	September 30, 2017			June 30, 2017

ASSETS
Current assets:
Cash and cash equivalents	$	19.6		$	17.7
Short-term investments		14.5			20.9
Accounts receivable, net of allowance		0.1			0.6
Prepaid and other current assets		0.3			0.7
Total current assets		34.5			39.9
Non-current assets:
Property and equipment, net		0.2			0.2
Total assets	$	34.7		$	40.1

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1.3		$	1.4
Accrued expenses		2.2			2.9
Short-term note payable		0.2			0.2
Liability related to sale of future royalties, current portion		1.5			1.4
Total current liabilities		5.2			5.9
Non-current liabilities:
Long-term note payable, net of current portion		0.1			0.1
Liability related to sale of future royalties, net of current portion		15.4			15.3
Other long-term liabilities, net of current portion		0.1			0.1
Total liabilities	20.8				21.4

Commitments and contingencies		-			-
Stockholders’ equity:
Preferred stock, $0.10 par value: 5,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.10 par value: 200,000,000 shares authorized; 38,649,237 shares issued and outstanding at September 30, 2017 and June 30, 2017		3.9			3.9
Additional paid-in capital		160.1			159.6
Accumulated other comprehensive income	19.0			19.0
Accumulated deficit		(169.1	)		(163.8	)
Total stockholders’ equity		13.9			18.7
Total liabilities and stockholders’ equity	$	34.7		$	40.1

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

September 30,2016

June 30,2016

ASSETS
Current assets:

Cash and cash equivalents
$ 45.9 $ 49.7
Short-term investments
12.4 19.3
Accounts receivable, net of allowance
0.6 0.7
Prepaid and other current assets
3.9 2.7
Total current assets
62.8 72.4
Non-current assets:

Property and equipment, net
0.3 0.3
Total assets
$ 63.1 $ 72.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable
$ 1.6 $ 3.9
Accrued expenses
5.6 3.6
Short-term note payable
0.4 0.4
Liability related to sale of future royalties, current portion
1.2 1.3
Total current liabilities
8.8 9.2
Non-current liabilities:

Long-term note payable, net of current portion
0.3 0.3
Liability related to sale of future royalties, net of current portion
17.2 16.8
Other long-term liabilities, net of current portion
0.2 0.2
Total liabilities
26.5 26.5

Commitments and contingencies
- -
Stockholders’ equity:

Preferred stock, $0.10 par value: 5,000,000 shares authorized, no shares issued and outstanding
- -
Common stock, $0.10 par value: 200,000,000 shares authorized; 38,640,487 shares issued and outstanding at September 30, 2016 and June 30, 2016
3.9 3.9
Additional paid-in capital
158.0 157.6
Accumulated other comprehensive income

19.0

19.0

Accumulated deficit
(144.3
)
(134.3
)
Total stockholders’ equity
36.6 46.2
Total liabilities and stockholders’ equity
$ 63.1 $ 72.7

Aviragen Therapeutics, Inc.

CondensedConsolidated Statements of Operations

(unaudited)
(in millions, except share and per share amounts)

	Three Months Ended September 30,
	2017			2016
Revenue:
Royalty revenue	$	-		$	0.1
Non-cash royalty revenue related to the sale of future royalties		0.1			-
Total revenue		0.1			0.1

Operating expense:
Research and development		2.8			7.6
General and administrative		2.3			2.2
Foreign exchange (gain) loss, net		-			(0.1	)
Total operating expense		5.1			9.7
Loss from operations		(5.0	)		(9.6	)
Other (expense) income:
Non-cash interest expense on liability related to sale of future royalties		(0.4	)		(0.4	)
Interest income		0.1			-
Total other (expense) income		(0.3	)		(0.4	)

Loss before tax		(5.3	)		(10.0	)
Income tax expense		-			-
Net loss	$	(5.3	)	$	(10.0	)


Basic and diluted net loss per share	$	(0.14	)	$	(0.26	)

Basic and diluted weighted-average shares outstanding		38,649,237			38,640,487

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

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Aviragen Therapeutics, Inc.

CondensedConsolidatedStatement of Stockholders’ Equity
(unaudited)
(in millions, except for share amounts)

	Common Stock									Accumulated
	Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Other Comprehensive Income		Total Stockholders’ Equity
Balances at June 30, 2017		38,649,237	$	3.9	$	159.6	$	(163.8	)	$	19.0	$	18.7
Net loss		-		-		-		(5.3	)		-		(5.3	)
Share-based compensation		-		-		0.5		-			-		0.5
Balances at September 30, 2017		38,649,237	$	3.9	$	160.1	$	(169.1	)	$	19.0	$	13.9

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

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~~Aviragen Therapeutics, Inc.~~

~~Condensed~~~~Consolidated Statements of Operations~~

~~(unaudited)~~
~~(in millions, except share and per share amounts)~~

Three Months Ended
September 30,

2016

2015

Revenue:

Royalty revenue and milestones
$ 0.1 $ 1.7
Total revenue
0.1 1.7

Operating expense:

Research and development
7.6 5.5
General and administrative
2.2 2.2
Foreign exchange (gain) loss
(0.1
)
0.7
Total operating expense
9.7 8.4
Loss from operations
(9.6
)
(6.7
)
Other (expense) income:

Non-cash interest expense on liability related to sale of future royalties
(0.4
)
-
Interest income
- 0.1
Total other (expense) income
(0.4
)
0.1

Net loss
$ (10.0
)
$ (6.6
)

Basic net loss per share
$ (0.26
)
$ (0.17
)
Diluted net loss per share
$ (0.26
)
$ (0.17
)

Basic weighted-average shares outstanding
38,640,487 38,624,227
Diluted weighted-average shares outstanding
38,640,487 38,624,227

~~The accompanying notes are an integral part of the condensed consolidated financial statements.~~

Aviragen Therapeutics, Inc.

CondensedConsolidated~~Statement~~ Statements of ~~Stockholders’ Equity~~Cash Flows

(unaudited)
(in ~~millions, except for share amounts)~~millions)

	Three Months Ended September 30,
	2017			2016


Cash flows from operating activities:
Net loss	$	(5.3	)	$	(10.0	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		0.5			0.4
Non-cash interest expense related to sale of future royalties		0.4			0.4
Non-cash royalty revenue related to sale of future royalties		(0.1	)		-

Change in operating assets and liabilities:
Accounts receivable		0.5			-
Prepaid expenses and other current assets		0.4			(1.2	)
Accounts payable and accrued expenses		(0.9	)		(0.3	)
Net cash used in operating activities		(4.5	)		(10.7	)

Cash flows from investing activities:
Purchases of short and long-term investments		(7.0	)		-
Maturity of short-term investments		13.4			6.9
Net cash provided by investing activities		6.4			6.9

Increase (decrease) in cash and cash equivalents		1.9			(3.8	)
Cash and cash equivalents at beginning of period		17.7			49.7
Cash and cash equivalents at end of period	$	19.6		$	45.9

Common Stock

Accumulated

Shares

Amount

Additional
Paid-in
Capital

Accumulated
Deficit

Other
Comprehensive
Income

Total
Stockholders’
Equity

Balances at June 30, 2016
38,640,487 $ 3.9 $ 157.6 $ (134.3
)
$ 19.0 $ 46.2
Net loss
- - - (10.0
)
- (10.0
)
Share-based compensation
- - 0.4 - - 0.4
Balances at September 30, 2016
38,640,487 $ 3.9 $ 158.0 $ (144.3
)
$ 19.0 $ 36.6

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

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Aviragen Therapeutics, Inc.

