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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: Ended December 31, 2020 or2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                to

Commission File No. 001-38247

AYTU BIOSCIENCE,BIOPHARMA, INC.

(www.aytubio.com)

​ Delaware 47-0883144 (State or other jurisdiction of incorporation or organization) ​ (IRS Employer Identification No.) ​ 373 Inverness Parkway, Suite 206 Englewood, Colorado80112 Englewood, Colorado 80112 (Address of principal executive offices, including zip code) (720) (720) 437-6580 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: ​ ​ ​ ​ ​ ​ Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share ​ AYTU ​ The NASDAQ Stock Market LLC ​ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ ​ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ ​ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒     Emerging growth company ☐ ​ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 per share AYTU The NASDAQ Stock Market LLC As of February 1, 2021,7, 2022, there were 17,882,89330,318,168 shares of Common Stockthe registrant’s common stock outstanding. ​ ​ ​ 1 Table of Contents AYTU BIOSCIENCE,BIOPHARMA, INC. AND SUBSIDIARIES FOR THE QUARTER ENDED DECEMBER December 31, 20202021 INDEX PART I—I—FINANCIAL INFORMATION ​ Page Item 1. Consolidated Financial Statements Condensed Consolidated Balance Sheets as of December 31, 20192021 (unaudited) and June 30, 2020 (audited)2021 4 Condensed Consolidated Statements of Operations for the three and six-monthssix months ended December 31, 2020 (unaudited)2021 and December 31, 2019 (unaudited)2020 65 Condensed Consolidated Statement of Stockholders’ Equity for the year-to-date interim periodsthree and six months ended December 31, 2020 (unaudited)2021 and December 31, 2019 (unaudited)2020 76 Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2020 (unaudited)2021 and the six months ended December 31, 2019 (unaudited)2020 87 Notes to Condensed Consolidated Financial Statements (unaudited) 108 ​ ​ Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations 2733   Item 3. Quantitative and Qualitative Disclosures About Market Risk 3147   Item 4. Controls and Procedures 3147   PART II—II—OTHER INFORMATION ​ Item 1. Legal Proceedings 3248   Item 1A. Risk Factors 3348   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 3348   Item 3. Defaults Upon Senior Securities 3348   Item 4. Mine Safety Disclosures 3348   ItemItem 5. Other Information 3348   Item 6. Exhibits 3449   SIGNATURES 50 ​ ​ ​ ​ 2 2 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our anticipated future clinical and regulatory events, future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. Forward looking statements are generally written in the future tense and/or are preceded by words such as “may,” “will,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” or similar words, or the negatives of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, without limitation: the planned expanded commercialization of our products and the potential future commercialization of our product candidates,candidates; our planned product candidate development strategy; our anticipated future cash position; our plan to acquire additional assets; our anticipated future growth rates; anticipated sales increases; anticipated net revenue increases; amounts of certain future expenses and costs of goods sold; anticipated increases to operating expenses, research and development expenses, and selling, general, and administrative expenses; and future events under our current and potential future collaborations. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including without limitation the risks described in “Risk Factors” in Part II Item 1A of our most recent Annual Report on Form 10- K, and in the reports we file with the Securities and Exchange Commission. These risks are not exhaustive. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements should not be relied upon as predictions of future events. We can provide no assurance that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. We assume no obligation to update or supplement forward-looking statements, except as may be required under applicable law. This Quarterly Report on Form 10-Q includesrefers to trademarks, such as Adzenys, Aytu, Karbinal®, Natesto®, Poly-Vi-Flor®, Tuzistra®,Aytu BioPharma, Apeaz, Cotempla, Diabasens, FlutiCare, Innovus Pharma, Neos, OmepraCare, Poly-Vi-Flor, Regoxidine, Tri-Vi-Flor, Tuzistra, Urivarx, Zestra, and ZolpiMist®, and the recently acquired consumer health products such as DiabaSens®, FlutiCare®, UriVarx® and Vesele®, as well as Beyond Human-®, a specialty marketing platform,ZolpiMist which are protected under applicable intellectual property laws and we ownare our property or have the rights to.property of our subsidiaries. This Form 10-Q also contains trademarks, service marks, copyrights and trade names of other companies which are the property of their respective owners. Solely for convenience, our trademarks and trade namestradenames referred to in this Quarterly Report on Form 10-Q may appear without the ® or TM™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and trade names.tradenames. ​ 3 3 Table of Contents AYTU BIOPHARMA, INC. AYTU BIOSCIENCE, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except shares and per-share) ​ Condensed Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ (Unaudited) December 31,  ​ June 30,  ​      2021      2021 Assets ​ ​ ​ ​ ​ ​ Current assets ​ ​         ​    Cash and cash equivalents ​ $ 35,277 ​ $ 49,649 Restricted cash ​   — ​   252 Accounts receivable, net ​   22,989 ​   28,176 Inventory, net ​   16,558 ​   16,339 Prepaid expenses ​   11,298 ​   9,780 Other current assets ​   1,418 ​   1,038 Total current assets ​   87,540 ​   105,234 Property and equipment, net ​   4,294 ​   5,140 Operating lease right-of-use asset ​   3,845 ​   3,563 Intangible assets, net ​ ​ 81,339 ​ ​ 85,464 Goodwill ​   46,349 ​   65,802 Other non-current assets ​ ​ 457 ​ ​ 465 Total non-current assets ​   136,284 ​   160,434 Total assets ​ $ 223,824 ​ $ 265,668 ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ ​ Current liabilities ​ ​         ​    Accounts payable and other ​ $ 15,604 ​ $ 19,255 Accrued liabilities ​   50,685 ​   51,295 Accrued compensation ​   5,041 ​   5,939 Short-term line of credit ​ ​ 7,209 ​ ​ 7,934 Current portion of debt ​   16,343 ​   16,668 Current portion of operating lease liabilities ​   1,173 ​   940 Current portion of fixed payment arrangements ​   3,310 ​   3,134 Current portion of CVR liabilities ​   — ​   218 Current portion of contingent consideration ​   1,206 ​   4,055 Total current liabilities ​   100,571 ​   109,438 Debt, net of current portion ​ ​ 129 ​ ​ 180 Operating lease liabilities, net of current portion ​   2,716 ​   2,624 Fixed payment arrangements, net of current portion ​   4,623 ​   6,324 CVR liabilities, net of current portion ​   1,392 ​   1,177 Contingent consideration, net of current portion ​ ​ 8,297 ​ ​ 8,002 Other non-current liabilities ​ ​ 560 ​ ​ 355 Total liabilities ​   118,288 ​   128,100 Commitments and contingencies (Note 12) ​      ​      Stockholders’ equity ​      ​      Preferred Stock, par value $.0001; 50,000,000 shares authorized; 0 shares issued or outstanding as of December 31, 2021 and June 30, 2021 ​   — ​   — Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding 30,010,468 and 27,490,412, respectively, as of December 31, 2021 and June 30, 2021 ​   3 ​   3 Additional paid-in capital ​   323,231 ​   315,864 Accumulated deficit ​   (217,698) ​   (178,299) Total stockholders’ equity ​   105,536 ​   137,568 Total liabilities and stockholders’ equity ​ $ 223,824 ​ $ 265,668     December 31,     June 30,       2020     2020       (Unaudited)           Assets   Current assets                 Cash and cash equivalents   $ 62,032,642     $ 48,081,715   Restricted cash     251,964       251,592   Accounts receivable, net     7,001,068       5,175,924   Inventory, net     6,571,254       9,999,441   Prepaid expenses and other     6,081,766       5,715,089   Other current assets     10,598,771       5,742,011   Total current assets     92,537,465       74,965,772   Fixed assets, net     89,663       258,516   Right-of-use asset     310,479       634,093   Licensed assets, net     15,449,281       16,586,847   Patents and tradenames, net     10,197,112       11,081,048   Product technology rights, net     20,051,666       21,186,666   Deposits     16,023       32,981   Goodwill     28,090,407       28,090,407   Total long-term assets     74,204,631       77,870,558   Total assets   $ 166,742,096     $ 152,836,330   ​ See the accompanying Notes to the Condensed Consolidated Financial Statements ​ 4 4 Table of Contents AYTU BIOSCIENCE,BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets, cont’dCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     December 31,     June 30,       2020     2020       (Unaudited)           Liabilities   Current liabilities                 Accounts payable and other   $ 7,157,208     $ 11,824,560   Accrued liabilities     8,877,715       7,849,855   Accrued compensation     2,540,353       3,117,177   Debt     41,318       982,076   Contract liability     475,680       339,336   Current lease liability     100,263       300,426   Current portion of fixed payment arrangements     1,937,476       2,340,166   Current portion of CVR liabilities     977,475       839,734   Current portion of contingent consideration     3,705,931       713,251   Total current liabilities     25,813,419       28,306,581   Long-term contingent consideration, net of current portion     12,573,916       12,874,351   Long-term lease liability, net of current portion     211,056       725,374   Long-term fixed payment arrangements, net of current portion     9,945,554       11,171,491   Long-term CVR liabilities, net of current portion     5,494,112       4,731,866   Other long-term liabilities     11,371       11,371   Total liabilities     54,049,428       57,821,034   Commitments and contingencies (Note 10)                 Stockholders' equity                 Preferred Stock, par value $.0001; 50,000,000 shares authorized; shares issued and outstanding 0 and 0, respectively as of December 31, 2020 and June 30, 2020, respectively.     -       -   Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding 17,882,893 and 12,583,736, respectively as of December 31, 2020 and June 30, 2020.     1,788       1,259   Additional paid-in capital     246,532,284       215,024,216   Accumulated deficit     (133,841,404 )     (120,010,179 ) Total stockholders' equity     112,692,668       95,015,296   Total liabilities and stockholders' equity   $ 166,742,096     $ 152,836,330   (In thousands, except shares and per-share) See accompanying Notes to the Condensed Consolidated Financial Statements(Unaudited) ​ 5 Table of Contents AYTU BIOSCIENCE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ December 31,  ​ December 31,  ​      2021      2020      2021 ​ 2020 Product revenue, net ​ $ 23,125 ​ $ 15,147 ​ $ 45,022 ​ $ 28,667 Cost of sales ​   10,826 ​ ​ 6,251 ​   20,267 ​ ​ 10,314 Gross profit ​ ​ 12,299 ​ ​ 8,896 ​ ​ 24,755 ​ ​ 18,353 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​   4,920 ​ ​ 286 ​   7,016 ​ ​ 469 Selling and marketing ​ ​ 9,660 ​ ​ 5,705 ​ ​ 18,957 ​ ​ 11,531 General and administrative ​ ​ 7,953 ​ ​ 5,584 ​ ​ 16,169 ​ ​ 11,004 Acquisition related costs ​ ​ — ​ ​ 1,312 ​ ​ — ​ ​ 1,312 Impairment of goodwill ​   — ​ ​ — ​   19,453 ​ ​ — Amortization of intangible assets ​   1,060 ​ ​ 1,584 ​   2,153 ​ ​ 3,169 Total operating expenses ​   23,593 ​   14,471 ​   63,748 ​   27,485 Loss from operations ​   (11,294) ​   (5,575) ​   (38,993) ​   (9,132) Other income (expense) ​      ​ ​    ​      ​      Other income/(expense), net ​   20 ​ ​ (379) ​   (20) ​ ​ (1,130) Loss from contingent consideration ​ ​ (277) ​ ​ (3,313) ​ ​ (496) ​ ​ (3,311) Loss on extinguishment of debt ​ ​ — ​ ​ (258) ​ ​ — ​ ​ (258) Total other expense ​   (257) ​   (3,950) ​   (516) ​   (4,699) Loss before income tax ​   (11,551) ​   (9,525) ​   (39,509) ​   (13,831) Income tax benefit ​   (3) ​ ​ — ​   (110) ​ ​ — Net loss ​ $ (11,548) ​ $ (9,525) ​ $ (39,399) ​ $ (13,831) Weighted average number of common shares outstanding ​ ​ 26,412,473 ​ ​ 13,281,904 ​   26,003,026 ​   12,717,180 Basic and diluted net loss per common share ​ $ (0.44) ​ $ (0.72) ​ $ (1.52) ​ $ (1.09) (unaudited)     Three Months Ended     Six Months Ended       December 31,     December 31,       2020     2019     2020     2019   Revenues                                 Product revenue, net   $ 15,147,034     $ 3,175,236     $ 28,667,280     $ 4,615,062                                     Operating expenses                                 Cost of sales     5,998,389       606,046       9,817,545       981,766   Research and development     286,572       66,675       469,437       144,695   Selling, general and administrative     12,852,614       6,516,160       24,342,983       11,662,603   Amortization of intangible assets     1,584,580       953,450       3,169,161       1,528,567   Total operating expenses     20,722,155       8,142,331       37,799,126       14,317,631   Loss from operations     (5,575,121 )     (4,967,095 )     (9,131,846 )     (9,702,569 ) Other (expense) income                                 Other (expense), net     (378,958 )     (446,958 )     (1,130,499 )     (642,344 ) Loss from change in fair value of contingent consideration     (3,313,656 )     -       (3,311,320 )     -   Gain from derecognition of contingent consideration     -       5,199,806       -       5,199,806   Gain from warrant derivative liability     -       -       -       1,830   Loss on debt exchange     (257,559 )     -       (257,559 )     -   Total other (expense) income     (3,950,173 )     4,752,848       (4,699,378 )     4,559,292   Net loss   $ (9,525,294 )   $ (214,247 )   $ (13,831,224 )   $ (5,143,277 ) Weighted average number of common shares outstanding     13,281,904       1,753,815       12,717,180       1,642,599   Basic and diluted net loss per common share   $ (0.72 )   $ (0.12 )   $ (1.09 )   $ (3.13 ) ​ See the accompanying Notes to the Condensed Consolidated Financial Statements. ​ 5 6 Table of Contents AYTU BIOSCIENCE,BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Stockholders’ EquityCONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (unaudited unless indicated otherwise)In thousands, except shares) (Unaudited)     Preferred Stock     Common Stock     Additional paid-in     Accumulated     Total Stockholders'       Shares     Amount     Shares     Amount     capital     Deficit     Equity   BALANCE - June 30, 2019 (audited)     3,594,981     $ 359       1,753,808     $ 176     $ 113,476,783     $ (106,389,500 )   $ 7,087,818   Stock-based compensation     -       -       -       -       165,171       -       165,171   Preferred stock converted in common stock     (443,833 )     (44 )     44,384       5       39       -       -   Net loss     -       -       -       -       -       (4,929,030 )     (4,929,030 ) BALANCE - September 30, 2019     3,151,148     $ 315       1,798,192     $ 181     $ 113,641,993     $ (111,318,530 )   $ 2,323,959                                                             Stock-based compensation           $ -       -     $ -     $ 162,264     $ -     $ 162,264   Issuance of Series F preferred stock from October 2019 private placement financing, net of $741,650 issuance costs     10,000       1       -       -       5,249,483       -       5,249,484   Warrants issued in connection with the private placement      -       -       -       -       4,008,866       -       4,008,866   Issuance of Series G preferred stock due to acquisition of the Cerecor portfolio of pediatrics therapeutics     9,805,845       981                       5,558,933               5,559,914   Preferred stock converted in common stock     (2,751,148 )     (275 )     275,115       28       247       -       -   Net loss             -       -       -       -       (214,247 )   $ (214,247 ) BALANCE - December 30, 2019     10,215,845     $ 1,022       2,073,307     $ 209     $ 128,621,786     $ (111,532,777 )   $ 17,090,240   ​     Preferred Stock     Common Stock     Additional paid-in     Accumulated     Total Stockholders'       Shares     Amount     Shares     Amount     capital     Deficit     Equity   BALANCE - June 30, 2020 (audited)     -     $ -       12,583,736     $ 1,259     $ 215,024,216     $ (120,010,179 )   $ 95,015,296   Stock-based compensation     -       -       -       -       454,918       -       454,918   Issuance costs     -       -       -       -       (101,537 )     -       (101,537 ) Net loss     -       -       -       -       -       (4,305,931 )     (4,305,931 ) BALANCE - September 30, 2020     -     $ -       12,583,736     $ 1,259     $ 215,377,597     $ (124,316,110 )   $ 91,062,746                                                             Stock-based compensation     -     $ -       -     $ -     $ 508,059     $ -     $ 508,059   Exchange of debt for common stock     -       -       130,081       13       1,057,546       -       1,057,559   Issuance of common stock, net of issue costs and warrants     -       -       5,169,076       516       28,316,928       -       28,317,444   Warrants issued in connection with common stock offering     -       -                       1,272,154               1,272,154         -       -                                           Net loss      -       -       -       -       -       (9,525,294 )     (9,525,294 ) BALANCE - December 31, 2020     -     $ -       17,882,893     $ 1,788     $ 246,532,284     $ (133,841,404 )   $ 112,692,668   ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended December 31,  ​ ​ 2021      2020 ​      Shares      Amount      Shares      Amount Preferred Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ — ​ $ — ​ ​ — ​ $ — Balance end of period ​ ​ — ​ ​ — ​ ​ — ​ ​ — Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ 27,771,912 ​ ​ 3 ​ ​ 12,583,736 ​ ​ 1 Stock-based compensation ​ ​ 76,972 ​ ​ — ​ ​ — ​ ​ — Issuance of common stock, net of issuance cost ​ ​ 2,161,584 ​ ​ — ​ ​ 5,169,076 ​ ​ 1 Issuance of common stock related to debt conversion ​ ​ — ​ ​ — ​ ​ 130,081 ​ ​ — Balance end of period ​ ​ 30,010,468 ​ ​ 3 ​ ​ 17,882,893 ​ ​ 2 Additional Paid-In Capital ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ — ​ ​ 317,647 ​ ​ — ​ ​ 215,378 Stock-based compensation ​ ​ — ​ ​ 1,229 ​ ​ — ​ ​ 508 Issuance of common stock, net of issuance cost ​ ​ — ​ ​ 4,355 ​ ​ — ​ ​ 29,588 Issuance of common stock related to debt conversion ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,058 Balance end of period ​ ​ — ​ ​ 323,231 ​ ​ — ​ ​ 246,532 Accumulated Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ — ​ ​ (206,150) ​ ​ — ​ ​ (124,316) Net loss ​ ​ — ​ ​ (11,548) ​ ​ — ​ ​ (9,525) Balance end of period ​ ​ — ​ ​ (217,698) ​ ​ — ​ ​ (133,841) Total stockholders' equity ​ ​ 30,010,468 ​ $ 105,536 ​ ​ 17,882,893 ​ $ 112,693 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended December 31,  ​ ​ 2021      2020 ​      Shares      Amount      Shares      Amount Preferred Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ — ​ $ — ​ ​ — ​ $ — Balance end of period ​ ​ — ​ ​ — ​ ​ — ​ ​ — Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ 27,490,412 ​ ​ 3 ​ ​ 12,583,736 ​ ​ 1 Stock-based compensation ​ ​ 296,972 ​ ​ — ​ ​ — ​ ​ — Issuance of common stock, net of issuance cost ​ ​ 2,223,084 ​ ​ — ​ ​ 5,169,076 ​ ​ 1 Issuance of common stock related to debt conversion ​ ​ ​ ​ ​ ​ ​ ​ 130,081 ​ ​ — Balance end of period ​ ​ 30,010,468 ​ ​ 3 ​ ​ 17,882,893 ​ ​ 2 Additional Paid-In Capital ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ — ​ ​ 315,864 ​ ​ — ​ ​ 215,024 Stock-based compensation ​ ​ — ​ ​ 2,748 ​ ​ — ​ ​ 963 Issuance of common stock, net of issuance cost ​ ​ — ​ ​ 4,625 ​ ​ — ​ ​ 29,487 Issuance of common stock related to debt conversion ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,058 Tax withholding for stock-based compensation ​ ​ — ​ ​ (6) ​ ​ — ​ ​ — Balance end of period ​ ​ — ​ ​ 323,231 ​ ​ — ​ ​ 246,532 Accumulated Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance beginning of period ​ ​ — ​ ​ (178,299) ​ ​ — ​ ​ (120,010) Net loss ​ ​ — ​ ​ (39,399) ​ ​ — ​ ​ (13,831) Balance end of period ​ ​ — ​ ​ (217,698) ​ ​ — ​ ​ (133,841) Total stockholders' equity ​ ​ 30,010,468 ​ $ 105,536 ​ ​ 17,882,893 ​ $ 112,693 ​ See the accompanying Notes to the Condensed Consolidated Financial Statements ​ 6 7 Table of Contents AYTU BIOSCIENCE,BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash FlowsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(In thousands) (Unaudited)     Six Months Ended       December 31,       2020     2019                     Operating Activities                 Net loss   $ (13,831,224 )   $ (5,143,277 ) Adjustments to reconcile net loss to cash used in operating activities:                 Depreciation, amortization and accretion     4,012,909       2,157,540   Stock-based compensation expense     962,977       327,435   Loss from change in fair value of contingent consideration     2,411,333           (Gain) from derecognition of contingent consideration     -       (5,199,806 ) Loss on sale of equipment     112,110       -   (Gain) on termination of lease     (343,185 )     -   Loss on debt exchange     257,559           Changes in allowance for bad debt     147,627       -   Loss from change in fair value of CVR     899,987       -   Derivative income             (1,830 ) Changes in operating assets and liabilities:                 Increase in accounts receivable     (1,965,271 )     (3,456,364 ) Increase in inventory     (3,615,662 )     (132,199 ) Increase in prepaid expenses and other     (379,337 )     (171,430 ) Decrease (increase) in other current assets     2,295,055       (136,694 ) (Decrease) increase in accounts payable and other     (3,136,163 )     2,806,973   Increase in accrued liabilities     1,711,466       145,467   Decrease in accrued compensation     (576,824 )     (62,729 ) Decrease in fixed payment arrangements     -       (216,150 ) Increase in contract liability     136,344       -   Decrease in deferred rent     -       (3,990 ) Net cash used in operating activities     (10,900,299 )     (9,087,054 )                   Investing Activities                 Deposit     (3,923 )     -   Contingent consideration payment     (42,760 )     (104,635 ) Note receivable     -       (1,350,000 ) Purchase of assets     -       (4,500,000 ) Net cash used in investing activities     (46,683 )     (5,954,635 )                   Financing Activities                 Issuance of preferred, common stock and warrants     32,249,652       10,000,000   Issuance cost related to registered offering     (4,292,781 )     (741,650 ) Payments made to borrowings     (272,727 )     -   Payments made to fixed payment arrangements     (2,785,863 )     -   Net cash provided by financing activities     24,898,281       9,258,350                     Net change in cash, restricted cash and cash equivalents     13,951,299       (5,783,339 ) Cash, restricted cash and cash equivalents at beginning of period     48,333,307       11,294,227   Cash, restricted cash and cash equivalents at end of period   $ 62,284,606     $ 5,510,888   ​ ​ ​ ​ ​ ​ ​ ​      Six Months Ended ​ ​ December 31,  ​      2021      2020 Operating Activities ​ ​      ​    Net loss ​ $ (39,399) ​ $ (13,831) Adjustments to reconcile net loss to cash used in operating activities: ​      ​      Depreciation, amortization and accretion ​   5,352 ​   3,905 Impairment of goodwill ​ ​ 19,453 ​   — Stock-based compensation expense ​   2,748 ​   963 Loss from contingent considerations ​   496 ​   3,311 Amortization of senior debt (premium) discount ​ ​ (326) ​ ​ 132 (Gain) loss on sale of equipment ​ ​ (50) ​ ​ 112 Gain on termination of lease ​ ​ — ​ ​ (343) Loss on debt extinguishment ​ ​ — ​ ​ 258 Inventory write-down ​ ​ 349 ​ ​ 99 Other noncash adjustments ​   (86) ​   148 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable ​   5,186 ​   (1,973) Inventory ​   (568) ​   (3,616) Prepaid expenses and other current assets ​   (1,896) ​   1,817 Accounts payable and other ​   (3,307) ​   (3,136) Accrued liabilities ​   (616) ​   1,271 Other operating assets and liabilities, net ​ ​ 51 ​ ​ (24) Net cash used in operating activities ​   (12,613) ​   (10,907) Investing Activities ​      ​      Contingent consideration payment ​   (3,109) ​   (43) Other investing activities ​   (28) ​   4 Net cash used in investing activities ​   (3,137) ​   (39) Financing Activities ​      ​      Proceeds from issuance of stock ​   4,825 ​   32,250 Payment of stock issuance costs ​   (172) ​   (4,293) Payment made to fixed payment arrangement ​ ​ (2,746) ​ ​ (2,786) Payments made to borrowings ​   (89,632) ​   (273) Proceeds from borrowings ​ ​ 88,857 ​ ​ — Other financing activities ​ ​ (6) ​ ​ — Net cash provided by financing activities ​   1,126 ​   24,898 Net change in cash, restricted cash and cash equivalents ​ ​ (14,624) ​ ​ 13,952 Cash, cash equivalents and restricted cash at beginning of period ​ ​ 49,901 ​ ​ 48,333 Cash, cash equivalents and restricted cash at end of period ​ $ 35,277 ​ $ 62,285 Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 35,277 ​ $ 62,033 Restricted cash ​ ​ — ​ ​ 252 Total cash, cash equivalents and restricted cash ​ $ 35,277 ​ $ 62,285 Supplemental cash flow data ​ ​ ​ ​ ​ ​ Cash paid for interest ​ $ 2,356 ​ $ 307 Non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Fixed payment arrangements included in accrued liabilities ​ $ — ​ $ 1,050 Issuance of common stock for note conversion ​ $ — ​ $ 1,058 Other noncash investing and financing activities ​ $ 29 ​ $ 43 Warrants issued ​ $ — ​ $ 356 ​ See the accompanying Notes to the Condensed Consolidated Financial Statements. ​ 7 8 Table of Contents AYTU BIOSCIENCE,BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows, cont’dNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)(Unaudited)     Six Months Ended       December 31,   Supplemental disclosures of cash and non-cash investing and financing transactions   2020     2019   Warrants issued to underwriters   $ 356,139     $ -   Cash paid for interest     306,752       3,390   Fair value of right-to-use asset and related lease liability     43,082       412,691   Contingent consideration included in accounts payable     -       3,430   Debt exchange     1,057,559       -   Fixed payment arrangements included in accrued liabilities     1,050,000       -   Inventory swap     7,043,849       -   Acquisition costs included in accounts payable     -       59,014   Exchange of convertible preferred stock into common stock   $ -     $ 44   See the accompanying Notes to the Condensed Consolidated Financial Statements 9 Table of Contents AYTU BIOSCIENCE, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) 1. Nature of Business, Financial Condition, Basis of Presentation Nature of Business.Aytu BioScience,BioPharma, Inc. (“Aytu”, the “Company” or “we”), is a commercial-stage specialty pharmaceutical company focused on commercializing novel products that address significant healthcare needs in both prescriptiontherapeutics and consumer health categories.healthcare products. The Company currently operates itsthe Aytu BioScienceBioPharma business, consisting of the primary care product portfolioCompany’s prescription pharmaceutical products (the “Primary Care Portfolio”), the prescription pediatric portfolio (the “Pediatric“Rx Portfolio”), and itsthe Aytu consumer healthcare products business (the “Consumer Health Portfolio”). The Aytu BioScience business is focused on commercializingcore Rx Portfolio commercial products consists primarily of prescription pharmaceutical products treating hypogonadism (low testosterone)for the treatment of attention deficit hyperactivity disorder ("ADHD"), coughallergies and upper respiratory symptoms, insomnia, male infertility,vitamin and various pediatric conditions.fluoride deficiency. The Aytu Consumer Healthconsumer health business is focused on commercializing consumer healthcare products. The Company plans to expand into other therapeutic areas as opportunities arise. The Company was incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado. AytuColorado and was re-incorporated in the state of Delaware on June 8, 2015. The Primary CareRx Portfolio consists of (i) Natesto,Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets, Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets and Adzenys ER (amphetamine) extended-release oral suspension for the only FDA-approved nasal formulationtreatment of testosterone for men with hypogonadism (low testosterone, or "Low T"),ADHD, (ii) ZolpiMist, the only FDA-approved oral spray prescription sleep aid, and (iii) Tuzistra XR, the only FDA-approved 12-hour codeine-based antitussive syrup. The Pediatric Care Portfolio, acquired on November 1, 2019, (the “Pediatric Portfolio”), includes (i) Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency, (ii) Cefaclor, a second-generation cephalosporin antibiotic suspension; and (iii) Karbinal ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions. On February 14, 2020,conditions, (iv) ZolpiMist, the Company acquired Innovus Pharmaceuticals Inc.only U.S. Food & Drug Administration (“Innovus”FDA”) approved oral spray prescription sleep aid, (v) Tuzistra XR, the only FDA-approved 12-hour codeine-based antitussive syrup and (vi) a generic Tussionex (hydrocodone and chlorpheniramine) (“generic Tussionex”), extended-release oral suspension for the treatment of cough and upper respiratory symptoms of a specialty pharmaceutical company licensing, developing and commercializing safe and effective consumer healthcare products designed to improve health and vitality. Innovus commercializescold. Adzenys ER was discontinued as of September 30, 2021. The Consumer Health Portfolio consists of over twenty 20 consumer health products competing in large healthcare categories, including diabetes men'smanagement, pain management, digestive health, sexual wellness and respiratory health. The Consumer Health Portfolio isurological health and general wellness, commercialized through direct-to- consumerdirect-to-consumer marketing channels utilizing Innovus’sthe Company's proprietary Beyond Human®Human marketing and sales platform and on e-commerce platforms. On December 10, 2020, the Company and Neutron Acquisition Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Neos Therapeutics, Inc. (“Neos”). The Merger Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Neos, with Neos surviving as a wholly owned subsidiary of the Company (the “Neos Merger”). The Neos Merger is subject to the approval of both the shareholders of the Company and Neos. Based on the number of shares of the Company’s common stock anticipated to be immediately issued to Neos stockholders upon closing of the merger (which could be impacted by changes in Neos stock price leading to the exercise of options not otherwise being assumed by the Company) and the number of shares of the Company’s common stock outstanding as of December 31, 2020, it is expected that, immediately after completion of the merger, former Neos stockholders will own approximately 24% of the outstanding shares of the Company’s common stock. Existing Company stockholders are expected to own approximately 76% of the outstanding shares of the Company’s common stock. In addition, each unvested option to acquire shares of Neos common stock that is outstanding as of immediately prior to the close of the Neos Merger (the "Effective Time") with an exercise price equal to or less than $0.95 shall be assumed by the Company and converted into an option to acquire shares of the Company’s common stock on the same terms and conditions. The number of shares of Company’s common stock subject to each such assumed option shall be equal to (i) the number of shares of Neos common stock subject to the corresponding assumed option immediately prior to the close multiplied by (ii) 0.1088 (the "Exchange Ratio"), rounded down, if necessary, to the nearest whole share of the Company’s common stock, and such assumed option shall have an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of Neos common stock otherwise purchasable pursuant to the corresponding assumed option divided by (B) the Exchange Ratio. As of February 5, 2021, the total estimated shares to be issued in connection with this merger totaled approximately 5.4 million with an estimated fair value of $44.2 million. In connection with the execution of the Merger Agreement, the Company and Neos have entered into a Commitment Letter (the “Bridge Commitment Letter”) for the Company to provide financing to Neos under an unsecured convertible note, in an aggregate amount of up to $5,000,000, subject to the terms set forth therein (the "Bridge Financing"). Interest accrues on the principal amount outstanding under the note at a rate of 6.0% per annum, compounding monthly and commencing if and when such Bridge Financing is provided. If an event of default has occurred and is continuing, the interest rate then in effect will be increased by 2.0% per annum, and all overdue obligations under the note will bear interest at the interest rate in effect at such time plus the additional 2.0% per annum. The Company's rights under the note, including rights to payment, are subordinated to the rights of Neos’s existing senior lenders. The maturity date of the note is the earlier of the acceleration of the obligations evidenced thereby and November 7, 2022. In the event that Neos draws down on the note, the exchange ratio will be adjusted downward by an amount equal to 0.00011 for every $100,000 of financing funded to Neos under the note. In April of 2020, the Company entered into a licensing agreement with Cedars-Sinai Medical Center to secure worldwide rights to various potential uses of Healight, an investigational medical device platform technology. Healight has demonstrated safety and efficacy in pre-clinical studies, and we plan to advance this technology and assess its safety and efficacy in human studies, initially focused on COVID-19 patients. The Company recently established a purchasing relationship with a U.S. supplier of Emergency Use Authorization (EUA) authorized antigen tests. Antigen tests rapidly detect the presence of the SARS-CoV-2 virus antigen via a nasopharyngeal swab and are used without laboratory equipment. Demand for rapid antigen tests has increased in recent months across the U.S. The Company’s strategy is to continue building its portfolio of revenue-generating products, leveraging its commercial team’s expertise to build leading brands within large therapeutic markets.markets, while also developing a late-stage pipeline focused on pediatric-onset conditions and difficult-to-treat diseases. Financial Condition.As of December 31, 2020,2021, the Company had approximately $62.3$35.3 million of cash and cash equivalents and restricted cash.equivalents. The Company’s operations have historically consumed cash and are expected to continue to require cash, but atconsume cash. The Company incurred a declining rate. Revenues fornet loss of approximately $11.5 million and $9.5 million during the three- and six-three months ended December 31, 2021 and 2020,were $15.1 respectively, and $39.4 million and $28.7 million, compared to $3.2 million and $4.6$13.8 million for the same periodssix months ended December 31, 2019,2021 and 2020, respectively. The Company had an increaseaccumulated deficit of approximately 377% $217.7 million and 521%,$178.3 million as of December 31, 2021 and June 30, 2021, respectively. Revenue is expected to increase over time, which will allow the Company to rely less on the Company's existing cash balance and proceeds from financing transactions. Cash used byin operations was approximately $12.6 million and $10.9 million during the six-monthssix months ended December 31, 2021 and 2020, was $10.9 million compared respectively. Management plans to $9.1 million forfocus on executing on its business plan or otherwise reducing its expenses, renegotiating its debt facilities, or raising additional capital in order to meet its obligations. Management believes that the six-months ended December 31, 2019. The increaseCompany has access to capital resources through possible public or private equity offerings, debt financings, or other means; however, the Company cannot provide any assurance that it will be able to raise additional capital or obtain new financing on commercially acceptable terms. If the Company is due primarilyunable to an increase in workingsecure additional capital, and pay downit may be required to curtail its operations or delay the execution of other liabilities. 