NOTE 4 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenue is recognized when, or as, performance obligations under terms of a contract are satisfied, which occurs when control of the promised service is transferred to a customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring services to a customer (“transaction price”). The Company will then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when, or as, the performance obligation is satisfied. When determining the transaction price of the contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. None of the Company’s licenses and collaboration agreements contained a significant financing component at either September 30, 2020 or December 31, 2019.

The Company’s existing license and collaboration agreements may contain a single performance obligation or may contain multiple performance obligations. Those which contain multiple performance obligations will require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised services underlying each performance obligation.

The Company’s existing license and collaboration agreements contain customer options for the license of additional products and territories. We determined the option’s standalone selling prices based on the option product’s potential market size in the option territory as compared to the currently licensed product and U.S. territory. Some of our existing license and collaboration agreements contain a license to the technology as well as licenses to tradenames or trademarks. The Company determined that the licenses to the tradenames or trademarks were immaterial in context of the contract. Price adjustments are accounted for as variable consideration. Provisions for variable consideration are based on current assumptions, executed contracts, and historical data and are provided for in the period the related revenues are recorded.

Sales-based Milestones and Royalty Revenues

The commercial sales-based milestones and sales royalties earned under the license and collaboration for Oxaydo and sales royalties earned under the license for the Nexafed products, are recorded in the period of the related sales by Assertio and MainPointe. Payments of sales-based milestones are generally due within 30 days after the end of a calendar year. Payments of royalties are generally due within 45 days after the end of a calendar quarter.

License and Collaboration Agreement Revenues

The achievement of milestones under the Company’s license and collaboration agreements will be recorded as revenue during the period the milestone’s achievement becomes probable, which may result in earlier recognition as compared to the previous accounting standards. The license fee of an option product or option territory under the Company’s license and collaboration agreements will be recorded as revenue when the option is exercised and any obligations on behalf of the Company, such as to transfer know-how, has been fulfilled. The monthly license fee under the Company’s LTX-03 license and collaboration agreement will be recorded as revenue upon the fulfillment of the monthly development activities. The out-of-pocket development expenses under the license and collaboration agreements will be recorded as revenue upon the performance of the service or delivery of the material during the month.

On June 28, 2019 we entered into an agreement with AD Pharma which was amended in October 2020 for the development and license of LTX-03 (hydrocodone bitartrate with acetaminophen) immediate-release tablets utilizing Acura’s patented LIMITx™ providing a monthly license payment of $350 thousand from AD Pharma to us for a period from inception up to April 2020 at which time the payment is $200 thousand per month through July 2021. The Company provided a price adjustment to AD Pharma in September 2020 when it was probable that the monthly license payments were being reduced from $350 thousand to $200 thousand. We have subsequently received the required monthly license payments for June thru October 2020 from AD Pharma. AD Pharma will pay directly for or reimburse Acura to the extent Acura pay’s for, all out-of-pocket development expenses.

Product Sales, net of allowance

Nexafed was launched in mid-December 2012 and Nexafed Sinus Pressure + Pain was launched in February 2015. Prior to entering into the MainPointe Agreement in March 2017, we sold our Nexafed products in the United States to wholesale pharmaceutical distributors as well as directly to chain drug stores. Our Nexafed products were sold subject to the right of return usually for a period of up to twelve months after the product expiration. During the second quarter 2020, we reviewed our product sales return allowance liability and recorded a $223 thousand favorable amount to product sales as we believe sufficient time has passed where the Nexafed product is no longer subject to right of return and we estimate no additional product will be returned and therefore, we no longer maintain a sales return allowance liability.

Disaggregation of Total Revenues

The Company has two license agreements for currently marketed products containing its technologies; the Oxaydo product containing the Aversion Technology has been licensed to Assertio and the Nexafed products containing the Impede Technology which have been licensed to MainPointe. The Company has a third license agreement having a product under development, LTX-03, containing its LIMITx™ technology to AD Pharma. We have recorded $0.3 million and $2.4 million of license fees for LTX-03 during the three and nine month periods ended September 30, 2020, respectively.

On January 1, 2020, MainPointe assigned to AD Pharma, with Acura's consent, all of its right, title and interest in the MainPointe Agreement between MainPointe and Acura. All of the Company's royalty revenues are earned from these two license agreements by the licensee's sale of products in the United States.

Royalty revenues by licensee are summarized below:


	Three months Ended				Nine months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Assertio (Oxaydo)	$	11	$	171	$	72	$	269
MainPointe - related party (Nexafed)		3		1		9		16
Royalty revenues	$	14	$	172	$	81	$	285

Contract Balance and Performance Obligations

The Company had no contract assets and contract liability balances under the license and collaboration agreements at either September 30, 2020 or 2019. Contract assets may be reported in future periods under prepaid expenses or other current assets on the consolidated balance sheet. Contract liabilities may be reported in future periods consisting of deferred revenue as presented on the consolidated balance sheet.