~~Condensed Consolidated Statements of Cash Flows~~

~~(unaudited)~~
~~(in millions)~~

Three Months Ended
September 30,

2016

2015

Cash flows from operating activities:

Net loss
$ (10.0
)
$ (6.6
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Share-based compensation
0.4 0.6
Non-cash interest expense related to sale of future royalties
0.4 -

Change in operating assets and liabilities:

Accounts receivables
- 9.4
Prepaid expenses and other current assets
(1.2
)
(0.2
)
Accounts payable and accrued expenses
(0.3
)
(2.3
)

Net cash (used in) provided by operating activities
(10.7
)
0.9

Cash flows from investing activities:

Purchases of short and long-term investments
- (1.2
)
Maturity of short-term investments
6.9 1.0

Net cash provided by (used in) investing activities
6.9 (0.2
)

Cash flows from financing activities:

Payment on note payable
- (0.1
)

Net cash used in financing activities
- (0.1
)

(Decrease) increase in cash and cash equivalents
(3.8
)
0.6
Cash and cash equivalents at beginning of period
49.7 44.7

Cash and cash equivalents at end of period
$ 45.9 $ 45.3

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

~~Aviragen Therapeutics, Inc.~~

Notes to the CondensedConsolidatedFinancial Statements (unaudited)
(for the quarterly period endedSeptember 30,~~, 2016)~~ 2017)

~~(1)~~1) Company Overview

~~Company Overview~~

Aviragen Therapeutics, Inc., together with its wholly owned subsidiaries (“Aviragen”, or the “Company”) is a biopharmaceutical company focused on the discovery and development of direct-acting antivirals to treat infections that have limited therapeutic options and affect a significant number of patients globally. The Company has three product candidates in active clinical development: vapendavir, an oral treatment for human rhinovirus (“HRV”) upper respiratory infections in moderate and severe asthmatics currently being evaluated in the Phase 2b SPIRITUS trial; BTA585, an oral fusion protein inhibitor in Phase 2 ~~development for the treatment and prevention of respiratory syncytial virus (“RSV”) infections; and~~clinical stage compounds: BTA074 ~~a topical~~ (teslexivir), an antiviral treatment ~~in Phase 2 development~~ for condyloma caused by human papillomavirus types 6 & 11; vapendavir, a capsid inhibitor for the prevention or treatment of rhinovirus (“RV”) upper respiratory infections; and ~~11.~~BTA585 (enzaplatovir), a fusion protein inhibitor in development for the treatment of respiratory syncytial virus infections. The Company also has a preclinical RSV non-fusion inhibitor program. The Company is incorporated in the state of Delaware and its corporate headquarters are located in Alpharetta, Georgia.

Although several of the ~~Company’s~~Company’s influenza product candidates have been successfully developed and commercialized to-date by other larger pharmaceutical companies under collaboration, license or commercialization agreements with the Company, it has not independently developed or received regulatory approval for any product candidate, and the Company does not currently have any sales, marketing or commercial capabilities. Therefore, it is possible that the Company may not successfully derive any significant product revenues from any product candidates that it is developing now, or may develop in the future. The Company expects to incur losses for the foreseeable future as it intends to support the clinical and preclinical development of its product candidates.

On October 30, 2017, the Company announced that it had entered into a definitive Agreement and Plan of Merger and Reorganization dated October 27, 2017, among the Company, Agora Merger Sub, Inc. and Vaxart, Inc. (the “Merger Agreement”) pursuant to which Vaxart., a privately-held clinical-stage company focused on developing oral recombinant vaccines from its proprietary delivery platform, would become a wholly-owned subsidiary of the Company (the “Merger”). This transaction marks the culmination of the Company’s Strategic Review process which was initiated in April. The Merger will result in a combined company focused on developing orally-delivered vaccines and therapeutics to address a variety of viral infections.

The exchange ratio in the merger agreement was determined by Vaxart assigning $60,000,000 in value to Aviragen for its financial and clinical assets, and $90,000,000 in value for its own assets. On a pro forma basis after giving effect to the number of shares of Aviragen common stock that will be issued to Vaxart security holders in the Merger and assuming no adjustments for cash balances as provided for in the Merger Agreement, current Vaxart security holders will own approximately 60% of the combined company and current Aviragen security holders will own approximately 40% of the combined company. The transaction has been approved by the boards of directors of both companies. The Merger is expected to close in the first quarter of 2018, subject to the approval of the stockholders of each company as well as other customary conditions.

Upon closing of the Merger, the name of the combined company will become Vaxart, Inc. and shares of the combined company are expected to continue trading on the NASDAQ Capital Market under the proposed ticker symbol VXRT. Wouter Latour, M.D., will serve as Chief Executive Officer of the combined company.

Prior to the completion of the proposed merger, the Company plans to continue to finance its operations with ~~(i)~~ existing cash, cash equivalents and investments, (ii) proceeds from existing or potential future royalty-bearing licenses or collaborative research and development arrangements, (iii) future equity and/or asset or debt financings, or (iv) other financing arrangements. The Company’s ability to continue to support its operations is dependent, in the near-term, upon managing its cash resources, continuing to receive royalty revenue under existing licenses, entering into future collaboration, license or commercialization agreements, the successful development of its product candidates, executing future financings and ultimately, upon the approval of its products for sale and achieving positive cash flows from operations on a consistent basis. There can be no assurance that additional capital or funds will be available on terms acceptable to the Company, if at all, that the Company will be able to enter into collaboration, license or commercialization agreements in the future, or that the Company will ever generate significant product revenue and become operationally profitable on a consistent basis.

investments.

(2)	Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. All material adjustments considered necessary for a fair presentation have been included. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). Except as disclosed herein, there has been no material change in the information disclosed in the notes to the condensed consolidated financial statements included in the ~~Company’s~~Company’s Annual Report on Form 10-K that was filed with the SEC on September ~~13, 2016.~~1, 2017.

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The unaudited interim condensed consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All inter-company transactions and balances are eliminated in consolidation.

Operating results for the three months ended September 30, ~~2016~~2017 are not necessarily indicative of those in future quarters or the annual results that may be expected for the Company’s fiscal year ending June 30, ~~2017.~~2018. For a more complete discussion of the Company’s significant accounting policies and other information, this report should be read in conjunction with the consolidated financial statements for the fiscal year ended June 30, ~~2016~~2017 included in the Company’s Annual Report on Form ~~10-K that was filed with the SEC on September 13, 2016.~~10-K.

The ~~Company’s~~Company’s significant accounting policies have not changed since June 30, ~~2016.~~

~~Aviragen Therapeutics, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements (unaudited)~~
~~(for the quarterly period ended~~~~September 30~~~~, 2016)~~2017.

~~Recent~~Recently Issued Accounting Standards

In May 2014, the FASB issued authoritative accounting guidance related to revenue from contracts with customers. This guidance is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2017. Accordingly, the Company will adopt this guidance on July 1, 2018. Companies may use either a full retrospective or a modified retrospective approach to adopt this guidance. The Company is evaluating which transition approach to use and its impact, if any, on its ~~consolidated financial statements.~~

In August 2014, the FASB issued authoritative accounting guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. This guidance is effective for annual reporting ending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted. Accordingly, the standard is effective for the Company on June 30, 2017. The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued guidance related to financial instruments - overall recognition and measurement of financial assets and financial liabilities. The guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for public companies for interim and annual periods beginning after December 15, 2017. Accordingly, the standard is effective for the Company on July 1, 2018. The Company is currently evaluating the impact that the standard will have on the consolidated financial statements.

In February 2016, the FASB issued new guidance on leases. This guidance replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures. The guidance is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The standard requires a modified retrospective approach, which includes several optional practical expedients. Accordingly, the standard is effective for the Company on July 1, 2019. The Company is currently evaluating the impact that this guidance will have on the consolidated financial statements.

In August 2016, the FASB issued new guidance on how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard is effective for the Company beginning July 1, 2018. Early adoption is permitted. We do not expect the adoption of this guidance to have a material impact on the consolidated financial statements.

(3)	Fair Value Measurements

A fair value hierarchy has been established that requires the Company to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy describes three levels of inputs that may be used to measure fair value:

	Level 1	Quoted prices in active markets for identical assets or liabilities.

	Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

	Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The following table sets forth the financial assets and liabilities that were measured at fair value on a recurring basis at September 30, ~~2016~~2017 and June 30, ~~2016,~~2017, by level within the fair value hierarchy. The assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

~~A portion of the Company’s~~The Company’s short-term investments have been classified as Level 2, which have been initially valued at the transaction price and subsequently revalued, at the end of each reporting period, utilizing a third party pricing service. The pricing service utilizes industry standard valuation models and observable market inputs to determine value that include surveying the bond dealer community, obtaining benchmark quotes, incorporating relevant trade data, and updating spreads daily. There have been no transfers of assets or liabilities between the fair value measurement classifications.

(in millions)
Quoted Pricesin
ActiveMarkets
for Identical
Assets

Significant
Other
Observable
Inputs

Significant
Unobservable
Inputs

September 30, 2016

Total

(Level 1)

(Level 2)
(Level3)
Cash equivalents
$ 9.4 $ 9.4 $ — $ —
Short-term investments available-for-sale
12.4 6.0 6.4 —
Total
$ 21.8 $ 15.4 $ 6.4 $ —

~~Aviragen Therapeutics, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements (unaudited)~~
~~(for the quarterly period ended~~~~September 30~~~~, 2016)~~

			Quoted Prices in		Significant
			Active Markets		Other		Significant
(in millions)			for Identical Assets		Observable Inputs		Unobservable Inputs
September 30, 2017	Total		(Level 1)		(Level 2)		(Level 3)
Cash equivalents	$	17.0	$	6.3	$	10.7	$	—
Short-term investments available-for-sale		14.5		—		14.5		—
Total	$	31.5	$	6.3	$	25.2	$	—

(in millions)			Quoted Pricesin ActiveMarkets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2016	Total		(Level 1)		(Level 2)		(Level3)
(in millions) June 30, 2017									Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	1.5	$	1.5	$	—	$	—	$	10.9	$	5.9	$	5.0	$	—
Short-term investments available-for-sale	19.3			10.0		9.3		—	20.9			—		20.9		—
Total	$	20.8	$	11.5	$	9.3	$	—	$	31.8	$	5.9	$	25.9	$	—

Cash equivalents consist primarily of money market funds. Short-term investments consist of ~~U.S. agency securities,~~ certificates of deposit, corporate securities, ~~and~~ U.S. Treasury securities and U.S. agency securities, classified as available-for-sale and have maturities ~~greater~~less than 365 days from the date of acquisition.