10 Table of Contents its business plan. As of the date of this Report, the Company expects its costs for its current operations to increase modestly as the Company continues to integrate the acquisition of the Pediatrics Portfolio, Innovus and if approved by the Company's and Neos' shareholders,integrates the Neos Merger,acquisition, invests in new product development, and continues to focus on revenue growth through increasing product sales and making additional acquisitions. The Company’s current assets totaling approximately $92.5$87.5 million as of December 31, 2020 plus2021 and the proceeds expected from ongoing product sales will be used to fund existing 8 Table of Contents operations. The Company may continue to access the capital markets from time-to-time when market conditions are favorable.time-to-time. The timing and amount of capital that may be raised is dependent on the terms and conditions upon which investors would require to provide such capital. There is no guarantee that capital will be available on terms favorable to the Company and its stockholders, or at all. The Company raised approximately $29.6 million, net during the three months ended December 31, 2020, from the sale of approximately 0.4 million shares using the Company’s at-the-market facility and from the issuance of approximately 4.8 million shares of the Company's common stock and 0.3 million placement agent warrants on December 15, 2020. On December 10, 2020, the Company exchanged $0.8 million of debt into 0.1 million shares of the Company's common stock, eliminating the use cash to satisfy this obligation (see Note 15). Between December 31, 2020, and the filing date of this quarterly report on Form 10-Q, the Company has not issued common stock under the Company’s at-the-market offering program.  As of the date of this report, the Company has adequate capital resources to complete its near-term operating objectives.  Since the Companybelieves it has sufficient cash on-hand as of December 31, 20202021 to cover potential net cash outflows for at least the twelve months following the filing date of this Quarterly Report, the Company reports that there exists no indication of substantial doubt about its ability to continue as a going concern. Report. If the Company is unable to raise adequate capital in the future when it is required, the Company's management can adjust its operating plans to reduce the magnitude of the Company's capital need under its existing operating plan. Some of the adjustments that could be made include delays of and reductions to commercial programs, reductions in headcount, narrowing the scope of the Company’s commercial plans or reductions or delays to its research and development programs.programs, or monetization of certain Company assets. Without sufficient operating capital, the Company could be required to relinquish rights to products or renegotiate to maintain such rights on less favorable terms than it would otherwise choose. This may lead to impairment or other charges, which could materially affect the Company’s balance sheet and operating results. Basis of Presentation. The unaudited condensed consolidated financial statements contained in this report represent the financial statements of the Company and its wholly-ownedwholly owned subsidiaries, Aytu Women’s Health, LLC, Innovus Pharmaceuticals, Inc., and Aytu Therapeutics, LLC.LLC and Neos Therapeutics, Inc. The unaudited consolidated financial statements should be read in conjunction with the Company'sCompany’s Annual Report on Form 10-K for the year ended June 30, 2020,2021, which included all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company and the results of operations and cash flows for the interim periods presented. The results of operations for the period ended December 31, 20202021 are not necessarily indicative of expected operating results for the full year. The information presented throughout this report, as of December 31, 2021 and for the three and six-month periodssix months ended December 31, 2020,2021, and 2019,2020, is unaudited. ​ On December 8, 2020, the Company effected a reverse stock split in which each common stockholder received one share of common stock for every 10 shares held (herein referred to collectively as the “Reverse Stock Split”). All share and per share amounts in this report have been adjusted to reflect the effect of the Reverse Stock Split. ​ Interim Unaudited Condensed Consolidated Financial Statements.2. Significant Accounting Policies The accompanying condensed consolidated balance sheet as of December 31, 2020, and the condensed consolidated statements of operations, stockholders’ equity, for the three- and six- months ended, and the interim condensed consolidated statements of cash flows for the six-months ended December 31, 2020 and 2019, are unaudited. The condensed consolidated balance sheet as of June 30, 2020 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the Company’s financial condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three and six-months ended December 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other period. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent consideration, contingent value rights ("CVRs"),assets and fixed payment obligationsliabilities at the date of the financial statements and the reported amountsamount of revenuerevenues and expenses forduring the reporting period. On an ongoing basis,In the Company evaluates itsaccompanying consolidated financial statements, estimates including,are used for, but not limited to, those related to thestock-based compensation, revenue recognition, allowance for doubtful accounts, determination of thevariable consideration for accruals of chargebacks, administrative fees and rebates, government rebates, returns and other allowances, allowance for inventory obsolescence, valuation of financial instruments and intangible assets, accruals for contingent liabilities, fair value of equity awards, the fair valuelong-lived assets, goodwill impairment, income tax provision, deferred taxes and valuation allowance, determination of identifiedright-of-use assets and lease liabilities, acquired in business combinations,purchase price allocations, and the usefuldepreciable lives of property and equipment, intangible assets, impairmentlong-lived assets. Because of long-lived and intangible assets, including goodwill, provisions for doubtful accounts receivable, certain accrued expenses, and the discount rate useduncertainties inherent in measuring lease liabilities. Thesesuch estimates, and assumptions are based on the Company’s historicalactual results and management’s future expectations. Actual results couldmay differ from those estimates. Management periodically evaluates estimates used in the preparation of the financial statements for reasonableness. Prior Period Reclassification Certain prior year amounts in the consolidated balance sheets, statements of earnings and statements of cashflows have been reclassified to conform to the current year presentation, including a reclassification made in the presentation of FDA fees for commercialized product. This was previously included in general and administrative expenses and now is recorded as a component of cost of sales on the consolidated statements of earnings. These reclassifications did not affect operating earnings or other consolidated financial statements for the three and six months ended December 31, 2021 and 2020. 9 11 Table of Contents Significant Accounting Policies Income Taxes The Company’s significant accounting policies are discussed in Note 2—Summary of Significant Accounting PoliciesCompany calculates its quarterly income tax provision based on estimated annual effective tax rates applied to ordinary income (or loss) and Recent Accounting Pronouncements in the Annual Report.other known items computed and recognized when they occur. There have been no significant changes to these policies that have hadin tax law affecting the tax provision during the six months ended December 31, 2021. The impairment of the Aytu BioPharma segment book goodwill changed the net deferred tax liability of $0.2 million recorded as of June 30, 2021 fiscal year end into a material impact onnet deferred tax liability of $0.1 million as of December 31, 2021. As a result, the Company’s unaudited condensed consolidated financial statements and related notesCompany recognized an income tax benefit of $0.1 million during the six months ended December 31, 2021. There was 0 income tax expense or benefit during the three and six months ended December 31, 2020. Adoption of New Accounting Pronouncements Fair Value Measurements (“ASU 2018-13”). In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in the standard apply to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. ASU 2018-13 removes, modifies, and adds certain disclosure requirements in ASC 820, Fair Value Measurement. The standard is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted this as of July 1, 2020, the beginning of the Company’s fiscal year-ended June 30, 2021. The most relevant component of ASU 2018-13 to the Company’s financial statements relates to the need to disclose the range and weighted-average of significant unobservable inputs used in Level 3 fair value measurements. However, the Company discloses on a discrete basis all significant inputs for all Level 3 Fair Value measurements. 2020. Recent Accounting Pronouncements Not Yet Adopted Financial Instruments – Credit Losses (“ASU 2016-13”). In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The standard was effective for interim and annual reporting periods beginning after December 15, 2019. However, in October 2019, the FASB approved deferral of the adoption date for smaller reporting companies for fiscal periods beginning after December 15, 2022. Accordingly, the Company’s fiscal year of adoption will be the fiscal year ended June 30, 2024. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018, but the Company did not elect to early adopt. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements, but no conclusion has been reached.statements. This QuarterlyFor a complete set of the Company’s significant accounting policies, refer to our Annual Report on Form 10-Q does not discuss recent pronouncements that are not anticipated to10-K for the fiscal year ended June 30, 2021. There have an impact on or are unrelatedbeen no significant changes to the Company’s financial condition, results of operations, cash flows or disclosures.significant accounting policies during the six months ended December 31, 2021. ​ 2.​ 3. Acquisitions The Pediatric Portfolio Neos Merger On October 10, 2019,March 19, 2021, the Company entered into the Purchase Agreement with Cerecor,acquired Neos Therapeutics, Inc. (“Cerecor”Neos”) to acquire the Pediatric Portfolio, which closed on November 1, 2019. The Pediatric Portfolio consists of four main prescription, a commercial-stage pharmaceutical company developing and manufacturing central nervous system-focused products (i) Cefaclor™ for Oral Suspension, (iii) Karbinal® ER (iii) Poly-Vi-Flor®, and (iv) Tri-Vi-Flor™. Total consideration transferred to Cerecor consisted of $4.5 million cash and approximately 980 thousand shares of Series G Convertible Preferred Stock. The Company also assumed certain of Cerecor’s financial and royalty obligations, and not more than $2.7 million of Medicaid rebates and up to $0.8 million of product returns, of which $3.5 million has been incurred. The Company also hired the majority of Cerecor’s workforce focused on sales, commercial contracts and customer relationships. In addition, the Company assumed Cerecor obligations due to an investor that include fixed and variable payments aggregating to $25.6 million. The Company assumed fixed monthly payments equal to $0.1 million from November 2019 through January 2021 plus $15 million due in January 2021. Monthly variable payments due to the same investor are equal to 15% of net revenue generated from a subset of the Pediatric Portfolio, subject to an aggregate monthly minimum of $0.1 million, except for January 2020, when a one-time payment of $0.2 million was paid to the investor. The variable payment obligation continues until the earlier of: (i) aggregate variable payments of approximately $9.5 million have been made, or (ii) February 12, 2026. In June 2020, the Company paid down a $15 million balloon payment originally owed in January 2021 to reduce the fixed liability. Further, certain of the products in the Pediatric Portfolio require royalty payments ranging from 12% to 15% of net revenue. One of the products in the Product Portfolio requires the Company to generate minimum annual sales sufficient to represent annual royalties of approximately $1.8 million, in the event the minimum sales volume is not satisfied. 12 Table of Contents While no equity was acquired by the Company, the transaction was accounted for as a business combination under the acquisition method of accounting pursuant to Topic 805. Accordingly, the tangible and identifiable intangible assets acquired, and liabilities assumed were recorded at fair value as of the date of acquisition, with the remainder of the aggregate purchase price recorded as goodwill. The goodwill recognized is attributable primarily to strategic opportunities related to an expanded commercial footprint and diversified product portfolio that is expected to provide revenue and cost synergies. The following table summarized the fair value of assets acquired and liabilities assumed at the date of acquisition.      As of       November 1, 2019   Consideration         Cash and cash equivalents   $ 4,500,000   Fair value of Series G Convertible Preferred Stock         Total shares issued     9,805,845   Estimated fair value per share of Aytu common stock   $ 0.567   Estimated fair value of equity consideration transferred     5,559,914   Total consideration transferred   $ 10,059,914   Recognized amounts of identifiable assets acquired and liabilities assumed         Inventory   $ 459,123   Prepaid assets     1,743,555   Other current assets     2,525,886   Intangible assets - product marketing rights     22,700,000   Accrued liabilities     (300,000 ) Accrued product program liabilities     (6,683,932 ) Assumed fixed payment obligations   $ (29,837,853 ) Total identifiable net assets     (9,393,221 ) Goodwill   $ 19,453,135   The fair values of intangible assets, including product technology rights were determined using variations of the income approach. Varying discount rates were also applied to the projected net cash flows. The Company believes the assumptions are representative of those a market participant would use in estimating fair value (see Note 9). The fair value of the net identifiable asset acquired was determined to be $22.7 million, which is being amortized over ten years. Innovus Merger (Consumer Health Portfolio) On February 14, 2020, the Company completed the Merger with Innovus Pharmaceuticals(the “Neos Merger”) after approval by the stockholders of both companiesNeos on February 13, 2020.March 18, 2021 and the approval of the consideration to be delivered by the Company in connection with the merger by the shareholders of Aytu, also on March 18, 2021. Upon the effectiveness of the Neos Merger, a subsidiary of the Company merged with and into Innovus,Neos, and all outstanding InnovusNeos common stock was exchanged for approximately 380 thousand5,472,000 shares of the Company’s common stockstock. The Company pursued the acquisition of Neos in order to gain scale in the industry, expand its product portfolio and upas an opportunity to $16potentially accelerate the pathway to breakeven. The Company incurred in relation to the Neos Merger (i) approximately $2.9 million of Contingent Value Rights (“CVRs”). The outstanding Innovus warrants with cash out rights were exchanged for approximately 200 thousand shares of Series H Convertible Preferred stock of the Company and retired. The remaining Innovus warrants outstanding, those without ‘cash- out’ rights, at the time of the Merger, continue to be outstanding, and upon exercise, retain the right to the merger consideration offered to Innovus stockholders, including any remaining claims represented by CVRs at the time of exercise. Innovus is now a 100% wholly-owned subsidiary of the Company, (“Aytu Consumer Health”). On March 31, 2020, the Company paid out the first CVR Milestone in the form of approximately 120 thousand shares of the Company’s common stock to satisfy the $2.0 million obligation as a result of Innovus achieving the $24 million revenue milestone for the calendar year ended December 31, 2019. As a result of this, the Companyacquisition related costs, recognized a gain of approximately $0.3 million. In addition, as part of the Merger, the Company assumed approximately $3.1operating expense, and (ii) $0.1 million of notes payable, $0.8 million in lease liabilities, and other assumed liabilities associated with Innovus. Of the $3.1 millionissuance costs, recognized as a component of notes payable, approximately $2.2 million was converted into approximately 180 thousand shares of the Company’s common stock since February 14, 2020. Approximately $41 thousand remained outstanding as of December 31, 2020.stockholders’ equity. 10 13 Table of Contents The following table summarizedsummarizes the preliminary fair value of assets acquired and liabilities assumed at the date of acquisition. These estimates are preliminary, pending final evaluation of certain assets and liabilities, and therefore, are subject to revisions that may result in adjustments to the values presented below:below; ​   As of     February 14, 2020   Consideration         ​ ​ ​ ​ ​      March 19, 2021 ​ ​ (In thousands, except share and per-share) Considerations: ​ ​ ​ Fair Value of Aytu Common Stock         ​ ​ ​ Total shares issued at close     3,810,393   ​   5,471,804 Estimated fair value per share of Aytu common stock   $ 0.756     $ 9.73 Estimated fair value of equity consideration transferred   $ 2,880,581     $ 53,241 Fair value of Series H Convertible Preferred Stock         Total shares issued     1,997,736   Estimated fair value per share of Aytu common stock   $ 0.756   Estimated fair value of equity consideration transferred   $ 1,510,288   Fair value of former Innovus warrants   $ 15,315   Fair value of Contingent Value Rights   $ 7,049,079   Forgiveness of Note Payable owed to the Company   $ 1,350,000   Cash ​ ​ 15,383 Estimated fair value of replacement equity awards ​ ​ 432 Total consideration transferred   $ 12,805,263     $ 69,056 ​   As of     February 14, 2020   ​ ​ ​ ​ ​ ​ March 19, 2021 ​ ​ (In thousands) Total consideration transferred   $ 12,805,263     $ 69,056 Recognized amounts of identified assets acquired and liabilities assumed         ​ ​ ​ Cash and cash equivalents   $ 390,916     $ 15,722 Accounts receivable     278,826   ​ ​ 24,696 Inventory     1,149,625   ​ ​ 10,984 Prepaid expenses and other current assets     1,692,133   ​ ​ 2,929 Operating leases right-to-use assets ​ ​ 3,515 Property, plant and equipment ​ ​ 5,519 Intangible assets ​ ​ 56,530 Other long-term assets     36,781   ​ ​ 149 Right-to-use assets     328,410   Property, plant and equipment     190,393   Trademarks and patents     11,744,000   Accounts payable and accrued other expenses     (7,202,309 ) Other current liabilities     (629,601 ) Notes payable     (3,056,361 ) Lease liability     (754,822 ) Total identifiable assets   $ 4,167,991   Accounts payable and accrued expenses ​ ​ (56,718) Short-term line of credit ​ ​ (10,707) Long-term debt, including current portion ​ ​ (17,678) Operating lease liabilities ​ ​ (3,515) Other long-term liabilities ​ ​ (82) Total identifiable net assets   ​ 31,344 Goodwill   $ 8,637,272     $ 37,712 ​ The fair values of intangible assets including product distribution rights were determined using variations of the incomecost approach, specificallyexcess earnings method and the relief-from-royalties method. It also includes customer lists using an income approach utilizing a discounted cash flow model. Varying discount rates were also applied to the projected net cash flows. The CVRs were valued using a Monte-Carlo model. The Company believes the assumptions are representative of those a market participant would use in estimating fair value (see Note 10).of Neos trade name, in-process R&D and developed product technology, which is the proprietary technology for the development of Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT and generic Tussionex, were determined using the relief from royalty method. The fair value of developed technology right, which is a proprietary modified-release drug delivery technology, was determined using multi-period excess earnings method. The fair value of RxConnect, which is a developed technology for the Neos-sponsored patient support program that offers affordable and predictable copays to all commercially insured patients, was determined using cost to recreate method. The finite-lived intangible assets are being amortized over a range of between 1 to 18 years. 11 Table of Contents The fair value of the net identifiable intangible assets acquired was determined to be $11.7 million, which is being amortized over a range between 1.5 to 10 years.were as follows: ​ 14 Table of Contents ​ ​ ​ ​ ​ ​ March 19, 2021 ​ ​ (In thousands) Identified intangible assets acquired: ​ ​ ​ Developed technology right   $ 30,200 Developed products technology ​ ​ 22,700 In-process R&D ​ ​ 2,600 RxConnect ​ ​ 630 Trade name ​ ​ 400 Total intangible assets acquired   $ 56,530 ​ Unaudited Pro Forma Information The following supplemental unaudited proforma financial information presents the Company’s results as if the following acquisitionsNeos acquisition had occurred on July 1, 2019: ● Acquisition of the Pediatric Portfolio, effective November 1, 2019; ● Merger with Innovus effective February 14, 2020. The unaudited pro forma results have been prepared based on estimates and assumptions, which management believes are reasonable,reasonable; however, the results are not necessarily indicative of the consolidated results of operations had the acquisition occurred on July 1, 2019,2020, or of future results of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​      Six Months Ended ​ ​ December 31,  ​      2021      2020 ​ ​ ​ ​ Pro forma ​ ​ Unaudited   Unaudited ​ ​ (In thousands) Total revenues, net ​ $ 45,022 ​ $ 52,331 Net loss ​ $ (39,399) ​ $ (23,037) ​     Three Months Ended     Six Months Ended       December 31, 2020     December 31, 2019     December 31, 2020     December 31, 2019       Actual     Pro forma     Actual     Pro forma       (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)   Total revenues, net   $ 15,147,034     $ 8,929,802     $ 28,667,280     $ 20,541,401   Net (loss)     (9,525,294 )     (2,450,247 )     (13,831,224 )     (11,255,247 ) Net (loss) per share (aa)   $ (0.72 )   $ (1.40 )   $ (1.09 )   $ (6.85 ) Rumpus Acquisition (aa) Pro forma net loss per share calculations excludedOn April 12, 2021, the impactCompany entered into an asset purchase agreement with Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus VEDS, LLC and Rumpus Therapeutics LLC, “Rumpus”) pursuant to which the Company acquired certain rights and other assets, including key commercial global licenses, relating primarily to the pediatric-onset rare disease development asset enzastaurin (now referred to as AR101), which is a pivotal study-ready therapeutic being studied for the treatment of vascular Ehlers-Danlos Syndrome (“VEDS”). This asset was acquired for an up-front fee of $1.5 million in cash and payment of aggregated fees of $0.6 million. Upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the Company’s option, are payable to Rumpus. AR101 (enzastaurin) is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the issuance of the (i) Series G Convertible Preferred StockPKC beta, PI3K and the, (ii) Series H Convertible Preferred Stock under the assumption those shares would continue to remain non-participatory during the periods reported above.AKT pathways (see Note 12 and Note 17). ​ 3.4. Revenue Recognition Contract Balances. Contract assets primarily relate to the Company’s right to consideration in exchange for products transferred to a customer in which that right to consideration is dependent upon the customer selling these products. There was 0 contract asset as of December 31, 2021. As of June 30, 2021, contract assets of $21,000 was included in other current assets in the condensed consolidated balance sheet. Contract liabilities primarily relate to advances or deposits received from the Company’s customers before revenue is recognized. As of December 31, 2021 and June 30, 2021, contract liabilities of $0.2 million were included in accrued liabilities in the consolidated balance sheet. Revenues by Geographic location.12 Table of Contents The following table reflects ourCompany disaggregated its revenue into 3 product revenues by geographic location as determined by the billing addressportfolios. The primary care portfolio is composed of our customers:     Three Months Ended     Six Months Ended       December 31,     December 31,       2020     2019     2020     2019       (unaudited)     (unaudited)     (unaudited)     (unaudited)   U.S.   $ 13,757,000     $ 3,047,000     $ 25,901,000     $ 4,309,000   International     1,390,000       128,000       2,766,000       306,000     Total net revenue   $ 15,147,000     $ 3,175,000     $ 28,667,000     $ 4,615,000   ZolpiMist and Tuzistra. The pediatric portfolio is composed of Adzenys XR-ODT, Cotempla XR-ODT Poly-Vi-Flor, Tri-Vi-Flor, Karbinal ER and a generic Tussionex. The Consumer Health portfolio is composed of consists of over 20 consumer health products competing in large healthcare categories. Revenues by Product Portfolio. Net revenue disaggregated by significant product portfolio for the three and six-monthssix months ended December 31, 20202021 and December 31, 20192020 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ December 31,  ​ December 31,  ​      2021      2020      2021      2020   Three Months Ended December 31,     Six Months Ended December 31,     2020     2019     2020     2019                                   Primary care and devices portfolio   $ 4,097,000     $ 1,190,000     $ 7,130,000     $ 2,630,000   ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Primary care portfolio   $ 192   $ 4,097   $ 617   $ 7,130 Pediatric portfolio     3,115,000       1,985,000       5,834,000       1,985,000   ​ ​ 14,451 ​ ​ 3,115 ​ ​ 27,909 ​ ​ 5,834 Consumer Health portfolio     7,935,000       -       15,703,000       -   ​ ​ 8,482 ​ ​ 7,935 ​ ​ 16,496 ​ ​ 15,703 Total net revenue   $ 15,147,000     $ 3,175,000     $ 28,667,000     $ 4,615,000   Consolidated revenue   $ 23,125   $ 15,147   $ 45,022   $ 28,667 ​ 15 Table ​ Revenues by Geographic location. The following table reflects the Company’s product revenues by geographic location as determined by the billing address of Contents 4. Inventoriescustomers: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Three Months Ended      Six Months Ended ​ ​ December 31,  ​ December 31,  ​      2021      2020      2021      2020 ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) U.S. ​ $ 22,547 ​ $ 13,757 ​ $ 43,653 ​ $ 25,901 International ​   578 ​   1,390 ​   1,369 ​   2,766 Total net revenue ​ $ 23,125 ​ $ 15,147 ​ $ 45,022 ​ $ 28,667 ​ ​ ​ ​ 5. Inventories Inventories consist of raw materials, work in process and finished goods and are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. AytuThe Company periodically reviews the composition of its inventories to identify obsolete, slow-moving or otherwise unsaleable items. If unsaleableIn the event that such items are observedidentified and there are no alternate uses for the inventory, Aytuthe Company will record a write-down to net realizable value in the period that the impairment is first recognized. The Company wrote down $0.1 million and $0.2 million of inventory during the three and six-monthsmonths ended December 31, 2021, and $0.3 million and $0.1 million during the six months ended December 31, 2021 and 2020,, respectively. There was no0 inventory written down forwrite-down during the three and six-monthsmonths ended December 31, 2019, respectively. 2020. Inventory balances consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31,  ​ June 30,  ​ ​ 2021 ​ 2021   As of     As of     December 31,     June 30,     2020     2020   ​ (In thousands) Raw materials   $ 590,000     $ 397,000     $ 2,427      $ 2,269 Finished goods, net     5,981,000       9,603,000     $ 6,571,000     $ 10,000,000   Work in process ​ ​ 2,173 ​ ​ 3,346 Finished goods ​   11,958 ​   10,724 Inventory, net ​ $ 16,558 ​ $ 16,339 5. Fixed Assets​ ​ Fixed assets​ 6. Property and Equipment Properties and equipment are recorded at cost to place into service and once placed in service, are depreciated on a straight-line basis over the estimated useful lives. Leasehold improvements are amortized over the shorter of the estimated economic life or related lease term. Fixed assets 13 Table of Contents Property and equipment consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      December 31,  ​ June 30,  ​ ​ 2021 ​ 2021         As of     As of     Estimated     December 31,     June 30,     Useful Lives in years     2020     2020   ​ ​ (In thousands) Manufacturing equipment   2 - 5     $ 112,000     $ 112,000   ​ $ 3,076      $ 3,070 Leasehold improvements   3       111,000       229,000       999 ​   959 Office equipment, furniture and other   2 - 5       281,000       312,000       1,099 ​   1,093 Lab equipment   3 - 5       90,000       90,000       832 ​   832 Assets under construction     128 ​   198 Less accumulated depreciation and amortization           (504,000 )     (484,000 ) ​ ​ (1,840) ​ ​ (1,012) Fixed assets, net         $ 90,000     $ 259,000   Property and equipment, net   $ 4,294 ​ $ 5,140 ​ ​ Depreciation and amortization expense was $0.4 million and $18,000 for the three months ended December 31, 2021 and 2020, respectively, and $0.8 million and $0.1 million for the six months ended December 31, 2021 and 2020, respectively. During the three and six months ended December 31, 2021, the Company recognized a gain of $0.1 million on sale of equipment. There was 0 disposal of property and equipment during the three months ended December 31, 2020. During the six months ended December 31, 2020,, the Company recognized a loss of $0.1 million on sale of equipment due to termination of leases. ​         Depreciation and amortization expense totaled $18,000 and $16,000 for the three-months ended December 31, 2020 and 2019, respectively, and $51,000 and $32,000 for the six-months ended December 31, 2020 and 2019, respectively. 6.7. Leases Right-to-Use Assets and Related Liabilities The Company previously adoptedhas entered into various operating lease agreements for certain of its offices, manufacturing facilities and equipment, and finance lease agreements for certain equipment. These leases have original lease periods expiring between 2022 and 2024. Most leases include one or more options to renew and the FASB issued ASU 2016-02, “Leases (Topic 842)” asexercise of July 1, 2019. Witha lease renewal option typically occurs at the adoptiondiscretion of ASU 2016-02,both parties. Certain leases also include options to purchase the leased property. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease until it is reasonably certain that the Company recorded anwill exercise that option. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. Upon the closing of the Neos Merger on March 19, 2021, Neos recognized operating right-of-uselease ROU asset and an operating lease liability on its balance sheet associated with the lease of its corporate headquarters. The right-of-use asset represents the Company’s right to use the underlying asset for the lease term, and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations were recognized at the later of the commencement date or July 1, 2019; the date of adoption of Topic 842; based on$3.5 million, which represented the present value of the remaining lease payments overas of the acquisition date, for its office space and manufacturing facilities at Grand Prairie, Texas. As the lease term. As the Company’s leaseagreement does not provide an implicit rate, the CompanyNeos used anits estimated incremental borrowing rate based on the information available at the commencement date in determiningof 6.7% to determine the present value of thefuture lease payments. Rent expenseThe finance leases are related to Neos equipment finance leases with fixed contract terms and an implicit interest rate of approximately 5.9%. In May 2021, the Company entered into a commercial lease agreement for 6,352 square feet of office in Berwyn, Pennsylvania that was to commence on December 1, 2021 and end on January 31, 2025. On July 19, 2021, the Company and the lessor amended the agreement to move the commencement date from December 1, 2021 to September 1, 2021. The Company recorded an operating lease ROU asset and lease liabilities of $0.5 million in the consolidated balance sheet representing the present value of minimum lease payments using Neos’ estimated borrowing rate of 6.25%. In October 2021, the Company’s Innovus subsidiary entered into a commercial lease agreement for 6,580 square feet of warehouse in Oceanside, California that commenced on December 1, 2021 and ends on December 31, 2026. The Company recorded an operating lease ROU asset and lease liabilities of $0.3 million in the consolidated balance sheet representing the present value of minimum lease payments using Innovus’ estimated borrowing rate of 18.0%. 