-6276 Copy To: Frost Brown Todd Attorneys, LLC 400 West Market St., 3200 Louisville, KY 40202 Attn: William G. Strench Telephone No. 502-589-5400 7.2 Receipt of Notice. All notices and other communications given to any Party in accordance with the provisions of this Agreement shall bedeemed to have been given on the date of receipt if delivered by hand or overnight courier services or sent by telecopy, or on the date five (5) business daysafter dispatch by certified or registered mail (postage prepaid) if mailed, in each case delivered, sent or mailed (properly addressed) to such Party as providedin this Article VII, or in accordance with the latest unrevoked direction from such Party given in accordance with this Article VII. 7.3 Customer Notification. Promptly after the Effective Date, MainPointe and Acura shall jointly prepare a written notice to Acura’s customersfor the Nexafed Products advising such customers (a) of the purchase by MainPointe of the Nexafed Products and the Acquired Assets, (b) that all purchaseorders for Nexafed Products received by Acura prior to the Effective Date but not filled as of such date have been transferred to MainPointe and (c) that allsubsequent purchase orders for Products should be sent to MainPointe or its designee, at the following address: 333 East Main Street, Suite 220, Louisville,Kentucky 40202. Acura shall provide such notice to customers for the Nexafed Products promptly following its completion by the Parties. ARTICLE VIII – PATENT PROSECUTION, INFRINGEMENT 8.1 Ownership of Intellectual Property Rights. Acura shall own all Intellectual Property Rights (including all Know-How and Patent Rights) inthe Impede® Technology, provided that if MainPointe makes any improvements to the Impede Technology, then MainPointe shall own such improvementsprovided that it shall inform Acura of such improvements, and hereby grants Acura a royalty-free, perpetual, sublicensable, non-exclusive license to suchimprovements to develop, manufacture and commercialize products other than the Products. MainPointe owns all trademarks and goodwill associated withthe marketing and commercialization of the Nexafed Products in the Territory, with the exception of any mark incorporating Acura’s corporate name,Impede® and Nexafed®, or any marks incorporating Impede® and Nexafed®, which shall be owned by Acura. 24  8.2 Patent Prosecution and Maintenance. Acura is responsible for the prosecution and maintenance of the Impede® Patent Rights in its solediscretion and at its own cost and expense, provided that any fees and expenses for maintenance or prosecution and maintenance outside the United Statesshall be at MainPointe's expense. Acura shall provide MainPointe a reasonable opportunity to review and comment on such prosecution and maintenanceefforts regarding Impede® Patent Rights in the Territory that may claim the Products, or the making or the use thereof. Acura shall provide MainPointe with acopy of material communications from any patent authority in the Territory regarding such Impede® Patent Rights within a reasonable time after receipt ofsuch communications and shall provide drafts of any material filings or responses to be made to such patent authorities in a reasonable amount of time inadvance of submitting such filings or responses for MainPointe's review and comment. Acura shall reasonably consider such comments by MainPointe inconnection with the prosecution and maintenance of the Impede® Patent Rights. If Acura decides to cease the prosecution or maintenance of any Impede®Patent Rights that claim the Product(s), after it has commenced prosecution of such Impede Patent Rights in the Territory, and Bayer has not exercised suchrights under the Bayer Agreement, Acura shall notify MainPointe in writing so that MainPointe may, at its discretion, assume the responsibility for theprosecution or maintenance of such Impede® Patent Rights in the Territory, provided Acura shall own all such resulting patents. 8.3 Infringement of Impede® Patent Rights. Each of MainPointe and Acura will notify the other Party within five (5) days upon learning of anypossible infringement by a Third Party of the Impede® Patent Rights, which infringement may reasonably be expected to affect the commercialization of aProduct. MainPointe has the exclusive right (after consultation with Acura), but not the obligation, at MainPointe's own cost, to take all steps, including legalaction, it deems necessary or advisable to eliminate or minimize the effect on the development, manufacture and commercialization of the Products of suchpossible infringement. Acura agrees to cooperate, upon reasonable request of MainPointe and at MainPointe's cost, in such steps or legal proceeding. Allproceeds realized upon any judgement or settlement in MainPointe's favor regarding such steps or legal action, net of direct out-of-pocket expenses of theParties relating thereto, shall be for the benefit of MainPointe provided MainPointe shall pay Acura the same royalty on the excess as it is required to pay onNet Sales. Notwithstanding the foregoing, Acura’s consent (which shall not be unreasonably withheld, delayed or conditioned) shall be required for anysettlement that entails any license or covenant not to sue, relating to the Impede® Patent Rights, or dedication to the public, admission of invalidity orunenforceability, or abandonment of any Impede® Patent Rights. 8.4 Notice by MainPointe of Intent to Assert; Acura’s Right to Assert. (a)No later than five (5) business days after learning or being notified of any possible infringement by a Third Party of the Impede®Patent Rights, which infringement may reasonably be expected to affect the commercialization of a Product, MainPointe shallprovide written notice to Acura as to whether MainPointe will exercise its rights conferred in Section 8.3. (b)If MainPointe does not provide Acura with such written notice within twenty (20) business days or within such time providesnotice to Acura electing not to exercise its rights conferred in Section 8.3, then at any time Acura may, but shall not be obligated,to provide MainPointe written notice as to whether Acura will take steps to eliminate or minimize the consequences of suchpossible infringement to the commercialization of the Products. 25  (c)If Acura elects, pursuant to Section 8.4(b), to take steps to eliminate or minimize the consequences of such possible infringementto the commercialization of a Product, the following shall apply: Acura shall have the exclusive right, at Acura’s own cost andexpense, to take such steps as it shall determine, including legal action, to eliminate or minimize the consequences of suchpossible infringement to the commercialization of the Product. Acura shall be entitled to any judgement or settlement relating tosuch action. MainPointe agrees to join as a named party and cooperate, upon reasonable request of Acura and at Acura’s cost andexpense, in any such steps or legal proceeding. 