The following table shows the unrealized gains and losses and fair values for those investments as ~~ofSeptember~~of September 30, ~~2016~~2017 and June 30, ~~2016~~2017 aggregated by major security type:

(in millions)			Unrealized		Unrealized
September 30, 2017	At Cost		Gains		(Losses)		At Fair Value
Money market funds	$	6.3	$	-	$	-	$	6.3
Corporate notes		9.7		-		-		9.7
Commercial paper		15.5		-		-		15.5
Total	$	31.5	$	-	$	-	$	31.5

(in millions)

Unrealized

Unrealized

September 30, 2016

At Cost

Gains

(Losses)

At Fair Value

Money market funds
$ 9.4 $ — $ — $ 9.4
Debt securities of U.S. government agencies
2.0 — — 2.0
U.S. Treasury securities
4.0 — — 4.0
Corporate notes
2.0 — — 2.0
Certificates of deposit
4.4 — — 4.4
Total
$ 21.8 $ — $ — $ 21.8

Table of Contents

(in millions)			Unrealized		Unrealized							Unrealized		Unrealized
June 30, 2016	At Cost		Gains		(Losses)		At Fair Value
June 30, 2017									At Cost			Gains		(Losses)		At Fair Value
Money market funds	$	1.5	$	—	$	—	$	1.5	$	5.9		$	—	$	—	$	5.9
Debt securities of U.S. government agencies		2.0		—		—		2.0
U.S. Treasury securities		7.0		—		—		7.0
Commercial paper										8.5			—		—		8.5
Corporate notes		2.9		0.1		—		3.0		17.4			—		—		17.4
Certificates of deposit		7.3		—		—		7.3
Total	$	20.7	$	0.1	$	—	$	20.8	$	31.8	��	$	—	$	—	$	31.8

~~As ofSeptember 30, 2016, the Company had no investments in an unrealized gain (loss) position.~~ As of September 30, 2017 and June 30, ~~2016,~~2017, the Company had investments in an unrealized gain (loss) position below material disclosure thresholds in the table above. The Company ~~has~~ determined that the unrealized gains and losses on these investments ~~are~~were temporary in nature and ~~expects~~expected the security to mature at its stated maturity principal. All available-for-sale securities held at September 30, ~~2016,~~2017, will mature ~~within a~~in less than one ~~year period.The~~year. The fair value of cash, accounts receivable, accounts payable and accrued liabilities approximate their carrying value because of the short-term nature of these financial instruments ~~respectively, atSeptember~~at September 30, ~~2016and~~2017 and June 30, ~~2016.~~2017, respectively. The fair value of the Company’s short-term note payable, which is measured using Level 2 inputs, approximates book value, ~~atSeptember~~at September 30, ~~2016and~~2017 and June 30, ~~2016.~~

~~Aviragen Therapeutics, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements (unaudited)~~
~~(for the quarterly period ended~~~~September 30~~~~, 2016)~~2017.

(4)	Accrued and Other Current Liabilities

Accrued expenses consist of the following (in millions):

	September 30, 2016		June30, 2016		September 30, 2017		June 30, 2017

Professional fees	$	0.6	$	0.1	$	0.4	$	0.4
Salary and benefits		0.3		0.6		0.4		0.4
Research and development expenses		4.6		2.2		1.3		1.8
Other accrued expenses		0.1		0.7		0.1		0.3
Total accrued expenses and other liabilities	$	5.6	$	3.6	$	2.2	$	2.9

(5)(5)

Liabilities Related to Sale of Future Royalties

In April 2016, the Company sold certain royalty rights related to the approved product Inavir^®, sold by Daiichi Sankyo Company, Limited (“Daiichi Sankyo”) in the Japanese market, for $20 million to HealthCare Royalty Partners III, L.P. (“HCRP”). Under the relevant accounting guidance, due to a limit on the amount of royalties that HCRP can earn under the arrangement, this transaction was accounted for as a liability that will be amortized using the interest method over the life of the arrangement. The Company has no obligation to pay any amounts to HCRP other than to pass through to HCRP its share of royalties as they are received from Daiichi Sankyo. In order to record the amortization of the liability, the Company is required to estimate the total amount of future royalty payments to be received under the License Agreement with Daiichi Sankyo and the payments that will be passed through to HCRP over the life of the agreement. The sum of the pass through amounts less the net proceeds received will be recorded as non-cash interest expense over the life of the liability. Consequently, the Company imputes interest on the unamortized portion of the liability and records non-cash interest expense using an estimated effective interest rate. The Company will periodically assess the expected royalty payments, and to the extent such payments are greater or less than the initial estimate, the Company will adjust the amortization of the liability and interest rate. As a result of this accounting, even though the Company does not retain HCRP’s share of the royalties, it will continue to record non-cash revenue related to those royalties until the amount of the associated liability and related interest is fully amortized.

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The following table shows the activity within the liability account during the three months ended September 30, ~~2016:~~

in millions

Total Liability related to sale of future royalties, June 30, 2016
$ 18.1
Non-cash royalty revenue paid to HCRP
(0.1 )
Non-cash interest expense recognized
0.4
Total Liability related to sale of future royalties, September 30, 2016
$ 18.4

~~Aviragen Therapeutics, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements (unaudited)~~
~~(for the quarterly period ended~~~~September 30~~~~, 2016)~~2017:

	in millions
Total Liability related to sale of future royalties, June 30, 2017	$	16.7
Non-cash royalty revenue paid to HCRP		(0.2	)
Non-cash interest expense recognized		0.4
Total Liability related to sale of future royalties, September 30, 2017	$	16.9

(6)	Net Loss per share

Basic and diluted net loss per share has been computed based on net loss and the weighted-average number of common shares outstanding during the applicable period. For diluted net loss per share, common stock equivalents (shares of common stock issuable upon the exercise of stock options and unvested restricted stock units) are excluded from the calculation as their inclusion would be anti-dilutive. The Company has excluded all anti-dilutive share-based awards to purchase common stock in periods indicating a loss, as their effect is anti-dilutive.

The following tables set forth the computation of historical basic and diluted net ~~income (loss)~~loss per share.

	Three Months Ended September 30,						Three Months Ended September 30,
	2016			2015			2017			2016

Net income (loss) (in millions)	$	(10.0	)	$	(6.6	)
Net loss (in millions)							$	(5.3	)	$	(10.0	)
Weighted-average shares outstanding		38,640,487			38,624,227			38,649,237			38,640,487
Dilutive effect of restricted stock and stock options		-			-			-			-
Shares used to compute diluted earnings per share		38,640,487			38,624,227			38,649,237			38,640,487
Basic net income (loss) per share	$	(0.26	)	$	(0.17	)
Diluted net income (loss) income per share	$	(0.26	)	$	(0.17	)
Basic net loss per share							$	(0.14	)	$	(0.26	)
Diluted net loss per share							$	(0.14	)	$	(0.26	)
Number of anti-dilutive share-based awards excluded from computation		5,806,900			4,394,607			7,452,999			5,806,900

(7)(7)

Licenses, Royalty Collaborative and Contractual Arrangements

Royalty agreements

The Company entered into a royalty-bearing research and license agreement with GlaxoSmithKline (“GSK”) in 1990 for the development and commercialization of zanamivir, a neuraminidase inhibitor ~~(“NI”)~~ marketed by GSK as ~~Relenza®~~Relenza^® to treat influenza. Under the terms of the agreement, the Company licensed zanamivir to GSK on an exclusive, worldwide ~~basis and is entitled to receive royalty payments of 7% of GSK's annual net sales of Relenza~~^® ~~in the U.S., Europe, Japan and certain other countries as well as 10% of GSK's annual net sales of Relenza~~^® ~~in Australia, New Zealand, South Africa and Indonesia.~~basis. Most of the Company’s Relenza^® patents have expired and the only substantial remaining intellectual property related to the Relenza^® patent portfolio is scheduled to expire in July 2019 in Japan. ~~In the U.S., the Company has a pending~~Until that patent ~~application, No. 08/737,141, relating to inhalation treatment of influenza with Relenza~~^®. In October 2016, the United States Court of Appeals for the Federal Circuit Decision Board upheld the United States Patent Office’s rejection of claims in the patent application. The Company is working with its partner GSK to evaluate possible next steps in the prosecution of this patent application. However, based on the most recent unsuccessful appeal, the Company believes it is unlikely that the U.S. patent claims will ever be issued and thatexpires, the Company will ~~not~~ receive ~~any further royalties~~a 7% royalty on ~~U.S.~~GSK’s annual net sales of ~~the product.~~Relenza^® in Japan.