14 Table of Contents The components of lease expenses are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ ​ ​ December 31,  ​ December 31,  ​ ​ ​      2021      2020      2021      2020      Statement of Operations Classification ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) ​ ​ Lease cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease cost ​ $ 330 ​ $ 30 ​ $ 626 ​ $ 125   Operating expenses Short-term lease cost     26 ​   2 ​   65 ​   5   Operating expenses Finance lease cost:     ​ ​ ​ ​ ​ ​ ​ ​ ​ ​   ​ Amortization of leased assets     19 ​   — ​   37 ​   —   Cost of sales Interest on lease liabilities ​ ​ 4 ​ ​ — ​ ​ 8 ​ ​ — ​ Other (expense), net Total net lease cost   $ 379 ​ $ 32 ​ $ 736 ​ $ 130      ​ ​ Supplemental balance sheet information related to leases is recognized on a straight-line basis over theas follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      December 31,  ​ June 30,       Balance Sheet Classification ​ ​ 2021 ​ 2021 ​ ​ ​ ​ (In thousands) ​ ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ Operating lease assets ​ $ 3,845 ​ $ 3,563   Operating lease right-of-use asset Finance lease assets ​ ​ 292 ​   329   Property and equipment, net, net Total leased assets ​ $ 4,137 ​ $ 3,892   ​ Liabilities: ​ ​ ​ ​ ​ ​   ​ Current: ​ ​ ​ ​ ​ ​ ​ ​ Operating leases ​ $ 1,173 ​ $ 940 ​ Current portion of operating lease liabilities Finance leases ​ ​ 103 ​ ​ 102 ​ Current portion of debt Non-current ​ ​ ​ ​ ​ ​ ​ ​ Operating leases ​ ​ 2,716 ​ ​ 2,624 ​ Operating lease liabilities, net of current portion Finance leases ​ ​ 129 ​ ​ 180 ​ Debt, net of current portion Total lease liabilities ​ $ 4,121 ​ $ 3,846 ​ ​ ​ ​ Remaining lease term subjectand discount rate used are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      December 31,  ​ June 30,    ​ ​ 2021 ​ 2021 ​ Weighted-Average Remaining Lease Term (years) ​ ​ ​ ​ ​ ​ ​ Operating lease assets   ​ 3.09 ​ ​ 3.42 ​ Finance lease assets   ​ 2.23 ​ ​ 2.72 ​ Weighted-Average Discount Rate   ​ ​ ​ ​ ​ ​ Operating lease assets   ​ 7.39 % ​ 6.62 % Finance lease assets ​ ​ 6.43 % ​ 6.41 % ​ ​ Supplemental cash flow information related to any changes in the lease or expectations regarding the terms. The lease liability is classified as current or long-term on the balance sheet.follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ December 31,  ​      2021      2020 ​ ​ (In thousands) Cash flow classification of lease payments: ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases ​ $ 585 ​ $ 125 Operating cash flows from finance leases ​ $ 8 ​ $ — Financing cash flows from finance leases ​ $ 50 ​ $ — ​ ​ 15 16 Table of Contents As of December 31, 2020,2021, the maturities of the Company’s future minimum lease payments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​      Operating      Finance ​ ​ (In thousands) 2022 (remaining 6 months) ​ $ 708 ​ $ 59 2023 ​ ​ 1,436 ​ ​ 104 2024 ​ ​ 1,379 ​ ​ 87 2025 ​ ​ 749 ​ ​ — 2026 ​ ​ 90 ​ ​ — 2027 ​ ​ 46 ​ ​ — Total lease payments ​ ​ 4,408 ​ ​ 250 Less: Imputed interest ​ ​ (519) ​ ​ (18) Lease liabilities ​ $ 3,889 ​ $ 232 ​     Operating     Finance   2021 (remaining 6 months)   $ 37,000     $ 61,000   2022     18,000       124,000   2023     -       127,000   2024     -       35,000   2025     -       3,000   Total lease payments     55,000       350,000   Less: Imputed interest             (39,000 ) Lease liabilities           $ 311,000   ​ Cash paid for amounts included in​ ​ ​ 8. Goodwill and Other Intangible Assets Since the measurement of finance lease liabilities forJune 30, 2021 annual goodwill impairment assessment, the sixCompany’s stock price has continued to decline. During the three months ended December 31, 2020 and 2019September 30, 2021, the continued decline was $147,000 and $63,000, respectively, and was included in net cash used in operating activities inconsidered a qualitative factor that led Management to reassess as to whether it is more likely than not that the consolidated statementsfair value of cash flows. Asone or more ofDecember 31, 2020, the weighted average remaining lease term is 2.28 years, and the weighted average discount rate used to determine operating lease liabilities was 8.0%. Rent expense for the three-months ended December 31, 2020 and 2019 totaled $90,000 and $30,000. Rent expense for the six-months ended December 31, 2020 and 2019 totaled $160,000 and $63,000, respectively. On August 28, 2020, the Company’s Innovus subsidiary signed a lease termination agreement withreporting units is greater than its lessor to terminate its lease effective September 30, 2020. The original lease termination date was April 30, 2023. As partcarrying value. Management’s evaluation of the agreement, Innovus agreed to makefirst step indicated that its Aytu BioPharma segment’s goodwill was potentially impaired. The Company then performed a cash payment toquantitative impairment test by calculating the landlord the equivalent of two additional months’ rent aggregating to $44,306 plus $125,000 less the security deposit of $20,881. The fair value of the lease liabilitysegment and comparing it to its carrying value. Significant assumptions inherent in the valuation methodologies include, but were not limited to prospective financial information, growth rates, terminal value, discount rates and comparable multiples from publicly traded companies in our industry. Due to the decline in stock price this was an indicator of increased risk primarily increasing the discount rates in the valuation models. The Company determined the fair value of the reporting segment utilizing the discounted cash flow model. As a result of the continued decline in its stock price, the Company risk adjusted its cost of equity, which increased the over-all discount rate. As of September 30, 2021, utilizing the risk adjusted weighted-average discount rate, the fair value of Aytu BioPharma segment was less than its carrying value. As a result, the Company recognized an impairment loss of $19.5 million related to this facility leasethe Aytu BioPharma segment. The quantitative test indicated there was approximately $0.7no impairment to the Aytu Consumer Health segment as it resulted in an implied fair value of $5.9 million compared with the $0.5 million carrying value. There was 0 such impairment during the three months ended December 31, 2021. The Aytu Consumer Health segment, which has $8.6 million goodwill from the March 2020 Innovus merger, reported $1.5 million negative carrying value as of June 30, 2020. The Company recognized a gain of approximately $343,000 during the six months ended December 31, 2020.2021. The change in carrying amount of goodwill by reportable segment is as follows:        On October 1, 2020, the Company's Innovus subsidiary entered into a short-term lease for warehouse space in Carlsbad, CA. The lease term is for one-year with an option to terminate after six months with ninety days' notice. This lease is accounted for as a short-term lease and is not included as a component of the Company's right-to-use assets and related liability.​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Aytu BioPharma      Aytu Consumer Health      Consolidated ​ ​ (In thousands) Balance as of June 30, 2021 ​ $ 57,165 ​ $ 8,637 ​ $ 65,802 Goodwill impairment ​   (19,453) ​   — ​   (19,453) Balance as of December 31, 2021 ​ $ 37,712 ​ $ 8,637 ​ $ 46,349 7. Intangible Assets – Amortizable ​ The Company currently holds the following intangible asset portfolios as of December 31, 2020:2021: (i) Licensed assets,asset, which consistconsists of pharmaceutical product assets that were acquired prior to July 1, 2020; (ii) Product technology rights, acquired from the November 1, 2019 acquisition of a line of prescription pediatric products (“Pediatric Portfolio”) from Cerecor, Inc. and the Pediatric Portfolio from Cerecor; and,Neos Merger on March 19, 2021; (iii) Proprietary modified-release drug delivery technology right as a result of the Merger with Innovus on February 14, 2020, both, (iii) theNeos Merger; (iv) Acquired product distribution rights;rights and commercial technology consisting of RxConnect and trade names as a result of the Neos Merger, and patents, and trade names and the Acquiredacquired customer lists. If acquired in an asset acquisition, the Company capitalizedlists from the acquisition cost of each licensed patent or tradename, which can include a combinationInnovus Pharmaceuticals, Inc. (“Innovus Merger”); (v) Acquired in-process R&D from the Neos Merger related to the NT0502 product candidate for the treatment of both upfront consideration, as well as the estimated future contingent consideration estimated at the acquisition date. If acquired in a business combination, the Company capitalizes the estimated fair valuesialorrhea. 16 Table of the intangible asset or assets acquired, based primarily on a discounted cash flow model approach or relief-from-royalties model.Contents The following table provides the summary of the Company’s intangible assets as of December 31, 20202021 and June 30, 2020,2021, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ Gross ​ ​ ​ ​ Net ​ Remaining ​ ​ Carrying ​ Accumulated ​ Carrying ​ Life (in ​      Amount      Amortization      Amount      years)   December 31, 2020     Gross Carrying Amount     Accumulated Amortization     Impairment     Net Carrying Amount     Weighted-Average Remaining Life (in years)   ​ ​ (In thousands) Licensed assets   $ 23,649,000     $ (8,200,000 )   $ -     $ 15,449,000       11.72   ​ $ 3,246 ​ $ (1,662) ​ $ 1,584 ​ 3.42 Acquired product technology right     22,700,000       (2,648,000 )     -       20,052,000       8.84   ​   45,400 ​   (5,963) ​   39,437   12.44 Acquired technology right ​ ​ 30,200 ​ ​ (1,390) ​ ​ 28,810 ​ 16.25 Acquired product distribution rights     11,354,000       (1,319,000 )     -       10,035,000       7.27   ​   11,354 ​   (2,827) ​   8,527   8.09 Acquired in-process R&D ​ ​ 2,600 ​ ​ — ​ ​ 2,600 ​ Indefinite-lived Acquired commercial technology ​ ​ 630 ​ ​ (493) ​ ​ 137 ​ 0.25 Acquired trade name ​ ​ 400 ​ ​ (156) ​ ​ 244 ​ 1.25 Acquired customer lists     390,000       (227,000 )     -       163,000       0.62   ​   390 ​   (390) ​   —   —   $ 58,093,000     $ (12,394,000 )   $ -     $ 45,699,000       9.44   Total ​ $ 94,220 ​ $ (12,881) ​ $ 81,339   13.13 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ Gross ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ Carrying ​ Accumulated      ​ Net Carrying ​ Life (in ​      Amount      Amortization      Amount      years)   June 30, 2020     Gross Carrying Amount     Accumulated Amortization     Impairment     Net Carrying Amount     Weighted-Average Remaining Life (in years)   ​ ​ (In thousands) Licensed assets   $ 23,649,000     $ (7,062,000 )   $ -     $ 16,587,000       11.88   ​ $ 3,246 ​ $ (1,430) ​ $ 1,816 ​ 3.92 MiOXSYS Patent     380,000       (185,000 )     (195,000 )     -       -   Acquired product technology right     22,700,000       (1,513,000 )     -       21,187,000       9.34   ​ ​ 45,400 ​ ​ (4,160) ​ ​ 41,240 ​ 12.88 Acquired technology right ​ ​ 30,200 ​ ​ (501) ​ ​ 29,699 ​ 16.75 Acquired product distribution rights     11,354,000       (565,000 )     -       10,789,000       7.78   ​ ​ 11,354 ​ ​ (2,073) ​ ​ 9,281 ​ 8.57 Acquired in-process R&D ​   2,600 ​   — ​   2,600 ​ Indefinite-lived Acquired commercial technology ​ ​ 630 ​ ​ (178) ​ ​ 452 ​ 0.75 Acquired trade name ​ ​ 400 ​ ​ (56) ​ ​ 344 ​ 1.75 Acquired customer lists     390,000       (98,000 )     -       292,000       1.12   ​ ​ 390 ​ ​ (358) ​ ​ 32 ​ 0.01   $ 58,473,000     $ (9,423,000 )   $ (195,000 )   $ 48,855,000       9.11   Total ​ $ 94,220 ​ $ (8,756) ​ $ 85,464 ​ 13.47 ​ 17 Table of Contents ​ ​ The following table summarizes the estimated future amortization expense to be recognized over the next five years and periods thereafter: ​   Amortization   2021   $ 3,157,000   2022     6,085,000   ​ ​ ​ ​ ​       December 31,  ​ ​ (In thousands) 2022 (remaining 6 months) ​ $ 3,914 2023     6,045,000   ​ ​ 7,489 2024     6,033,000   ​ ​ 7,333 2025     4,480,000   ​ ​ 7,099 2026 ​ ​ 6,331 2027 ​ ​ 6,301 Thereafter     19,899,000   ​ ​ 40,272   $ 45,699,000   Total future amortization expense ​ $ 78,739 ​ Certain of the Company’s amortizable intangible assets include renewal options, extending the expected life of the asset. The renewal periods range between approximately 1 to 20 years depending on the license, patent or other agreement. Renewals are accounted for when they are reasonably assured. Intangible assets are amortized using the straight-line method over the estimated useful lives. Amortization expense of intangible assets was $1.6$2.0 million and $0.9 17 Table of Contents $1.6 million for the three months ended December 31, 2021 and 2020, respectively, and 2019, respectively. Amortization expense of intangible assets was $3.2$4.1 million and $1.5$3.2 million for the six months ended December 31, 2021 and 2020, and 2019, respectively. ​ 8.9. Accrued liabilities Accrued liabilities consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31,  ​ June 30,  ​ ​ 2021 ​ 2021 ​ ​ (In thousands) Accrued program liabilities ​ $ 10,515 ​ $ 8,689 Accrued product-related fees ​   1,637 ​   2,501 Accrued savings offers ​ ​ 17,995 ​ ​ 20,148 Accrued distributor fees ​ ​ 3,156 ​ ​ 2,710 Accrued liabilities for trade partners ​   4,120 ​   5,421 Accrued option exercise and milestone fees ​ ​ 3,050 ​ ​ 600 Medicaid liabilities ​   1,258 ​   1,714 Return reserve ​   5,781 ​   6,367 Other accrued liabilities* ​   3,173 ​   3,145 Total accrued liabilities ​ $ 50,685 ​ $ 51,295     As of     As of       December 31,     June 30,       2020     2020   Accrued settlement expense   $ 150,000     $ 315,000   Accrued program liabilities     1,386,000       959,000   Accrued product-related fees     2,332,000       2,471,000   Credit card liabilities     712,000       510,000   Medicaid liabilities     2,094,000       1,842,000   Return reserve     1,656,000       1,329,000   Sales taxes payable     175,000       175,000   Other accrued liabilities*     373,000       249,000   Total accrued liabilities   $ 8,878,000     $ 7,850,000   *Other accrued liabilities consist of franchise tax,credit card liabilities, taxes payable, accounting fee, interest payable, merchant services charges,samples expense and consultants’ fees, none of which individually represent greater than five percent of total current liabilities.liabilities. 10. Debt The Neos Revolving Loan. On October 2, 2019, Neos entered into a senior secured credit agreement with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”) as agent for the lenders (the “Loan Agreement”). Under the Loan Agreement, Eclipse will extend up to $25.0 million in secured revolving loans to Neos (the “Revolving Loans”), of which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable. The Revolving Loans bear variable interest through maturity at the one-month London Interbank Offered Rate (“LIBOR”), plus 4.50%. In addition, Neos is required to pay an unused line fee of 0.50% of the average unused portion of the maximum revolving facility amount during the immediately preceding month. Interest is payable monthly in arrears. The maturity date under the Loan Agreement is May 11, 2022. In the event that, for any reason, all or any portion of the lender’s commitment to make revolving loans is terminated prior to the scheduled maturity date, in addition to the payment of the principal amount and all unpaid accrued interest and other amounts due thereon, Neos is required to pay to the lender a prepayment fee equal to 0.5% of the revolving loan commitment if such event occurs prior to May 11, 2022. Neos may permanently terminate the revolving loan facility with at least five business days prior notice. The Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the Loan Agreement, including covenants and restrictions that, among other things, require Neos to satisfy certain capital expenditure and other financial covenants, and restrict Neos’ ability to incur liens, incur additional indebtedness, engage in mergers and acquisitions or make asset sales without the prior written consent of the Lenders. A failure to comply with these covenants could permit the Lenders to declare Neos’ obligations under the Loan Agreement, together with accrued interest and fees, to be immediately due and payable, plus any applicable additional amounts relating to a prepayment or termination, as described above. In connection with the closing of the Neos Merger, Neos and Eclipse entered into a Consent, Waiver and First Amendment to the Loan Agreement, dated as of March 19, 2021 (the “Eclipse Consent, Waiver and Amendment”). Pursuant to the Consent, Waiver and First Amendment, Eclipse (i) irrevocably waives the right to impose the default rate of interest solely to the extent resulting from the inclusion of a "going concern" qualification in the audited financial statements of Neos on a consolidated basis for the fiscal year ending December 31, 2020 (the “Specified Default), (ii) the 9.18 Table of Contents right to impose the Default Rate of interest under Section 3.1 of the Loan Agreement, or to collect interest accruing at such Default Rate that Lenders had a lawful right to collect or apply with respect to any such Specified Default, and (iii) makes certain other modifications to the Eclipse Loan Agreement to reflect the consummation of the Neos Merger and the status of Neos as a wholly-owned subsidiary of Aytu, in each case subject to the terms and conditions of the Eclipse Consent, Waiver and Amendment. The interest expense was $0.2 million and $0.3 million for the three and six months ended December 31, 2021, respectively. As of December 31, 2021 $7.2 million borrowing was outstanding under the Revolving Loan and Neos was in compliance with the covenants under the Loan Agreement as amended. The Neos Senior Secured Credit Facility. On May 11, 2016, Neos entered into a $60.0 million senior secured credit facility (the “Facility”) with Deerfield Private Design Fund III, L.P. (66 2/3% of Facility) and Deerfield Partners, L.P. (33 1/3% of Facility) (collectively, “Deerfield”). As of March 19, 2021, the date of the Neos Merger, the remaining principal on the Facility was $15.6 million, with $0.6 million due on April 11, 2021 and with a final payment of principal, interest and all other obligations under the Facility due May 11, 2022. In addition, upon the payment in full of the Obligations (whether voluntarily, in the connection with a Change of Control or an Event of Default and whether before, at the time of or after the Maturity Date), the Company shall pay to Deerfield a non-refundable exit fee in the amount of approximately $1.0 million, which shall be due and payable in cash. Interest is due quarterly beginning in June 2021, at a rate of 12.95% per year. Borrowings under the Facility are collateralized by substantially all of Neos’ assets, except assets under finance lease. If all or any of the principal are prepaid or required to be prepaid prior to December 31, 2021, then the Company shall pay, in addition to such prepayment and accrued interest thereon, a prepayment premium equal to 6.25% of the amount of principal prepaid. The terms of the Facility require the Company to maintain cash on deposit of not less than $5.0 million. Long-term debt consists of the following; ​ ​ ​ ​ ​ ​ ​ ​ ​      December 31,       June 30,  ​ ​ 2021 ​ 2021 ​ ​ (In thousands) Neos senior secured credit facility, due on May 11, 2022 ​ $ 15,000 ​ $ 15,000 Exit fee ​ ​ 1,000 ​ ​ 1,000 Unamortized premium ​ ​ 240 ​ ​ 566 Financing leases, maturing through May 2024 ​ ​ 232 ​ ​ 282 Total debt ​ ​ 16,472 ​ ​ 16,848 Less: current portion ​ ​ (16,343) ​ ​ (16,668) Non-current portion of debt ​ $ 129 ​ $ 180 ​ In connection with the Neos Merger, Neos and Deerfield entered into a Consent, Waiver and Sixth Amendment to the Facility, dated as of March 19, 2021 (the “Deerfield Consent, Waiver and Amendment”). Pursuant to the Consent, Waiver and Sixth Amendment, Deerfield (i) consented to certain amendments to the Eclipse loan documents, (ii) irrevocably waive the Going Concern Conditions as described in the Deerfield Consent, Waiver and Amendment and their right to impose the default rate of interest as provided for in the Facility as of May 11, 2016, or to collect interest accruing at such default rate of interest, that the Lenders had a lawful right to collect or apply with respect to any such Event of Default for failure to satisfy such Going Concern Condition, (iii) subject the Company and its subsidiaries to certain restrictive covenants including limitations on the incurrence of debt, granting of liens and transfers of assets of the Company and its subsidiaries and (iv) makes certain other modifications to the Facility to reflect the consummation of the Neos Merger and the status of Neos as a wholly-owned subsidiary of the Company. Such modifications also include the prepayment of $15.0 million by the Company of the principal of the loan that was otherwise due on May 11, 2021 plus any accrued interest thereon through March 19, 2021, plus a make-whole payment equal to the interest that would otherwise have been due on that $15.0 million for the period beginning March 19, 2021 through May 11, 2021. The Sixth Amendment also eliminated the right of Deerfield to convert outstanding amounts of the loans into conversion shares and the right of Neos to make payments to Deerfield in the form of shares of common stock. The Company is a guarantor under the Facility. 19 Table of Contents Pursuant to the terms of the Facility, as amended, the $15.0 million principal prepayment was paid in cash on March 19, 2021, and the carrying amount of the remaining outstanding debt was $16.6 million. As the Neos Merger was accounted for as a business combination, Neos evaluated and determined that the fair value of the remaining outstanding debt was $17.4 million as of March 20, 2021. Accordingly, Neos recorded a premium of $0.8 million, which is the difference between carrying amount and the fair value of the debt and is being amortized into interest expense using the effective interest method over the remaining term of the debt. As of December 31, 2021, the Company was in compliance with the covenants under the Facility as amended. Total interest expense on the Facility, net of premium amortization, was $0.4 million and $0.7 million for the three and six months ended December 31, 2021, respectively. Future principal payments of long-term debt, including financing leases, are as follows: ​ ​ ​ ​ ​ ​      December 31,  ​ ​ (In thousands) 2022 ​ $ 16,104 2023 ​ ​ 89 2024 ​ ​ 39 Future principal payments ​ ​ 16,232 Add unamortized premium ​ ​ 240 Less current portion ​ ​ (16,343) Non-current portion of debt ​ $ 129 ​ ​ ​ ​ ​ 11. Fair Value Considerations The Company’s asset and liability classified financial instruments include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, warrant derivative liability and contingent consideration. The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The fair value of acquisition-related contingent consideration is based on Monte-Carlo models. The valuation policies are determined by management, and the Company’s Board of Directors is informed of any policy change. 18 Table of Contents Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows: Level 1: Inputs that reflect unadjusted quoted prices in active markets that are accessible to Aytu for identical assets or liabilities; Level 2: Inputs that include quoted prices for similar assets and liabilities in active or inactive markets or that are observable for the asset or liability either directly or indirectly; and Level 3: Unobservable inputs that are supported by little or no market activity. The Company’s assets and liabilities which are measured at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company’s policy is to recognize transfers in and/or out of fair value hierarchy as of the date in which the event or change in circumstances caused the transfer. AytuThe Company has consistently applied the valuation techniques discussed below in all periods presented. 20 Table of Contents Recurring Fair Value Measurements The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 20202021 and June 30, 2020,2021, by level within the fair value hierarchy. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      ​ ​ ​ Fair Value Measurements at December 31, 2021 ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Priced in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Markets ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ for ​ Other ​ Significant ​ ​ ​ ​ ​ Identical ​ Observable ​ Unobservable ​      Fair Value at December 31,       Assets      Inputs      Inputs ​ ​ 2021   (Level 1)   (Level 2)   (Level 3)           Fair Value Measurements at December 31, 2020     Fair Value at December 31, 2020     Quoted Priced in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)   Recurring:                                 ​ ​ (In thousands) Assets:   ​ ​   ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 35,277 ​ $ 35,277 ​ $ — ​ $ — Total ​ $ 35,277   $ 35,277   $ — ​ $ — Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration     16,280,000       –       –       16,280,000     $ 9,503   $ —   $ —   $ 9,503 CVR liability     6,472,000       –       –       6,472,000     ​ 1,392   ​ —   ​ —   ​ 1,392   $ 22,752,000       –       –     $ 22,752,000   Total ​ $ 10,895   $ —   $ — ​ $ 10,895 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      ​ ​ ​ Fair Value Measurements at June 30, 2021 ​ ​ ​ ​ ​ Quoted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Priced in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Active ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Markets ​ Significant ​ ​ ​ ​ ​ ​ ​ ​ for ​ Other ​ Significant ​ ​ ​ ​ ​ Identical ​ Observable ​ Unobservable ​      Fair Value at June 30,       Assets      Inputs      Inputs ​ ​ 2021   (Level 1)   (Level 2)   (Level 3)           Fair Value Measurements at June 30, 2020     Fair Value at June 30, 2020     Quoted Priced in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)   Recurring:                                 ​   (In thousands) Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 49,649 ​ $ 49,649 ​ $ — ​ $ — Total ​ $ 49,649   $ 49,649   $ — ​ $ — Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration     13,588,000       –       –       13,588,000   ​ $ 12,057   $ —   $ —   $ 12,057 CVR liability   $ 5,572,000       –       –     $ 5,572,000   ​ ​ 1,395   ​ —   ​ —   ​ 1,395   $ 19,160,000       –       –     $ 19,160,000   Total ​ $ 13,452   $ —   $ — ​ $ 13,452 ​ Contingent Consideration. The Company classifies its contingent consideration liability in connection with the acquisition of Tuzistra XR, ZolpiMist and Innovus, within Level 3 as factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity. The Company estimates Tuzistra XR. At the fair value of our contingent consideration liability basedacquisition date on projected payment dates, discount rates, probabilities of payment, and projected revenues. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow methodology. As of November 2, 2018, the contingent consideration related to this Tuzistra XR, was valued at $8.8 million using a Monte Carlo simulation. As of December 31,2020,31, 2021 and June 30, 2021, the contingent consideration was revalued at $15.8$8.5 million and $11.0 million, respectively, using the same Monte Carlo simulation methodology, and based on current interest rates, expected sales potential, and Aytu stock trading variables.Scenario-Based model. During the three months ended December 31, 2021, the Company paid $3.0 million in cash upon the satisfaction of the time-based milestone. As of December 31, 2020, none2021, NaN of the remaining milestones had been achieved, and therefore, no milestone payment was made. However, approximately $3.0 million is expected to be paid in November 2021, as this milestone will be satisfied.achieved. 19 Table of Contents TheZolpiMist. At the acquisition date on June 11, 2018, the contingent consideration related to the ZolpiMist royalty payments was valued at $2.6 million using a Monte Carlo simulation, as of June 11, 2018.simulation. As of December 31, 2020,2021 and June 30, 2021, the contingent consideration was revalued at $0.3$0.7 million, using the same Monte Carlo simulation methodology, and based on current interest rates, expected sales potential, and Aytu stock trading variables. The Company reevaluates the contingent consideration on a quarterly basis for changes in the fair value recognized after the acquisition date, such as measurement period adjustments.model. As of December 31, 2020, none2021, NaN of the milestones had been achieved, and therefore, no0 milestone payment was made. 21 TheTable of Contents On February 14, 2020, the Company recognized approximately $0.2 million in product related contingent consideration as a result of the February 14, 2020 Innovus Merger. The fair value was based on a discounted value of the future contingent payment using a 30% discount rate based on the estimatesestimated risk that the milestones are achieved. TheAs of December 31, 2021 and June 30, 2021, the contingent consideration accretion expensewas $0.3 million. In June 2017, Innovus entered into Exclusive License Agreement (“the UIRD Agreement”) with University of Iowa Research Foundation (“UIRD”) for the use of patent and technology know-how. Pursuant to the agreement, Innovus will pay to UIRD a total milestone payment of $50,000 every other year beginning on July 1, 2021 for a total payment of $0.2 million. The fair value was based on a discounted value of the future contingent payment using a 26% discount rate based on the estimated risk that the milestones would be achieved. The discounted value as of December 31, 2021 and June 30, 2021, was approximately $48,000 and $0.1 million, respectively. During the three and six-monthsmonths ended December 31, 2021 and 2020, the Company recognized a net loss of $0.3 million and 2019 was $15,000, and $28,000, respectively. There was no material change$2.4 million, respectively, in this valuation asthe consolidated statements of operations from changes in fair values of these contingent considerations. During the six months ended December 31, 2021 and 2020,. the Company recognized a net loss of $0.5 million and $2.4 million, respectively in the consolidated statements of operations from changes in fair values of these contingent considerations. The total accretion expense included in the consolidated statements of operations related to these contingent considerations was approximately $22,000, and $0.3 million during the three months ended December 31, 2021 and 2020, respectively, and $0.1 million and $0.3 million during the six months ended December 31, 2021 and 2020, respectively. Contingent value rights. Contingent value rights (“CVRs”) represent contingent additional consideration of up to $16$16.0 million payable to satisfy future performance milestones related to the Innovus Merger. Consideration can be satisfied in up to 470 thousand470,000 shares of the Company’s common stock, or cash either upon the option of the Company or in the event there are insufficient shares available to satisfy such obligations. The fair value of the contingent value rights was based on a Monte Carlo model which takes into account current interest rates and expected sales potential. On March 31, 2020, the Company paid outthe CVR holders approximately 120 thousand123,820 shares of the Company’s common stock to satisfy the first $2$2.0 million milestone, which relates to the Innovus achievement of $24$24.0 million in revenues during the 2019 calendar year. On March 20, 2021, the Company paid the CVR holders approximately 103,190 shares of the Company’s common stock to satisfy one of two $1.0 million 2020 milestones, which relates to the Innovus achievement of $30.0 million in revenues during the 2020 calendar year. The unrealized$1.0 million 2020 milestone for achieving profitability was not met. The $1.0 million 2021 milestones, which relate to the Innovus achievement of $40.0 million in revenues during the 2021 calendar year and $1.0 million for achieving profitability were not met. As of December 31, 2021 and June 30, 2021, the CVRs were revalued at $1.4 million, using the same Monte Carlo model. During the three months ended December 31, 2021 and 2020, the Company recognized a loss forof $44,000 and $0.1 million, respectively, and a loss of $0.9 million during the three and six-monthssix months ended December 31, 2020 and 2019was $0.1 million and $0.8 million, respectively.in the consolidated statements of operations from changes in fair values of CVRs. The CVR's did not exist until afternet gain during the six months ended December 31, 2019. 2021 was negligible. Summary of Level 3 Input Changes The following table sets forth a summary of changes to those fair value measures using Level 3 inputs for the three months ended December 31, 2020:2021: ​ ​ ​ ​ ​ ​ ​ ​ ​      CVR      Contingent ​ ​ Liability ​ Consideration ​ (In thousands) Balance as of June 30, 2021   $ 1,395 ​ $ 12,057 Included in earnings   ​ (3) ​ ​ 555 Purchases, issues, sales and settlements:     ​ ​ ​ ​ Settlements     — ​   (3,109) Balance as of December 31, 2021   $ 1,392 ​ $ 9,503 ​     CVR Liability     Contingent Consideration   Balance as of June 30, 2020   $ 5,572,000     $ 13,588,000   Transfers into Level 3     –       –   Transfer out of Level 3     –       –   Total gains, losses, amortization or accretion in period     –       –   Included in earnings   $ 900,000     $ 2,735,000   Included in other comprehensive income     –       –   Purchases, issues, sales and settlements     –       –   Purchases     –       –   Issues     –       –   Sales     –       –   Settlements     –     $ (43,000 ) Balance as of December 31, 2020   $ 6,472,000     $ 16,280,000   22 Table of Contents Significant Assumptions Contingent consideration. The Company estimates the fair value of the Contingent Consideration at each reporting date using management's forecast as the baseline for developing a Monte-Carlo model.The other significantSignificant assumptions used in valuing the Monte Carlo Simulation as of December 31, 2020, were as follows:  As of December 31, 2020 Contingent Consideration Credit risk assumption 19.10% Sales volatility 45.00% Credit spread 4.00% Time steps per year 1 Number of iterations 500 Contingent value rights. The Company estimates the fair value of the Contingent Value Rights at each reporting date using management's forecast as the baseline for developing a Monte-Carlo model. The other significant assumptions used in the Monte Carlo Simulation as of December 31, 2020contingent consideration were as follows: ​ ​ ​ ​ ​ ​ As of December 31, 2020 Contingent Value Rights​ Credit risk assumption​ 9.6%2021 Time steps per yearTuzistra 30.00 Number of iterationsValuation model ​ 10,000Scenario-Based ​ Leveraged Beta 0.66 Market risk premium 6.00 %   Risk-free interest rate 1.80 %   Discount 14.30 %   Company specific discount 15.00 %   ​ 20 Table of Contents ​ ​ ​ ​ ​ December 31,  ​ ​ 2021 ZolpiMist Valuation method ​ Monte Carlo ​ Leveraged Beta 1.08 Market risk premium 6.00 %   Risk-free interest rate 1.90 %   Discount 11.50 %   Company specific discount 15.00 %   ​ 10.Significant assumptions used in valuing the CVRs were as follows: ​ ​ ​ ​ ​ ​ December 31,  ​ 2021 Contingent Value Rights ​ Valuation method ​ Monte Carlo ​ Leveraged Beta 0.85 ​ Market risk premium ​ 6.00 % Risk-free interest rate ​ 0.73 % Discount ​ 18.00 % Company specific discount 10.00 % ​ ​ ​ ​ ​ 12. Commitments and Contingencies Commitments and contingencies are described below and summarized by the following as of December 31, 2020:     Total     2021     2022     2023     2024     2025     Thereafter   Prescription database   $ 1,278,000     $ 545,000     $ 733,000       -       -       -       -   Pediatric portfolio fixed payments and product minimums     15,825,000       1,650,000       3,300,000       3,300,000       3,300,000       3,300,000       975,000   Inventory purchase commitment     1,717,000       981,000       736,000       -       -       -       -   CVR liability     14,000,000       2,000,000       2,000,000       5,000,000       5,000,000       -       -   Product contingent liability     2,500,000       -       -       -       -       -       2,500,000   Product milestone payments     3,000,000       -       3,000,000       -       -       -       -                                               ��                 $ 38,320,000     $ 5,176,000     $ 9,769,000     $ 8,300,000     $ 8,300,000     $ 3,300,000     $ 3,475,000   Prescription Database In May 2016, the Company entered into an agreement with a vendor that willto provide it with prescription database information. The Company agreed to pay approximately $1.6 million over three years for access to the database of prescriptions written for Natesto.certain products. In January 2020, the Company amended the agreement and agreed to pay an additional $0.6 million to add access to the database of prescriptions written for the Pediatric Portfolio. The payments have been broken down into quarterly payments.agreement was further amended to include all prescriptions written for the Rx Portfolio. Pediatric Portfolio Fixed Payments and Product Milestone The Company assumedhas two fixed, periodic payment obligations to an investor (the “Fixed Obligation”). BeginningUnder the first fixed obligation, the Company was to pay monthly payment of $86,400 beginning November 1, 2019 through January 2021, the Company will pay monthly payments of $86,840, with a balloon payment of $15,000,000$15.0 million that was to be due in January 2021.2021 (“Balloon Payment Obligation”). A second fixed obligation requires the Company pay a minimum of $100,000 monthly through February 2026, except for $210,767 paid in January 2020. 