8.5 Third Party Challenges to Impede® Patent Rights. Notwithstanding Section 8.3, each of MainPointe and Acura shall notify the other Partyno later than five (5) business days after receiving a Paragraph IV Certification, an Inter Parties or Post Grant review petition, or any other challenge that anImpede® Patent Right is invalid or unenforceable, if such Impede® Patent Right claims the Product, or the manufacture, or use thereof. MainPointe has theright (after consultation with Acura), but not the obligation, at MainPointe's own cost, to exclusively pursue any negotiations with such Third Party andexclusively control the enforcement or defense of any legal proceeding regarding such challenge. Acura agrees to cooperate, upon reasonable request ofMainPointe and at MainPointe's cost, in such negotiations or legal proceeding. All proceeds realized upon any judgement or settlement in MainPointe's favorregarding such negotiations or legal proceeding, net of direct out-of-pocket expenses of the Parties relating thereto, shall be for the benefit of MainPointe,provided MainPointe shall pay Acura the same royalty on the excess as it is required to pay on Net Sales. Notwithstanding the foregoing, Acura’s consent(which shall not be unreasonably withheld, delayed or conditioned) shall be required for any settlement that entails any license or covenant not to sue,relating to the Impede® Patent Rights, or dedication to the public, admission of invalidity or unenforceability, or abandonment of the Impede® PatentRights. 8.6 Notice by MainPointe to Defend; Acura’s Right to Defend. (a)Notwithstanding Section 8.4, no later than five (5) business days after MainPointe learns of a Paragraph IV Certification, an InterParties or Post Grant review petition, or any other challenge that an Impede® Patent Right is invalid or unenforceable, whichImpede® Patent Right claims a Product, or the manufacture, or use thereof, MainPointe shall provide written notice to Acura as towhether MainPointe will exercise its rights conferred in Section 8.5. (b)If MainPointe does not provide Acura with such written notice within its ten (10) business day period of Section 8.6(a) or withinsuch time provided notice to Acura electing not to exercise its rights conferred in Section 8.5, then Acura may at its option, butshall not be obligated to, notify MainPointe in writing at any time thereafter whether Acura will undertake the enforcement ordefense of any legal proceeding. 26  (c)If Acura undertakes such defense or enforcement pursuant to Section 8.6(b), the following paragraph shall apply: Acura shall beentitled, at Acura’s own cost and expense, to exclusively pursue any negotiations with such Third Party and exclusively controlthe enforcement or defense of any legal proceeding regarding such challenge. If Acura undertakes the defense or enforcement,Acura shall be entitled to any judgement or settlement relating to such action. MainPointe agrees to join as a named party andcooperate, upon reasonable request of Acura and at MainPointe's cost and expense, in any such steps or legal proceeding.Notwithstanding the foregoing, MainPointe's consent (which shall not be unreasonably withheld, delayed or conditioned) shall berequired for any settlement that would limit or restrict MainPointe's rights conferred by this Agreement. 8.7 Allegations of Infringement by Third Parties. (a)Each of MainPointe and Acura will forthwith notify the other Party upon learning of any allegation by a Third Party that (i) aProduct may infringe Third Party intellectual property rights, or (ii) any product that includes the Impede® Technology other thana Product (a “Related Impede® Technology Product”) may infringe Third Party intellectual property rights and the Parties shall inthat event consult with each other, including a possible defense strategy. (b)If the infringement allegation against a Product is due to the Impede® Technology, MainPointe has the obligation to pursue anynegotiations with the claimant and to control the defense of any legal proceeding regarding such infringement allegation againstthe Product at its own cost and expense (including the cost of defense, judgments, damages and settlements) and shall indemnifyand hold Acura harmless from same. Acura shall, at MainPointe's expense, reasonably collaborate with MainPointe and render anyreasonable assistance to MainPointe in MainPointe's negotiations with the claimant and defense of any such legal proceedingregarding such allegation of infringement. (c)If the infringement allegation is against a Related Impede® Technology Product, Acura reserves the limited right to negotiate withthe claimant solely in its own name and on its own behalf relating to the Related Impede® Technology Product and defend onlyitself in any legal proceeding regarding such allegation of infringement as it may relate to the Related Impede® TechnologyProduct at its own cost and expense (including the cost of defense, judgments, damages, and settlements). MainPointe shall, atMainPointe's expense, reasonably collaborate with Acura and render any reasonable assistance to Acura in Acura’s negotiationswith the claimant and Acura’s defense of any legal proceeding regarding such allegation of infringement as it may relate to theRelated Impede® Technology Product. If Acura elects to undertake negotiation or defense pursuant to this section, Acura isneither authorized nor obligated to negotiate on behalf of or defend MainPointe. 