The Company also generates royalty revenue from the sale of Inavir^® (laninamivir octanoate or LANI) in Japan, pursuant to a collaboration and license agreement ~~that~~and a related commercialization agreement (collectively, the ~~Company entered into~~“Inavir^® License Agreement”) with Daiichi ~~Sankyo in 2009. In September 2010,~~Sankyo. Under the Inavir^® ~~was approved for sale by the Japanese Ministry of Health and Welfare for the treatment of influenza in adults and children. Under the agreement,~~License Agreement, the Company currently receives a 4% royalty on net sales of Inavir^® in Japan and is eligible to earn sales milestone payments. Under the ~~collaboration and license agreement,~~Inavir^® License Agreement, the Company and Daiichi Sankyo have cross-licensed the world-wide rights to develop and commercialize the related intellectual property, and have agreed to share equally in any royalties, license fees, or milestone or other payments received from any third party licenses outside of Japan. ~~Patents on~~The patent relating to hydrates and the ~~composition~~crystalline form of ~~matter for~~ LANI used in Inavir^® expires in 2021 (not including extensions) in the U.S. and EU and in 2024 in Japan. In February 2015, a patent containing claims relevant to the manufacture of Inavir ^®was issued in Japan ~~generally expire~~and expires in ~~2024.~~December 2029.

Table of Contents

In April ~~22,~~ 2016, the Company entered into a Royalty Interest Acquisition Agreement (“Agreement”) with HCRP. Under the Agreement, HCRP made a $20 million cash payment to the Company in consideration for acquiring from the ~~Sellers~~Company certain royalty rights (“Royalty Rights”) related to ~~the approved product~~ Inavir^® in the Japanese market. The Royalty Rights were obtained pursuant to the collaboration and license agreements (the “License Agreement”) and a commercialization agreement that the Company entered into with Daiichi Sankyo Company, Limited.

The following tables summarize the key components of the ~~Company’s~~Company’s revenues (in millions):

Three Months Ended September 30,

2016

2015

(in millions)

Royalty revenue – Relenza^®
$ 0.1 $ 1.7
Total revenue
$ 0.1 $ 1.7

~~Aviragen Therapeutics, Inc.~~

~~Notes to the Condensed Consolidated Financial Statements (unaudited)~~
~~(for the quarterly period ended~~~~September 30~~~~, 2016)~~

	Three Months Ended September 30,
	2017		2016
	(in millions)
Royalty revenue - Relenza^®	$	-	$	0.1
Non-cash royalty revenue related to the sale of future royalties		0.1		-
Total revenue	$	0.1	$	0.1

Collaborative and contract arrangements

In July 2016, the Company entered into an exclusive, worldwide license for RSV replication inhibitors intellectual property with Georgia State University Research Foundation (“GSURF”) in exchange for an upfront fee, future milestone payments and royalties on future net sales of any products that utilize the underlying RSV intellectual property. The Company has an obligation to make a minimum payment of $10,000 to GSURF annually until the license agreement expires or is terminated. The Company also entered into a two year sponsored research agreement with GSURF for annual sponsored research payments.

In connection with the Company’s BTA585 clinical trial, a Clinical Research Organization (“CRO”), engaged by the Company to provide certain services for this trial, notified the Company of its intent to explore additional compensation in an amount up to $1.6 million, due to a previous delay in the trial. The Company is currently reviewing the facts of the notice and due to the early stages of the matter described above, the Company cannot reasonably estimate the possible loss or range of loss, if any, that may result from these matters. As such, the Company is not currently able to estimate the impact of the potential additional expense on its financial position or results of operations.

(8)(8)

~~Share-based Compensation~~Subsequent Events

~~For the three month periods ended September~~On October 30, ~~2016 and 2015,~~2017, the Company ~~recorded share-based compensation expense related~~announced that it had entered into the Merger Agreement pursuant to ~~grants~~which Vaxart., a privately-held clinical-stage company focused on developing oral recombinant vaccines from equity incentive plans of $0.4 million and $0.6 million, respectively. No income tax benefit was recognized in the statements of operations and no share-based compensation expense was capitalized as part of any assets for the three month periods ended September 30, 2016 and 2015.

~~Stock Options~~

~~The fair value of each stock option award was estimated at~~ its ~~respective date of grant using the Black-Scholes method with the following assumptions:~~

Three Months Ended
September 30,

2016

2015

Weighted-average risk-free interest rate
1.10 % 1.50 %
Dividend yield
— —
Expected weighted-average volatility
.76 .75
Expected weighted-average life of options (years)
6.0 4.0
Weighted-average fair value of options granted
$ 0.87 $ 1.35

~~The risk-free rate interest rate is based on the expected life~~proprietary delivery platform, would become a wholly-owned subsidiary of the ~~option and~~Company. This transaction marks the corresponding U.S. Treasury bond, which in most cases is the U.S. five year Treasury bond. The expected term of stock options granted is derived from actual and expected option behavior and represents the period of time that options granted are expected to be outstanding. The Company uses historical data to estimate option exercise patterns and future employee terminations to determine expected life and forfeitures. Expected volatility is based on the historical volatilityculmination of the Company’s ~~publicly traded common stock.~~

~~Aviragen Therapeutics, Inc.~~

~~Notes~~Strategic Review process which was initiated in April. The Merger will result in a combined company focused on developing orally-delivered vaccines and therapeutics to ~~the Condensed Consolidated Financial Statements (unaudited)~~
~~(for the quarterly period ended~~~~September 30~~~~, 2016)~~address a variety of viral infections.

~~A summary~~

Table of ~~the Company’s outstanding stock option activity for the three months ended September 30, 2016 is as follows:~~

Number of
Stock Options

Weighted Average
Exercise Price
Per Option

Weighted-Average
Remaining Contractual
Term

Aggregate Intrinsic
Value($000)

(In Years)

Outstanding at June 30, 2016
4,751,423 $ 4.07 -
Granted
1,310,000 1.33
Exercised
— —
Forfeited or expired
(254,523
)
2.59
Outstanding at September 30, 2016
5,806,900 $ 3.52 7.4 $ -

The total intrinsic value of stock options exercised during the three month period ended September 30, 2016 was zero, and no cash proceeds were received by the Company. Further, no actual tax benefits were realized, as the Company currently records a full valuation allowance for all tax benefits due to uncertainties with respect to its ability to generate sufficient taxable income in the future.

~~The following tables summarize information relating to outstanding and exercisable options as of September 30, 2016:~~

September 30, 2016

Outstanding
WeightedAverage
Exercisable
Exercise Prices
Number of
Stock Options

Remaining
Contractual Life

Weighted Average
Exercise Price

Number of
Stock Options

Weighted Average
Exercise Price

(In Years)

$ 1.30 — 1.40 1,514,167 9.82 $ 1.34 9,167 $ 1.37
$ 1.50 — 2.45 1,617,547 8.02 2.26 491,460 2.37
$ 2.47 — 4.07 2,274,000 5.79 3.29 1,587,290 3.61
$ 4.15 — 39.60 401,186 4.89 18.08 308,686 22.02
5,806,900 7.40 $ 3.52 2,396,603 5.72

~~Restricted Stock Units and Market Stock Units (MSUs).~~~~A summary of the Company’s outstanding restricted stock and market stock unit (MSU) activity for the three months ended September 30, 2016 is as follows:~~

Shares

Weighted
Average
Grant Date
Fair Value

Balance at June 30, 2016
49,206 $ 4.00
Awarded
- -
Released
- -
Forfeited
(4,375
)
4.00
Balance at September 30, 2016
44,831 $ 4.00

As of September 30, 2016 there was $2.9 million of unrecognized share-based compensation expense related to all unvested share-based awards. Unrecognized stock-based compensation expense for equity awards will be adjusted for future changes in estimated forfeitures. This balance is expected to be recognized over a weighted-average period of approximately 2.1 years.