23 Table of Contents On May 29, 2020, the Company entered into an Early Payment Agreement and Escrow Instruction (the “Early Payment Agreement”) pursuant to which the Company agreed to pay $15.0 million to the investor in early satisfaction of the Balloon Payment Obligation. The parties to the Early Payment Agreement acknowledged and agreed that the remaining fixed payments other than the Balloon Payment Obligation remainremained due and payable pursuant to the terms of the Agreement, and that nothing in the Early Payment Agreement alters, amends, or waives any provisions or obligations in the Waiver or the Investor agreement other than as expressly set forth therein. The first fixed obligation was fully paid as of January 2021. On June 21, 2021, the Company entered into a Waiver, Release and Consent pursuant to which the Company paid $2.8 million to the investor in early satisfaction of the second fixed obligation. The Company agreed to pay the remaining fixed obligation of $3.0 million in six equal quarterly payments of $0.5 million over the next six quarters commencing September 30, 2021. In addition, the Company acquired a Supply and Distribution Agreement with Tris Pharma, Inc. ("TRIS"), (the “Karbinal Agreement”), under which the Company is granted the exclusive right to distribute and sell the product in the United States. The initial term of the Karbinal Agreement was 20 years. The Company will pay TRISTris a royalty equal to 23.5% of net sales. A third party agreed to offset the 23.5% royalty payable by 8.5%, for a net royalty equal to 15%, in fiscal year 2018 and 2019 for net sales of Karbinal. The Karbinal Agreement make-whole payment is capped at $2,100,000 each year. The Karbinal Agreement also contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31, of 70,000 units annually through 2025. The Company is required to pay TRISTris a royalty make whole payment of $30 for each unit under the 70,000-unit annual minimum sales commitment through 2025. The Karbinal Agreement make-whole payment is capped at $2.1 million each year. The annual payment is due in August of each year. The Karbinal Agreement also has multiple commercial milestone obligations that aggregate up to $3.0 million based on cumulative net sales, the first of which is triggered at $40.0 million of net revenues. Inventory Purchase Commitment On May 1, 2020, the Company'sCompany’s Innovus subsidiary entered into a Settlement Agreement and Release (the “Settlement Agreement”) with Hikma Pharmaceuticals USA, Inc. (“Hikma”). Pursuant to the settlement agreement, Innovus has agreed to purchase and Hikma has agreed to manufacture a minimum amount of our branded fluticasone propionate nasal spray USP, 50 mcg per spray (FlutiCare®), under Hikma’s FDA approved ANDA No. 207957 in the U.S. The commitment requires Innovus to purchase three batches of product through fiscal year 2022 each2022. The Company has completed the purchase of whichthe first two batches and fully paid the amount under the agreement. The remaining $0.7 million for the batch three purchase is expected to $1.0 million.be paid in the third quarter of fiscal year 2022. CVR Liability On February 14, 2020, the Company closed on the Merger with Innovus Pharmaceuticals after approval by the stockholders of both companies on February 13, 2020. Upon closing the Innovus Merger, a subsidiary of the Company merged with and into Innovus and entered into a Contingent Value Rights Agreement (the “CVR Agreement”).CVR Agreement. Each CVR entitles its holder to receive its pro rata share, payable in cash or stock, at the option of Aytu,the Company, of certain payment amounts if the targets are met. If any of the payment amounts isare earned, they are to be paid by the end of the first quarter of the calendar year following the year in which they are earned. Multiple revenue milestones can be earned in one year. On March 31, 2020,20, 2021, the Company paid outissued to the first CVR Milestone in the form of approximately 120 thousandholders 103,190 shares of the Company’s common stock to satisfy one of two $1.0 million 2020 milestones, which relates to the $2.0Innovus achievement of $30.0 million obligation as a result of Innovus achievingin revenues during the $24.02020 calendar year. The $1.0 million revenue2020 milestone for achieving profitability was not met. The $1.0 million 2021 milestones, which relates to the Innovus achievement of $40.0 million in revenues during the 2021 calendar year ended December 31, 2019. As a result of this, the Company recognized a gain of approximately $0.3and $1.0 million during the fiscal year ended June 30, 2020. No additional milestone payments have been paid as of December 31, 2020.for achieving profitability were not met. 21 Table of Contents Product Contingent Liability In February 2015, Innovus acquired Novalere, which included the rights associated with distributing FlutiCare. As part of the Merger, Innovus is obligated to make 5 additional payments of $0.5million each when certain levels of FlutiCare sales are achieved. The discounted value as of December 31, 2020,2021, is approximately $0.3 million. 24 Table of Contents Pursuant to the University of Iowa Research Foundation (the “UIRD”) Agreement, Innovus will pay to UIRD a total milestone payment of $50,000 every other year beginning on July 1, 2021 for a total payment of $0.2 million. The discounted value as of December 31, 2021, is approximately $48,000. The first milestone cash payment of $50,000 was made in July 2021. Rumpus Earn Out Payments Product Milestone Payments In connectionOn April 12, 2021, the Company acquired substantially all of the assets of Rumpus, pursuant to which the Company acquired certain rights and other assets, including key commercial global licenses with Denovo Biopharma LLC (“Denovo”) and Johns Hopkins University (“JHU”), relating to AR101, which is a pivotal study-ready therapeutic being studied for the treatment of VEDS. This asset was acquired for an up-front fee of $1.5 million in cash and payment of aggregated fees of $0.6 million to Denovo and JHU. Upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the Company’s intangible assets, Aytu has certain milestone payments, totaling $3.0option, are payable to Rumpus. Under the license agreement with Denovo, the Company assumed the responsibility for paying annual maintenance fees of $25,000, a license option fee of $0.6 million payable atin April 2022, and upon the achievement of certain regulatory and commercial milestones, up to $101.7 million, and escalating royalties based on net product sales ranging in percentage from the low teens to the high teens. Finally, under the license agreement with JHU, the Company assumed the responsibility for paying minimum annual royalties escalating from $5,000 to $20,000 beginning in calendar year 2022, royalties of 3.0% of net product sales, and upon the achievement of certain regulatory and commercial milestones, up to $1.6 million. On December 7, 2021, upon receiving Orphan Drug Designation (“ODD”) from the FDA for AR101, a future date, are not directly tiedmilestone payment of $2.5 million is due and payable to future sales, but upon other events certain to happen. These obligations are includedRumpus in the valuationcash or in shares of the Company’s contingent consideration (see Note 9).common stock. The $2.5 million milestone payment is included in our accrued liabilities in the condensed consolidated balance sheets as of December 31, 2021. ​ 11.13. Capital Structure The Company has 200 million shares of common stock authorized with a par value of $0.0001 per share and 50 million shares of preferred stock authorized with a par value of $0.0001 per share. On As of December 31, 20202021 and June 30, 2020, Aytu2021, the Company had 17,882,89330,010,468 and 12,583,73627,490,412 common shares outstanding, respectively, and zero0 preferred shares outstanding, respectively. Included in the common stock outstanding are 365,8692,163,040 shares of restricted stock issued to executives, directors employees, and consultants.employees. On June 8, 2020, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on June 17, 2020. This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2020 Shelf”). As of December 31, 2021, approximately $43.3 million remains available under the 2020 Shelf. On September 28, 2021, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 7, 2021. This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”). As of December 31, 2021, the Company has not issued any common stock, preferred stock, debt securities, warrants, rights or units under the 2021 Shelf. On June 4, 2021, the Company entered into a sales agreement with Cantor Fitzgerald & Co., as sales agent, to provide for the offering, issuance and sale by the Company of up to $30.0 million of its common stock from time to time in “at-the-market” offerings under the 2020 Shelf (the “Cantor ATM”). In July 2021, the Company issued 61,500 shares of common stock under the Cantor ATM, with total gross proceeds of approximately $0.3 million before deducting underwriting discounts, commissions, and other offering expenses. During the three months ended December 31, 2021, the Company issued an additional 2,161,584 shares of common stock under the Cantor ATM, with total gross proceeds 25 Table of Contents of approximately $4.5 million before deducting underwriting discounts, commissions, and other offering expenses of $0.2 million. As of December 31, 2021, approximately $12.5 million of the Company’s common stock remained available to be sold pursuant to the Cantor ATM. ​ 14. Equity Incentive Plans Aytu 2015 Plan. On June 1, 2015, the Company’s stockholders approved the Aytu BioPharma 2015 Stock Option and Incentive Plan (the “Aytu 2015 Plan”), which, as amended in July 2017, provides for the award of stock options, stock appreciation rights, restricted stock and other equity awards for up to an aggregate of 3.0 million shares of common stock. The shares of common stock underlying any awards that are forfeited, canceled, reacquired by Aytu prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2015 Plan will be added back to the shares of common stock available for issuance under the Aytu 2015 Plan. On February 13, 2020, the Company’s stockholders approved an increase to 5.0 million total shares of common stock in the Aytu 2015 Plan. Stock options granted under this plan have contractual terms of 10 years from the grant date and a vesting period ranging from 3 to 4 years. The restricted stock awards have a vesting period ranging from 4 to 10 years, whereas the restricted stock units have a vesting period of 4 years. As of December 31, 2021, the Company had 2,603,044 shares available for grant under the Aytu 2015 Plan. Neos 2015 Plan. Pursuant to the Neos Merger, the Company assumed 69,721 stock options and 35,728 restricted stock units (RSUs) previously granted under Neos plan. Accordingly, on April 19, 2021, the Company registered 105,449 shares of its common stock under the Neos Therapeutics, Inc. 2015 Stock Options and Incentive Plan (the "Neos 2015 Plan") with the SEC. The terms and conditions of the assumed equity securities will stay the same as they were under the previous Neos plan. In addition to the 105,449 registered shares to cover the assumed awards, the remaining 1,255,310 shares available under the legacy Neos plan was added back to the new Neos 2015 Plan. The Company allocated costs of the replacement awards attributable to pre- and post-combination service periods. The pre-combination service costs were included in the considerations transferred. The remaining costs attributable to the post-combination service period are being recognized as stock-based compensation expense over the remaining terms of the replacement awards. Stock options granted under this plan have contractual terms of 10 years from the grant date and a vesting period ranging from 1 to 4 years. As of December 31, 2021, the Company had 1,218,997 shares available for grant under the Neos 2015 Plan. Stock Options Stock option activity is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​                ​ ​      Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Weighted ​ Remaining ​ ​ Number of ​ Average ​ Contractual ​ ​ Options ​ Exercise Price ​ Life in Years Outstanding June 30, 2021   109,588 ​ $ 14.52   8.07 Forfeited/Cancelled   (9,355) ​ ​ 6.35      Expired   (9,502) ​ ​ 8.10      Outstanding at December 31, 2021   90,731 ​ $ 16.03   8.22 ​ ​ ​ ​ ​ ​ ​ ​ Exercisable at December 31, 2021   47,838 ​ $ 22.99   8.17 ​ As of December 31, 2021, there was $0.3 million of total unrecognized compensation costs adjusted for estimated forfeitures, related to non-vested stock options granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2 years. Restricted Stock On August 2, 2021, the Company granted 220,000 shares of restricted stock, with certain accelerated vesting conditions, to a member of its management pursuant to the Aytu 2015 Plan, of which 1/3 vest on August 2, 2022 and 1/12 on 26 Table of Contents thefirstday of eachquarterthereafter, subject to continuing employment with the Company through each vesting date until August 2, 2024. These restricted stocks grants have a grant date fair value of $4.02 per-share. On October 11, 2021, the Company granted 75,000 shares of restricted stock to a member of its management pursuant to the Neos 2015 Plan, of which 1/3 vest on October 11, 2022 and 1/12 each quarterthereafter, subject to continuingemploymentwith the Company through each vesting date until October 11, 2024. These restricted stocks grants have a grant date fair value of $2.65 per-share. Restricted stock activity is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average Grant ​ ​ Number of ​ Date Fair ​ ​ Shares ​ Value Unvested at June 30, 2021   1,955,268 ​ $ 7.83 Granted   295,000 ​ ​ 3.67 Vested   (90,836) ​ ​ 7.97 Unvested at December 31, 2021   2,159,432 ​ $ 7.26 ​ As of December 31, 2021, there was $11.9 million of total unrecognized compensation costs adjusted for estimated forfeitures, related to non-vested restricted stock granted under the Company’s equity incentive plan. The unrecognized compensation cost is expected to be recognized over a weighted average period of 3.1 years. The Company previously issued 158 shares of restricted stock outside the Aytu 2015 Plan, which vest in July 2026. The unrecognized expense related to these shares was $0.9 million as of December 31, 2021 and is expected to be recognized over the weighted average period of 4.52 years. Restricted Stock Unit On December 1, 2021, the Company granted 20,000 shares of restricted stock units, to a member of its management pursuant to the Aytu 2015 Plan, of which 1/3 vest on December 1, 2022 and 1/12onthefirstdayofeach quarter thereafter, subject to continuing employment with the Company through each vesting date until December 1, 2024. These restricted stocks grants have a grant date fair value of $1.86 per-share. Restricted stock unit activity is as follows: ​ ​ ​ ​ ​ ​ ​ ​                ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average Grant ​ ​ Number of ​ Date Fair ​ ​ Shares ​ Value Unvested at June 30, 2021   78,318 ​ $ 7.20 Granted ​ 20,000 ​ ​ 1.86 Vested   (1,972) ​ ​ 6.04 Forfeited ​ (62,922) ​ ​ 7.44 Unvested at December 31, 2021   33,424 ​ $ 3.61 ​ As of December 31, 2021, there was $0.1 million of total unrecognized compensation costs adjusted for any estimated forfeitures, related to non-vested RSUs granted under the Company’s equity incentive plans. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.0 years. 27 Table of Contents Stock-based compensation expense related to the fair value of stock options and restricted stock and RSUs was included in the statements of operations as set forth in the below table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ December 31,  ​ December 31,  ​      2021      2020 ​ 2021      2020 ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Cost of sales ​ $ 8 ​ $ — ​ $ 17 ​ $ — Research and development ​ ​ 75 ​ ​ — ​ ​ 394 ​ ​ — Selling and marketing ​ ​ 19 ​ ​ — ​ ​ 28 ​ ​ — General and Administrative ​   1,127 ​   508 ​   2,309 ​   963 Total stock-based compensation expense ​ $ 1,229 ​ $ 508 ​ $ 2,748 ​ $ 963 ​ The stock-based compensation expense included in the table above attributable to stock options was $22,000 and $0.1 million for the three months ended December 31, 2021 and 2020, respectively, and $45,000 and $0.2 million for the six months ended December 31, 2021 and 2020, respectively. The stock-based compensation expense included in the table above attributable to restricted stock was $1.2 million and $0.4 million for the three months ended December 31, 2021 and 2020, respectively, and $2.7 million and 0.8 million for the six months ended December 31, 2021 and 2020, respectively. ​ 15. Warrants On July 1, 2020, 92,302 warrants previously issued to a placement agent with a weighted average exercise price of $15.99 per warrant expired. In addition, during July 2021, 2,205 various other warrants with a weighted average exercise price of $582.50 per warrant to purchase the Company’s shares of common stock expired. As of December 31, 2021, the Company had 24,105 liability warrants outstanding with a weighted-average exercise price of $720.0. These warrants expire on August 25, 2022. A summary of equity-based warrants is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      ​      ​ ​      Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ Weighted ​ Remaining ​ ​ Number of ​ Average ​ Contractual ​ ​ Warrants ​ Exercise Price ​ Life in Years Outstanding June 30, 2021   1,254,952 ​ $ 35.85   2.83 Warrants expired   (95,670) ​   114.33   — Outstanding December 31, 2021   1,159,282 ​ $ 29.51   2.72 ​ ​ 16. Net Loss per Common Share Basic income (loss) per common share is calculated by dividing the net income (loss) available to the common shareholders by the weighted average number of common shares outstanding during that period. Diluted net loss per share reflects the potential of securities that could share in the net loss of the Company. For all periods presented, there is no difference in the number of shares used to compute basic and diluted shares outstanding due to the Company’s net loss position. Restricted stock is considered legally issued and outstanding on the grant date, while RSUs are not considered legally issued and outstanding until the RSUs vest. Once the RSUs vest, equivalent common shares will be issued or issuable to the grantee and therefore the RSUs are not considered for inclusion in total common shares issued and outstanding until vested. 28 Table of Contents The following table sets-forth securities that could be potentially dilutive, but for the three and six months ended December 31, 2021 and 2020 are anti-dilutive, and therefore excluded from the calculation of diluted earnings per share. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31,  ​      ​      2021      2020 Warrants to purchase common stock - liability classified   (Note 15) ​ 24,105   24,105 Warrant to purchase common stock - equity classified   (Note 15) ​ 1,159,282   2,379,918 Employee stock options   (Note 14) ​ 90,731   76,594 Employee unvested restricted stock   (Note 14) ​ 2,159,432   381,686 Employee unvested restricted stock units ​ (Note 14) ​ 33,424 ​ — Total ​ ​ ​ 3,466,974   2,862,303 ​ ​ ​ ​ 17. License Agreements Rumpus (AR101) In April 2021, the Company acquired substantially all the assets of Rumpus. Through this transaction the Company secured exclusive global rights to AR101 from Denovo in the fields of rare genetic pediatric onset or congenital disorders outside of oncology. AR101 is a pivotal study-ready therapeutic candidate initially targeting the treatment of VEDS. Under the terms of the transaction, the Company paid an upfront fee of $1.5 million and aggregated fees of $0.6 million to Denovo and JHU. Upon the achievement of certain regulatory and commercial milestones, the Company will pay Rumpus up to $67.5 million in earn-out payments, which are payable in cash or shares of common stock, generally at the Company’s option. In addition, the Company received assignments of third-party licenses from Denovo and JHU and took over royalty obligations and performance-based milestones under these licenses. On December 7, 2021 the FDA granted ODD to AR101 for the treatment of Ehlers-Danlos Syndrome, which includes the treatment of VEDS. As a result of this designation, a milestone payment of $2.5 million is due and payable to Rumpus in cash or in shares of the Company’s common stock. The $2.5 million milestone payment is included in our accrued liabilities in the condensed consolidated balance sheets as of December 31, 2021. In addition, on December 13, 2021 the FDA has cleared the IND application for AR101, enabling the Company to proceed with initiating a pivotal clinical trial for AR101 in VEDS. The PREVEnt Trial will assess the safety and efficacy of enzastaurin in COL3A1-confirmed VEDS patients. Healight In April 2020, the Company entered into a licensing agreement with Cedars-Sinai Medical Center to secure worldwide rights to various potential esophageal and nasopharyngeal uses of Healight, an investigational medical device platform technology. Healight has demonstrated safety and efficacy in a proof-of-concept clinical study in SARS-CoV-2 patients, and the Company plans to advance this technology to further assess its safety and efficacy in additional randomized, controlled human studies, initially focused on SARS-CoV-2 patients. The agreement with Cedars-Sinai grants the Company a license to all patent and development related technology rights for the intra-corporeal therapeutic use of ultraviolet light in the field of endotracheal and nasopharyngeal applications. The term of the agreement is on a country-by-country basis and will expire on the latest of the date upon which the last to expire valid claim shall expire, ten years after the first bona fide commercial sale of such licensed product in a country, or the expiration of any market exclusivity period granted by a regulatory agency. Pursuant to the terms of the agreement, the Company paid an initial $0.3 million license fee and approximately $0.1 million in earlier patent prosecution fees. On November 23, 2021 the U.S. Patent and Trademark Office (the “USPTO”) issued a U.S. patent for the Healight ultraviolet-A light-based respiratory catheter to Cedars-Sinai Medical Center. The U.S. Patent Number 29 Table of Contents 11,179,575, titled “Internal Ultraviolet Therapy,” is the first issued patent protecting the Healight investigational device and covers methods of treating a patient for an infectious condition inside the patient's body through the insertion of a UV-light-emitting delivery tube inside a respiratory cavity of the patient at specific UV-A light wavelengths. The term of this patent extends to August of 2040. NeuRx In October 2018, Neos entered into an Exclusive License Agreement (“NeuRx License”) with NeuRx Pharmaceuticals LLC (“NeuRx”), pursuant to which NeuRx granted Neos an exclusive, worldwide, royalty-bearing license to research, develop, manufacture, and commercialize certain pharmaceutical products containing NeuRx’s proprietary compound designated as NRX-101, referred to by Neos as NT0502. NT0502 is a new chemical entity that is being developed by Neos for the treatment of sialorrhea, which is excessive salivation or drooling. Under the NeuRx License, Neos made an upfront payment of $0.2 million to NeuRx upon the execution of the agreement. Neos made a payment of $0.2 million following receipt of notice of allowance of the first Licensed Patent by the United States Patent and Trademark Office (“USPTO”), as defined in the NeuRx License. Such Licensed Patent subsequently was issued by the USPTO. In April 2020, Neos met the completion of the first Pilot PK Study milestone, as defined in the NeuRx License, triggering the cash payment of $0.3 million. Neos may in the future be required to make certain development and milestone payments and royalties based on annual net sales, as defined in the NeuRx License. Royalties are to be paid on a country-by-country and licensed product-by-licensed product basis, during the period of time beginning on the first commercial sale of such licensed product in such country and continuing until the later of: (i) the expiration of the last-to-expire valid claim in any licensed patent in such country that covers such licensed product in such country; and/or (ii) expiration of regulatory exclusivity of such licensed product in such country. Teva On October 31, 2017, Neos received a paragraph IV certification from Teva Pharmaceuticals USA, Inc. (“Teva”) advising Neos that Teva has filed an Abbreviated New Drug Application (“ANDA”) with the FDA for a generic version of Cotempla XR-ODT, in connection with seeking to market its product prior to the expiration of patents covering Cotempla XR-ODT. On December 13, 2017, Neos filed a patent infringement lawsuit in federal district court in the District of Delaware against Teva alleging that Teva infringed Neos’ Cotempla XR-ODT patents. On December 21, 2018, Neos and Teva entered into a Settlement Agreement (the “Teva Settlement Agreement”) and a Licensing Agreement (the “Teva Licensing Agreement” and collectively with the Teva Settlement Agreement, the “Teva Agreement”) that resolved all ongoing litigation involving Neos’ Cotempla XR-ODT patents and Teva’s ANDA. Under the Teva Licensing Agreement, Neos granted Teva a non-exclusive license to certain patents owned by Neos by which Teva has the right to manufacture and market its generic version of Cotempla XR-ODT under its ANDA beginning on July 1, 2026, or earlier under certain circumstances. The Teva Licensing Agreement has been submitted to the applicable governmental agencies. Actavis On July 25, 2016, Neos received a paragraph IV certification from Actavis Laboratories FL, Inc. (“Actavis”) advising Neos that Actavis had filed an ANDA with the FDA for a generic version of Adzenys XR-ODT. On September 1, 2016, Neos filed a patent infringement lawsuit in federal district court against Actavis alleging that Actavis infringed Neos’ Adzenys XR-ODT patents. On October 17, 2017, Neos entered into a Settlement Agreement (the “Actavis Settlement Agreement”) and a Licensing Agreement (the “Actavis Licensing Agreement” and collectively with the Actavis Settlement Agreement, the “Actavis Agreement”) with Actavis that resolved all ongoing litigation involving Neos’ Adzenys XR-ODT patents and Actavis’s ANDA. Under the Actavis Licensing Agreement, Neos granted Actavis a non-exclusive license to certain patents owned by Neos by which Actavis has the right to manufacture and market its generic version of Adzenys XR-ODT under its ANDA beginning on September 1, 2025, or earlier under certain circumstances. The Actavis Licensing Agreement has been submitted to the applicable governmental agencies. Shire 30 Table of Contents In July 2014, Neos entered into a Settlement Agreement and an associated License Agreement (the “2014 License Agreement”) with Shire LLC (“Shire”) for a non-exclusive license to certain patents for certain activities with respect to Neos’ New Drug Application (the “NDA”) No. 204326 for an extended-release orally disintegrating amphetamine polistirex tablet. In accordance with the terms of the 2014 License Agreement, following the receipt of the approval from the FDA for Adzenys XR-ODT, Neos paid an up-front, non-refundable license fee of an amount less than $1.0 million in February 2016. Neos is paying a single digit royalty on net sales of Adzenys XR-ODT during the life of the patents. In March 2017, Neos entered into a License Agreement (the “2017 License Agreement”) with Shire, pursuant to which Shire granted Neos a non-exclusive license to certain patents owned by Shire for certain activities with respect to Neos’ NDA No. 204325 for an extended-release amphetamine oral suspension. In accordance with the terms of the 2017 License Agreement, following the receipt of the approval from the FDA for Adzenys ER, Neos paid an up-front, non-refundable license fee of an amount less than $1.0 million in October 2017. Neos is paying a single digit royalty on net sales of Adzenys ER during the life of the patents. Adzenys ER was discontinued as of September 30, 2021. The royalties are recorded as cost of goods sold in the same period as the net sales upon which they are calculated. Additionally, each of the 2014 and 2017 License Agreements contains a covenant from Shire not to file a patent infringement suit against Neos alleging that Adzenys XR-ODT or Adzenys ER, respectively, infringes the Shire patents. 18. Segment reporting The Company’s chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance. The Company manages and aggregates its operational and financial information in accordance with 2 reportable segments: Aytu BioPharma and Aytu Consumer Health. The Aytu BioPharma segment consists of the Company’s prescription products. The Aytu Consumer Health segment contains the Company’s consumer healthcare products. Select financial information for these segments is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ December 31,  ​ December 31,  ​      2021      2020 ​ 2021      2020 ​ ​ (In thousands) ​ (In thousands) Consolidated revenue: ​ ​      ​    ​ ​      ​    Aytu BioPharma ​ $ 14,643 ​ $ 7,212 ​ $ 28,526 ​ $ 12,964 Aytu Consumer Health ​   8,482 ​   7,935 ​   16,496 ​   15,703 Consolidated revenue ​ $ 23,125 ​ $ 15,147 ​ $ 45,022 ​ $ 28,667 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated net loss: ​      ​      ​      ​      Aytu BioPharma ​ $ (9,591) ​ $ (8,268) ​ $ (36,048) ​ $ (11,218) Aytu Consumer Health ​   (1,957) ​   (1,257) ​   (3,351) ​   (2,613) Consolidated net loss ​ $ (11,548) ​ $ (9,525) ​ $ (39,399) ​ $ (13,831) 31 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31,  ​ June 30,  ​ ​ 2021 ​ 2021 ​ ​ (In thousands) Total assets: ​ ​ ​ ​ ​ ​ Aytu BioPharma ​ $ 194,419 ​ $ 236,449 Aytu Consumer Health ​   29,405 ​   29,219 Consolidated assets ​ $ 223,824 ​ $ 265,668 ​ ​ ​ ​ 19. Subsequent Events On January 26, 2022, the Company entered into a Loan and Security Agreement (the “Avenue Capital Agreement”) with Avenue Venture Opportunities Fund II, L.P., Avenue Venture Opportunities Fund II, L.P. and Avenue Capital Management II, L.P. (collectively, “Avenue Capital”). Pursuant to the Avenue Capital Agreement, Avenue Capital (i) provided a term loan (the “Avenue Capital Loan”) in the principal amount of $15.0 million, at an interest rate of the greater of prime and 3.25%, plus 7.4%, with a three-year term, consisting of 18 monthly payments of interest only followed by equal monthly payments of principal and accrued interest (with the interest-only period being extended up to 36 months contingent upon the Obligors achieving certain milestones) and (ii) permitted the Avenue Capital Loan proceeds to be used towards the full repayment of the Neos Senior Secured Credit Facility with Deerfield. As consideration for entering into the Avenue Capital Agreement, Aytu issued warrants to the Avenue Capital Lenders valued at $1,050,000, and exercisable to shares of the Company’s common stock at per share exercise price equal to $1.21 (subject to adjustment) (the “Warrants”). The Warrants are immediately exercisable and expire on January 31, 2027. In connection with the Avenue Capital Agreement, the Company entered into a Consent, Waiver and Second Amendment to Loan and Security Agreement, dated as of January 26, 2022 (the “Eclipse Consent, Waiver and Second Amendment”). The Eclipse Consent, Waiver and Second Amendment, among other modifications, extends the maturity date of the Loan Agreement with Eclipse to January 26, 2025 and reduces the availability under the Loan Agreement from $25.0 million to $12.5 million. ​ ​ 32 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This discussion should be read in conjunction with Aytu BioPharma, Inc.’s Annual Report on Form 10-K for the year ended June 30, 2021, filed on September 28, 2021. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see the risk factors included in Aytu’s Form 10-K and Form 10-Q filed with the Securities and Exchange Commission on September 28, 2021 and November 15, 2021 respectively . Objective The purpose of the Management Discussion and Analysis (the “MD&A”) is to present information that management believes is relevant to an assessment and understanding of our results of operations and cash flows for the three and six months ended December 31, 2021 and our financial condition as of December 31, 2021. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and notes. The MD&A is organized in the following sections: ● Overview ● Significant Developments. We discuss (i) impact of COVID-19 on our operations, (ii) regulatory developments and (iii) material divestitures. ● Results of Operations. We discuss changes in our statements of operations line items, including the major drivers of these changes for three and six months ended December 31, 2021, as compared with the three and six months ended December 31, 2020. ● Liquidity and Capital Resources. We discuss (i) sources of our liquidity, (ii) cash flows, (iii) obligations due on our debt obligations and (iv) expected payments under contractual obligations, commitments and contingencies. ● Critical Accounting Estimates. We discuss the critical accounting policies and estimates that require significant management judgment. Overview We are commercial-stage pharmaceutical company focused on commercializing novel therapeutics and consumer healthcare products. We operate through two business segments (i) Aytu BioPharma segment, consisting of various prescription pharmaceutical products sold through third party wholesalers, and (ii) Aytu Consumer Health segment, which consists of various consumer health products sold directly to consumers. We generate revenue by selling our products through third party intermediaries in our marketing channels as well as directly to our customers. We develop and manufacture our ADHD products at our manufacturing facilities and use third party manufacturers for our other prescription and consumer health products. We have incurred significant losses in each year since inception. Our net losses were $11.5 million and $9.5 million for the three months ended December 31, 2021 and 2020, respectively, and $39.4 million and $13.8 million for the six months ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and June 30, 2021, we had an accumulated deficit of approximately $217.7 million and $178.3 million, respectively. We expect to continue to incur significant expenses in connection with our ongoing activities, including the integration of our acquisitions and development of our product pipeline. 33 Table of Contents Significant Developments COVID-19 The ongoing COVID-19 pandemic continues to impact the global economy and create economic uncertainties during fiscal years 2020 and 2021. The federal government and states-imposed restrictions on travel and business operations and placed limitations on the size of public and private gatherings. However, beginning the third quarter of fiscal 2021, with the introduction of vaccines under emergency use authorizations, these restrictions began to wind down and business operating environments have improved. We believe COVID-19 has negatively impacted the overall market for prescription products. The extent to which COVID-19 continues to negatively impact our business in the future will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the new variants of coronavirus, the actions taken to contain the coronavirus or treat its impact, and the continued impact of each of these items on the economies and financial markets in the United States and abroad. While states and jurisdictions have rolled back stay-at-home and quarantine orders and reopened in phases, it is difficult to predict what the lasting impact of the pandemic will be, and if we or any of the third parties with whom we engage were to experience additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could have a material adverse impact on our business, results of operation and financial condition. In addition, a recurrence or impact from new strains of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest. We will continue to monitor developments as we deal with the disruptions and uncertainties relating to the COVID-19 pandemic. Orphan Drug Designation and FDA clearance of IND application for AR101 On December 7, we were notified by the U.S. Food & Drug Administration (“FDA”) that AR101/Enzastaurin received Orphan Drug Designation for the treatment of Ehlers-Danlos Syndrome. The treatment of vascular Ehlers-Danlos Syndrome (“VEDS”) is captured within this designation. The FDA grants Orphan Drug designation status to drugs and biologics that are intended for the safe and effective treatment, diagnosis or prevention of rare diseases, or conditions that affect fewer than 200,000 people in the U.S. Orphan Drug designation affords us certain financial incentives to support clinical development and the potential for up to seven years of market exclusivity in the U.S. upon regulatory approval. Pursuant to the Asset Purchase Agreement among Aytu BioPharma and Rumpus VEDS LLC, Rumpus Therapeutics LLC and Rumpus Vascular (together with various of their affiliated persons, “Rumpus”), this achievement of an earn-out milestone for achieving Orphan Drug designation resulted in our obligation to pay $2.5 million to Rumpus in cash or in shares of our common stock. The $2.5 million milestone payment is included in our accrued liabilities in the condensed consolidated balance sheets as of December 31, 2021. We have agreed with Rumpus that the payment will be made on the earlier to occur of ten business following our next financing or April 1, 2022. On December 13, 2021 the FDA has cleared the Investigational New Drug (“IND”) application for AR101, enabling us to proceed with initiating a pivotal clinical trial for AR101 in VEDS. We plan to initiate the PREVEnt Trial in VEDS in the first half of calendar year 2022. The PREVEnt Trial will assess the safety and efficacy of enzastaurin in COL3A1-confirmed VEDS patients. There are currently no FDA-approved therapies for VEDS. AR101 is an orally available investigational first-in-class small molecule, serine/threonine kinase inhibitor of the PKC beta, PI3K and AKT pathways. AR101 has been studied in more than 3,300 patients across a range of solid and hematological tumor types in trials previously conducted by Eli Lilly & Company. Dr. Hal Dietz developed the first preclinical model that mimics the human condition and recapitulates VEDS, and this model serves as the basis for the plausible clinical benefit and rationale for conducting a clinical trial with AR101 in VEDS. First U.S. patent for Healight™ On November 23, 2021 the U.S. Patent and Trademark Office (the “USPTO”) issued a U.S. patent for the Healight™ ultraviolet-A light-based respiratory catheter. U.S. Patent Number 11,179,575, titled “Internal Ultraviolet Therapy,” is the first issued patent protecting the Healight investigational device and covers methods of treating a patient 34 Table of Contents for an infectious condition inside the patient's body through the insertion of a UV-light-emitting delivery tube inside a respiratory cavity of the patient at specific UV-A light wavelengths. The term of this patent extends to August of 2040. Healight is an investigational medical device technology employing proprietary methods of administering intermittent ultraviolet (UV)-A light via a novel respiratory medical device. This patent was issued to Cedars-Sinai Medical Center, from which we have an exclusive worldwide license for all respiratory applications of the UV-A light-based technology. Proof of concept clinical findings demonstrated significant reductions in SARS-CoV-2 viral load and improvement in clinical outcomes in a small number of mechanically ventilated COVID-19 patients. Divestiture of MiOXSYS On July 1, 2021 we signed an Asset Purchase Agreement with UAB “Caerus Biotechnologies” (“UAB”). Pursuant to the terms and conditions of the agreement, UAB has acquired all existing intellectual property rights, technical information and know-how related to MiOXSYS as well as all existing inventory and all rights attached and related to the product and manufacturing thereof. As consideration, UAB agreed to pay us approximately $0.5 million and make royalty payments to us of five percent of global net revenue of the MiOXSYS product for five years from the closing date of the transactions contemplated in the Asset Purchase Agreement. On September 29, 2021, we and UAB entered into an amendment to the UAB APA, pursuant to which, (i) September 30, 2021 was established as the closing date, (ii) UAB was provided with termination rights in the event that the Company is unable to complete the transfer of intellectual property assets to UAB by May 31, 2022 (“Termination Rights”), provided that the delay is not due to IP offices, foreign or domestic and (iii) the Company is required to pay 5% of the deal purchase price in the event UAB terminates the agreement as provided in the Termination Rights. As of December 31, 2021, we received $0.1 million payments from the agreed upon consideration of $0.5 million. We deferred the $0.1 million received from UAB as income until it satisfies the provisions in the Termination Rights, which was included in accrued liabilities in the consolidated balance sheet. 35 Table of Contents RESULTS OF OPERATIONS Three months ended December 31, 2021 compared to the three months ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Three Months Ended ​ ​ ​ ​ ​   ​ ​ December 31,  ​ ​ ​ ​ ​ ​ ​      2021      2020      Change      %   ​ ​ (In thousands) ​ ​ ​ Product revenue, net ​ $ 23,125 ​ $ 15,147 ​ $ 7,978   53 % Cost of sales ​ ​ 10,826 ​ ​ 6,251 ​ ​ 4,575 ​ 73 % Gross profit ​ ​ 12,299 ​ ​ 8,896 ​ ​ 3,403 ​ 38 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​      ​      ​           ​ Research and development ​   4,920 ​   286 ​   4,634   1,620 % Advertising and direct marketing ​ ​ 4,985 ​ ​ 4,621 ​ ​ 364   8 % Other selling and marketing ​ ​ 4,675 ​ ​ 1,084 ​ ​ 3,591 ​ 331 % General and administrative ​ ​ 7,953 ​ ​ 5,584 ​ ​ 2,369 ​ 42 % Acquisition related costs ​ ​ — ​   1,312 ​ ​ (1,312) ​ (100) % Amortization of intangible assets ​   1,060 ​   1,584 ​   (524)   (33) % Total operating expenses ​   23,593 ​   14,471 ​   9,122   63 % Loss from operations ​   (11,294) ​   (5,575) ​   (5,719)   103 % Other income (expense) ​      ​      ​           ​ Other income/(expense), net ​ ​ 20 ​ ​ (379) ​ ​ 399 ​ (105) % Loss from contingent consideration ​   (277) ​ ​ (3,313) ​ ​ 3,036   (92) % Loss on extinguishment of debt ​ ​ — ​ ​ (258) ​ ​ 258 ​ (100) % Total other expense ​   (257) ​   (3,950) ​   3,693   (93) % Loss before income tax ​   (11,551) ​   (9,525) ​   (2,026)   21 % Income tax benefit ​   (3) ​ ​ — ​   (3)   — ​ Net loss ​ $ (11,548) ​ $ (9,525) ​ $ (2,023)   21 % ​ Product revenue. Total net product revenue was $23.1 million during the three months ended December 31, 2021, an increase of approximately $8.0 million, or 53%, compared to $15.1 million during the three months ended December 31, 2020. The increase was primarily driven by the $11.1 million net revenue generated from the ADHD product portfolio of Neos, which we acquired in March 2021 and $0.5 million increase in year-over-year revenue of our consumer health products, partially offset by the $3.4 million decrease in revenue from sale of COVID-19 test kits, $0.2 million decrease in revenue resulting from the divesture of our Natesto prescription product in the third fiscal quarter of 2021 and $0.2 million decrease in revenue from the divestiture of MiOXSYS on July 1, 2021. Cost of sales. Total cost of sales was $10.8 million during the three months ended December 31, 2021, an increase of $4.5 million, or 73%, compared to $6.3 million during the three months ended December 31, 2020. The increase was primarily driven by the $5.5 million costs incurred for the production and sale of the ADHD product portfolio of Neos, which we acquired in March 2021 and $1.3 million increase in cost of sales of our consumer health products, partially offset by the $2.3 million decrease in costs for COVID-19 test kits. Neos manufactures the ADHD products at its Grand Prairie, Texas facilities, and as such, allocates a significant portion of its intangible assets amortization and fixed assets depreciation into cost of sales. During the three months ended December 31, 2021, $0.7 million of depreciation and amortization expenses were included in cost of sales. Research and development. Total research and development expense was $4.9 million during the three months ended December 31, 2021, an increase of $4.6 million, compared to $0.3 million during the three months ended December 31, 2020. The increase was due primarily to $4.0 million expenses related to AR101, which was acquired in April 2021, including a $2.5 milestone payment upon receiving ODD, and $0.6 million regulatory and medical monitoring costs associated with ADHD product portfolio that was acquired in March 2021. 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Three Months Ended ​ ​ ​ ​ ​   ​ ​ December 31,  ​ ​ ​ ​ ​ ​ ​      2021      2020      Change      %   ​ ​ (In thousands) ​ ​ ​ Research and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AR101 ​ $ 4,008 ​ $ — ​ $ 4,008   100 % Healight ​ ​ 196 ​ ​ 193 ​ ​ 3   2 % ADHD ​ ​ 620 ​ ​ — ​ ​ 620 ​ 100 % Others ​ ​ 96 ​ ​ 93 ​ ​ 3 ​ 3 % Total Research and development ​ $ 4,920 ​ $ 286 ​ $ 4,634   1,620 % ​ Advertising and direct marketing. Advertising and direct marketing expenses include direct-to-consumer marketing, advertising, sales and customer support and processing fees related to our consumer health segment. Total advertising and direct marketing expense were $5.0 million for the three months ended December 31, 2021, an increase of $0.4 million, or 8%, compared to $4.6 million during the three months ended December 31, 2020. Other selling and marketing. Total other selling and marketing expense was $4.7 million during the three months ended December 31, 2021, an increase of $3.6 million, or 331%, compared to $1.1 million during the three months ended December 31, 2020. The increase was primarily driven by the $4.5 million expenses associated with the commercialization of our ADHD product portfolio, which was acquired in March 2021, partially offset by the $0.2 million decrease in selling and marketing expenses resulting from the divesture of our Natesto prescription product in the third fiscal quarter of 2021. General and administrative. Total general and administrative expense was $8.0 million during the three months ended December 31, 2021, an increase of $2.4 million, or 42%, compared to $5.6 million during the three months ended December 31, 2020. The increase was primarily driven by the $2.5 million general and administrative expenses of Neos, which was acquired in March 2021. Acquisition related costs. Acquisition related costs was $1.3 million during the three months ended December 31, 2020, primarily related to the Neos Merger, which was closed on March 19, 2021. Such costs include legal fees, due diligence expenses and financial advisory fees. There was no such cost during the three months ended December 31, 2021. Amortization of intangible assets. Total amortization expense of intangible assets, excluding amounts included in cost of sales, was $1.1 million during the three months ended December 31, 2021, a decrease of $0.5 million, or 33%, compared to $1.6 million for the three months ended December 31, 2020. The decrease was due primarily to licensed intangible assets that were being amortized during the three months December 31, 2020 but which have subsequently been divested or written-off. Other income/(expense), net. Total other income, net during the three months ended December 31, 2021 was approximately $20,000, an increase of $0.4 million, or 105%, compared to other expense, net of $0.4 million during the three months ended December 31, 2020. The increase was primarily due to an increase in other income of $0.8 million from partial proceeds from the Natesto divestiture, partially offset by an increase in interest expense from the debt assumed from the Neos Merger in March 2021. Loss from contingent consideration. Net loss from contingent considerations during the three months ended December 31, 2021 was $0.3 million compared to $3.3 million loss during the three months ended December 31, 2020 (see Note 10 – Fair Value Considerations). Loss on debt extinguishment. During the three months ended December 31, 2020, we recognized $0.3 million loss from conversion of outstanding debt to our shares of common stock. There was no such loss during the three months ended December 31, 2021. 37 Table of Contents Six months ended December 31, 2021 compared to the six months ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Six Months Ended ​ ​ ​ ​ ​   ​ ​ December 31,  ​ ​ ​ ​ ​ ​ ​      2021      2020      Change      %   ​ ​ (In thousands) ​ ​ ​ Product revenue, net ​ $ 45,022 ​ $ 28,667 ​ $ 16,355   57 % Cost of sales ​ ​ 20,267 ​ ​ 10,314 ​ ​ 9,953 ​ 96 % Gross profit ​ ​ 24,755 ​ ​ 18,353 ​ ​ 6,402 ​ 35 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses ​      ​      ​           ​ Research and development ​   7,016 ​   469 ​   6,547   1,396 % Advertising and direct marketing ​ ​ 9,530 ​ ​ 9,383 ​ ​ 147   2 % Other selling and marketing ​ ​ 9,427 ​ ​ 2,148 ​ ​ 7,279 ​ 339 % General and administrative ​ ​ 16,169 ​ ​ 11,004 ​ ​ 5,165 ​ 47 % Acquisition related costs ​ ​ — ​   1,312 ​ ​ (1,312) ​ (100) % Impairment of intangible assets ​   19,453 ​   — ​   19,453   N/A ​ Amortization of intangible assets ​   2,153 ​   3,169 ​   (1,016)   (32) % Total operating expenses ​   63,748 ​   27,485 ​   36,263   132 % Loss from operations ​   (38,993) ​   (9,132) ​   (29,861)   327 % Other income (expense) ​      ​      ​           ​ Other income/(expense), net ​ ​ (20) ​ ​ (1,130) ​ ​ 1,110 ​ (98) % Loss from contingent consideration ​   (496) ​ ​ (3,311) ​ ​ 2,815   (85) % Loss on extinguishment of debt ​ ​ — ​ ​ (258) ​ ​ 258 ​ (100) % Total other expense ​   (516) ​   (4,699) ​   4,183   (89) % Loss before income tax ​   (39,509) ​   (13,831) ​   (25,678)   186 % Income tax benefit ​   (110) ​   — ​   (110)   — ​ Net loss ​ $ (39,399) ​ $ (13,831) ​ $ (25,568)   185 % ​ Product revenue. Total net product revenue was $45.0 million during the six months ended December 31, 2021, an increase of approximately $16.3 million, or 57%, compared to $28.7 million during the six months ended December 31, 2020. The increase was primarily driven by the $20.8 million net revenue generated from the ADHD product portfolio of Neos, which we acquired in March 2021, $2.2 million increase in net revenue from Karbinal and Poly-Vi-Flor, our other products within the Pediatric portfolio and $0.8 million increase in year-over-year revenue of our consumer health products, partially offset by the $5.4 million decrease in revenue from sale of COVID-19 test kits, $0.9 million decrease in revenue resulting from the divesture of our Natesto prescription product in the third fiscal quarter of 2021 and $0.4 million decrease in revenue from the divestiture of MiOXSYS on July 1, 2021. Cost of sales. Total cost of sales was $20.3 million during the six months ended December 31, 2021, an increase of $10.0 million, or 96%, compared to $10.3 million during the six months ended December 31, 2020. The increase was primarily driven by the $10.4 million costs incurred for the production and sale of the ADHD product portfolio of Neos, which we acquired in March 2021 and $2.2 million increase in cost of sales of our consumer health products, partially offset by the $2.9 million decrease in costs for COVID-19 test kits. Neos manufactures the ADHD products at its Grand Prairie, Texas facilities, and as such, allocates a significant portion of its intangible assets amortization and fixed assets depreciation into cost of sales. During the six months ended December 31, 2021, $1.3 million of depreciation and amortization expenses were included in cost of sales. Research and development. Total research and development expense was $7.0 million during the six months ended December 31, 2021, an increase of $6.5 million, compared to $0.5 million during the six months ended December 31, 2020. The increase was due primarily to $5.1 million expenses related to AR101, which was acquired in April 2021, including a $2.5 milestone payment upon receiving ODD, $0.3 million increase in costs associated with our Healight Platform product candidate as well as $1.2 million regulatory and medical monitoring costs associated with ADHD product portfolio that we acquired in March 2021. 38 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      Six Months Ended ​ ​ ​ ​ ​   ​ ​ December 31,  ​ ​ ​ ​ ​ ​ ​      2021      2020      Change      %   ​ ​ (In thousands) ​ ​ ​ Research and development: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ AR101 ​ $ 5,069 ​ $ — ​ $ 5,069   100 % Healight ​ ​ 569 ​ ​ 293 ​ ​ 276   94 % ADHD ​ ​ 1,211 ​ ​ — ​ ​ 1,211 ​ 100 % Others ​ ​ 167 ​ ​ 176 ​ ​ (9) ​ (5) % Total Research and development ​ $ 7,016 ​ $ 469 ​ $ 6,547   1,396 % ​ Advertising and direct marketing. Advertising and direct marketing expenses include direct-to-consumer marketing, advertising, sales and customer support and processing fees related to our consumer health segment. Total advertising and direct marketing expense were $9.5 million for the six months ended December 31, 2021, an increase of $0.1 million, or 2%, compared to $9.4 million during the six months ended December 31, 2020. Other selling and marketing. Total other selling and marketing expense was $9.4 million during the six months ended December 31, 2021, an increase of $7.3 million, or 339%, compared to $2.1 million during the six months ended December 31, 2020. The increase was primarily driven by $9.0 million costs associated with the commercialization of our ADHD product portfolio, which was acquired in March 2021, partially offset by $0.5 million decrease in selling and marketing expenses from the divesture of our Natesto prescription product in the third fiscal quarter of 2021. General and administrative. Total general and administrative expense was $16.2 million during the six months ended December 31, 2021, an increase of $5.2 million, or 47%, compared to $11.0 million during the six months ended December 31, 2020. The increase was primarily driven by $5.0 million general and administrative expenses of Neos which we acquired in March 2021. Acquisition related costs. Acquisition related costs was $1.3 million during the six months ended December 31, 2020, primarily related to the Neos Merger, which was closed on March 19, 2021. Such costs include legal fees, due diligence expenses and financial advisory fees. There was no such cost during the six months ended December 31, 2021. Impairment of goodwill. Since the June 30, 2021 annual goodwill impairment assessment, our stock price has continued to decline. As of September 30, 2021, our market capitalization was below the carrying value of our assets, which led Management to consider whether those assets should be revalued for impairment at an interim reporting date. Pursuant to the guidance under Topic ASC 350, Management conducted impairment testing at each reporting unit level to determine the recoverability of goodwill. Based on the evaluation, during the six months ended December 31, 2021, we recognized an impairment loss of $19.5 million related to the Aytu BioPharma segment. There was no such impairment expense during the six months ended December 31, 2020 (see Note 8 – Goodwill and Other Intangible Assets). Amortization of intangible assets. Total amortization expense of intangible assets, excluding amounts included in cost of sales, was $2.2 million during the six months ended December 31, 2021, a decrease of $1.0 million, or 32%, compared to $3.2 million for the six months ended December 31, 2020. The decrease was due primarily to licensed intangible assets that were being amortized during the six months December 31, 2020 but which have subsequently been divested or written-off. Other income/(expense), net. Total other expense, net of other income during the three months ended December 31, 2021 was approximately $20,000, a decrease of $1.1 million, or 98%, compared to $1.1 million during the six months ended December 31, 2020. The decrease was primarily due to an increase in other income of $1.5 million from partial proceeds from the Natesto divestiture and $0.5 million decrease in interest expense from fixed payment obligations, partially offset by $0.9 million increase in interest expense from the debt assumed from the Neos Merger in March 2021. 39 Table of Contents Loss from contingent consideration. Net loss from contingent considerations during the three months ended December 31, 2021 was $0.5 million compared to $3.3 million loss during the six months ended December 31, 2020 (see Note 10 – Fair Value Considerations). Loss on debt extinguishment. During the six months ended December 31, 2020, we recognized $0.3 million loss from conversion of outstanding debt to our shares of common stock. There was no such loss during the six months ended December 31, 2021. Income tax benefit. The impairment of the Aytu BioPharma segment book goodwill changed the net deferred tax liability of $0.2 million recorded as of June 30, 2021 fiscal year end into a net deferred tax liability of $0.1 million as of December 31, 2021. As a result, we recognized an income tax benefit of $0.1 million during the six months ended December 31, 2021. There was no income tax expense or benefit during the six months ended December 31, 2020. Liquidity and Capital Resources Sources of Liquidity We finance our operations through a combination of sales of our common stock and warrants, borrowings under our line of credit facility and cash generated from operations. Shelf Registrations On September 28, 2021, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 7, 2021. This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2021 Shelf”). As of December 31, 2021, the Company has not issued any common stock, preferred stock, debt securities, warrants, rights or units under the 2021 Shelf. On June 8, 2020, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on June 17, 2020. This shelf registration statement covered the offering, issuance and sale by the Company of up to an aggregate of $100.0 million of its common stock, preferred stock, debt securities, warrants, rights and units (the “2020 Shelf”). As of December 31, 2021, approximately $43.3 million remains available under the 2020 Shelf. In June 2020, the Companywe initiated an at-the-market offering program ("ATM"), which allows the Companyallow us to sell and issue shares of our common stock from time-to-time. The companySince initiated in June 2020 through December 31, 2021, we issued 430,230a total of 5,316,623 shares of common stock with total grossfor aggregate proceeds of $6.8$28.0 million before deducting underwriting discounts, commissions and otherestimated offering expenses payable by the Companycosts of $0.2$2.8 million. On June 2, 2021, we terminated our “at-the-market” sales agreement with Jefferies LLC. On June 4, 2021, we entered into a Controlled Equity OfferingSM Sales Agreement (the “Cantor Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which we agreed to sell up to $30.0 million through of our common stock from time to time in “at-the-market” offerings. As of December 31, 2020. The Company did not issue any shares2021, approximately $12.5 million of our common stock under the at-the-market offering program during the three months ended September 30, 2020. During the three months ended December 31, 2020, the Company issued 352,912 shares of common stock, with total gross proceeds of approximately $3.6 million before deducting underwriting discounts, commissions, and other offering expenses payable by the Company of $0.1 million. In July 2020, the Company paid $1.5 million issuance cost in cash relatedremained available to be sold pursuant to the March 10, 12, and 19 offerings (the “March Offerings”) and issued 92,302 warrants to purchase 92,302 shares of the Company's common stock with an weighted-average exercise price of $15.99 to an investment bank conjunction with the March 2020 offerings. The warrants have a term of one year from the issuance date. These warrants had at issuance a fair value of approximately $356,000 and were valued using a Black-Scholes model.Cantor ATM. Underwriting Agreement On December 10, 2020, the Company entered into an exchange agreement to exchange the $0.8 million of debt outstanding for 130,081 shares of the Company's common stock (see Note 15). On December 10, 2020, the Company entered into an underwriting agreement with H.C. Wainwright & Co., LLC (“Wainwright”) (as amended and restated, the “Underwriting Agreement”). Pursuant to the Underwriting Agreement, the Company agreed to sell, in an upsized firm commitment offering, 4,166,667 shares (the “Shares”) of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), to Wainwright at an offering price to the public of $6.00 per share, less underwriting discounts and commissions. In addition, pursuant to the Underwriting Agreement, the Company has granted Wainwright a 30-day option to purchase up to an additional 625,000 shares of Common Stock at the same offering price to the public, less underwriting discounts and commissions. Wainwright exercised their over-allotment option in full, purchasing a total common stock of 4,791,667 shares.shares of Common Stock. The Company raised gross proceeds of $28.8 million through this offering. Offering costs totaled $2.6 million resulting in net cash proceeds of $26.2 million. In connection with the offering, the Company issued 311,458 underwriter warrants to 40 Table of Contents purchase up to 311,458 shares of common stock.Common Stock. The exercise price per share of the underwriter warrants is $7.50 (equal to 125% of the public offering price per share for the shares of common stock sold in the offering) and the underwriter warrants have a term of five years from the date of effectiveness of the offering. The underwriter warrants will beare exercisable immediately. 12. Equity Incentive Plan Share-based Compensation Plans On June 1, 2015, the Company’s stockholders approved the Aytu BioScience 2015 Stock Option and Incentive Plan (the “2015 Plan”), which, as amended in July 2017, provides for the award of stock options, stock appreciation rights, restricted stock and other equity awards for up to an aggregate of 3.0 million shares of common stock. The shares of common stock underlying any awards that are forfeited, canceled, reacquired by Aytu prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2015 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan. On February 13, 2020, the Company’s stockholders approved an increase to 5.0 million total shares of common stock in the 2015 Plan. As of December 31, 2020, we have 4,560,864 shares that are available for grant under the 2015 Plan. 22 Table of Contents Stock Options Employee Stock Options: The fair value of the options is calculated using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding components of the model, including the estimated fair value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to valuation. Aytu estimates the expected term based on the average of the vesting term and the contractual term of the options. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of the grant for treasury securities of similar maturity. There were no grants of stock options to employees during the three- and six-months ended December 31, 2020 and 2019 Stock option activity is as follows:     Number of Options     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life in Years     Aggregate Intrinsic Value   Outstanding June 30, 2020     76,614     $ 19.39       9.67     $ -   Granted     -       -                   Exercised     -       -                   Forfeited/Cancelled     (3,187 )     -                   Expired     (2 )     -                   Outstanding December 31, 2020     73,425       19.71       9.08       -   Exercisable at December 31, 2020     9,095     $ 67.62       7.81     $ -   As of December 31, 2020, there was $494,000 unrecognized option-based compensation expense related to non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 2.68 years. Restricted Stock Restricted stock activity is as follows:     Number of Shares     Weighted Average Grant Date Fair Value     Weighted Average Remaining Contractual Life in Years   Unvested at June 30, 2020     418,454     $ 14.69       6.4   Granted                         Vested     (52,743 )                 Forfeited                         Unvested at December 31, 2020     365,711     $ 15.66       6.3   Under the 2015 Plan, there was $4.3 million of total unrecognized stock-based compensation expense related to the non-vested restricted stock as of December 31, 2020. The Company expects to recognize this expense over a weighted-average period of 6.3 years. The Company previously issued 158 shares of restricted stock outside the Company’s 2015 Plan, which vest in July 2026. The unrecognized expense related to these shares was $1.1 million as of December 31, 2020 and is expected to be recognized over the weighted average period of 5.5 years. Stock-based compensation expense related to the fair value of stock options and restricted stock was included in the statements of operations as selling, general and administrative expenses as set forth in the table below:     Three Months Ended December 31,     Six Months Ended December 31,   Selling, general and administrative:   2020     2019     2020     2019   Stock options   $ 94,000     $ 2,000     $ 166,000     $ 7,000   Restricted stock     414,000       160,000       797,000       320,000   Total stock-based compensation expense   $ 508,000     $ 162,000     $ 963,000     $ 327,000   23 Table of Contents 13. Warrants In July 2020, the Company issued 92,302 shares of warrants with a weighted average exercise price of $15.99 in connection with the March Offerings. The warrants have a term of one year from the issuance date. These warrants have a fair value of $356,000 and are classified within stockholders' equity. On December 15, 2020, the Company issued 311,458 shares of warrants with an exercise price of $7.50 in connection with the December 15, 2020 offering. These warrants have a fair value of approximately $1.3 million and are classified withinwith the stockholders' equity. Significant assumptions in valuing Effective June 2, 2021, the warrants issued duringCompany terminated the quarter are as follows: Warrants Issued Three Months Ended December 31, 2020 Expected volatility 100 % Equivalent term (years) 5.0 Risk-free rate 37 % Dividend yield 0.00 % A summary of equity-based warrants is as follows:     Number of Warrants     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life in Years   Outstanding June 30, 2020     2,288,528     $ 30.26       2.00   Warrants issued     403,760                   Warrants expired     (842 )                 Warrants exercised     -                   Outstanding December 31, 2020     2,691,446     $ 26.94       1.65   14. Net Loss per Common Share Basic income (loss) per common share is calculated by dividing the net income (loss) availableUnderwriting Agreement with Wainwright; pursuant to the common shareholders by the weighted average number of common shares outstanding during that period. Diluted net loss per share reflects the potential of securities that could share in the net losssuch termination, there will be no future sales of the Company. For each three-month period presented,Company’s Common Stock under the basic and diluted loss per share were the same for 2020 andUnderwriting Agreement. Revolver Loan Agreement In October 2019, as they were not included in the calculation of the diluted net loss per share because they would have been anti-dilutive. The following table sets-forth securities that could be potentially dilutive, but as of the three and six-months ended December 31, 2020 and 2019 are anti-dilutive, and therefore excluded from the calculation of diluted earnings per share.       