27  8.8 Settlement of Allegations of Infringement. For purposes of Sections 8.7 and 8.8, the Party negotiating with the claimant or defending thelegal proceeding is referred to as the “Defending Party” and the other Party is referred to as the “non-Defending Party.” The Defending Party shall have theright to exclusively control and manage such claim of infringement (including without limitation, control over the settlement of such action), provided,however, that any such settlement shall also release the non-Defending Party from the claims relating to the claim of infringement (provided that the non-Defending Party executes a mutual release in favor of the party releasing the non-Defending Party). The written consent of the non-Defending Party to thesettlement is required if the settlement obligates the non-Defending Party to take or forgo any action (which consent shall not be unreasonably withheld,delayed or conditioned). Without limiting the foregoing, Acura’s consent (which shall not be unreasonably withheld, delayed or conditioned) shall berequired for any settlement that entails any license, covenant not to sue relating to, dedication to the public, admission of noninfringement, invalidity orunenforceability or abandonment of Acura’s Intellectual Property Rights, including without limitation the Impede® Technology, and MainPointe's consent(which shall not be unreasonably withheld, delayed or conditioned) shall be required for any settlement that that would limit or restrict the ability ofMainPointe to have made, use, offer for sale, sell or otherwise commercialize Product(s) in the Field in the Territory ARTICLE IX – REPRESENTATIONS, WARRANTIES AND COVENANTS 9.1 Cooperation. 9.1.1 MainPointe and Acura shall cooperate with each other, and shall cause their respective officers, employees, agents, auditors andrepresentatives to cooperate with each other, for a period of one hundred twenty (120) days after the Effective Date to ensure the orderly transition of theProducts and the Acquired Assets from Acura to MainPointe and to minimize any disruption to the respective businesses of Acura, APT and MainPointe thatmight result from the transactions contemplated hereby. After the Effective Date, upon reasonable written notice, MainPointe and Acura shall furnish or causeto be furnished to each other and their employees, counsel, auditors and representatives reasonable access, during normal business hours, to such informationand assistance relating to the Products and the Acquired Assets as is reasonably necessary for financial reporting and accounting matters, the preparation andfiling of any Tax returns, reports or forms or the defense of any Tax claim or assessment. The obligation to cooperate pursuant to the preceding sentenceinsofar as it concerns Taxes shall terminate at the time the relevant applicable statute of limitations expires (giving effect to any extension thereof). Eachparty shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 9.1. Neither party shallbe required by this Section 9.1 to take any action that would unreasonably interfere with the conduct of its business or unreasonably disrupt its normaloperations. 28  9.1.2 From time to time, as and when requested by either party hereto, the other party shall execute and deliver, or cause to beexecuted and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions, as such other Party mayreasonably deem necessary or desirable to consummate the transactions contemplated by this Agreement. 9.2 Mutual Representations, Warranties and covenants. Each Party represents and warrants that (i)it has the full right, power and authority to enter into this Agreement; (ii)that entering into and performing its obligations set forth in this Agreement does not conflict with any other agreement to which it is aparty; (iii)as at the Effective Date, there are no claims, judgments, litigations, suits, actions, disputes, arbitration, judicial or legal, administrative orother proceedings or governmental investigations pending or, to such Party’s knowledge, threatened against such Party or any of itsAffiliates, and neither such Party nor its Affiliates is a party to any settlement agreement, which would be reasonably expected to materiallyaffect or restrict the ability of such Party to consummate the transactions contemplated under this Agreement and to perform its obligationsunder this Agreement; and (iv)neither Party has used or shall use any employee or consultant who has been debarred by any Regulatory Authority or, to such Party’sknowledge, is or has been the subject of debarment proceedings by a Regulatory Authority. Each Party shall notify the other Party promptlyupon becoming aware that any of its employees or consultants has been debarred or is the subject of debarment proceedings by anyRegulatory Authority. 9.3 Acura Representations, Warranties. Acura represents and warrants that: (i) it has all rights necessary to validly grant the licenses set forth inSection 2; (ii) the Patent Rights included in the Impede® Technology and set forth on Exhibit D have not expired and any maintenance fees have been paidwhen due or within any permitted extension; (iii) it is not subject to any court proceedings, judgment or order related to the subject matter of this Agreement;(iv) it has not received any written claim or allegation of infringement from a Third Party for the infringement of Third Party intellectual property rights basedon the making, using, or selling of the Currently Marketed Nexafed Products (other than for a claim related to the use of the Nexafed trademark that has beenresolved); (v) it has not assigned and/or granted licenses, nor shall it assign and/or grant licenses, to the Impede® Technology to any Third Party that wouldrestrict or impair the rights granted hereunder, and it has not granted to anyone any rights that cover Nexafed Products in the Territory; (vi) the Impede PatentRights are the only Patents Right Controlled by Acura relating to the Nexafed Products and any products referred to as Nexafed 2.0 which have beendeveloped by Acura; and (vii) to its actual knowledge the Impede® Technology (a) does not infringe any valid claim in a granted patent known to Acura asof the Effective Date owned by a Third Party and (b) has not been misappropriated from a Third Party. 29  9.4 MainPointe’s Representations Warranties and Covenants. MainPointe represents, warrants and covenants that (i) it shall develop,manufacture and commercialize the Products in accordance with Applicable Law and (ii) neither MainPointe nor its Affiliates shall engage in a PatentChallenge, or knowingly assist any Third Party to engage in a Patent Challenge with respect to any of the Impede® Patent Rights or intentionally or willfullyinfringe the Impede Patent Rights. 