Contents

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In most cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “forecast,” “potential,” “likely” or “possible”, as well as the negative of such expressions, and similar expressions intended to identify forward-looking statements. These forward-looking statements include, without limitation, statements relating to:

●

our ~~anticipated timing~~expectations as to ~~report top line-data from our Phase2b SPIRITUS clinical trial~~when enrollment will be completed and top-line safety and efficacy data for ~~vapendavir;~~BTA074 (teslexivir), are expected;

●

~~our anticipated timing to report top line-data from our Phase 2a challenge study for BTA585;~~

●

~~our anticipated timing to fully enroll and report top line-data from our Phase 2 clinical trial for BTA074;~~

●

~~our anticipated timing of filing our clinical hold complete response to the Food and Drug Administration for BTA585;~~

●

~~our preclinical respiratory syncytial virus (“RSV”) non-fusion inhibitor that may complement BTA585;~~

●

~~our anticipation that royalty revenue from the net sales of Relenza~~^® ~~may decrease in fiscal 2017 due to the expiration of the composition of matter patents for Relenza~~^® ~~in the multiple countries and the outcome of the pending patent application related to Relenza in the U.S.;~~

●

our anticipation that we will generally incur net losses from operations in the future due to our intention to continue to support the preclinical and clinical development of our product candidates;

●

our future financing requirements, the factors that may influence the timing and amount of those requirements and our ability to fund them;

●

the number of months that our current cash, cash equivalents, investments and anticipated future proceeds from existing royalty-bearing licenses ~~and other existing license and collaboration agreements~~ will allow us to operate; and

●

~~our plan to continue to finance our operations with our existing cash, cash equivalents~~the expected post-Merger share ownership split between Vaxart and ~~proceeds from existing or potential future royalty-bearing licenses, or collaborative research~~Aviragen stockholders and ~~development arrangements, or through future equity and/or debt financings or other financing vehicles.~~anticipated timing of the closing of the Merger.

Various important factors could cause actual results, performance, events or achievements to materially differ from those expressed or implied by forward-looking statements, includingthe U.S. Food and Drug Administration (“FDA”) or a similar regulatory body in another country, a data safety monitoring board, or an institutional review board delaying, limiting, suspending or terminating any of the Company’s clinical development programs at any time for a lack of safety,efficacy,tolerability, anti-viral activity, commercial viability, regulatory or manufacturing issues, or any other reason whatsoever; the Company's ability to secure, manage and retain qualified third-party clinical research, preclinical research, data management and contract manufacturing organizations upon which it relies to assist in the design, development, implementation and execution of the clinical and preclinical development of all its product candidates; and these third-party organizations fulfilling their contractual obligations on a timely and satisfactory basis;the safety or efficacy data from planned or ongoing future preclinical and clinical studies of any of its product candidates not supporting the clinical development of that product candidate; the successful enrollment of the requisite number of study participants on a timely basis; the Company’s ability to comply with applicable government regulations in various countries and regions in which we are conducting, or expect to conduct, clinical trials; the Company’s ability to retain and recruit sufficient staff, including key ~~execute~~executive management and employees, to manage our business; the Company’s ability to maintain, protect or defend its proprietary rights from unauthorized use by others, or not infringe on the intellectual property rights of others; ourability to successfully manage our expenses, operating results and financial position in line with our plans and expectations; the condition of the financial equity and debt markets and our ability to raise sufficient funding in such markets; changes in the general economic business or competitive conditions in the industry or with respect to our product candidates; potential employee resignations on short notice; provisions in certificate of incorporation, bylaws and laws of Delaware containing provisions that could delay or discourage a change in control of the Company; the Company’s obtaining the requisite stockholder approval and other conditions to the Merger being satisfied; and other cautionary statements contained elsewhere in this Quarterly Report on ~~Form10-Q~~Form10-Q and in the Company’s Annual Report on Form 10-K for the year ended June 30, ~~2016,~~2017, as filed with the U.S. Securities and Exchange Commission on September ~~13, 2016.~~1, 2017.

There may be events in the future that we are unable to predict accurately, or over which we have no control. You should completely read this Form 10-Q and the documents that we reference herein that have been filed or incorporated by reference as exhibits and with the understanding that our actual future results may be materially different from what we expect. Our business, financial condition, results of operations, and prospects may change. We may not update these forward-looking statements, even though our situation may change in the future, unless we have an obligation under the federal securities laws to update and disclose material developments related to previously disclosed information.We qualify all of the information presented in this Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.

Table of Contents

Aviragen is a registered trademark of Aviragen Therapeutics Inc., Relenza^®is a registered trademark of GlaxoSmithKline plc, and Inavir^®is a registered trademark of Daiichi Sankyo Company, Ltd.

References to “we,” “us,” and “our” refer to Aviragen Therapeutics, Inc. and its subsidiaries.

The following is a discussion and analysis of the major factors contributing to our results of operations for the three months ended September 30 ~~2016,~~, 2017, and our financial condition at that date, and should be read in conjunction withthe financial statements and the notes thereto included inPart I,Item 1 of this Quarterly Report on Form 10-Q.

Company Overview

We are focused on the discovery and development of direct-acting antivirals to treat infections that have limited therapeutic options and affect a significant number of patients globally. ~~We have~~The Company has three product candidates in active clinical development: vapendavir, an oral treatment for human rhinovirus (“HRV”) upper respiratory infections in moderate and severe asthmatics currently being evaluated in the Phase 2b SPIRITUS trial; BTA585, an oral fusion protein (F-protein) inhibitor in Phase 2 ~~development for the treatment and prevention of respiratory syncytial virus (“RSV”) infections; and~~clinical stage compounds: BTA074 ~~a topical~~(teslexivir), an antiviral treatment ~~in Phase 2 development~~ for condyloma caused by human papillomavirus types 6 & 11; vapendavir, a capsid inhibitor for the prevention or treatment of rhinovirus (“RV”) upper respiratory infections; and ~~11. We also have preclinical RSV non-fusion~~BTA585 (enzaplatovir), a fusion protein inhibitor ~~program that we believe complements our F-protein inhibitor BTA585.~~in development for the treatment of respiratory syncytial virus infections.

Although several of our influenza product candidates have been successfully developed and commercialized ~~to-date~~to date by other larger pharmaceutical companies under license, collaboration or commercialization agreements with us, we have not independently developed or received regulatory approval for any product candidate, and we do not currently have any sales, marketing or commercial capabilities. Therefore, it is possible that we may not derive any significant product revenues from any product candidates that we are developing now, or may develop in the future. We expect to incur losses for the foreseeable future as we intend to support the clinical and preclinical development of our product candidates.

~~We plan~~On October 30, 2017, the Company announced that it had entered into the Merger Agreement pursuant to ~~continue~~which Vaxart., a privately-held clinical-stage company focused on developing oral recombinant vaccines from its proprietary delivery platform, would become a wholly-owned subsidiary of the Company. This transaction marks the culmination of the Company’s Strategic Review process which was initiated in April. The Merger will result in a combined company focused on developing orally-delivered vaccines and therapeutics to finance our operations with (i) our existing cash, cash equivalents, and investments (ii) proceeds from existing or potential future royalty-bearing licenses, collaborative research and development arrangements, (iii) future equity and/or formsaddress a variety of ~~asset and debt financing or (iv) other financing arrangements. Our ability to continue to support our operations is dependent,~~viral infections.

The exchange ratio in the ~~near-term, upon our successful management~~merger agreement was determined by Vaxart assigning $60,000,000 in value to Aviragen for its financial and clinical assets, and $90,000,000 in value for its own assets. On a pro forma basis after giving effect to the number of ~~our~~shares of Aviragen common stock that will be issued to Vaxart security holders in the Merger and assuming no adjustments for cash ~~resources, our continuing~~balances as provided for in the Merger Agreement, current Vaxart security holders will own approximately 60% of the combined company and current Aviragen security holders will own approximately 40% of the combined company. The transaction has been approved by the boards of directors of both companies. The Merger is expected to ~~receive royalty revenue under our existing licenses, our ability~~close in the first quarter of 2018, subject to enter into future collaboration, license or commercialization agreements, the successful development of our product candidates, our ability to execute future financings, if needed, and ultimately, upon the approval of ~~our products for sale and achievement~~the stockholders of positive cash flows from operations on a consistent basis. There can be no assurance that additional capital or funds will be available on terms acceptable to us, if at all, or that we will be able to enter into collaboration, license or commercialization agreements in the future, or that we will ever generate significant product revenue and become operationally profitable on a consistent basis.each company as well as other customary conditions.

Table of Contents

~~Recent Corporate Highlights~~

~~BTA585 Phase 1a and 1b Data Presented at ID Week 2016.~~In October 2016, pharmacokinetic (PK) and safety data from a Phase 1 single ascending dose and multiple ascending dose study of BTA585 was presented in New Orleans at ID Week 2016. The clinical data demonstrated that in 85 healthy volunteers BTA585 was generally well tolerated, there was a low incidence of adverse events with the most common being headache, nausea, and chromaturia. BTA585 plasma Cmax was rapidly achieved at approximately one hour following oral dosing, exposure was dose-proportional, there was no accumulation of BTA585 over the duration of dosing and the half-life (T1/2) was approximately five to six hours. Additionally, dosing of BTA585 with a high fat meal did not adversely affect the PK.

~~Hosted K~~eyO~~pinion~~L~~eader (KOL)~~ ~~Meeting on HRV Infections.~~In October 2016, the Company hosted a KOL breakfast focused on the significant burden of HRV infections in at-risk patient populations. The meeting featured keynote presentations from Dr. Frederick G. Hayden, Professor Emeritus of Infectious Diseases and International Health at the University of Virginia, School of Medicine, and Dr. Sebastian L. Johnston, Professor of Respiratory Medicine and Allergy at Imperial College London and Director of the Wellcome Trust Centre for Respiratory Infection.