Three Months Ended         December 31,         2020     2019   Warrants to purchase common stock - liability classified     24,105       24,105   Warrant to purchase common stock - equity classified (Note 13)     2,691,446       1,621,891   Employee stock options (Note 12)     73,425       156   Employee unvested restricted stock (Note 12)     365,869       234,261   Convertible preferred stock (Note 11)     -       315,115           3,154,845       2,195,528   24 Table of Contents 15. Notes Payable The Aytu BioScience Note. On February 27, 2020, the Company issued a $0.8 million promissory note (the “Note”) and received consideration of approximately $0.6 million. The Note had an eight-month term with principal and interest payable on November 1, 2020, and the recognition of approximately $0.2 million of debt discount related to the issuance of promissory notes. The discount was amortized over the life of the promissory notes through the fourth quarter of calendar 2020. During the three and six-months ended months ended December 31, 2020 and 2019 the Company recorded approximately $15,000 and $70,000, respectively, of related amortization. There was no amortization for the same period in 2019. On December 10, 2020, the Company agreed to exchange the Note for 130,081 shares of the Company's common stock. The Company recognized a non-cash loss of approximately $0.3 million as a result of this exchange, saving the Company $0.8 million in cash that otherwise would have been used to satisfy this obligation on December 31, 2020. The Innovus Notes. On January 9, 2020, prior to the completion of the merger, Innovus Pharmaceuticals, Inc.,our Neos subsidiary entered into a notesenior secured credit agreement upon which it received gross proceeds of $0.4 million with Eclipse Business Capital LLC (f/k/a principal amount of $0.5 million. The note requires twelve equal monthly payments of approximately $45,000. As of December 31, 2020,Encina Business Credit, LLC) (“Eclipse”) as agent for the net balance of the note was $41,000. 16. Segment reporting The Company’s chief operating decision makerlenders (the “CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance. The Company manages and aggregates its operational and financial information in accordance with two reportable segments: Aytu BioScience and Aytu Consumer Health. The Aytu BioScience segment consists of the Company’s prescription products. The Aytu Consumer Health segment contains the Company’s consumers healthcare products, which was the result of the Innovus Merger. Select financial information for these segments is as follows:     Three months Ended December 31,     Six Months Ended December 31,       2020     2019     2020     2019   Consolidated revenue:                                 Aytu BioScience   $ 7,212,000     $ 3,175,000     $ 13,000,000     $ 4,615,000   Aytu Consumer Health     7,935,000       -       16,000,000       -   Consolidated revenue     15,147,000       3,175,000       29,000,000       4,615,000                                     Consolidated net loss:                                 Aytu BioScience     (8,267,000 )     (214,000 )     (11,218,000 )     (5,143,000 ) Aytu Consumer Health     (1,258,000 )     -       (2,613,000 )     -   Consolidated net loss     (9,525,000 )     (214,000 )     (13,831,000 )     (5,143,000 )     As of     As of       December 31,     June 30,       2020     2020   Total assets:                 Aytu BioScience   $ 140,647,000     $ 126,267,000   Aytu Consumer Health     26,095,000       26,569,000   Total assets   $ 166,742,000     $ 152,836,000   17. Related Party Transactions Tris Pharma, Inc. On November 2, 2018, the Company entered into a License, Development, Manufacturing and Supply Agreement (the “Tris License“Loan Agreement”). On November 1, 2019, the Company acquired the rights to Karbinal as a result of the acquisition of the Pediatric Portfolio from Cerecor, Inc. (See Notes 2 and 10). Mr. Ketan Mehta serves as a Director on the Board of Directors of the Company and is also the Chief Executive Officer of TRIS. The Company paid TRIS approximately $1.9 million and $0.2 million during the three months ended December 31, 2020 and 2019, respectively for a combination of royalty payments, inventory purchases and other payments as contractually required. The Company’s liabilities, including accrued royalties, contingent consideration and fixed payment obligations were $24.1 million and $24.8 million as of December 31, 2020 and 2019, respectively. In October 2020, the Company paid Tris approximately $1.6 million related to its Karbinal fixed payment obligation. 25 18. Subsequent Events Except for below, see Footnote 1 for information relating to certain events occurring between December 31, 2020, and the filing of this report Form 10-Q, impacting information disclosed above. MiOXSYS® Licensing Agreement On January 20, 2021, the Company signed an Exclusive License Agreement (the “ MiOXSYS Agreement”)to exclusively license the intellectual property surrounding the use of the Company's rapid in vitro diagnostic test that accurately measures seminal oxidative stress, including all components of the MiOXSYS® commercial system (the “Product”). The Agreement has been entered into with Avrio Genetics, LLC (“Avrio Genetics”), a Pennsylvania-based limited liability company focused on reproductive health. Under the MiOXSYSLoan Agreement, Avrio GeneticsEclipse will purchase existing inventory, commercialize, and market the Product under a royalty on Product net sales with a minimum annual payment fee structure for a term of ten (10) years, with the term continuing in perpetuity with a fixed percentage royalty rate based on Product sales payable annually to the Company. The Company will continue to own the intellectual property in the Product, with Avrio Genetics bearing all related patent maintenance and prosecution fees, commercial expenses, and regulatory fees. Further, Avrio Genetics will foster and expand all related customer, manufacturing, marketing, and distribution relationships in their effort to increase the commercialization of the Product. With Avrio’s assumption of the Product-related expenses and management of the Product programs, the Company expects to eliminate expenses associated the Product while maintain future revenue potential in the form of royalty and minimum annual payments from Avrio Genetics. 26 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This discussion should be read in conjunction with Aytu BioScience, Inc.’s Annual Report on Form 10-K for the year ended June 30, 2020, filed on October 6, 2020. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. For additional information regarding these risks and uncertainties, please see the risk factors included in Aytu’s Form 10-K filed with the Securities and Exchange Commission on October 6, 2020. Overview We are a commercial-stage specialty pharmaceutical company focused on commercializing novel products that address significant healthcare needs in both prescription and consumer health categories. We are currently operate our Aytu BioScience business, consisting of the Primary Care Portfolio (the “Primary Care Portfolio”) and Pediatric Care Portfolio (the “Pediatric Portfolio”), and our Aytu Consumer Health business (the “Consumer Health Portfolio”). Our Aytu BioScience business is focused on prescription pharmaceutical products treating hypogonadism (low testosterone), cough and upper respiratory symptoms, insomnia, male infertility, and various pediatric conditions. Our Consumer Health business is focused on consumer health products. We plan to expand into other therapeutic areas as opportunities arise. Aytu was incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado. Aytu was re-incorporated in the state of Delaware on June 8, 2015. The primary care portfolio includes (i) Natesto, the only FDA-approved nasal formulation of testosterone for men with hypogonadism (low testosterone, or "Low T"), (ii) ZolpiMist, the only FDA-approved oral spray prescription sleep aid, and (iii) Tuzistra XR, the only FDA- approved 12-hour codeine-based antitussive syrup. The pediatric care portfolio, acquired on November 1, 2019, (the “Pediatric Portfolio”), includes (i) Poly-Vi-Flor and Tri-Vi-Flor, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various formulations for infants and children with fluoride deficiency, (ii) Cefaclor, a second-generation cephalosporin antibiotic suspension; and (iii) Karbinal ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions. On February 14, 2020 we acquired Innovus Pharmaceuticals (“Innovus”), a specialty pharmaceutical company licensing, developing and commercializing safe and effective consumer healthcare products designed to improve health and vitality. Innovus commercializes over twenty consumer health products competing in large healthcare categories including diabetes, men's health, sexual wellness and respiratory health. The Innovus product portfolio is commercialized through direct-to-consumer marketing channels utilizing the Innovus’s proprietary Beyond Human® marketing and sales platform and on e-commerce platforms. On December 10, 2020, Aytu and Neutron Acquisition Sub, Inc., our wholly owned subsidiary (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Neos Therapeutics, Inc. (“Neos”). The Merger Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Neos, with Neos surviving as a wholly owned subsidiary of Aytu (the “Neos Merger”). The Neos Merger is subject to the approval of both the shareholders of Aytu and Neos. Based on the number of shares of our common stock anticipated to be immediately issued to Neos stockholders upon closing of the merger (which could be impacted by changes in Neos stock price leading to exercise of options not otherwise being assumed by Aytu or by additional issuances of Neos common stock that we may consent to) and the number of shares of our common stock outstanding as of December 31, 2020, it is expected that, immediately after completion of the merger, former Neos stockholders are expected to own approximately 24% of the outstanding shares of the our common stock and existing Aytu stockholders are expected to own approximately 76% of the outstanding shares of our common stock. In addition, each unvested option to acquire shares of Neos common stock that is outstanding as of immediately prior to the close of the Neos Merger  (the "Effective Time") with an exercise price equal to or less than $0.95 shall be assumed by Aytu and converted into an option to acquire shares of our common stock on the same terms and conditions. The number of shares of our common stock subject to each such assumed option shall be equal to (i) the number of shares of Neos common stock subject to the corresponding assumed option immediately prior to the Effective Time multiplied by (ii) 0.1088 (the "Exchange Ratio"), rounded down, if necessary, to the nearest whole share of our common stock, and such assumed option shall have an exercise price per share (roundedextend up to the nearest whole cent) equal$25.0 million in secured revolving loans to (A) the exercise price per shareus (the “Revolving Loans”), of Neos common stock otherwise purchasable pursuant to the corresponding assumed option divided by (B) the Exchange Ratio. As of February 5, 2021, the total estimated shares to be issued as consideration in connection with this merger totaled approximately 5.4 million with an estimated fair value of $44.2 million.  In connection with the execution of the Merger Agreement, Aytu and Neos have entered into a Commitment Letter (the “Bridge Commitment Letter”) for us to provide financing to Neos under an unsecured convertible note, in an aggregate amount ofwhich up to $5,000,000, subject to the terms set forth therein (the "Bridge Financing"). Interest accrues on the principal amount outstanding under the note at a rate of 6.0% per annum, compounding monthly and commencing if and when such Bridge Financing is provided. If an event of default has occurred and is continuing, the interest rate then in effect will be increased by 2.0% per annum, and all overdue obligations under the note will bear interest at the interest rate in effect at such time plus the additional 2.0% per annum. Our rights under the note, including rights to payment, are subordinated to the rights of Neos’s existing senior lenders. The maturity date of the note is the earlier of the acceleration of the obligations evidenced thereby and November 7, 2022. In the event that Neos draws down on the note, the exchange ratio will be adjusted downward by an amount equal to 0.00011 for every $100,000 of financing funded to Neos under the note. In April of 2020, the Company entered into a licensing agreement with Cedars-Sinai Medical Center to secure worldwide rights to various potential uses of Healight, an investigational medical device platform technology. Healight has demonstrated safety and efficacy in pre-clinical studies, and we plan to advance this technology and assess its safety and efficacy in human studies, initially focused on COVID-19 patients. We recently established a purchasing relationship with a U.S. supplier of Emergency Use Authorization (EUA) authorized antigen tests. Antigen tests rapidly detect the presence of the SARS-CoV-2 virus antigen via a nasopharyngeal swab and are used without laboratory equipment. Demand for rapid antigen tests has increased in recent months across the U.S. Our strategy is to continue building our portfolio of revenue-generating products, leveraging our focused commercial team and expertise to build leading brands within large therapeutic markets. Strategic Growth Initiatives Pursuant to our strategy of identifying and acquiring complimentary assets and companies, we expect to substantially increase our revenue generating capacity and provide opportunities to reduce our combined operating losses through a combination of our recent acquisitions during the twelve months ended June 30, 2020, coupled with the December 10, 2020 announcement of our planto merge with Neos. The combined impact of these transactions on revenue and operating expenses is expected to position us to achieve positive cash flow earlier than previously expected.  Strategic Rx Acquisitions. On December 10, 2020, we entered in a Merger Agreement with Neos Therapeutics, Inc. The merger is subject the approval by shareholders of both Aytu and Neos. The merger can accelerate our path to profitability, with estimated annualized cost synergies of up to approximately $15M beginning FY 2022. Neos’ established, multi-brand ADHD portfolio, will enhance our footprint in pediatrics and expanding our presence in adjacent specialty care segments. Opportunity to leverage and further enhance Neos RxConnect, a best-in-class patient support program, for our product portfolio of best-in-class prescription therapeutics, and potentially, our consumer health products. On November 1 2019, we acquired the Cerecor, Inc.'s ("Cerecor") portfolio of prescription pediatric therapeutics (the “Pediatric Portfolio”). The Pediatric Portfolio consists of four pharmaceutical and other prescription products consisting of (i) Cefaclor for Oral Suspension, (ii) Karbinal ER, (iii) Poly- Vi-Flor, and (iv) Tri-Vi-Flor. . Total consideration transferred consisted of $4.5 million cash and approximately 9.8 million shares of Series G Convertible Preferred Stock, plus the assumption not more than $3.5 million of Medicaid rebates and products returns. In addition, we hired the majority of the Cerecor’s workforce focused on commercial sales, commercial contracts, and customer relationships. 27 Table of Contents We have assumed obligations due to an investor including fixed and variable payments. We assumed fixed monthly payments equal to $0.1 million from November 2019 through January 2021 plus $15 million due in January 2021. Monthly variable payments due to the same investor are equal to 15% of net revenue generated from a subset of the Product Portfolio, subject to an aggregate monthly minimum of $0.1 million, except for January 2020, when a one-time payment of $0.2 million was due and paid. The variable payment obligation continues until the earlier of: (i) aggregate variable payments of approximately $9.5 million have been made, or (ii) February 12, 2026. The Company subsequently paid down the $15 million balloon payment early in June 2020, removing this obligation from our balance sheet. Further, certain of the products in the Pediatric Portfolio require royalty payments ranging from 15% to 38.0% of net revenue. One of the products in the Pediatric Portfolio requires us to generate minimum annual sales sufficient to represent annual royalties of approximately $1.75 million. Consumer Health Acquisitions. On February 14, 2020, we closed on the merger with Innovus Pharmaceuticals after approval by the stockholders of both companies on February 13, 2020. The acquisition of Innovus has enabled the company to expand into the consumer healthcare market with Innovus’ over-the-counter medicines and other consumer health products. We expect Innovus to continue to develop additional consumer healthcare products and expand its product portfolio. This, we expect, will drive additional revenue for the consumer health subsidiary and contribute meaningfully to the company's overall revenue growth. Additionally, we expect to continue to participate in the U.S. COVID-19 testing market. We have purchased 1,600,000 COVID-19 IgG/IgM rapid antibody tests from Zhejiang Orient Gene Biotech Limited via our distribution agreement with L.B. Resources, Ltd. We also signed an exclusive license with Cedars-Sinai Medical Center for rights to a medical device technology platform that is a prospective treatment for COVID-19 for seriously ill patients in the ICU. We expect to advance this technology through development and, if proven clinically effective and able to be manufactured at scale, expect to commercialize this product in the future. In the near-term, we expect to create value for shareholders by implementing a focused strategy of increasing sales of our prescription therapeutics while leveraging our commercial infrastructure. Further, we expect to increase sales of our consumer healthcare product portfolio. Additionally, we expect to expand both our Rx and consumer health product portfolios through continuous business and product development. Finally, we expect to identify operational efficiencies identified through our recent transactions and implement expense reductions accordingly. ACCOUNTING POLICIES Significant Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to recoverability and useful lives of long-lived assets, stock compensation, valuation of derivative instruments, allowances, contingent consideration, contingent value rights ("CVR"), fixed payment arrangements and going concern. Management bases its estimates and judgments on historical experience and on various other factors, including COVID-19, that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates, and judgments used by us in applying these critical accounting policies have a significant impact on the results we report in our consolidated financial statements. Our significant accounting policies and estimates are included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed with the SEC on October 6, 2020. Information regarding our accounting policies and estimates can be found in the Notes to the consolidated Financial Statements. Newly Issued Accounting Pronouncements Information regarding the recently issued accounting standards (adopted and pending adoption as of December 31, 2020) are presented in Note 1 to the condensed consolidated financial statements. 28 Table of Contents RESULTS OF OPERATIONS Results of Operations –Three and Six Months Ended December 31, 2020 compared to the Three and Six Months Ended December 31, 2019     Three months Ended December 31,                       2020     2019     Change     %                                     Revenues                                 Product and service revenue, net   $ 15,147,034     $ 3,175,236     $ 11,971,798       377 % Operating expenses                                 Cost of sales     5,998,389       606,046       5,392,343       890 % Research and development     286,572       66,675       219,897       330 % Selling, general and administrative     12,852,614       6,516,160       6,336,454       97 % Amortization of intangible assets     1,584,581       953,450       631,131       66 % Total operating expenses     20,722,156       8,142,331       12,579,825       154 % Loss from operations     (5,575,122 )     (4,967,095 )     (608,027 )     12 % Other (expense) income                                 Other (expense), net     (378,958 )     (446,958 )     68,000       -15 % Loss from change in fair value of contingent consideration     (3,313,656 )     -       (3,313,656 )     −   Gain from derecognition of contingent consideration     -       5,199,806       (5,199,806 )     -100 % Loss on debt exchange     (257,559 )     -       (257,559 )     −   Total other (expense) income     (3,950,173 )     4,752,848       (8,703,021 )     -183 % Net loss   $ (9,525,295 )   $ (214,247 )   $ (9,311,048 )     4346 %                                                                                                                                             Six Months Ended December 31,                       2020     2019     Change       %                                   Revenues                                 Product and service revenue, net   $ 28,667,280     $ 4,615,062     $ 24,052,218       521 % Operating expenses                                 Cost of sales     9,817,545       981,766       8,835,779       900 % Research and development     469,437       144,695       324,742       224 % Selling, general and administrative     24,342,983       11,662,603       12,680,380       109 % Amortization of intangible assets     3,169,161       1,528,567       1,640,594       107 % Total operating expenses     37,799,126       14,317,631       23,481,495       164 % Loss from operations     (9,131,846 )     (9,702,569 )     570,723       -6 % Other (expense) income                                 Other (expense), net     (1,130,499 )     (642,344 )     (488,155 )     76 % Loss from change in fair value of contingent consideration     (3,311,320 )     -       (3,311,320 )     −   Gain from derecognition of contingent consideration     -       5,199,806       (5,199,806 )     -100 % Gain from warrant derivative liability     -       1,830       (1,830 )     -100 % Loss on debt exchange     (257,559 )     -       (257,559 )     −   Total other (expense) income     (4,699,378 )     4,559,292       (9,258,670 )     -203 % Net loss   $ (13,831,224 )   $ (5,143,277 )   $ (8,687,947 )     169 % Product revenue. We recognized net revenue from product sales of approximately $15.1 million and $3.2 million for the three months ended December 31, 2020 and 2019, respectively. We recognized net revenue from product sales of approximately $28.7 and $4.6 million for the six months ended December 31, 2020, and 2019, respectively. The increase was primarily driven by the acquisition of the Pediatric Portfolio on November 1, 2019 and Consumer Health Portfolio on February 14, 2020, as well as additional revenues from COVID-19 test kit sales.  Cost of sales. We incurred the cost of sales of $6.0 million and $0.6 million recognized for the three months ended December 31, 2020 and 2019, respectively. We incurred the cost of sales $9.8 million and $1.0 million for the six months ended December 31, 2020 and 2019, respectively. The increase was primarily driven by the acquisition of the Pediatric Portfolio on November 1, 2019 and Innovus (a/k/a Consumer Health Portfolio) on February 14, 2020, as well as additional sales from COVID-19 test kit sales.  Research and Development. Research and development expenses increased $0.2 million, or 230%, for the three months ended December 31, 2020, compared to the three months ended December 31, 2019. Research and development expenses increased approximately $0.3 million, or 224% for the six months ended December 31, 2020, compared to the six months ended December 31, 2019. The increase was due primarily to costs associated with the Company’s Healight Platform license and initial development and clinical costs. Selling, General and Administrative. Selling, general and administrative costs increased $6.3 million, or 97%, for the three months ended December 31, 2020, compared the three months ended December 31, 2019. Selling, general and administrative costs increased $12.7 million, or approximately 109% for the six months ended December 31, 2020. The increase was primarily due to the Pediatric Portfolio and Innovus acquisition that occurred in the prior year ended June 30, 2020, of which, only the Pediatric Portfolio was a component of our financial results for November and December of 2019. 29 Table of Contents Amortization of Intangible Assets. Amortization expense for the remaining intangible assets was approximately $1.6 million and $1.0 million for the for the three months ended December 31, 2020 and 2019, respectively. Amortization expense for the remaining intangible assets was approximately $3.2 million and $1.5 million, respectively, for the six months ended December 31, 2020. This expense is related to corresponding amortization of our finite-lived intangible assets. The increase of this expense is due to the Pediatric Portfolio acquisition from Cerecor and Innovus Merger that occurred in the 2020 fiscal year ended June 30, 2020. Interest (expense) income, net. Interest (expense) income, net for the three months ended December 31, 2020, was expense of approximately $0.4 million, compared to expenses of $0.5 million for the three months ended December 31, 2019. Interest (expense) income, net for the six months ended December 31, 2020, was expense of approximately $1.1 million, compared to interest expense of $0.6 million for the three months ended December 31, 2019. The increase was primarily due to the accretion and interest expense resulting from the assumed fixed payment obligations and other long-term liabilities that arose from the (i) November 1, 2019 acquisition of the Pediatric Portfolio from Cerecor, Inc. and (ii) the February 14, 2020, Merger with Innovus. Loss from change in fair value of contingent consideration. We recognized a loss of approximately $2.5 million from the change in the fair value of the ZolpiMist and Tuzistra contingent consideration liability and a loss of approximately $0.8 million from the change in fair value of the contingent value rights ("CVR's") liability related to the Innovus Merger. Liquidity and Capital Resources As of December 31, 2020, we had approximately $62.3 million of cash, cash equivalents and restricted cash. Our operations have historically consumed cash and are expected to continue to require cash, but at a declining rate. Revenues for the three and six-months ended December 31, 2020, were approximately $15.1 million and $28.7 million, compared to $3.2 million and $4.6 million for the same periods ended December 31, 2019, an increase of 377% and 521%, respectively. Revenues increased 277% and 100% for each of the years ended June 30, 2020 and 2019, respectively. Revenue is expected to increase over time, which will allow us to rely less on our existing cash balance and proceeds from financing transactions. Cash used by operations during the three and six-months ended December 31, 2020 was $10.9 million compared to $9.1 million for the three and six-months ended December 31, 2019. The increase is due primarily to an increase in working capital and pay down of other liabilities. As of the date of this report, we expect costs for current operations to increase modestly as we continue to integrate the acquisition of the Pediatrics Portfolio and Innovus and continue to focus on revenue growth through increasing product sales. Our current assets totaling approximately $92.5 million as of December 31, 2020, plus the proceeds expected from ongoing product sales will be used to fund existing operations. We may continue to access the capital markets from time-to-time when market conditions are favorable. The timing and amount of capital that may be raised is dependent the termsavailable for short-term swingline loans, against 85% of eligible accounts receivable (see Note 10 and conditions upon which investors would require to provide such capital. There is no guarantee that capital will be available on terms favorable to us and our stockholders, or at all. We raised approximately $29.6 million, net during the three months ended December 31, 2020, from the sale of approximately 0.4 million shares using the Company’s at-the-market facility and from the issuance of approximately 4.8 million shares of our common stock and 0.3 million placement agent warrants on the December 15, 2020 offering. Finally, on December 10, 2020, we exchanged $0.8 million of debt into 0.1 million shares of our common stock, reducing the need to use cash to satisfy this obligation. Between December 31, 2020, and the filing date of this quarterly report on Form 10-Q, we have not issued any common stock under our at-the-market offering program. As of the date of this report, we have adequate capital resources to complete our near-term operating objectives. Note 19). Since we have sufficient cash on-hand as of December 31, 2020, to cover potential net cash outflows for the twelve months following the filing date of this Quarterly Report, we report that there is no indication of substantial doubt about our ability to continue as a going concern. If we are unable to raise adequate capital in the future when it is required, we can adjust our operating plans to reduce the magnitude of the capital needs under our existing operating plan. Some of the adjustments that could be made include delays of and reductions to commercial programs, reductions in headcount, narrowing the scope of our commercial plans, or reductions to its research and development programs. Without sufficient operating capital, we could be required to relinquish rights to products or renegotiate to maintain such rights on less favorable terms than it would otherwise choose. This may lead to impairment or other charges, which could materially affect our balance sheet and operating results. Cash Flows The following table shows cash flows for the threesix months ended December 31, 20202021 and 2019:2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended December 31,  ​ Increase ​      2021      2020      (Decrease)   Six Months Ended December 31,     2020     2019   ​ ​ (In thousands) Net cash used in operating activities   $ (10,900,299 )   $ (9,087,054 ) ​ $ (12,613) ​ $ (10,907) ​ $ (1,706) Net cash used in investing activities     (46,683 )     (5,954,635 ) ​ $ (3,137) ​ $ (39) ​ $ (3,098) Net cash provided by financing activities   $ 24,898,281     $ 9,258,350   ​ $ 1,126 ​ $ 24,898 ​ $ (23,772) 30 Table of Contents ​ Net Cash Used in Operating Activities Net cash used in operating activities during these periods primarily reflected our net losses, partially offset by changes in working capital and non-cash charges including inventory write-down, changes in fair values of various liabilities, stock-based compensation expense, depreciation, amortization and accretion and other charges. During the six-monthssix months ended December 31, 2020, our2021, net cash used in operating activities used $10.9totaled $12.6 million. The use of cash was approximately $26.7 million in cash, which was less than the net loss due primarily to non-cash charges of goodwill impairment, depreciation, amortization and accretion, stock-based compensation, inventory write-down and loss from change in fair values of contingent consideration. These non-cash charges were partially offset by non-cash amortization of debt premium and non-cash gain from change in fair values of contingent value rights. In addition, our use of cash decreased due to changes in working capital including decreases in accounts receivable and prepaid expense and other current assets, increase in accrued liabilities, offset by a decrease in accounts payable. During the six-months ended December 31, 2020, net cash used in operating activities totaled $10.9 million. The use of cash was approximately $13.8 million less than the net loss due primarily due to the non-cash depreciation, amortization and accretion, stock-based compensation, and loss from change in fair value of contingent consideration and CVR, a decrease in inventory and an increase in accrued liabilities. These charges were offset by increases in accounts receivable, prepaid expenses, and other current assets and decreases in accounts payables and accrued compensation. During the six-months ended December 31, 2019, our operating activities used $9.1 million in cash, which was greater than the net loss of $5.1 million, primarily as a result of derecognition of contingent consideration and an increase in accounts receivable, offset by the non-cash depreciation, amortization and accretion, stock-based compensation charges to earnings, coupled with an increase in accounts payable. Net Cash Used in Investing Activities DuringNet cash used in investing activities of $3.1 million during the six-monthssix months ended December 31, 2020, we made a2021 was primarily due to $3.1 million payment of $0.05 millioncontingent consideration to Tris. 41 Table of Contents Net cash used in contingent consideration. Duringinvesting activities of approximately $39,000 during the six-monthssix months ended December 31, 2019, we issued a note receivable2020 was primarily due to Innovus totaling $1.4 million. We also used $4.5 million for the Cerecor acquisition and we paid $105,000 inpayment of contingent consideration. Net Cash fromProvided by Financing Activities Net cash provided by financing activities of $1.1 million during the six months ended December 31, 2021 was primarily from $4.6 million net proceeds from issuance of our common stock under the ATM, partially offset by $2.7 million in payments of fixed payment arrangements and $0.8 million net reduction in our revolving loan. Net cash provided by financing activities in the six-monthssix months ended December 31, 2020, was $24.9 million. This was primarily related to the December 2020 offering for gross proceeds cost of $28.8 million offset by the offering cost of $2.6 million. We also completed the ATM offering with gross proceeds of $3.5 million, which was offset by the offering cost of $1.7 million, driven by a one-time payment in July 2020 of approximately $1.5 million. We paid approximately $2.8 million related to fixed payment obligation and $0.3 million of debt. Capital Resources Net cashWe have obligations related to our loan and credit facilities, contingent considerations related to our acquisitions, milestone payments and purchase commitments. Loan and Credit Upon closing of the Neos Merger, we assumed $15.6 million principal and approximately $1.0 million in exit fee obligation under Neos’ credit facility with Deerfield. As of December 31, 2021, $16.0 million was outstanding under the Deerfield facility, including the exit fee. Interest is due quarterly at a rate of 12.95% per year. Payment on the Deerfield facility, including the exit fee and any unpaid interest, is due on May 11, 2022. If all or any of the principal is prepaid or required to be prepaid prior to December 31, 2021, then we shall pay, in addition to such prepayment and accrued interest thereon, a prepayment premium equal to 6.25% of the amount of principal prepaid. Our Neos subsidiary’s Loan Agreement with Eclipse, provide us with up to $25.0 million in Revolving Loans, of which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable. The Revolving Loans bear variable interest through maturity at the one-month London Interbank Offered Rate, plus 4.50%. In addition, we are required to pay an unused line fee of 0.50% of the average unused portion of the maximum revolving facility amount during the immediately preceding month. Interest is payable monthly in arrears. The maturity date under the Loan Agreement is May 11, 2022. We may permanently terminate the Loan Agreement with at least five business days prior notice and the payment of a prepayment fee equal to 0.5% of the aggregate principal amount prepaid if such prepayment occurs prior to May 11, 2022. Contractual Obligations, Commitments and Contingencies As a result of our acquisitions and licensing agreements, we are contractually and contingently obliged to pay, when due, various fixed and contingent milestone payments (see Note 11 – Commitments and Contingencies for additional information). Upon closing of the Pediatric Portfolio acquisition from Cerecor, Inc. in October 2019, we assumed payment obligations that required us to make a payment of up to $9.5 million. In February 2020, upon closing of our Innovus Merger, all of Innovus shares were converted to our common stock and CVRs, which represents contingent additional consideration of up to $16.0 million payable to satisfy future performance milestones. Depending on satisfaction of these conditions, we may be required to pay up to $10 million. 