9.5 No Use of Certain Names; Transitional License. MainPointe shall promptly, and in any event within ninety (90) days after Effective Date,(a) revise any and all product literature and labeling and Transferred Advertising Material to delete all references to the Acura Names and (b) delete allreferences to Acura or APT’s customer service address or telephone number; provided, however, that for a period of one hundred eighty (180) days from theEffective Date MainPointe may continue to distribute such product literature and Transferred Advertising Material that uses any Acura Names, addresses ortelephone numbers to the extent that such product literature and Transferred Advertising Material exists on the date hereof, and, only to the extent necessaryto allow MainPointe to distribute such product literature and Transferred Advertising Material during such one hundred eighty (180) day period, Acurahereby grants to MainPointe the limited right, on a royalty-free basis, to use the Acura Name and Acura’s trade dress, copyrights and other intellectualproperty owned by Acura and appearing in such product literature and Transferred Advertising Material on the date hereof. In no event shall MainPointe useany Acura Names or Acura’s addresses, telephone numbers, trade dress, copyrights or other intellectual property after the Effective Date in any manner or forany purpose different from the use of such Acura Name or Acura’s addresses, telephone numbers, trade dress, copyrights or other intellectual property byAcura or APT with respect to the Nexafed Products prior to the Effective Date. With respect to the Transferred Inventory, MainPointe shall be entitled tocontinue to use the Acura Name and Acura’s NDC Number for each of the Nexafed Products until such time as the Transferred Inventory is exhausted,provided, however, that notwithstanding the foregoing, in the event MainPointe encounters difficulties in obtaining a new NDC Number for a Product or inobtaining FDA approval for changes to the labeling for a Nexafed Product which deletes all references to the Acura Name, Acura shall provide MainPointewith such reasonable extensions to the time period in which MainPointe may use the Acura Name and Acura’s NDC Number as may be requested byMainPointe to Acura in writing. “Acura Name” means (i) “Acura”, “Acura Pharmaceuticals”, “Acura Pharmaceuticals, Inc,”, “Acura PharmaceuticalTechnologies”, and “Acura Pharmaceutical technologies, Inc.”, any variations and derivatives thereof. 9.6 Disclaimers. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER,WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ONBEHALF OF A PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, AREHEREBY EXPRESSLY EXCLUDED. 30  ARTICLE X – TERM AND TERMINATION 10.1 Term and Expiration. The “Term” of this Agreement shall be from the Effective Date until the earlier of (i) termination of this Agreementpursuant to Section 10.2 or 10.3 or (ii) the last to expire Royalty Term. 10.2 Termination for Breach. Either Party may terminate the Agreement in its entirety by giving written notice of termination at any time, if the other Party fails to fulfill orbreaches any material term or condition of this Agreement, and does not remedy the failure or breach within thirty (30) days of receipt of written noticespecifying such failure or breach given by the other Party. 10.3 Termination for Patent Challenge. Acura will be permitted to terminate this Agreement by written notice effective upon receipt if MainPointe or its Affiliates, directly or indirectlythrough assistance granted to a Third Party, commence any interference or opposition proceeding, challenge in a legal or administrative proceeding thevalidity or enforceability of, or oppose in a legal or administrative proceeding any extension of or the grant of a supplementary protection certificate withrespect to (i) any Patent Rights licensed hereunder (except as a defense against a patent infringement action initiated by Acura or its Affiliates or licenseesagainst MainPointe or its Affiliates) (each such action, a “Patent Challenge”). MainPointe will include provisions in all agreements granting sublicenses of MainPointe's rights hereunder (other than agreements withmanufacturers, services providers, distributors and other agents) providing that if the sublicensee or its Affiliates undertake a Patent Challenge with respect toany Patent Rights licensed hereunder under which the sublicensee is sublicensed, MainPointe will be permitted to terminate such sublicense agreement. If asublicensee of MainPointe (or an Affiliate of such sublicensee) undertakes a Patent Challenge of any such Patent Right under which such sublicensee issublicensed (other than sublicensees that are manufacturers, services providers, distributors and other agents), then MainPointe upon receipt of notice fromAcura of such Patent Challenge will terminate the applicable sublicense agreement. If MainPointe fails to so terminate such sublicense agreement, Acura mayterminate MainPointe's right to sublicense in the country(ies) covered by such sublicense agreement and any sublicenses previously granted in suchcountry(ies) shall automatically terminate. In connection with such sublicense termination, MainPointe shall cooperate with Acura’s reasonable requests tocause such a terminated sublicensee to discontinue activities with respect to a Product in such country(ies). 10.4 Consequences of Expiration and Termination. 10.4.1 Upon expiration of this Agreement with respect to a country, MainPointe shall retain a non-exclusive, perpetual, irrevocable,fully paid-up and royalty-free license to, develop, have made, sell, promote, or otherwise exploit the Product in such country. 10.4.2 Upon termination of this Agreement: (i) all of MainPointe's licenses with respect to Acura’s trademarks and the Impede®Technology shall terminate; (ii) MainPointe's non-compete contained in Section 2.9 shall terminate immediately; and (iii) at Acura’s request MainPointe andAcura shall use commercially reasonable efforts to transition the commercialization of Nexafed Products back to Acura so that, among other things, sales ofNexafed Products are not interrupted and which may include, by way of example, assignment of Product manufacturing and supply agreements to Acura or itsdesignee. 31  Termination, relinquishment or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit ofeither Party prior to such termination, relinquishment or expiration. Such termination, relinquishment or expiration shall not relieve either Party fromobligations that are expressly indicated to survive termination or expiration of this Agreement. 