~~Recent Clinical Highlights~~

~~Announced Completion of Enrollment in the SPIRITUS Phase 2b Trial of Vapendavir for the Treatment of Human Rhinovirus (HRV) Infections.~~In November 2016, we announced the completion of patient enrollment in the Phase 2b trial of vapendavir for the treatment of HRV infections in moderate and severe asthmatics. Given the 35 day follow up for each patient, the last patient is expected to complete the study in early December. Top-line data are expected approximately eight weeks after the last patient completes the study. The primary endpoint of SPIRITUS is the change from baseline to study day 14 measured by an asthma control questionnaire (ACQ)-6 total score. The secondary endpoints are focused on safety and tolerability, and lung function assessments.

~~Announced Completion of Enrollment in the Phase 2a RSV Challenge Study of BTA585.~~ In November 2016, we announced the completion of patient enrollment in the final cohort (600 mg bid) in the Phase 2a trial in healthy volunteers intranasally challenged with RSV. Top-line data from this trial is expected around the end of the year.

~~Reported Data from the Vapendavir Phase 1 Bioavailability Trial.~~In August 2016, we completed a single-center, open-label, three-period comparative bioavailability study in healthy volunteers to assess the comparability of the vapendavir phosphate salt capsule, and two new formulations of vapendavir free base in the forms of an oral suspension and tablet. Results showed that the bioavailability of the oral suspension and tablet formulations were comparable to the capsule form of vapendavir. The oral suspension formulation is intended to enable the conduct of future pediatric trials, and the tablet formulation will allow an increase in manufacturing scale appropriate for Phase 3 trials and commercial development.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~Management’s~~Management’s Discussion and Analysis of Results of Operations discusses our financial results, which (except to the extent described in the Notes thereto) have been presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

We base our estimates and judgments on historical experience, current economic and industry conditions, and various other factors that we believe to be reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no changes to our critical accounting policies that require significant judgment and estimates as discussed in detail in our ~~2016~~2017 annual 10-K filing:

~~Use of estimates~~

~~Revenue recognition~~

~~Accrued expenses~~

~~Share-based compensation~~

~~Recent Accounting Standards~~

~~In August 2014,~~For a description of recent accounting policies and the FASB issued authoritative accounting guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be basedimpact on ~~relevant conditions and events that are known and reasonably knowable at the date that the~~our financial statements, ~~are issued. In doing so, the amendments should reduce diversity~~refer to Note 2 in the timing and content of footnote disclosures. This guidance is effective for annual reporting ending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted. Accordingly, the standard is effective for the Company on June 30, 2017. The adoption of this guidance is not expected to have a material impact on the Company’scondensed consolidated financial statements.

Results of Operations for the Three months ended September 30 ~~2016~~, 2017and September 30 ~~2015~~, 2016

Summary. For the three months ended September 30, ~~2016,~~2017, we reported a net loss of ~~$10.0~~$5.3 million, as compared to a net loss of ~~$6.6~~$10.0 million in the same period of the prior fiscal year. Basic and diluted net loss per share was ~~$0.26~~$0.14 for the three month period ended September 30, ~~2016,~~2017, as compared to a basic and diluted net loss per share of ~~$0.17~~$0.26 in the same period of ~~2015.~~2016. The following commentary provides details underlying changes from last year in the major line items of our statement of operations:

Revenue. Revenue ~~decreased to~~remained the same at $0.1 million for the three ~~months~~month periods ended September 30, ~~2016 from $1.7 million for the same period in 2015.~~2017 and 2016. The following table summarizes the key components of our revenue for the three months ended September 30, ~~2016~~2017 and ~~2015:~~2016:

Three Months Ended September 30,

(in millions)

2016

2015

Royalty revenue – Relenza^®
$ 0.1 $ 1.7
– Inavir^®
- -
Total revenue
$ 0.1 $ 1.7

	Three Months Ended September 30,
	2017		2016
	(in millions)
Royalty revenue - Relenza^®	$	-	$	0.1
Non-cash royalty revenue related to the sale of future royalties		0.1		-
Total revenue	$	0.1	$	0.1

~~Royalty revenues decreased primarily due to a reduction in Relenza~~^® government stockpiling orders compared to the prior year comparable period. In October 2016, the United States Court of Appeals for the Federal Circuit Decision Board upheld the United States Patent Office’s rejection of claims in U.S. Patent Application 08/737,141 relating to the method of prevention and treatment of influenza by inhalation of zanamivir (Relenza^®~~). The Company is working with our partner GlaxoSmithKline to evaluate possible next steps in the prosecution of this patent application.~~

Research and Development Expense. Research and development expense ~~increased~~decreased to ~~$7.6~~$2.8 million for the three months ended September 30, ~~2016~~2017 from ~~$5.5~~$7.6 million for the same period in ~~2015.~~2016. The following table summarizes the components of our research and development expense for the three months ended September 30, ~~2016~~2017 and ~~2015.~~2016.

	Three Months Ended September 30,				Three Months Ended September 30,
	(in millions)				(in millions)
	2016		2015		2017		2016

Direct preclinical, clinical and product development expenses	$	6.4	$	4.5	$	1.9	$	6.4
Salaries, benefits and share-based compensation expenses		1.1		1.0		0.8		1.1
Depreciation and facility related expenses		0.1		-		0.1		0.1
Total research and development expense	$	7.6	$	5.5	$	2.8	$	7.6

Table of Contents

Direct preclinical, clinical and product development expense ~~increased~~decreased largely due to reduced clinical trial activity and manufacturing costs, associated with the Phase 2a challenge trial for BTA585 that resumed enrollment and dosing in July 2016, continuing costs for the Phase 2b SPIRITUS clinical trial for vapendavir, and chemistry expenses for BTA074 for theas two of our three Phase 2 clinical ~~trial that was initiated~~trials came to a close in ~~February 2016.~~the end of the prior fiscal year. Salaries, benefits and share-based compensation ~~increased compared to prior year~~expenses decrease due to ~~additional personnel hired to support~~a reduction in headcount during the ~~clinical and regulatory operations. Depreciation and facility related expenses increased slightly primarily due to the addition~~fourth quarter of ~~office space in January 2016.~~fiscal 2017.

General and Administrative Expense. General and administrative expense ~~was $2.2~~increased to $2.3 million for the three months ended September 30, ~~2016 and~~2017 from $2.2 million for the same period in ~~2015.~~2016. The following table summarizes the components of our general and administrative expense for the three months ended September 30, ~~2016~~2017 and ~~2015.~~2016.

	Three Months Ended September 30,				Three Months Ended September 30,
	(in millions)				(in millions)
	2016		2015		2017		2016

Salaries, benefits and share-based compensation expenses	$	1.0	$	1.4	$	1.1	$	1.0
Professional and legal fees expenses		0.4		0.2		0.6		0.4
Other expenses		0.8		0.6		0.6		0.8
Total general and administrative expense	$	2.2	$	2.2	$	2.3	$	2.2

Salaries, benefits and share-based compensation decreased primarily due to a reduction in administrative personnel. Other expenses increased due to timing of audit and tax fees incurred compared to the same period in the prior year.

Foreign Exchange Loss (Gain),net. The impact of foreign exchange changed from a ~~loss of $0.7 million in September 30, 2015 to a~~ gain of $0.1 million ~~for~~in the three months ended September 30, ~~2016.~~2016 to no gain or loss for the three months ended September 30, 2017. The ~~positive~~negative impact on foreign exchange on our statement of operations was due to fluctuations in foreign currency exchange rates versus the U.S. dollar, largely related to the British ~~Pound.~~Pound and Australian dollar. The vast majority of our cash holdings are held in the U.S. dollar. We re-measure all of our foreign assets and liabilities at the period-end exchange rate and the net effect of these translation adjustments is shown as a foreign currency loss or gain.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended September 30, ~~2016,~~2017, cash and cash equivalents ~~decreased~~increased by ~~$3.8~~$1.9 million. This ~~decrease~~increase was primarily the result of the maturities of our ~~operating activities, offset in part by the maturity of short term~~short-term investments.

Net cash used by operating activities was ~~$10.7~~$4.5 million for the three months ended September 30, ~~2016,~~2017, which reflected our net loss during the period of ~~$10.0~~$5.3 million, ~~in addition to the net increase in operating assets of $1.2 million and~~a net decrease in operating liabilities of ~~$0.3~~$0.9 million, ~~which was~~ partially offset by net non-cash adjustments of $0.8 million and a net decrease in operating assets of $0.9 million. Non-cash adjustments consist of $0.4 million in non-cash ~~charges.~~interest expense and $0.5 million in share-based compensation expense, partially offset by $0.1 million in non-cash royalty income.