42 Table of Contents Our Innovus subsidiary is also contractually obligated for inventory purchase commitments, for which we are expected to pay approximately $0.7 million during the fiscal year 2022. Assumed with our acquisition of Innovus, we are required to make five payments of $0.5 million, between fiscal year 2026 through fiscal year 2033 to Novalere, when certain levels of FlutiCare sales are achieved. In connection with our acquisition of the Rumpus assets, upon satisfaction of the milestones, we may be required to pay up to $67.5 million in earn-out payments to Rumpus. Under the licensing agreement with Denovo, we are required to make a payment of $0.6 for an option license fee in April 2022 and upon achievement of regulatory and commercial milestones, up to $101.7 million is payable to Denovo. Under the licensing agreement with JHU, upon achievement of regulatory and commercial milestone, we may be required to pay up to $1.6 million to JHU. Furthermore, as discussed above under “Significant Developments” the ODD ear-out milestone payment of $2.5 million is due and payable to Rumpus. Critical Accounting Estimates Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of any contingent assets and liabilities at the date of the financial statements, as well as reported revenue and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ materially from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 2 to the notes to our audited financial statements included elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements. Revenue recognition We generate revenue from product sales through our Aytu BioPharma segment and Aytu Consumer Health Segment. We recognize revenue when all of the following criteria are satisfied: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) as each performance obligation is individually satisfied. Revenue from our Aytu BioPharma segment involves significant judgment and estimates of the net sales price, including estimates of variable consideration (e.g., savings offers, prompt payment discounts, product returns, wholesaler (distributor) fees, wholesaler chargebacks and estimated rebates) to be incurred on the respective product sales (known as “Gross to Net” adjustments), and we recognize the estimated net amount as revenue when control of the product is transferred to our customers (e.g., upon delivery). Variable consideration is determined using either an expected value or a most likely amount method. The estimate of variable consideration is also subject to a constraint such that some or all of the estimated amount of variable consideration will only be included in the transaction price to the extent that it is probable that a significant reversal of revenue (in the context of the contract) will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Estimating variable consideration and the related constraint requires the use of significant management judgment and other market data. We provide for prompt payment discounts, wholesaler fees and wholesaler chargebacks based on customer contractual stipulations. We analyze recent product return history to determine a reliable return rate. Additionally, management analyzes historical savings offers and rebate payments based on patient prescriptions and information obtained from third party providers to determine these respective variable considerations. 43 Table of Contents Savings offers We offer savings programs for our patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. The amount of redeemed savings offers is recorded based on information from third-party providers against the estimated discount recorded as accrued expenses. The estimated discount is recorded as a gross to net sales adjustment at the time revenue is recognized. Historical trends of savings offers will be regularly monitored, which may result in adjustments to such estimates in the future. Prompt payment discounts Prompt payment discounts are based on standard programs with wholesalers and are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustment at the time revenue is recognized. Wholesale distribution fees Wholesale distribution fees are based on definitive contractual agreements for the management of our products by wholesalers and are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is recognized. Rebates The Rx Portfolio products are subject to commercial managed care and government managed Medicare and Medicaid programs whereby discounts and rebates are provided to participating managed care organizations and federal and/or state governments. Calculations related to rebate accruals are estimated based on information from third-party providers. Estimated rebates are recorded as accrued expenses and as a gross to net sales adjustment at the time revenue is recognized. Historical trends of estimated rebates will be regularly monitored, which may result in adjustments to such estimates in the future. Returns Wholesalers’ contractual return rights are limited to defective product, product that was shipped in error, product ordered by customer in error, product returned due to overstock, product returned due to dating or product returned due to recall or other changes in regulatory guidelines. The return policy for expired product allows the wholesaler to return such product starting six months prior to expiry date to twelve months post expiry date. Estimated returns are recorded as accrued expenses and as a gross to net sales adjustments at the time revenue is recognized. We analyzed return data available from sales since inception date to determine a reliable return rate. Wholesaler chargebacks The Rx Portfolio products are subject to certain programs with wholesalers whereby pricing on products is discounted below wholesaler list price to participating entities. These entities purchase products through wholesalers at the discounted price, and the wholesalers charge the difference between their acquisition cost and the discounted price back to us. Estimated chargebacks are recorded as a discount allowance against accounts receivable and as a gross to net sales adjustment at the time revenue is recognized based on information provided by financing activitiesthird parties. Inventories Inventories consist of raw materials, work in process and finished goods and are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Until objective and persuasive evidence exists that regulatory approval has been received and future economic benefit is probable, pre-launch inventories are expensed into research and development. Post-FDA approval, manufacturing costs for the production of our products are being capitalized into inventory. We periodically review the composition of our inventories in order to identify obsolete, slow-moving, excess or otherwise unsaleable items. Unsaleable items will be written down to net realizable value in the period identified. 44 six-monthsTable of Contents Stock-based compensation expense Stock-based compensation awards, including stock options, restricted stock and restricted stock units are recognized in the statement of operations based on their fair values on the date of grant. Stock option grants are valued on the grant date using the Black-Scholes option pricing model and compensation costs are recognized ratably over the period of service using the graded method. Restricted stock and restricted stock unit grants are valued based on the estimated grant date fair value of the Company’s common stock and recognized ratably over the requisite service period. Forfeitures are adjusted for as they occur. We calculated the fair value of options using the Black Scholes option pricing model. Restricted stock and restricted stock unit grants are valued based on the estimated grant date fair value of our common stock. The Black Scholes option pricing model requires the input of subjective assumptions, including stock price volatility and the expected life of stock options. The application of this valuation model involves assumptions that are highly subjective, judgmental and sensitive in the determination of compensation cost. We have not paid and do not anticipate paying cash dividends. Therefore, the expected dividend rate is assumed to be 0%. The expected stock price volatility for stock option awards is based on our stock price volatility in the valuation model. The risk-free rate was based on the U.S. Treasury yield curve in effect commensurate with the expected life assumption. The average expected life of stock options was determined according to the “simplified method” as described in SAB Topic 110, which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate was determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. Forfeitures are adjusted for as they occur. There is a high degree of subjectivity involved when using option pricing models to estimate stock-based compensation. There is currently no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values. Although the fair value of employee stock-based awards is determined using an option pricing model, such a model value may not be indicative of the fair value that would be observed in a market transaction between a willing buyer and willing seller. If factors change and we employ different assumptions when valuing our options, the compensation expense that we record in the future may differ significantly from what we have historically reported. Impairment of Long-lived Assets We assess impairment of long-lived assets annually and when events or changes in circumstances indicates that their carrying value amount may not be recoverable. Long-lived assets consist of property and equipment, net and goodwill and other intangible assets, net. Circumstances which could trigger a review include but are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life. If the estimated future undiscounted cash flows, excluding interest charges, from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value. Goodwill Goodwill is recorded as the difference between the fair value of the purchase consideration and the fair value of the net identifiable tangible and intangible assets acquired. Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. We typically complete our annual impairment test for goodwill using an assessment date in the fourth quarter of each fiscal year. Pursuant to the guidance under ASC350, we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of one or more of our reporting units is greater than its carrying amount. If, after assessing events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is no need to perform any further testing. However, if we conclude otherwise, then we perform a quantitative impairment test by comparing the fair value of the reporting unit with the carrying value. We also have the option to bypass the 45 Table of Contents qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. The fair value of the reporting unit is determined using a combination of a market multiple and a discounted cash flow approach. Determining the fair value of a reporting unit requires the use of estimates, assumptions and judgment. The principal estimates and assumptions that we use include prospective financial information (revenue growth, operating margins and capital expenditures), future market conditions, weighted average costs of capital, a terminal growth rate, comparable multiples of publicly traded companies in our industry, and the earnings metrics and multiples utilized. We believe that the estimates and assumptions used in impairment assessments are reasonable. If the fair value of the reporting unit is less than the carrying amount, an impairment charge is recorded in the amount of the difference. We have determined that we have two reporting units that require periodic review for goodwill impairment, the Aytu BioPharma segment and the Aytu Consumer Health segment. Due to the decline in stock price during the three months ended September 30, 2021, we determined that this was an indicator of increased risk primarily increasing the discount rates in the valuation models. We determined the fair value of our reporting segments utilizing the discounted cash flow model. As a result of the continued decline in its stock price, we risk adjusted our cost of equity, which increased the over-all discount rate. As a result, we determined that the fair value of the Aytu BioPharma segment was less than its carrying value, resulting in an impairment loss of $19.5 million. The quantitative test indicated there was no impairment to the Aytu Consumer Health segment as it resulted in an implied fair value of $5.9 million compared with the $0.5 million carrying value. There was no such impairment loss during the three months ended December 31, 2019, was $9.3 million. This was primarily2020. The Aytu Consumer Health segment, which has $8.6 million goodwill from the March 2020 Innovus merger, reported $1.4 million negative carrying value as of December 31, 2021. Contingent considerations We classify contingent consideration liabilities related to business acquisitions within Level 3 as factors used to develop the October 2019 Offering for gross proceedsestimated fair value are unobservable inputs that are not supported by market activity. We estimate the fair value of $10.0 million, offset by the offering costcontingent consideration liabilities based on projected payment dates, discount rates, probabilities of $0.7 million which was paid in cash. Off Balance Sheet Arrangements We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “variable interest entities.” Contractual Obligationspayment, and Commitments Information regarding our Contractual Obligations and Commitments is contained in Note 10projected revenues. Projected contingent payment amounts are discounted back to the Financial Statements.current period using a discounted cash flow methodology. The fair value of the contingent value rights was based on a model in which each individual payout was deemed either (a) more likely than not to be paid out or (b) less likely than not to be paid out. From there, each obligation was then discounted at a 30% discount rate to reflect the overall risk to the contingent future payouts pursuant to the CVRs. This value is then re-measured for future expected payout as well as the increase in fair value due to the time value of money. These gains or losses, if any, are included as a component of operating cash flows. Fixed payment arrangements are comprised of minimum product payment obligations relating to either make whole payments or fixed minimum royalties arising from a business acquisition. The fixed payment arrangements were recognized at their amortized cost basis using a market appropriate discount rate and are accreted up to their ultimate face value over time. The liabilities related to fixed payment arrangements are not re-measured at each reporting period, unless we determine the circumstances have changed such that the fair value of these fixed payment obligations would have changed due to changes in company specific circumstances or interest rate environments. Warrants Equity classified warrants are valued using a Black-Scholes model . Liability classified warrants are accounted for by recording the fair value of each instrument in its entirety and recording the fair value of the warrant derivative liability. The fair value of liability classified derivative financial instruments were calculated using a lattice valuation model. Changes in the fair value of liability classified derivative financial instruments in subsequent periods are recorded as derivative income or expense for the warrants and reported as a component of cash flows from operations. ​ 46 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are not currently exposed to material market risk arising from financial instruments, changes in interest rates or commodity prices, or fluctuations in foreign currencies. We have not identified a need to hedge against anysmaller reporting company as defined by Rule 12b-2 of the foregoing risksExchange Act and therefore currently engage in no hedging activities.are not required to provide information under this item. ​ Item 4. Controls and Procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by our management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and are operating in an effective manner. In connection with the preparation of our financial statements for the period ended June 30, 2021, we concluded that we had a material weakness in internal control over financial reporting related to our analysis for the accounting of goodwill and other intangibles and accounting for the impairment of long-lived assets. As a result, our management concluded that, as of June 30, 2021, our internal control over financial reporting is not effective (whereas we previously indicated in our Form 10-K that it is effective as of that date). In connection with the material weakness, we sought and received technical guidance from a third-party provider. This deficiency did not result in a revision of any of our previously issued financial statements. However, the deficiency may have resulted in a material misstatement in the future. In response, we have taken a number of steps, including incorporating the third-party provider review and expertise in our analysis, and we believe that our controls are now designed properly and operating effectively. Such measures were implemented as of the date of the filing of this Quarterly Report and management believes that the enhanced controls are operating effectively and the deficiencies that contributed to the material weakness have been remediated. We expect to continue our efforts to maintain and improve our control processes, though there can be no assurance that we will avoid potential future material weaknesses. Changes in Internal Control over Financial Reporting ThereOther than the material weakness discussed above, there were no changes in our internal controls over financial reporting, except as described below, known to the Chief Executive Officer or the Chief Financial Officer that occurred during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The Company’sOur assessment over changes in our internal controls over financial reporting excluded those processes or controls that exist at our Aytu Consumer Health reporting unitNeos subsidiary, which we acquired from the February 14,March 19, 2021 Neos Merger. Neos’ last annual report for the year ended December 31, 2020 Innovus Merger are being evaluated internally, andhas been audited without any changes as a result of that evaluation will be disclosed in future filings. qualifications. Since the merger, there has been no significant change to its internal control over financial reporting. ​ 47 31 Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings. Hikma. On May 8, 2017, Innovus entered into a Supply Agreement with Hikma (formerly West-Ward Pharmaceuticals Corp.) for the supply of FlutiCare®, a branded fluticasone propionate nasal spray. During the second year of the Supply Agreement, Innovus received multiple shipments of FlutiCare® products containing non-compliant labelling dueThere have not been any material changes to defective label adhesive. Following that Hikma and Innovus began negotiations to settle the issues relating to the defective products and the status of the Supply Agreement. On May 1, 2020, Hikma and Innovus (now a Company subsidiary) entered into the Settlement Agreement requiring Innovus to purchase three batches of FlutiCare® through theour legal proceedings from those reported in our fiscal year 2022 at a price of $1 million per batch in exchange for Hikma agreeing to a product quality threshold and inspection and qualification of the product by a third party. Marin County DA. On August 24, 2018, Innovus received a letter from the Marin County District Attorney’s Office (the “Marin DA”) demanding substantiation for certain advertising claims made by Innovus related to DiabaSens®, and Apeaz®, which were sold and marketed in Marin County, California. The Marin DA is part of a larger Northern California task force comprising of district attorney offices from ten counties that agree to handle customer protection matters. Innovus responded to the Marin DA through its regulatory counsel in November 2018 and continued to exchange correspondence2021 Annual Report on Form 10-K filed with the Marin DA through April 2019. In June 2019, Innovus met with the Northern California task force. In March 2020, Innovus (now a Company subsidiary) entered into a Stipulation for Entry of Final Judgement (the “Stipulation”), pursuant to which Innovus agreed to the following: (i) certain injunctive relief relating the advertising and sale of DiabaSens®, and Apeaz®; (ii) to pay a civil penalty of $150,000; (iii) to reimburse investigative costs of $11,500; and (iv) to pay restitution of $43,000. In May 2020, the Marin DA filed the judgement with the Superior Court for the County of Monterrey and the parties are waiting for the judge to approve the stipulation.SEC on September 28, 2021. ​ 32 Table of Contents Pliscott. Between November 20, 2019 and December 17, 2019, four putative class action lawsuits were filed in Delaware state and federal courts in connection with: (i) Aytu’s proposal to approve, in accordance with Nasdaq Marketplace Rule 5635(d), the convertibility of the Company’s Series F convertible preferred stock and the exercisability of certain warrants, in each case, issued in a private placement offering that closed on October 16, 2019 (the “Nasdaq Rule 5635(d) Proposal”); (ii) Aytu’s proposal to approve an amendment to its Certificate of Incorporation to increase the number of its authorized shares of common stock from 100,000,000 to 120,000,000 shares of common stock (the “Authorized Share Increase Proposal”); and (iii) Aytu’s proposal to approve the adjournment of the special meeting, if necessary, to continue to solicit votes for the Nasdaq Rule 5635(d) Proposal and/or the Authorized Share Increase Proposal (“Adjournment Proposal” and, together with the Nasdaq Rule 5635(d) Proposal and the Authorized Share Increase Proposal, the “Proposal”). Three lawsuits were filed in the Court of Chancery of the State of Delaware: Carl Pliscott v. Joshua R. Disbrow, et al. , Case No. 2019-0933, filed on November 20, 2019 (the “Pliscott Action”); Adam Kirschenbaum v. Aytu Bioscience, Inc., et al. , Case No. 2019-0984, filed on December 10, 2019 (the “Kirschenbaum lawsuit”); and Michael Sebree v. Josh Disbrow, et al. , Case No. 2019-1011, filed on December 17, 2019 (the “Sebree Action”). The Kirschenbaum Action and Sebree Action were both assigned to Chancellor Andre G. Bouchard. The Pliscott Action was removed to the United States District Court for the District of Delaware on December 5, 2019, captioned as Carl Pliscott v. Joshua R. Disbrow, et al., Case No. 19-cv-02228-UNA, but was remanded to the Court of Chancery and assigned to Chancellor Andre G. Bouchard on January 14, 2020. One lawsuit was filed in the United States District Court for the District of Delaware and assigned to Chief Judge Leonard P. Stark: Adam Franchi v. Aytu Bioscience, Inc., et al., Case No. 19-cv-02204- LPS, filed on November 26, 2019 (the “Franchi Action”). The Pliscott Action, Kirschenbaum Action, and Sebree Action alleged that the members of the Aytu board breached their fiduciary duties to Aytu stockholders by failing to disclose all information material to the Proposals. The Franchi Action alleged that Aytu and the individual members of the Aytu board violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (and Rule 14a-9, promulgated thereunder) by virtue of allegedly false and misleading statements contained in the proxy statement filed by Aytu on November 21, 2019. All four lawsuits sought, among other things, declaratory relief allowing the action to be maintained as a class action, injunctive relief prohibiting any stockholder vote on the Proposals or other consummation of the Proposals, damages, attorneys’ fees and costs, and other and further relief. The Sebree Action further sought injunctive relief prohibiting consummation of the Asset Purchase Agreement, dated October 10, 2019. Aytu and the board have asserted that all claims asserted are meritless and vigorously defended against the four lawsuits. On January 30, 2020, the parties in the Pliscott Action, Kirschenbaum Action, and Sebree Action filed a stipulation voluntarily dismissing the cases as moot, with plaintiffs reserving the right to seek mootness fees. On February 5, 2020, the Chancery Court dismissed the cases while retaining jurisdiction to adjudicate anticipated mootness fee motions. No mootness fee motion has been filed to date. At this stage, it is not otherwise possible to predict the effect of lawsuits on Aytu. Item 1A. Risk Factors. In addition to other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report, which could materially affect ourOur business financial condition, cash flows, and/or future results. The risk factors in our Annual Report are not the only risks facing our Company. Additionalfaces significant risks and uncertainties, not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or future results. There are no additional risk factors other than those contained in our Annual Report. Risks Related toincluding the Merger             Because the Exchange Ratio is fixed and the market price of Aytu common stock may fluctuate, Neos stockholders cannot be certainimpact of the precise value of the stock consideration theyCOVID-19 pandemic. Certain important factors may receive in the merger. The Exchange Ratio is fixed and will only be adjusted in certain limited circumstances (including the Bridge Note Adjustment, recapitalizations, reclassifications, stock splits or combinations, exchanges, mergers, consolidations or readjustments of shares, or stock dividends or similar transactions involving Aytu or Neos) and the value of the stock consideration will depend on the market price of Aytu common stock at the time the transaction is completed. Time will elapse from the date of the Merger Agreement, when the Exchange Ratio was established, until each of the date of this joint proxy statement/prospectus, the date on which Neos stockholders vote to approve the Merger Agreement at the Neos special meeting, the date the Aytu stockholders approve the merger consideration, including the Common Stock Issuance, at the Aytu special meeting and the date on which Neos stockholders entitled to receive shares of Aytu common stock under the Merger Agreement actually receive such shares. The market value of Aytu common stock may fluctuate during these periods as a result of a variety of factors, including, among others, general market and economic conditions, changes in Aytu’s businesses, operations and prospects and regulatory considerations, federal, state and local legislation, governmental regulation and legal developments in the businesses in which Aytu operates, any potential stockholder litigation related to the merger, market assessments of the likelihood that the transaction will be completed, the timing of the transaction and the anticipated dilution to holders of Aytu common stock as a result of the issuance of the merger consideration. Many of these factors are outside of the control of Aytu and Neos. The closing trading price per share of Neos common stock as of December 9, 2020, the last trading date before the public announcement of the Merger Agreement, was $0.55, and the closing trading price per share has fluctuated as high as $0.933 and as low as $0.625 between that date and February 5, 2021. The closing trading price per share of Aytu common stock as of December 9, 2020, the last trading date before the public announcement of the Merger Agreement, was $6.83 and the closing trading price per share has fluctuated as high as $8.35 and as low as $5.98 between that date and February 5, 2021. Consequently, at the time Neos stockholders must decide whether to approve the Merger Agreement, they will not know the actual market value of the shares of Aytu common stock they may receive when the merger is completed. The actual value of the shares of Aytu common stock to be issued to Neos stockholders who receive stock consideration will depend on the market value of shares of Aytu common stock on the date of issuance. This value will not be known at the time of the Neos special meeting and may be more or less than the current price of Aytu common stock or the price of Aytu common stock at the time of the Neos special meeting. Neos stockholders should obtain current stock quotations for shares of Aytu common stock before voting their shares of Neos common stock. For additional information about the merger consideration, see the section entitled “The Merger Agreement — Merger Consideration.” The market price of shares of Aytu common stock after the merger will continue to fluctuate and may be affected by factors different from those that are currently affecting or historically have affected the market price of shares of Neos common stock or Aytu common stock. Upon completion of the merger, holders of shares of Neos common stock will become holders of shares of Aytu common stock. The market price of Aytu common stock may fluctuate significantly following completion of the merger, and holders of shares of Neos common stock could lose the value of their investment in Aytu common stock if, among other things, the combined company is unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of the Neos and Aytu business are not realized, or if the transaction costs relating to the merger are greater than expected. The market price also may decline if the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts. The issuance of shares of Aytu common stock in the merger could on its own have the effect of depressing the market price for Aytu common stock. In addition, many Neos stockholders may decide not to hold the shares of Aytu common stock they receive as a result of the merger. Other Neos stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Aytu common stock they receive as a result of the merger. Any such sales of Aytu common stock could have the effect of depressing the market price for Aytu common stock.  In addition, in the future Aytu may issue additional securities to raise capital. Aytu may also acquire interests in other companies by issuing Aytu common stock to finance the acquisition, in whole or in part. Aytu may also issue securities convertible into Aytu common stock.  