10.4.3 All of the Parties’ rights and obligations under Sections 2.6, 2.7, 2.8.2, 2.10, 2.13, 3.3, 3.4, 4.2, 4.4, 4.5, 4.7, 4.8, 4.9, 4.10, 4.11,4.12, 4.13.2 and Articles 5, 6, 7, 8, 10 and 11, shall survive termination or expiration of this Agreement (unless such Section specifically states that it shallonly survive expiration but not termination, in which case it shall survive as set forth therein), and all other provisions reasonably construed to survive shallalso survive termination or expiration. Where a provision specifies a survival period, such provision shall survive only during such survival period. ARTICLE XI – MISCELLANEOUS 11.1 Dispute Resolution. MainPointe and Acura agree to use good faith efforts to resolve any and all disputes arising out of or relating to thisAgreement. If after forty five (45) days following receipt of notice by one Party from the other of a dispute under this Agreement, the Parties are unable toresolve the dispute, then the matter shall by fully and finally resolved by arbitration. A Party that desires to arbitrate a dispute shall serve a written noticeupon another requesting arbitration of a dispute pursuant to this Section 11.1. Any such arbitration shall be submitted to final and binding arbitration underthe then current commercial arbitration rules of the American Arbitration Association (the “AAA”) in accordance with this Section 11.1. The place ofarbitration of any dispute shall be New York, New York. Such arbitration shall be conducted by one (1) arbitrator mutually agreed by the Parties but if suchagreement cannot be reached within ten (10) days of the commencement of the arbitration, then an arbitrator appointed by the AAA. The arbitrator shall be aperson with relevant experience in the pharmaceutical industry. The arbitration proceeding shall be held as soon as practicable but in any event within ninety(90) days of appointment of the arbitrator. Any award rendered by the arbitrators shall be final and binding upon the Parties. Judgment upon any awardrendered may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order ofenforcement, as the case may be. The arbitrator shall render a formal, binding, non-appealable resolution and award as expeditiously as possible, but not morethan forty-five (45) days after the hearing. Each Party shall pay its own expenses of arbitration, and the expenses of the arbitrator shall be equally sharedbetween the Parties unless the arbitrators assess as part of their award all or any part of the arbitration expenses of a Party (including reasonable attorneys’fees) against the other Party. A Party may make application to the Arbitrator for the award and recovery of its fees and expenses (including reasonableattorneys’ fees). This Section 10.1 shall not prohibit a Party from seeking injunctive relief from a court of competent jurisdiction in the event of a breach orprospective breach of this Agreement by any other Party which would cause irreparable harm to the first Party. 32  11.2 Rights in Bankruptcy. 11.2.1 All rights and licenses granted under or pursuant to this Agreement by one Party to the other are, for all purposes of Title 11 ofthe United States Code (“Title 11”), licenses of rights to “intellectual property” as defined in Title 11, and, in the event that a case under Title 11 iscommenced by or against either Party (the “Bankrupt Party”), the other Party shall have all of the rights set forth in Section 365(n) of Title 11 to themaximum extent permitted thereby. During the Term, each Party shall create and maintain current copies to the extent practicable of all such intellectualproperty. Without limiting the Parties’ rights under Section 365(n) of Title 11, if a case under Title 11 is commenced by or against the Bankrupt Party, theother Party shall be entitled to a copy of any and all such intellectual property and all embodiments of such intellectual property, and the same, if not in thepossession of such other Party, shall be promptly delivered to it (i) before this Agreement is rejected by or on behalf of the Bankrupt Party, within thirty (30)days after the other Party’s written request, unless the Bankrupt Party, or its trustee or receiver, elects within thirty (30) days to continue to perform all of itsobligations under this Agreement, or (ii) after any rejection of this Agreement by or on behalf of the Bankrupt Party, if not previously delivered as providedunder clause (i) above. All rights of the Parties under this Section 11.2 and under Section 365(n) of Title 11 are in addition to and not in substitution of anyand all other rights, powers, and remedies that each party may have under this Agreement, Title 11, and any other Applicable Laws. The non-Bankrupt Partymay perform the obligations of the Bankrupt Party hereunder with respect to such intellectual property, but neither such provision nor such performance bythe non-Bankrupt Party shall release the Bankrupt Party from any such obligation or liability for failing to perform it. (b) The Parties agree that they intend the foregoing non-Bankrupt Party rights to extend to the maximum extent permitted by law and anyprovisions of applicable contracts with Third Parties, including for purposes of Title 11, (i) the right of access to any intellectual property (including allembodiments thereof) of the Bankrupt Party or any Third Party with whom the Bankrupt Party contracts to perform an obligation of the Bankrupt Party underthis Agreement, and, in the case of the Third Party, which is necessary for the development, Regulatory Approval and manufacture of Products and (ii) theright to contract directly with any Third Party described in (i) in this sentence to complete the contracted work. (c) Any intellectual property provided pursuant to the provisions of this Section 11.2 shall be subject to the licenses set forth elsewhere in thisAgreement and the payment obligations of this Agreement, which shall be deemed to be royalties for purposes of Title 11. 11.3 No Set-off. Except as expressly set forth in this Agreement, neither Party may set-off or recoup against a payment owed to the other Party,without the consent of the other Party. 11.4 Waivers; Amendment. The failure of either Party to insist, in any one or more instances, upon the performance of any of the terms, covenantsor conditions of this Agreement or to exercise any right hereunder, shall not be construed as a waiver or relinquishment of the future performance of any suchterm, covenant or conditions or the future exercise of such right, and the obligation of the other Party with respect to such future performance shall continuein full force and effect. No item or provision of this Agreement may be altered, amended or waived except by a writing signed by both Parties. 33  11.5 Assignment. Neither Party shall assign any of its rights or obligations under this Agreement, in whole or in part to any person, firm,partnership, or other entity, except to an Affiliate, without the prior written consent of the other Party, which consent shall not be unreasonably withheld,delayed or conditioned. Notwithstanding the foregoing, a Party may assign this Agreement in connection with (i) the transfer of all or substantially all of itsassets or its Impede Technology assets (by merger, sale of assets or otherwise) to the transferee thereof or (ii) the sale of its line of business to which thisAgreement relates; provided in each instance the transferee agrees to be bound by all obligations of the transferring Party to the other Party hereunder. 