Our net loss resulted largely from our funding of research and development activities including conducting clinical and preclinical studies, manufacturing and formulation of our product candidates, as well as ongoing general and administrative expenses. The net ~~change~~changes in operating assets and liabilities primarily reflects a ~~$1.2~~$0.9 million ~~increase~~decrease in accounts payable and accrued expense due to reduced clinical trial activity, offset by a $0.4 million decrease in prepaid ~~expenses.~~expenses, also due to reduced clinical trial activity and a $0.5 million decrease in receivables, which is largely related to royalty income.

Net cash provided by investing activities during the three months ended September 30, ~~2016~~2017 consisted of the maturity of ~~$6.9~~$13.4 million of investments, partially offset by the purchase of $7.0 million of investments.

At September 30, ~~2016,~~2017, our cash, cash equivalents and investments totaled ~~$58.3~~$34.1 million. Our cash and cash equivalents are currently held in the form of short-term deposits with large U.S. banks. Our short-term investments consist primarily of ~~U.S. treasury securities, U.S. government agency securities, certificates of deposit and~~ highly-rated corporate securities.

~~Our future funding requirements are difficult to determine and will depend on a number of factors, including:~~

●

~~the development timelines and plans for our product candidates, including any changes to those timelines, plans or our strategy;~~

●

~~the variability, timing and costs associated with conducting clinical trials for our product candidates, the rate of enrollment in such clinical trials, and the results of these clinical trials;~~

●

~~the variability, timing and costs associated with conducting preclinical studies, and the results of these studies;~~

●

~~the cost of scaling up, formulating and manufacturing preclinical and clinical trial materials to evaluate our product candidates;~~

●

~~whether we receive regulatory approval to advance or begin the clinical development of our product candidates in a timely manner, if at all;~~

●

~~the cost and time to obtain regulatory approvals required to advance the development of our product candidates;~~

●

~~the scope and size of our research and development efforts;~~

●

~~the variability of future royalty revenue we may receive from existing royalty-bearing license agreements;~~

●

~~the size and cost of the general and administrative function we need to manage our operations, including the infrastructure to support being a publicly-traded company; and~~

●

~~the cost of filing, prosecuting, and enforcing patent and other intellectual property claims.~~

Based on our current strategy and operating plan, and considering the potential costs associated with advancing the preclinical and clinical development of our product candidates, we believe that our existing cash, cash equivalents and investments of approximately ~~$58.3~~$34.1 million ~~as well as our accounts receivable~~ as of September 30, ~~2016,~~2017, along with the anticipated proceeds from existing royalty-bearing licenses will enable us to operate for a period of at least 12 ~~months.~~months from the date of this report.

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We have an ATM facility in place, which may allow us to quickly access the equity capital markets if we think it is prudent to do so and if market conditions allow. However, we currently do not have any commitments for future funding, nor do we anticipate that we will generate significant revenue, aside from revenue from existing royalty-bearing arrangements. ~~Therefore, in order to meet our anticipated liquidity needs beyond 12 months to support~~

On October 30, 2017, the ~~development of our product candidates, or possibly sooner in~~ Company announced that it had entered into the event we enter into other transactions or revise our strategy or development plans, we may need to raise or secure additional capital. If we do, we would expect to do so primarily through the sale of additional common stock or other equity securities, as well as through proceeds from future licensing agreements, strategic collaborations, forms of asset or debt financing, or any other financing arrangement. Funds from these sources may not be available to us on acceptable terms, if at all, and our failure to raise such funds could have a material adverse impact on our future business strategy and plans, financial condition and results of operations. If adequate funds are not available to us on acceptable terms in the future, we may be required to delay, reduce the scope of, or eliminate one or more, if not all, of our research and development programs, or delay or curtail preclinical studies and clinical trials, or reduce our internal cost structure. If additional capital is not available to us on acceptable terms, we may need to obtain funds through license agreements, or collaborative or partner arrangementsMerger Agreement pursuant to which weVaxart, a privately-held clinical-stage company focused on developing oral recombinant vaccines from its proprietary delivery platform, would become a wholly-owned subsidiary of the Company. This transaction marks the culmination of the Company’s Strategic Review process which was initiated in April. The Merger will likely relinquish rights to certain product candidates that we might otherwise choose to develop or commercialize independently, or be forced to enter into such arrangements earlier than we would prefer, which would likely result in ~~less favorable transaction terms. Additional equity financings may be dilutive~~a combined company focused on developing orally-delivered vaccines and therapeutics to ~~holders~~address a variety of ~~our common stock, and debt financing, if available, may involve significant payment obligations and restrictive covenants that restrict how we operate our business.~~viral infections.

Contractual and Commercial Commitments

There have been no material changes from the information included in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2016.~~ 2017.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined in Item 303(a)(4) (ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended.

ITEM 3: Quantitative and Qualitative Disclosures about Market Risk

There has been no material change in our assessment of sensitivity to market risk since our presentation set forth in Item 7A “Quantitative and Qualitative Disclosures about Market Risk” in the our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2016.~~2017.

ITEM~~ITEM~~ 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended September 30, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM~~ITEM~~ 1. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition or results of operations.

ITEM 1A. RISK FACTORS

~~There have been no material changes from~~Risks Related to Investment in our Business

Any investment in our business involves a high degree of risk. Before making an investment decision, you should carefully consider the ~~risk factors disclosed~~information we include in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and accompanying notes, and the additional information in the ~~“Risk Factors” section of~~other reports we file with the Securities and Exchange Commission along with the risks described in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2016.~~2017. These risks may result in material harm to our business and our financial condition and results of operations. In this event, the market price of our common stock may decline and you could lose part or all of your investment.

Risks Related to Our Pending Merger

Because the lack of a public market for Vaxart shares makes it difficult to evaluate the fairness of the Merger, the stockholders of Vaxart may receive consideration in the Merger that is less than the fair market value of the Vaxart shares and/or we may pay more than the fair market value of the Vaxart shares.

The outstanding capital stock of Vaxart is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Vaxart. Because the percentage of our equity to be issued to Vaxart securityholders was determined based on our negotiations with Vaxart, it is possible that the value of our common stock to be issued to Vaxart securityholders will be less than the fair market value of Vaxart, or we may pay more than the aggregate fair market value for Vaxart.

There is no assurance that the proposed Merger between us and Vaxart will be completed in a timely manner or at all. If the Merger with Vaxart is not consummated, our business could suffer materially and our stock price could decline.

The consummation of the proposed Merger between us and Vaxart is subject to a number of closing conditions, including the approval by our stockholders of the issuance of our shares in the Merger and other customary closing conditions. If the conditions are not satisfied or waived, the Merger will not occur or will be delayed.

If the proposed Merger between us and Vaxart is not consummated, we may be subject to a number of material risks, and our business and stock price could be adversely affected, as follows:

• we have incurred and expect to continue to incur significant expenses related to the proposed Merger with Vaxart even if the Merger is not consummated;

• we could be obligated to pay Vaxart up to a $1.95 million termination fee under certain circumstances pursuant to the Merger Agreement;

• the market price of our common stock may decline to the extent that the current market price reflects a market assumption that the proposed Merger will be completed; and

• we may not be able to pursue an alternate merger transaction if the proposed Merger with Vaxart is not completed.

The market price of our common stock following the Merger may decline as a result of the Merger.

The market price of our common stock may decline as a result of the Merger for a number of reasons including if:

• investors react negatively to the prospects of the combined organization’s business and prospects from the Merger;

• the effect of the Merger on the combined organization’s business and prospects is not consistent with the expectations of financial or industry analysts; or

• the combined organization does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts.

During the pendency of the Merger, we may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect our business.

Covenants in the Merger Agreement impede the ability of Aviragen to make acquisitions, subject to certain exceptions relating to fiduciaries duties, or complete other transactions that are not in the ordinary course of business, pending completion of the Merger. As a result, if the Merger is not completed, we may be at a disadvantage to our competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third party, subject to, in the case of Aviragen, certain exceptions. These restrictions apply even if such transactions could be favorable to our stockholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Aviragen and Vaxart from soliciting competing proposals or cooperating with persons making unsolicited acquisition proposals, except in the case of Aviragen if Aviragen’s board of directors determines in good faith, after consultation with our outside financial advisors and outside legal counsel, that an unsolicited alternative competing proposal is or is reasonably likely to result in a superior competing proposal and that failure to enter into discussions with the proponent of the proposal is reasonably likely to be inconsistent with the board’s fiduciary duties. In addition, even if our board of directors desires to terminate the Merger Agreement to accept a superior competing proposal, the Merger Agreement requires that we must first hold a meeting of our stockholders before we can terminate the Merger Agreement. If we or Vaxart terminate the Merger Agreement under certain circumstances, including terminating because of a decision of our board of directors to recommend a superior proposal, we would be required to pay a termination fee of $1.95 million to Vaxart. This termination fee and the other requirements of the Merger Agreement described above may discourage third parties from submitting competing proposals to us or our stockholders, and may cause our board of directors to be less inclined to recommend an alternative proposal.