Moreover, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, the Aytu common stock, regardless of Aytu’s actual operating performance. The businesses of Aytu differ from those of Neos in important respects and, accordingly, the results of operations of the combined company after the merger, as well as the market price of shares of Aytu common stock, may be affected by factors different from those that are currently affecting, historically have affected or would in the future affect the results of operations of Neos and Aytu as stand-alone public companies, as well as the market price of shares of Neos common stock and Aytu common stock prior to completion of the merger. Current Aytu and Neos stockholders will have a reduced ownership and voting interest in Aytu after the merger. Upon the completion of the merger, each Neos stockholder who receives shares of Aytu common stock will become a stockholder of Aytu with a percentage ownership of Aytu that is substantially smaller than the stockholder’s current percentage ownership of Neos. Accordingly, the former Neos stockholders would exercise significantly less influence over Aytu after the merger relative to their influence over Neos prior to the merger, and thus would have a less significant impact on the approval or rejection of future Aytu proposals submitted to a stockholder vote. Immediately upon consummation of the merger, pre-closing Neos stockholders (other than Aytu and its subsidiaries) are expected to own approximately 24% of the outstanding shares of Aytu common stock and pre-closing Aytu stockholders are expected to own approximately 76% of the outstanding shares of Aytu common stock. Aytu and Neos are subject to restrictive interim operating covenants during the pendency of the merger. Until the merger is completed, the Merger Agreement restricts each of Aytu and Neos from taking specified actions without the consent of the other party, and requires each of Aytu and Neos to operate in the ordinary course ofour business consistent with past practice. Neos is subject to a number of customary interim operating covenants relating to, among other things, its capital expenditures, incurrence of indebtedness, entry into or amendment of certain types of agreements, issuances of securities and changes in director, officer, employee and independent contractor compensation. Although less restrictive than those imposed on Neos, the Merger Agreement also imposes certain restrictive interim operating covenants on Aytu. These restrictions may prevent Aytu and/or Neos from making appropriate changes to their respective businesses or pursuing financing transactions or attractive business opportunities that may arise prior to the completion of the merger. See the section entitled “The Merger Agreement – Conduct of Business Pending the Merger” for a description of the restrictive covenants applicable to Aytu and Neos, respectively. Aytu and Neos directors and officers have interests in the merger that may be different from, or in addition to, the interests of Aytu stockholders and Neos stockholders. Certain executive officers of Aytu participated in the negotiation of the terms of the Merger Agreement. The Aytu Board approved the Merger Agreement and the merger consideration, including the Common Stock Issuance, and determined that the Merger Agreement and the transactions contemplated thereby, including the merger consideration, are advisable and in the best interests of Aytu and its stockholders. The Neos Board approved the Merger Agreement and determined that the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of Neos and its stockholders. In considering these facts and the other information contained in this joint proxy statement/prospectus, you should be aware that certain of Aytu’s directors and executive officers and certain of Neos’ directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Aytu’s or Neos’ stockholders. For example, some Neos directors will serve as Aytu directors. These interests are described in more detail in the sections entitled “Interests of Neos’ Directors and Executive Officers in the Merger.” Certain officers and directors of Aytu and Neos, have agreed to vote in favor of the merger consideration and the Merger Agreement, as applicable, regardless of how other Aytu and Neos stockholders vote. Concurrently with the execution and delivery of the Merger Agreement, certain officers and directors of Aytu and Neos holding approximately 2% and 1%, respectively, of the companies’ outstanding voting shares entered into voting agreements with Neos and Aytu, as applicable (the “Voting Agreements”). Pursuant to the Voting Agreements, each of the stockholders of Aytu and Neos, as applicable, have agreed, among other things, to vote their shares of Aytu common stock, or Neos common stock, as applicable, that such stockholder owns in favor of the issuance of shares of Aytu common stock in connection with the merger, or the merger proposal, as applicable. Accordingly, the Voting Agreements make it more likely that the necessary Aytu and Neos stockholder approval will be received for the merger consideration and the Merger Agreement than would be the case in the absence of the voting agreements. The Aytu Board and the Neos Board have not requested, and do not anticipate requesting, an updated opinion from their respective financial advisors reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement. The opinions rendered to the respective boards of directors of Aytu and Neos by Cowen and MTS, respectively, were provided in connection with the Aytu Board’s and the Neos Board’s respective evaluation of the merger. Neither the Aytu Board nor the Neos Board has obtained an updated opinion from Cowen or MTS, respectively, as of the date of this joint proxy statement/prospectus or as of any other date, and the Aytu Board and the Neos Board have not requested, and do not anticipate requesting, an updated opinion from their respective financial advisors reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement. As a result, neither the Aytu Board nor the Neos Board will receive an updated, revised or reaffirmed opinion prior to the consummation of the merger. Changes in the operations and prospects, of Aytu or Neos, general market and economic conditions and other factors that may be beyond the control of Aytu or Neos, including the social, political and economic impact of the COVID-19 pandemic, may significantly alter the value of Aytu or Neos or the prices of Aytu common stock or Neos common stock by the time the merger is consummated. The opinions of Cowen and MTS speak as of the date each opinion was rendered, and do not speak as of the time the merger will be consummated or as of any date other than the date of each such opinion. The opinions of Cowen and MTS do not address the fairness of the Exchange Ratio, from a financial point of view, at any time other than the time each such opinion was delivered.                Failure to consummate the merger could negatively impact respective future stock prices, operations and financial results of Aytu and Neos. If the merger is not consummated for any reason, the ongoing businesses of Aytu and/or Neos may be adversely affected, and Aytu and Neos will be subject to a number of risks, including the following: ● being required to pay a termination fee to the other party under certain circumstances provided in the Merger Agreement; ● having to pay certain costs related to the merger, including, but not limited to, fees paid to legal, accounting and financial advisors, filing fees and printing costs; ● declines in the stock prices of Aytu common stock and Neos common stock to the extent that the current market prices reflect a market assumption that the merger will be consummated; and ● any negative impact of having the focus of management of each of Aytu and Neos on the merger, which may have the effect of diverting management’s attention and potentially causing Aytu or Neos, as applicable, not to pursue opportunities that could have been beneficial to Aytu or Neos, as applicable. If the merger is not completed, Aytu and Neos cannot assure their stockholders that these risks will not materialize and will not materially adversely affect the business, financial results and stock prices of Aytu or Neos. In addition, if the merger with Aytu does not close, Neos may be required to seek other strategic alternatives, including but not limited to, strategic partnerships, a potential business combination or a sale of Neos or its business, or otherwise reduce its operations. There can be no assurance that Neos would be able to take any of these actions or that any effort to sell additional debt or equity securities would be successful or would raise sufficient funds to meet its financial obligations, including the May 2021 debt payment of $15.0 million due to Deerfield. If additional financing is not available when required or is not available on acceptable terms, Neos may need to curtail, delay, modify or abandon its commercialization plans for its marketed products, reduce its investment in the development of its product candidate and Neos may be unable to take advantage of business opportunities or respond to competitive pressures, which could have a material adverse effect on Neos’ revenue, results of operations and financial condition. To preserve Neos’ cash resources, it may be required to reorganize its operations, such as through a reduction in force with respect to one or more functions within Neos or across Neos. If Neos is unable to fund its operations without additional external financing and therefore cannot sustain future operations, it may be required to cease its operations and/or seek bankruptcy protection. In addition, if the merger does not close, Neos may be required to effectuate a reverse stock split of its common stock to increase the per-share market price of Neos common stock to satisfy the Minimum Bid Price Rule under the Nasdaq rules so that Neos common stock, which will remain outstanding and registered under the Exchange Act, will be able to regain compliance with the applicable continued listing standards of Nasdaq and avoid being delisted from Nasdaq Global. The merger may disrupt the attention of Aytu’s management or Neos’ management from ongoing business operations. Each of Aytu and Neos has expended, and expects to continue to expend, significant management resources to complete the merger. Their respective management’s attention may be diverted away from the day-to-day operations of their respective businesses, implementing initiatives to improve performance and executing existing business plans in an effort to complete the merger. This diversion of management resources could disrupt their respective operations and may have an adverse effect on their respective businesses, financial conditions and results of operations. Aytu and Neos stockholders will not be entitled to appraisal or dissenters’ rights in the merger. Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the DGCL. In the merger, because Neos common stock is listed on the Nasdaq, and because Neos stockholders are not required to accept in the merger any consideration in exchange for their shares of Neos common stock other than shares of Aytu common stock, which is listed on the Nasdaq, and cash in lieu of fractional shares (if applicable), holders of Neos common stock will not be entitled to any appraisal rights in connection with the merger with respect to their shares of Neos common stock. Under Delaware law, Aytu stockholders are also not entitled to appraisal or dissenters’ rights in connection with the Aytu share issuance proposal. Aytu and Neos may have difficulty attracting, motivating and retaining executives and other key employees in light of the merger. Aytu’s success after the transaction will depend in part on the ability of Aytu to retain key executives and other employees of Neos. Uncertainty about the effect of the merger on Aytu and Neos employees may have an adverse effect on each of Aytu and Neos separately and consequently the combined business. This uncertainty may impair Aytu’s and/or Neos’ ability to attract, retain and motivate key personnel. Employee retention may be particularly challenging during the pendency of the merger, as employees of Aytu and Neos may experience uncertainty about their future roles in the combined business. Furthermore, if key employees of Aytu or Neos depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial security or a desire not to become employees of the combined business, Aytu may have to incur significant costs in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise and talent, and the combined company’s ability to realize the anticipated benefits of the merger may be materially and adversely affected. No assurance can be given that the combined company will be able to attract or retain key employees to the same extent that Neos has been able to attract or retain employees in the past. Completion of the merger is subject to a number of other conditions, and if these conditions are not satisfied or waived, the merger will not be completed. The obligations of Aytu and Neos to complete the merger are subject to satisfaction or waiver of a number of conditions including (1) the approval of the merger proposal by a majority of the holders of the outstanding shares of Neos common stock, (2) approval of the issuance of Aytu common stock by a majority of the votes cast by Aytu stockholders on the matter, (3) that the conditions to the Debt Facility Letters have been satisfied as of the time of closing, and that the lenders do not dispute the satisfaction thereof, (4) accuracy of each party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement, (5) the absence of a material adverse effect of either party and (6) compliance in all material respects with each party’s obligations under the Merger Agreement and certain other conditions. There can be no assurance that the conditions to closing the merger will be satisfied or waived or that the merger will be completed within the expected time frame, or at all. Aytu will assume a significant amount of debt in the merger, which, together with Aytu’s other debt, could limit Aytu’s operational flexibility or otherwise adversely affect Aytu’s financial condition. If the merger closes, Aytu will indirectly assume approximately $30.6 million of term debt currently owed by Neos, of which $15.0 million will be due upon the closing of the merger, $0.6 will come due in April 2021, and $15.0 million which is due in May 2022. If Aytu fails to meet its obligations under the debt Aytu assumes in the merger, the lenders would be entitled to foreclose on all or some of the collateral securing such debt which could have a material adverse effect on Aytu and its ability to make expected distributions, and could threaten Aytu’s continued viability. Aytu is subject to the risks normally associated with debt financing, including the following risks: ● Aytu’s cash flow may be insufficient to meet required payments of principal and interest, or require Aytu to dedicate a substantial portion of its cash flow to pay its debt and the interest associated with its debt rather than to other areas of its business; ● it may be more difficult for Aytu to obtain additional financing in the future for its operations, working capital requirements, capital expenditures, debt service or other general requirements; ● Aytu may be more vulnerable in the event of adverse economic and industry conditions or a downturn in its business; ● Aytu may be placed at a competitive disadvantage compared to its competitors that have less debt; and ● Aytu may not be able to refinance at all or on favorable terms, as its debt matures. If any of the above risks occurred, Aytu’s financial condition, and results of operations, could be materially adversely affected. Aytu and Neos may be targets of transaction related lawsuits which could resultyou should carefully consider them. There have not been any material changes to our risk factors from those reported in substantial costsour fiscal year 2021 Annual Report on Form 10-K and may delay or prevent the merger from being completed. If the merger is completed, Aytu will also assume Neos’ risks arising from various legal proceedings. Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into Merger Agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impactQuarterly Report on Aytu’s and Neos’ respective liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the merger, then that injunction may delay or prevent the merger from being completed, which may adversely affect Aytu’s and Neos’ respective business, financial position and results of operation. There can be no assurance that no complaints will beForm 10-Q filed with respect to the merger, or that any additional complaints will be filed with respect to the Aytu’s acquisition of a portfolio of pediatric primary care products from Cerecor, Inc. (“Cerecor”) in 2019 (the “Cerecor Transaction”). Currently, with regard to the merger, Aytu and Neos are not aware of any securities class action lawsuits or derivative lawsuits being filed with respect to the merger. Aytu and Neos have incurred, and will incur, substantial direct and indirect costs as a result of the merger. Aytu and Neos have incurred and expect to incur additional material non-recurring expenses in connection with the merger and completion of the transactions contemplated by the Merger Agreement. Both parties have incurred significant legal, advisory and financial services fees in connection with the process of negotiating and evaluating the terms of the merger. Additional significant unanticipated costs may be incurred in the course of coordinating the businesses of Neos and Aytu after completion of the merger. Even if the merger is not completed, Aytu and Neos will each need to pay certain costs relating to the merger incurred prior to the date the merger was abandoned, such as legal, accounting, financial advisory, filing and printing fees. Such costs may be significant and could have an adverse effectSEC on Aytu’s and Neos’ respective plans. If the merger is completed, Aytu may fail to realize the anticipated benefits and cost savings of the merger, which could adversely affect the value of shares of Aytu common stock. The success of the merger will depend, in part, on Aytu’s ability to realize the anticipated benefits and cost savings from combining the businesses of Aytu and Neos. Aytu’s ability to realize these anticipated benefits and cost savings is subject to certain risks, including, among others: ● Aytu’s ability to successfully combine the businesses of Aytu and Neos; ● the risk that the combined businesses will not perform as expected; ● the extent to which Aytu will be able to realize the expected synergies, which include potential savings from re-assessing priority assets and aligning investments, eliminating duplication and redundancy, adopting an optimized operating model between both companies and leveraging scale, and value creation resulting from the combination of the businesses of Aytu and Neos; ● the possibility that Aytu paid more for Neos than the value it will derive from the merger; ● the assumption of known and unknown liabilities of Neos; ● the possibility of a decline of the credit ratings of the combined company following the completion of the merger; and ● the possibility of costly litigation challenging the merger.                If Aytu is not able to successfully combine the businesses of Aytu and Neos within the anticipated time frame, or at all, the anticipated cost savings and other benefits of the merger may not be realized fully or may take longer to realize than expected, the combined businesses may not perform as expected and the value of the shares of Aytu common stock may be adversely affected. Aytu and Neos have operated and, until completion of the merger will continue to operate, independently, and there can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of key Aytu or Neos employees, the disruption of either company’s or both companies’ ongoing businesses or in unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, issues that must be addressed in integrating the operations of Neos and Aytu in order to realize the anticipated benefits of the merger so the combined business performs as expected include, among others: ● combining the companies’ separate operational, financial, reporting and corporate functions; ● integrating the companies’ technologies, products and services; ● identifying and eliminating redundant and underperforming operations and assets; ● harmonizing the companies’ operating practices, employee development, compensation and benefit programs, internal controls and other policies, procedures and processes; ● addressing possible differences in corporate cultures and management philosophies; ● maintaining employee morale and retaining key management and other employees; ● attracting and recruiting prospective employees; ● consolidating the companies’ corporate, administrative and information technology infrastructure; ● coordinating sales, distribution and marketing efforts; ● managing the movement of certain businesses and positions to different locations; ● maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors; ● coordinating geographically dispersed organizations; and ● effecting potential actions that may be required in connection with obtaining regulatory approvals. In addition, at times, the attention of certain members of each company’s management and each company’s resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company. The Merger Agreement contains provisions that make it more difficult for Aytu and Neos to pursue alternatives to the merger and may discourage other companies from trying to acquire Neos for greater consideration than what Aytu has agreed to pay. The Merger Agreement contains provisions that make it more difficult for Neos to sell its business to a party other than Aytu, or for Aytu to sell its business. These provisions include a general prohibition on each party soliciting any acquisition proposal. Further, there are only limited exceptions to each party’s agreement that its board of directors will not withdraw or modify in a manner adverse to the other party the recommendation of its board of directors in favor of the merger proposal, in the case of Neos, or the approval of the merger consideration, in the case of Aytu, and the other party generally has a right to match any acquisition proposal that may be made. However, at any time prior to the approval of the merger proposal by Neos stockholders, in the case of Neos, or the approval of the merger consideration by Aytu stockholders, in the case of Aytu, such party’s board of directors is permitted to make an adverse recommendation change if it determines in good faith that the failure to take such action would be reasonably likely to be inconsistent with its fiduciary duties under applicable law. In the event that either the Neos Board or the Aytu Board make an adverse recommendation change and the Merger Agreement is terminated, then such party may be required to pay a $2,000,000 termination fee. The parties believe these provisions are reasonable and not preclusive of other offers, but these restrictions might discourage a third party that has an interest in acquiring all or a significant part of either Neos or Aytu from considering or proposing an acquisition proposal, even if that party were prepared to pay consideration with a higher per-share value than the currently proposed merger consideration, in the case of Neos, or that party were prepared to enter into an agreement that may be favorable to Aytu or its stockholders, in the case of Aytu. Furthermore, the termination fees described above may result in a potential competing acquirer proposing to pay a lower per-share price to acquire the applicable party than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable by such party in certain circumstances. The indebtedness of the combined company following completion of the merger will be greater than Aytu’s indebtedness on a stand-alone basis. This increased level of indebtedness could adversely affect the combined company’s business flexibility, and increase its borrowing costs. Any resulting downgrades in Aytu’s credit ratings could adversely affect Aytu’s and/or the combined company’s respective businesses, cash flows, financial condition and operating results.               As of January 26, 2021, the current outstanding indebtedness of Neos is $38.3 million, which is subject to change between January 29,September 28, 2021 and the closing. As a result of the merger, Aytu will assume the outstanding indebtedness of Neos at the closing. The amount of cash required to service Aytu’s increased indebtedness levels and thus the demands on Aytu’s cash resources will be greater than the amount of cash flows required to service the indebtedness of Aytu individually prior to the merger. The increased levels of indebtedness could also reduce funds available to fund Aytu’s efforts to combine its business with Neos and realize expected benefits of the merger and/or engage in investments in product development, capital expenditures, and other activities and may create competitive disadvantages for Aytu relative to other companies with lower debt levels. While Aytu successfully raised net proceeds of $26.1 million in a common stock financing after announcement of the merger in December 2020, Aytu may be required to raise additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes. Aytu’s ability to arrange additional financing or refinancing will depend on, among other factors, Aytu’s financial position and performance, as well as prevailing market conditions and other factors beyond Aytu’s control. Aytu cannot assure you that it will be able to obtain additional financing or refinancing on terms acceptable to Aytu or at all.November 15, 2021 respectively. ​ Aytu may not be able to service all of the combined company’s indebtedness and may be forced to take other actions to satisfy Aytu’s obligations under Aytu’s indebtedness, which may not be successful. Aytu’s failure to meet its debt service obligations could have a material adverse effect on the combined company’s business, financial condition and results of operations. Aytu depends on cash on hand and revenue from operations to make scheduled debt payments. Aytu expects to be able to meet the estimated cash interest payments on the combined company’s debt following the merger through the expected revenue from operations of the combined company. However, Aytu’s ability to generate sufficient revenue from operations of the combined company and to utilize other methods to make scheduled payments will depend on a range of economic, competitive and business factors, many of which are outside of Aytu’s control. There can be no assurance that these sources will be adequate. If Aytu is unable to service Aytu’s indebtedness and fund Aytu’s operations, Aytu will be forced to reduce or delay capital expenditures, seek additional capital, sell assets or refinance Aytu’s indebtedness. Any such action may not be successful and Aytu may be unable to service Aytu’s indebtedness and fund Aytu’s operations, which could have a material adverse effect on the combined company’s business, financial condition or results of operations. Aytu will incur significant transaction and integration-related costs in connection with the merger. In addition, the merger may not be accretive, and may be dilutive, to Aytu’s earnings per share, which may negatively affect the market price of shares of Aytu’s common stock. Aytu expects to incur a number of non-recurring costs associated with the merger and combining the operations of the two companies. Aytu will incur significant transaction costs related to the merger. Aytu also will incur significant integration-related fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs. Aytu continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the merger and the integration of the two companies’ businesses. While Aytu has assumed that a certain level of transaction expenses will be incurred, factors beyond Aytu’s control, such as certain of Neos’ expenses, could affect the total amount or the timing of these expenses. Although Aytu expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow Aytu to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all. Following the closing of the merger, there is a risk that a significant amount of the combined company’s total assets will be related to acquired intangible assets and goodwill, which are subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate that the carrying value may not be recoverable. Because of the significance of these assets, any charges for impairment as well as amortization of intangible assets could have a material adverse effect on the combined company’s results of operations and financial condition. The combined company will be subject to the risks that Neos faces, in addition to the risks faced by Aytu. In particular, the success of the combined company will depend on its ability to obtain, commercialize and protect intellectual property. Neos and Aytu currently have a limited number of products and the combined company may not be successful in marketing and commercializing these products. In addition, following the merger Aytu may seek to develop current or new product candidates of both Aytu and Neos. The testing, manufacturing and marketing of these product candidates would require regulatory approvals, including approval from the FDA and similar bodies in other countries. To the extent the combined company seeks to develop product candidates, the future growth of the combined company would be negatively affected if Aytu, Neos or the combined company fails to obtain requisite regulatory approvals within the expected time frames, or at all, in the United States and internationally for products in development and approvals for Aytu’s existing products for additional indications. The future results of the combined company may be adversely impacted if the combined company does not effectively manage its expanded operations following completion of the merger. Following completion of the merger, the size of the combined company’s business will be significantly larger than the current size of either Aytu’s or Neos’ respective businesses. The combined company’s ability to successfully manage this expanded business will depend, in part, upon management’s ability to implement an effective integration of the two companies and its ability to manage a combined business with significantly larger size and scope with the associated increased costs and complexity. There can be no assurances that the management of the combined company will be successful or that the combined company will realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the merger. Item 2. Unregistered Sales of Securities and Use of Proceeds. None. ​ Item 3. Defaults Upon Senior Securities. None. ​ Item 4. Mine Safety Disclosures. Not Applicable. ​ Item 5. Other Information. None. 48 33 Table of Contents Item 6. Exhibits. ​ Exhibit No.   Description   Registrant’s Form   Date Filed   Exhibit Number   Filed Herewith                         2.1   Agreement and Plan of Merger, dated as of September 12, 2019, by and among Aytu BioScience, Inc., Aytu Acquisition Sub, Inc. and Innovus Pharmaceuticals, Inc.   8-K   9/18/19     2.1                             2.2   Asset Purchase Agreement, dated October 10, 2019   8-K   10/15/19     2.1                             2.3   Agreement and Plan of Merger, dated as of December 10, 2020, by and among Aytu BioScience, Inc., Neutron Acquisition Sub, Inc. and Neos Therapeutics, Inc.   8-K   12/10/2020     2.1                             3.1   Certificate of Incorporation effective June 3, 2015   8-K   6/09/15     3.1                             3.2   Certificate of Amendment of Certificate of Incorporation effective June 1, 2016   8-K   6/02/16     3.1                             3.3   Certificate of Amendment of Certificate of Incorporation, effective June 30, 2016   8-K   7/01/16     3.1                             3.4   Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, filed on August 11, 2017   8-K   8/16/17     3.1                             3.5   Certificate of Amendment of Certificate of Incorporation, effective August 25, 2017   8-K   8/29/17     3.1                             3.6   Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock filed on March 2, 2018   S-1/A   2/27/18     3.6                             3.7   Certificate of Amendment to the Restated of Certificate of Incorporation, effective August 10, 2018   8-K   8/10/18     3.1                             3.8   Amended and Restated Bylaws   8-K   6/09/15     3.2                             3.9   Certificate of Designation of Preferences, Rights and Limitations of Series E Convertible Preferred Stock   10-Q   2/7/19     10.4                             3.10   Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock   8-K   10/15/19     3.1                             3.11   Certificate of Designation of Preferences, Rights and Limitations of Series G Convertible Preferred Stock   8-K   11/4/19     3.1                             3.12   Certificate of Amendment to the Restated Certificate of Incorporation, effective December 7, 2020   8-K   12/8/2020     3.1                             4.1   Form of Placement Agent Warrant issued in 2015 Convertible Note Financing   8-K   7/24/15     4.2                             4.2   Warrant Agent Agreement, dated May 6, 2016 by and between Aytu BioScience, Inc. and VStock Transfer, LLC   8-K   5/6/16     4.1                             4.3   First Amendment to May 6, 2016 Warrant Agent Agreement between Aytu BioScience, Inc. and VStock Transfer LLC   S-1   9/21/16     4.5                             4.4   Warrant Agent Agreement, dated November 2, 2016 by and between Aytu BioScience, Inc. and VStock Transfer, LLC   8-K   11/2/16     4.1                             4.5   Form of Amended and Restated Underwriters Warrant (May 2016 Financing)   8-K   3/1/17     4.1                             4.6   Form of Amended and Restated Underwriters Warrant (October 2016 Financing)   8-K   3/1/17     4.2                             4.7   Form of Common Stock Purchase Warrant issued on August 15, 2017   8-K   8/16/17     4.1                             4.8   Form of Common Stock Purchase Warrant for March 2018 Offering   S-1   2/27/18     4.8                             4.9   Form of Pre-Funded Purchase Warrant   8-K   3/13/20     4.1                             4.10   Form of Placement Agents Warrant   8-K   3/13/20     4.2                             4.11   Form of Warrant   8-K   3/13/20     4.1                             4.12   Form of Placement Agents Warrant   8-K   3/13/20     4.2                             4.13   Form of Warrant   8-K   3/20/20     4.1                             4.14   Form of Placement Agents Warrants   8-K   3/20/20     4.2                             4.15   Form of Wainwright Warrant   8-K   7/2/20     4.1                             4.16   Form of Underwriter's Warrant   8-K   12/14/2020     4.1                             10.1   Amended Employment Agreement with Joshua R. Disbrow dated July 1, 2020   10-K   10/6/20     10.62                             10.2   Amended Employment Agreement with David A. Green dated July 1, 2020   10-K   10/6/20     10.63     34 Table of Contents Exhibit No. Description Registrant’s Form Date Filed Exhibit Number Filed Herewith 10.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.1† ​ LicenseEmployment Agreement with Avrio Genetics, LLC,between Aytu BioPharma, Inc. and Mark Oki, effective January 17, 2022. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.2† ​ Restricted Stock Award Agreement between Aytu BioPharma, Inc. and Mark Oki, effective January 17, 2022. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.3& ​ Loan and Security Agreement dated January 20, 2020*26, 2022 between the registrant and the Avenue Capital Lenders and Avenue Capital Agent. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31.1 10.4& ​ Consent, Joinder and Second Amendment to Loan and Security Agreement dated January 26, 2022 between the registrant and Eclipse Business Capital LLC. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.5 ​ Registration Rights Agreement dated January 26, 2022 between Aytu and each of the warrant holders. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.6& ​ Form of Warrants. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31.1 ​ Certificate of the Chief Executive Officer of Aytu BioScience,BioPharma, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.2002. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31.2 ​ Certificate of the Chief Financial Officer of Aytu BioPharma, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32.1 ​ Certificate of the Chief Executive Officer and the Chief Financial Officer of Aytu BioScience,BioPharma, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.2002. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 32.1 101 ​ Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*. X 101 XBRL (extensible Business Reporting Language). The following materials from Aytu BioScience,BioPharma, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 20202021 formatted in Inline XBRL: (i) the Consolidated Balance Sheet, (ii) the Consolidated Statement of Operations, (iii) the Consolidated Statement of Stockholders’ Equity (Deficit), (iv) the Consolidated Statement of Cash Flows, and (v) the Consolidated Notes to the Financial Statements. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 104 ​ Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101. ​ ​ ​ ​ ​ ​ ​ X ​ † Indicates is a management contract or compensatory plan or arrangement. *& Information in this exhibit identified by brackets is confidential and has been excluded pursuantPursuant to Item 601(b)(10)(iv) of Regulation S-K, because itportions of this exhibit (indicated by asterisks) have been omitted as the registrant has determined that (1) the omitted information is not material and (2) the omitted information would likely cause competitive harm to the Companyregistrant if publicly disclosed. An unredacted copy of this exhibit will be furnished to the Securities and Exchange Commission on a supplemental basis upon request.disclosed. ​ ​ 49 Table of Contents 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 hereunto duly authorized. AYTU BIOPHARMA, INC. Date:  February 14, 2022 By: /s/ Joshua R. Disbrow Joshua R. Disbrow Chief Executive Officer ​ ​ ​ 50