11.6 Covenant of Further Assurances. MainPointe and Acura covenant and agree that subsequent to the execution and delivery of this Agreementand without any additional consideration, each of MainPointe and Acura shall execute and deliver any further legal instruments and perform such acts whichare or may become necessary to effectuate the purposes of this Agreement. 11.7 Headings. The heading of the Articles and Sections used in this Agreement are included for convenience only and are not to be used inconstruing or interpreting this Agreement. 11.8 Governing Law. Unless any competent governmental entity or any other applicable laws and regulations require otherwise, this Agreementshall be governed by and construed under the laws of the State of New York as applied to agreements executed and performed solely in New York, withoutregard to choice-of-law principles thereof. 11.9 Severability. The provisions of this Agreement shall be deemed separate. Accordingly, the invalidity or unenforceability of any particularprovision of this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if such invalid or unenforceableprovision were omitted, except in cases where such unenforceable provision is a basic prerequisite of any Party or both Parties to enter into this Agreement.The Parties shall in such an instance use their best efforts to replace the unenforceable provision(s) with valid, legal and enforceable provision(s) which,insofar as practical, implement the purposes of this Agreement. 11.10 Entire Agreement. This Agreement including all Exhibits and Schedules attached hereto constitutes the entire Agreement betweenMainPointe and Acura with respect to the subject matter addressed herein and this Agreement supersedes all prior understandings and agreements, whetheroral or written, between the MainPointe and Acura with respect thereto, except the Prior Confidentiality Agreement to the extent set forth in Section 5.4. Anyamendment to any provisions set forth in the Agreement must be in writing, signed by both MainPointe and Acura and specifically state that it is anamendment. 11.11 Counterparts; Facsimile Signatures. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be anoriginal and of equal force and effect, but all of which taken together shall constitute one and the same instrument. A facsimile, digital, PDF, e-mail or otherelectronic copy hereof shall suffice as an original Agreement. 11.12 Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting andnegotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shallnot apply. 34  IN WITNESS WHEREOF, MainPointe and Acura have caused this Agreement to be executed by their duly authorized officers as of the day andyear first above written. ACURA PHARMACEUTICALS, INC. MAINPOINTE PHARMACEUTICALS, LLC By:/s/ Robert B. Jones By:/s/ Douglas Morris Name:President & CEO Name:Douglas E. Morris Title:Robert B. Jones Title:Secretary/Treasurer Date:14 March 2017 Date:3/16/17 35  Exhibit AAssignment of Contracts (General) ASSIGNMENT OF CONTRACT RIGHTS For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Acura Pharmaceuticals, Inc., with offices at 616N. North Court, Palatine IL 60067 (“Seller”), does hereby assign, grant, bargain, transfer, sell, convey and deliver to Mainpointe Pharmaceuticals, LLC, aKentucky limited liability company, with offices at 333 East Main Street, Suite 220, Louisville, Kentucky 40202 (“Buyer”), Seller’s rights under theTransferred Contracts, as such term is defined in the License, Commercialization and Option Agreement by and among Buyer and Seller (the “Agreement”),to the extent set forth in the Agreement. Seller for itself, its successors and assigns hereby covenants and agrees that, at any time and from time to timeforthwith upon the written request of Buyer, Seller will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered,each and all of such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by Buyer inorder to assign, transfer, set over, convey, assure and confirm unto and vest in Buyer, its successors and assigns, all of the rights of Seller under the TransferredContracts. Buyer’s assumption of liabilities under the Transferred Contracts is governed by a separate instrument entitled “Assumption of Liabilities,” and issubject to all of the qualifications and conditions stated in such instrument and in the Agreement. his Assignment of Contract Rights is being executed and delivered by Seller as of the date set forth below pursuant to the terms of the Agreement. Dated this ____ day of March, 2017 SELLER: ACURA PHARMACEUTICALS, INC. By: Name: Title: BUYER: Mainpointe Pharmaceuticals, LLC By: Name: Title: 36  Exhibit BAssumption Agreement ASSUMPTION OF LIABILITIES Pursuant to that certain License, Commercialization and Option Agreement (the “Agreement”) by and among by and between MainpointePharmaceuticals, LLC, a Kentucky limited liability company, with offices at 333 East Main Street, Suite 220, Louisville, Kentucky 40202 (“Buyer”), andAcura Pharmaceuticals, Inc., with offices at 616 N. North Court, Palatine IL 60067 (“Seller”), for good and valuable consideration, the receipt and adequacyof which are hereby acknowledged, Buyer hereby does assume the Assumed Liabilities (including all liabilities of Acura under or otherwise relating to theassigned contracts to the extent the event, circumstance, condition, action or inaction giving thereto occurs on or after the date hereof) as such term is definedin the Agreement by and subject to the terms and conditions of the Agreement. Dated this ____ day of March, 2017 BUYER: MAINPOINTE PHARMACEUTICALS, LLC By: Name: Title: 37  Exhibit CBill of Sale For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Acura Pharmaceuticals, Inc., with offices at 616N. North Court, Palatine IL 60067 (“Seller”), does hereby assign, grant, bargain, transfer, sell, convey and deliver to Mainpointe Pharmaceuticals, LLC, aKentucky limited liability company, with offices at 333 East Main Street, Suite 220, Louisville, Kentucky 40202 (“Buyer”), all right, title and interest in andto the Acquired Assets as such term is defined in the License, Commercialization and Option Agreement dated as of the date hereof by and among Buyer andSeller (the “Agreement”). Buyer hereby acknowledges that Seller is making no representation or warranty with respect to the assets conveyed hereby exceptas specifically set forth in the Agreement. Seller for itself, its successors and assigns hereby covenants