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Item 1.01
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Entry into a Material Definitive Agreement
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On October 5, 2018 we received a $1.8 million
loan from John Schutte, which combined with earlier loans, total $4.0 million in loans from Mr. Schutte. In connection with the
$1.8 million loan, we issued a promissory note, or the Schutte Note, in that principal amount to him. The Schutte Note bears interest
at prime plus 2%, and matures on January 2, 2020, at which time all principal and interest is due. These terms are the same as
the terms for the $2.2 million loans previously received from Mr. Schutte which are also represented by promissory notes (together
with the Schutte Note, the “Schutte Notes”). Events of Default under the Schutte Notes include bankruptcy events and
failure to pay interest and principal when due. We used $1.5 million of the loan proceeds to retire in full our senior secured
debt with Oxford Finance. The Schutte Notes provide that they must be secured after our obligations to Oxford Finance have been
satisfied in full under the Loan Agreement. As a result of the termination of the Loan Agreement, we are now required to secure
payment of all of the Schutte Notes with a security interest in our assets and the Schutte Notes now become our senior secured
debt. The Schutte Notes may be prepaid in whole or part at any time.
The funding provided by Mr. Schutte enables
us to continue operations into November 2018 while the Company remains focused on licensing its lead asset LTX-03, by which time
we hope to have entered into a licensing agreement or raised additional funds.
There can be no assurance we will be successful
entering into such a licensing arrangement or receive additional financing. In the absence of closing a licensing agreement upon
acceptable terms or securing additional funding, Acura will be required to scale back or terminate operations and/or seek protection
under applicable bankruptcy laws. This could result in a complete loss of shareholder value in the company. Even assuming Acura
is successful in securing additional sources of financing to fund continued operations, there can be no assurance that the proceeds
of such financing will be sufficient to fund operations until such time, if at all, that Acura generates sufficient revenue from
its products and product candidates to sustain and grow its operation.
Mr. Schutte is our largest shareholder
and directly owns approximately 47.5% of our common stock (after giving effect to the exercise of warrants he holds). Mr. Schutte
also controls MainPointe Pharmaceuticals LLC, or MainPointe. In March 2017, we granted MainPointe an exclusive license to our Impede®
technology to commercialize our Nexafed® and Nexafed® Sinus Pressure + Pain Products in the United States and Canada. MainPointe
also has options to expand the territory and for other covered products for additional sums.
Certain statements in this Report constitute
“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking
statements.
Forward-looking statements
may include, but are not limited to:
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our ability to fund or obtain funding
for our continuing operations, including the development of our products utilizing our Limitx and Impede technologies;
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the expected results of clinical studies
relating to LTX-03, a Limitx hydrocodone bitartrate and acetaminophen combination product, or any successor product candidate,
the date by which such studies will be complete and the results will be available and whether LTX-03 will ultimately receive FDA
approval;
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whether Limitx will retard the release
of opioid active ingredients as dose levels increase;
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whether the extent to which products formulated
with the Limitx technology deter abuse will be determined sufficient by the FDA to support approval or labelling describing abuse
deterrent features;
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whether our Limitx technology can be expanded
into extended-release formulations;
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our and our licensee’s ability to
successfully launch and commercialize our products and technologies, including Oxaydo® Tablets and our Nexafed® products;
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the pricing and price discounting that
may be offered by Egalet for Oxaydo;
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the results of our development of our
Limitx Technology;
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our or our licensees’ ability to
obtain necessary regulatory approvals and commercialize products utilizing our technologies;
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the market acceptance of, timing of commercial
launch and competitive environment for any of our products;
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expectations regarding potential market
share for our products;
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our ability to develop and enter into
additional license agreements for our product candidates using our technologies;
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our exposure to product liability and
other lawsuits in connection with the commercialization of our products;
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the increasing cost of insurance and the
availability of product liability insurance coverage;
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the ability to avoid infringement of patents,
trademarks and other proprietary rights of third parties;
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the ability of our patents to protect
our products from generic competition and our ability to protect and enforce our patent rights in any paragraph IV patent infringement
litigation;
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whether the FDA will agree with or accept
the results of our studies for our product candidates;
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the ability to fulfill the FDA requirements
for approving our product candidates for commercial manufacturing and distribution in the United States, including, without limitation,
the adequacy of the results of the laboratory and clinical studies completed to date, the results of laboratory and clinical studies
we may complete in the future to support FDA approval of our product candidates and the sufficiency of our development process
to meet over-the-counter (“OTC”) Monograph standards, as applicable;
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the adequacy of the development program
for our product candidates, including whether additional clinical studies will be required to support FDA approval of our product
candidates;
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changes in regulatory requirements;
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adverse safety findings relating to our
commercialized products or product candidates in development;
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whether the FDA will agree with our analysis
of our clinical and laboratory studies;
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whether further studies of our product
candidates will be required to support FDA approval;
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whether or when we are able to obtain
FDA approval of labeling for our product candidates for the proposed indications and whether we will be able to promote the features
of our abuse discouraging technologies; and
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whether Oxaydo or our Aversion and Limitx
product candidates will ultimately deter abuse in commercial settings and whether our Nexafed products and Impede technology product
candidates will disrupt the processing of pseudoephedrine into methamphetamine.
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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. These statements reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking
statements. We discuss many of these risks in greater detail in our filings with the
Securities and Exchange Commission
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A press release regarding our restructured
debt obligations is attached as Exhibit 99.1.
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Item 1.02
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Termination of a Material Definitive Agreement
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On September 14, 2018 we filed a Report
on Form 8-K with the SEC and reported that we failed to make a required monthly installment payment of approximately $260,000 due
on or about September 4, 2018, under the Loan and Security Agreement (the “Loan Agreement”) dated December 27, 2013,
as previously amended, with Oxford Finance LLC (“Oxford” or the “Lender”), as collateral agent and as lender,.
Such failure constituted an Event of Default under the Loan Agreement and gave Oxford the right to accelerate payment of all principal
and interest due thereunder, which was approximately $1,025,000 million of principal and interest on the loan (the initial principal
amount of the loan was $10,000,000), plus a balloon interest payment of $795,000. If payment was accelerated by Oxford, a prepayment
penalty of approximately $10,200 would also be due. Such loan was secured by substantially all of Acura’s assets, including
the stock of Acura Pharmaceutical Technologies, Inc., and the occurrence of the Event of Default gives Oxford the right to foreclose
on the collateral as well as all other remedies specified in the Loan Agreement. As a result of the occurrence of the Event of
Default, the interest rate on the loan was automatically increased from 8.35% to 13.35%. The Company reported it was in discussions
with Oxford to present a plan to remedy the default and forestall acceleration although there could be no assurance that these
discussions would result in a plan satisfactory to Oxford.
On October 5, 2018 we negotiated a pay-off
of the Loan Agreement with Oxford for $1.5 million and used proceeds from the Schutte Note to pay-off the Loan Agreement. Pursuant
to the pay-off of the Loan Agreement, Oxford will release their security interest in all our existing assets, including our intellectual
property assets. Oxford retains the warrants we previously issued to them to purchase an aggregate of up to 59,560 shares of our
common stock at an exercise price equal to $2.52 per share. The warrants are exercisable for cash or by net exercise and will expire
December 27, 2020. As a result of the termination of the Loan Agreement, pursuant to the terms of the Schutte Notes we are now
required to secure payment of all of the Schutte Notes (with an aggregate principal amount of $4.0 million) with a security interest
in our assets.