Some Aviragen executive officers and directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.

Certain officers and directors of Aviragen participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the combined organization and continued indemnification, severance payments upon termination of employment and acceleration of stock options.

Failure to obtain stockholder approval for the proposed reverse stock split may result in our stock being delisted from the NASDAQ Capital Market.

We are required pursuant to the terms of the Merger Agreement to submit to our stockholders a proposal to approve an amendment to our certificate of incorporation to authorize our board of directors to effect a reverse stock split of all outstanding shares of our common stock. If our proposal for implementing a reverse stock split is not approved by our stockholders, we will likely not be able to regain compliance with the minimum bid price requirement of the NASDAQ Stock Market LLC (“Nasdaq”) and as a consequence, Nasdaq will provide us written notification that our common stock will be delisted. Upon receipt of such delisting letter, we may appeal the determination to the Hearings Panel (the “Panel”). At the hearing, we will be required to provide a plan to regain compliance. If the Panel decides to continue with delisting of the Company, the Panel’s decision may be appealed to the Nasdaq Listing and Hearing Review Council but such appeal will not stay the delisting process. There can be no assurance that, if the Company does appeal any delisting determination, any such appeal would be successful.

The issuance of shares of our common stock to Vaxart stockholders in the pending Merger will dilute substantially the voting power of our current stockholders.

If the pending Merger is completed, each outstanding share of Vaxart common stock will be converted into the right to receive a number of shares of our common stock equal to the exchange ratio determined pursuant to the Merger Agreement. Immediately following the Merger, our equityholders are expected to own approximately 40% of the outstanding capital stock of the combined company on a fully diluted basis, and the Vaxart equityholders are expected to own approximately 60% of the outstanding capital stock of the combined company on a fully diluted basis. Accordingly, the issuance of shares of our common stock to Vaxart stockholders in the merger will reduce significantly the relative voting power of each share of our common stock held by our current equityholders. Consequently, our equityholders as a group will have significantly less influence over the management and policies of the combined company after the Merger than prior to the Merger.

The pendency of the Merger could have an adverse effect on the trading price of our common stock and our business, financial condition, results of operations or business prospects.

While there have been no significant adverse effects to date, the pendency of the Merger could disrupt our businesses in the following ways, including:

•the attention of our management may be directed toward completion of the Merger and related matters and may be diverted from the day-to-day business operations; and

•third parties may seek to terminate or renegotiate their relationships with us as a result of the Merger, whether pursuant to the terms of their existing agreements with us or otherwise.

Should they occur, any of these matters could adversely affect the trading price of our common stock or harm our financial condition, results of operations or business prospects.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM~~ITEM~~ 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

ITEM~~ITEM 4. MINE SAFETY DISCLOSURE~~

~~Not applicable.~~

~~ITEM~~ 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits to this report are listed in the Exhibit Index, which is incorporated into this Item 6 by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Aviragen Therapeutics, Inc.

Date: November ~~8, 2016~~7, 2017	By:	/s/ Joseph M. Patti
		Joseph M. Patti
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Mark P. Colonnese
		Mark P. Colonnese
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

		Filed	Incorporation by Reference
Exhibit Number	Exhibit Title	with ~~this~~ this Form 10-Q	Form	File No.	Date Filed

31.1*	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended	X

31.2*	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended	X

32.1*	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350	X

101	The following financial information from the Aviragen Therapeutics, Inc. Quarterly Report on Form 10-Q for the period ended September 30, ~~2016~~2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations for the Three months, (iii) the Condensed Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements	X

* This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of Aviragen Therapeutics, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.


Large accelerated filer		☐	Accelerated filer	~~Accelerated filer~~		☒☐

Non-accelerated filer	☐	Smaller reporting company	☒

Emerging growth company	☐		~~Smaller reporting company~~		☐


PART I: FINANCIAL INFORMATION

Item ~~Item~~1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, ~~2016 (unaudited)~~2017 and June 30, ~~2016~~ 2017 (unaudited)	3

Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2017 and 2016 ~~and 2015~~ (unaudited)	4

Condensed Consolidated Statement of ~~Stockholders’~~Stockholders’ Equity for the Three Months ended September 30, ~~2016~~2017 (unaudited)	5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2017 and 2016 ~~and 2015~~ (unaudited)	6

Notes to the Condensed Consolidated Financial Statements (unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1413

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2017

Item 4. Controls and Procedures	2017


PART II: OTHER INFORMATION	2118

Item ~~1A. Risk Factors~~1. Legal Proceedings	2118
Item 1A. Risk Factors	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2118
Item 3. Defaults Upon Senior Securities	2118
Item 4. Mine Safety Disclosure	2119
Item 5. Other Information	2119
Item 6. Exhibits	2119
Signatures	2220

Exhibit Index	2321

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

	September 30,2016			June 30,2016

ASSETS
Current assets:
Cash and cash equivalents	$	45.9		$	49.7
Short-term investments		12.4			19.3
Accounts receivable, net of allowance		0.6			0.7
Prepaid and other current assets		3.9			2.7
Total current assets		62.8			72.4
Non-current assets:
Property and equipment, net		0.3			0.3
Total assets	$	63.1		$	72.7

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1.6		$	3.9
Accrued expenses		5.6			3.6
Short-term note payable		0.4			0.4
Liability related to sale of future royalties, current portion		1.2			1.3
Total current liabilities		8.8			9.2
Non-current liabilities:
Long-term note payable, net of current portion		0.3			0.3
Liability related to sale of future royalties, net of current portion		17.2			16.8
Other long-term liabilities, net of current portion		0.2			0.2
Total liabilities		26.5			26.5

Commitments and contingencies		-			-
Stockholders’ equity:
Preferred stock, $0.10 par value: 5,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.10 par value: 200,000,000 shares authorized; 38,640,487 shares issued and outstanding at September 30, 2016 and June 30, 2016		3.9			3.9
Additional paid-in capital		158.0			157.6
Accumulated other comprehensive income	19.0			19.0
Accumulated deficit		(144.3	)		(134.3	)
Total stockholders’ equity		36.6			46.2
Total liabilities and stockholders’ equity	$	63.1		$	72.7

	Common Stock									Accumulated
	Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Other Comprehensive Income		Total Stockholders’ Equity
Balances at June 30, 2016		38,640,487	$	3.9	$	157.6	$	(134.3	)	$	19.0	$	46.2
Net loss		-		-		-		(10.0	)		-		(10.0	)
Share-based compensation		-		-		0.4		-			-		0.4
Balances at September 30, 2016		38,640,487	$	3.9	$	158.0	$	(144.3	)	$	19.0	$	36.6

(in millions)			Quoted Pricesin ActiveMarkets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
September 30, 2016	Total		(Level 1)		(Level 2)		(Level3)
Cash equivalents	$	9.4	$	9.4	$	—	$	—
Short-term investments available-for-sale		12.4		6.0		6.4		—
Total	$	21.8	$	15.4	$	6.4	$	—

	in millions
Total Liability related to sale of future royalties, June 30, 2016	$	18.1
Non-cash royalty revenue paid to HCRP		(0.1	)
Non-cash interest expense recognized		0.4
Total Liability related to sale of future royalties, September 30, 2016	$	18.4

	Number of Stock Options			Weighted Average Exercise Price Per Option		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value($000)
						(In Years)
Outstanding at June 30, 2016		4,751,423		$	4.07				-
Granted		1,310,000			1.33
Exercised		—			—
Forfeited or expired		(254,523	)		2.59
Outstanding at September 30, 2016		5,806,900		$	3.52		7.4	$	-

				September 30, 2016
				Outstanding WeightedAverage							Exercisable
Exercise Prices				Number of Stock Options		Remaining Contractual Life		Weighted Average Exercise Price		Number of Stock Options		Weighted Average Exercise Price
						(In Years)
$	1.30	—	1.40		1,514,167		9.82	$	1.34		9,167	$	1.37
$	1.50	—	2.45		1,617,547		8.02		2.26		491,460		2.37
$	2.47	—	4.07		2,274,000		5.79		3.29		1,587,290		3.61
$	4.15	—	39.60		401,186		4.89		18.08		308,686		22.02
					5,806,900		7.40	$	3.52		2,396,603		5.72

	Shares			Weighted Average Grant Date Fair Value
Balance at June 30, 2016		49,206		$	4.00
Awarded		-			-
Released		-			-
Forfeited		(4,375	)		4.00
Balance at September 30, 2016		44,831		$	4.00

	•	Use of estimates
	•	Revenue recognition
	•	Accrued expenses
	•	Share-based compensation