and agrees that, at any time and from time to timeforthwith upon the written request of Buyer, Seller will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered,such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may reasonably be required by Buyer in order to assign,transfer, set over, convey, assure and confirm unto and vest in Buyer, its successors and assigns, title to the Acquired Assets sold, conveyed, transferred anddelivered by this Bill of Sale. This Bill of Sale is being executed and delivered by Seller as of the date set forth below pursuant to the terms of the Agreement. Dated this ____ day of March, 2017 SELLER: ACURA PHARMACEUTICALS, INC. By: Name: Title: 38  EXECUTION COPY Exhibit D ACURA PHARMACEUTICALS, INC.Patent Summary 39  ACURA PHARMACEUTICALS, INC.Patent Summary as of 2/8/2017 ISSUED OR NOTICE OF ALLOWANCE Case Patent File/Issue/Expire Primary Claim(s) Status5014-00 US 8,901,113 F-9/29/2010I-12/2/2014E-2/27/2032 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Granted5014-01US 14/552,067 F-11/24/2014 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Allowed – Re-examrequested to fix typo. 5014-AU AU 2010300641 F-9/29/2010I-6/3/2016E-9/29/2030 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Granted5014-CA CA 2,775,890 F-9/29/2010I-6/21/2016E-9/29/2030 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Granted5014-EP EP 2,488,029 F-9/29/2010I-3/23/2016E-9/29/2030 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Granted and validatedin Germany (60 2010031 496.0), Spain,France, UK, Italy,5014-HK 13102020.5 F-9/29/2010I-10/14/2016E-9/29/2030 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Granted5014-IL IL 218533 F-9/29/2010E-9/29/2030 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Granted US APPLICATIONSCase App Number Filed Primary Claim(s) Status5014-PR 61/247,225 F-9/30/2009 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Expired5014-PR2 61/304,108 F-2/12/2010 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Expired5014-02US 15/426,296 F-2/7/2017 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Pending5019-PR 61/842,424 F-7/2/2014 Meth precursor+gel polymer+emulsifier+disintegrant+surfactant Expired5019-US 14/322,596 F-7/2/2014 Meth precursor+gel polymer+ glycerol monostearate+disintegrant+sodiumlauryl sulfate Published5020-PR 62/009,600 F-6/9/2014 PSE+Triglyceride+HPC+PEO+Disintegrant Expired5020-US 14/734,364 F-6/9/2015 PSE+Triglyceride+HPC+PEO+Disintegrant Published 40  WO APPLICATIONSCase App Number Filed Primary Claim(s) Status5014-WO PCT/US2010/050723 F-9/29/2010E-3/30/2012 Drug+PEO+HPC+Disintegrant Expired5019-WO PCT/US2014/045256 F-7/2/2014E-2/3/2016 Meth precursor+gel polymer+emulsifier+disintegrant+surfactant Expired5020-WO PCT/US2015/034786 F-6/9/2015 PSE+Triglyceride+HPC+PEO+Disintegrant Expired AU APPLICATIONSCase App Number Filed Primary Claim(s) Status5014-01AU 2016204065 F-9/29/2010 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Pending5019AU 2014284333 F-7/2/2014 Meth precursor+gel polymer+emulsifier+disintegrant+surfactant Pending5020AU 2015274936 F-6/9/2015 PSE+Triglyceride+HPC+PEO+Disintegrant Pending CA APPLICATIONSCase App Number Filed Primary Claim(s) Status5019CA 2,916,973 F-7/2/2014 Meth precursor+gel polymer+emulsifier+disintegrant+surfactant Pending5020CA 2,951,563 F-6/9/2015 PSE+Triglyceride+HPC+PEO+Disintegrant Pending CN APPLICATIONSCase App Number Filed Primary Claim(s) Status5019CN 201480037082.5 F-7/2/2014 Meth precursor+gel polymer+ glycerol monostearate+disintegrant+sodiumlauryl sulfate Published5020CN 201580030318.7 F-6/9/2015 PSE+Triglyceride+HPC+PEO+Disintegrant Pending 41  EU APPLICATIONSCase App Number Filed Primary Claim(s) Status5014-01EP 16161681.8 F-9/29/2010 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Published5019EP 14820721.0 F-7/2/2014 Meth precursor+gel polymer+emulsifier+disintegrant+surfactant Published5020EP 15807096.1 F-6/9/2015 PSE+Triglyceride+HPC+PEO+Disintegrant Pending IL APPLICATIONSCase App Number Filed Primary Claim(s) Status5014-IL 245734 F-9/29/2010 Drug+PEO+HPC+Disintegrant (incl ethylcellulose) Pending5019IL 242880 F-7/2/2014 Meth precursor+gel polymer+emulsifier+disintegrant+surfactant Pending NZ APPLICATIONSCase App Number Filed Primary Claim(s) Status5019NZ 716482 F-7/2/2014 Meth precursor+gel polymer+ glycerol monostearate+disintegrant+sodiumlauryl sulfate Pending ISR APPLICATIONSCase App Number Filed Primary Claim(s) Status 42  Exhibit E Form of Royalty Report. ROYALTY REPORTQuarter Reported _________________ Licensee Name: Property: Territory: Address: Contact: Phone Number: Fax Number: CURRENT QUARTER Less: TerritoryorTerritories GrossSales Deductions/Returns* Discounts Net Sales RoyaltyRate % Royalty $- $- $- $- % $- $- $- $- $- % $- $- $- $- $- % $- Total $- $- $- $- % $- 43  Exhibit F ASSET ALLOCATION Item Quantity (if applicable) Amount Comment Assignment of Contracts $0 Transferred Advertising Materials $0 Equipment – See Schedule 3.2.1(b) for breakdown $102,743 Amount from NBV Columns onSchedule 3.2.1(b) Raw Materials Inventory – See Schedule 3.2.1(a) for breakdown $97,475 Consists of Raw Materials fromSchedule 3.2.1(a) Finished Materials Inventory - See Schedule 3.2.1(a) forbreakdown $109,159 Consists of Finished Goods fromSchedule 3.2.1(a) Prepaid Inventory (Half of Mikart PO 1050) $115,643 Total $425,020 44  Exhibit G JOINT PRESS RELEASE Acura Pharmaceuticals and MainPointe Pharmaceuticals Announce Deal for Nexafed® Products Expands Commercialization of Acura’s Methamphetamine-Resistant Pseudoephedrine Products PALATINE, IL, March XX, 2017: Acura Pharmaceuticals, Inc. (OTCQB: ACUR) and MainPointe Pharmaceuticals, LLC today announced that they haveentered into a License Agreement (the "Agreement") to have MainPointe exclusively market NEXAFED and NEXAFED Sinus in the US and Canada. Thepseudoephedrine-containing NEXAFED brand products utilize Acura’s IMPEDE® Technology which disrupts the extraction and conversion of thepseudoephedrine into the illicit drug, methamphetamine. MainPointe will assume all manufacturing and commercialization activities from Acura. “MainPointe is an emerging OTC pharmaceutical company that brings added leverage to our NEXAFED business”, commented Bob Jones, Acura’s Presidentand CEO. “With additional products in distribution and new customer contacts, MainPointe is well positioned to expand on the over 15,000 US pharmacydistribution achieved by Acura over the past several years”. “Conversion of pseudoephedrine products into methamphetamine remains an acute problem in many communities”, said John Schutte, MainPointe’sPresident. “The NEXAFED products have