A.	Description of Business and Basis of Presentation

Organization

KemPharm, Inc. (the “Company”) is a specialty pharmaceutical company focused on the discovery and development of proprietary prodrugs to treat serious medical conditions through its proprietary Ligand Activated Therapy ("LAT™") technology. The Company utilizes its proprietary LAT technology to generate improved prodrug versions of U.S. Food and Drug Administration (the "FDA") approved drugs as well as to generate prodrug versions of existing compounds that

may

have applications for new disease indications. The Company's product candidate pipeline is focused on the high need areas of attention deficit hyperactivity disorder ("ADHD") and stimulant use disorder ("SUD"). The Company's clinical product candidates for the treatment of ADHD include

KP415

and

KP484,

and the Company's preclinical product candidate for the treatment of SUD includes

KP879.

The Company was formed and incorporated in Iowa in

October 2006

and reorganized in Delaware in

May 2014.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for inter

im financial information and with the instructions to Form

-Q and Rule

of Regulation S-

Accordingly, they do

not

include all of the information and related notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying financial statements. Operating results for the

three

months ended

March 31, 2019

are

not

necessarily indicative of the results that

may

be expected for the full year ending

December 31, 2019.

This interim information should be read in conjunction with the audited financial statements included in the Company

’s Annual Report on Form

-K for the fiscal year ended

December 31, 2018,

filed with the Securities and Exchange Commission (“SEC”) on

March 1, 2019 (the "Annual Report").

Going Concern

The unaudited condensed financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has experienced recurring losses from operations and negative operating cash flows and has a stockholders' deficit, and its existing cash and cash equivalents and restricted cash are

not

sufficient to fund the Company’s operating expenses and capital expenditure requirements for at least

one

year from date these unaudited condensed financial statements are issued. Various internal and external factors will affect whether and when product candidates become approved drugs and how significant the market share of those approved products will be. The length of time and cost of developing and commercializing these product and product candidates and/or failure of them at any stage of the drug approval or commercialization process will materially affect the Company’s financial condition and future operations. The Company's ability to continue as a going concern

may

require additional financing to fund its operations. The perception of the Company's inability to continue as a going concern

may

make it more difficult to obtain financing for the continuation of operations and could result in the loss of confidence by investors, suppliers and employees. Adequate additional financing

may

not

be available to the Company on acceptable terms, or at all.

Management believes these conditions raise substantial doubt about the Company’s ability to continue as a going concern within the

twelve

months after the date these financial statements are issued. The ability to continue as a going concern is dependent upon profitable future operations, positive cash flows and additional financing. These financial statements do

not

include any adjustments that might result from the outcome of this uncertainty.

Management intends to finance operating costs over the next

twelve

months with existing cash and cash equivalents and restricted cash, as well as, additional financing through the Company's active registration statement on Form S-

covering the sale of up to

$150.0

million of the Company's common stock, preferred stock, and debt and/or warrants, if available. After the Company filed its Annual Report, in order to issue securities under this registration statement, it must rely on Instruction

I.B.6.

of Form S-

which imposes a limitation on the maximum amount of securities that the Company

may

sell pursuant to the registration statement during any

twelve

-month period. At the time it sells securities pursuant to the registration statement, the amount of securities to be sold plus the amount of any securities it has sold during the prior

twelve

months in reliance on Instruction

I.B.6.

may

not

exceed

one

third

of the aggregate market value of its outstanding common stock held by non-affiliates as of a day during the

days immediately preceding such sale, as computed in accordance with Instruction

I.B.6.

This calculation was updated immediately after the Company’s filed the Annual Report and the amount of securities the Company was then able to sell under the registration statement on Form S-

during a

-month period was approximately

$18.5

million, of which the Company filed prospectus supplements to register (i) approximately

$15.3

million for sales under the Purchase Agreement (as defined below); and (ii) approximately

$3.2

million for sales under the Second ATM Agreement (as defined below). Based on this calculation, the Company expects it will be unable to sell additional securities beyond those amounts pursuant to its effective registration statement on Form S-

for a period of

twelve

months, unless and until the market value of its outstanding common stock held by non-affiliates increases significantly. In addition, under the terms of the Purchase Agreement, stockholder approval

may

be required to access a portion of the amounts available under the Purchase Agreement. As of

March 31, 2019,

the Company has sold

1,401,271

shares of common stock for approximately

$2.7

million in gross proceeds under the Purchase Agreement and

shares of common stock under the Second ATM Agreement.