proven to be a success in curbing this costly problem and we look forward to driving this business forward”. The Agreement provided for an upfront cash payment of $2.5 million to Acura. Acura is eligible to receive a royalty 7.5% based on commercial sales byMainPointe. About Acura PharmaceuticalsAcura Pharmaceuticals is a specialty pharmaceutical company engaged in the research, development and commercialization of product candidates intendedto address medication abuse and misuse, utilizing its proprietary LIMITX™, AVERSION® and IMPEDE® Technologies. LIMITX contains ingredients thatare intended to reduce or limit the rate or extent of opioid release when multiple tablets are ingested. AVERSION contains polymers that cause the drug to gelwhen dissolved; it also contains compounds that irritate the nasal passages if the product is snorted. IMPEDE is designed to disrupt the processing ofpseudoephedrine from tablets into methamphetamine. OXAYDO® (oxycodone HCl immediate-release tablets) which incorporates the AVERSION Technology, is FDA approved and marketed in the U.S. by ourpartner Egalet Corporation. 45  NEXAFED® and NEXAFED® Sinus, which are pseudoephedrine containing products, utilize the IMPEDE Technology. Forward-Looking StatementsCertain statements in this press release 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 orachievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.Forward-looking statements may include, but are not limited to: ·our ability to fund or obtain funding for our continuing operations;·the expected results of clinical studies relating to LTX-04 or any successor product candidate, the date by which such study results will be availableand whether LTX-04 or any successor product candidate will ultimately receive FDA approval;·whether LIMITX will retard the release of opioid active ingredients as dose levels increase;·whether we will be able to reformulate LTX-04 or any successor product candidate to provide an efficacious level of drug when one or two tablets aretaken;·whether we will be able to reformulate LTX-04 or any successor product candidate to improve its abuse deterrent performance;·whether the extent to which products formulated with the LIMITX technology deter abuse will be determined sufficient by the FDA to supportapproval or labelling describing 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;·our and our licensee’s 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;·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 IVpatent infringement litigation;·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 clinicalstudies 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 FDAapproval of our product candidates;·changes in regulatory requirements; 46  ·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 topromote the features of our abuse discouraging technologies; and·whether Oxaydo or our Aversion and LIMITX product candidates will ultimately deter abuse in commercial settings and whether our Nexafed productsand Impede technology product candidates will disrupt the processing of pseudoephedrine into methamphetamine. In some cases, you can identify forward- looking statements by terms such as "may," “will”, "should," "could," "would," "expects," "plans," "anticipates,""believes," "estimates," “indicates”, "projects," predicts," "potential" and similar expressions intended to identify forward-looking statements. Thesestatements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given theseuncertainties, you should not place undue reliance on these forward-looking statements. We discuss many of these risks in greater detail in our filings withthe Securities and Exchange Commission. Contact:for Acura Investor Relationsinvestors@acurapharm.com847-705-7709 47  Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Acura Pharmaceuticals, Inc.Palatine, Illinois We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-221645, 333-213017, 333-195612, 333-151653,333-151620, 333-133172, 333-123615, 333-63288, and 33-98396), and on Form S-3 (Nos. 333-210039 and 333-146416) of Acura Pharmaceuticals, Inc. ofour report dated June 7, 2018, relating to the consolidated financial statements, which appear in this Form 10-K. Our report contains an explanatoryparagraph regarding the Company’s ability to continue as a going concern. /s/ BDO USA, LLP Chicago, IllinoisJune 7, 2018  EXHIBIT 31.1 CERTIFICATION I, Robert B. Jones, certify that: 1.I have reviewed this Annual Report on Form 10-K of Acura Pharmaceuticals, Inc.; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (its fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control overfinancial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: June 7, 2018 /s/ Robert B. Jones Robert B. Jones President and Chief Executive Officer  EXHIBIT 31.2 CERTIFICATION I, Peter A. Clemens, certify that: 1.I have reviewed this Annual Report on Form 10-K of Acura Pharmaceuticals, Inc.; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) )for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (its fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control overfinancial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: June 7, 2018 /s/ Peter A. Clemens Peter A. Clemens Senior Vice President and Chief Financial Officer  EXHIBIT 32 CERTIFICATION OF CHIEF EXECUTIVE OFFICERANDCHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert B. Jones, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report onForm 10-K of Acura Pharmaceuticals, Inc. for the fiscal year ended December 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934 and that information contained in such Annual Report of Form 10-K fairly presents, in all material respects, the financialcondition Acura Pharmaceuticals, Inc. as of the dates presented and results of operations of Acura Pharmaceuticals, Inc. for the periods presented. June 7, 2018By:/s/ Robert B. Jones Robert B. Jones President and Chief Executive Officer I, Peter A. Clemens, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report onForm 10-K of Acura Pharmaceuticals, Inc. for the fiscal year ended December 31, 2017 fully complies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934 and that information contained in such Annual Report of Form 10-K fairly presents, in all material respects, the financialcondition Acura Pharmaceuticals, Inc. as of the dates presented and results of operations of Acura Pharmaceuticals, Inc. for the periods presented. June 7, 2018By:/s/ Peter A. Clemens Peter A. Clemens Senior Vice President and Chief Financial Officer 

Continue reading text version or see original annual report in PDF format above