Entry into First ATM Agreement

October 2016,

the Company entered into a Common Stock Sales Agreement (the “First ATM Agreement”) with Cowen and Company, LLC (“Cowen”). The First ATM Agreement was terminated in

September

2018.

Prior to termination of the First ATM Agreement, the Company sold an aggregate of

762,338

shares of common stock under the First ATM Agreement resulting in gross proceeds to the Company of

$4.9

million. The Company paid Cowen a commission of up to

three

percent (

3.0%

) of the gross sales proceeds for such sales of common stock. Pursuant to the terms of the First ATM Agreement, specified obligations of the parties, including the Company’s indemnification obligations to Cowen, survive the termination of the First ATM Agreement.

Entry into Second ATM Agreement

September 2018,

the Company entered into a Common Stock Sales Agreement (the “Second ATM Agreement”) with RBC Capital Markets, LLC (“RBCCM”) under which the Company

may

offer and sell, from time to time, in its sole discretion, shares of common stock having an aggregate offering price of up to

$50,000,000

through RBCCM as its sales agent. The Company’s registration statement on Form S-

contemplated under the Second ATM Agreement was declared effective by the SEC on

October 17, 2016.

The registration statement on Form S-

includes a prospectus supplement covering the offering of up to

$50,000,000

of shares of common stock in accordance with the Second ATM Agreement. In

March 2019,

the Company filed an updated prospectus supplement regarding the Second ATM Agreement covering the offering of up to

$3.2

million of shares of common stock in order to be in compliance with Instruction

I.B.6

of Form S-

As of

March 31, 2019,

the Company has

not

sold any shares of common stock under the Second ATM Agreement.

RBCCM

may

sell common stock under the Second ATM Agreement by any method permitted by law deemed to be an “at the market offering” as defined in Rule

415

of the Securities Act of

1933,

as amended (the "Securities Act"), including without limitation sales made by means of ordinary brokers’ transactions on the Nasdaq Global Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company. RBCCM will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company

may

impose). The Company will pay RBCCM a commission of up to

three

percent (

3.0%

) of the gross sales proceeds of any common stock sold through RBCCM under the Second ATM Agreement, and also has provided RBCCM with customary indemnification rights.

The Company is

not

obligated to make any sales of common stock under the Second ATM Agreement. The offering of shares of common stock pursuant to the Second ATM Agreement will terminate upon the earlier of (i) the sale of all common stock subject to the Second ATM Agreement, or (ii) termination of the Second ATM Agreement in accordance with its terms.

Underwritten Public Offering

October 2018,

the Company entered into an underwriting agreement (the “Underwriting Agreement”) with RBCCM, pursuant to which, on

October 10, 2018,

the Company sold

8,333,334

shares of common stock of the Company in an underwritten public offering pursuant to the Company's registration statement on Form S-

filed with the SEC on

October 17, 2016,

and a related prospectus and prospectus supplement, filed with the SEC on

October 17, 2016

and

October 5, 2018,

respectively. The offering price to the public was

$3.00

per share. The Company’s net proceeds from the offering were approximately

$23.1

million, after deducting underwriting discounts and commissions and estimated offering expenses.

Entry into Purchase Agreement

February 2019,

the Company entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company

may

sell to Lincoln Park up to

$15.0

million of shares of common stock from time to time over the

-month term of the Purchase Agreement, and upon execution of the Purchase Agreement the Company issued an additional

120,200

shares of common stock to Lincoln Park as commitment shares in accordance with the closing conditions within the Purchase Agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park (the “Registration Rights Agreement”) pursuant to which the Company agreed to register the sale of the shares of common stock that have been and

may

be issued to Lincoln Park under the Purchase Agreement pursuant to the Company’s existing shelf registration statement on Form S-

or a new registration statement. As of

March 31, 2019,

the Company has sold

1,401,271

shares of common stock to Lincoln Park under the Purchase Agreement for approximately

$2.7

million in gross proceeds.