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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: MarchEnded December 31, 2021 or

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 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 every Interactive Data File required to be submitted 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 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 May 10, 2021,February 7, 2022, there were 25,170,59630,318,168 shares of Common Stockthe registrant’s common stock outstanding. ​ ​ ​ 1 Table of Contents AYTU BIOPHARMA, INC. AND SUBSIDIARIES FOR THE QUARTER ENDED MarchDECEMBER 31, 2021 INDEX PART I—I—FINANCIAL INFORMATION ​ Page Item 1. Consolidated Financial Statements Condensed Consolidated Balance Sheets as of MarchDecember 31, 2021 (unaudited) and June 30, 2020 (audited)2021 4 Condensed Consolidated Statements of Operations for the three and nine-monthssix months ended MarchDecember 31, 2021 (unaudited) and March 31, 2020 (unaudited) 65 Condensed Consolidated Statement of Stockholders’ Equity for the year-to-date interim periodsthree and six months ended MarchDecember 31, 2021 (unaudited) and March 31, 2020 (unaudited) 76 Condensed Consolidated Statements of Cash Flows for the ninesix months ended MarchDecember 31, 2021 (unaudited) and the nine months ended March 31, 2020 (unaudited) 87 Notes to Condensed Consolidated Financial Statements (unaudited) 108 ​ ​ Item 2. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations 3533   Item 3. Quantitative and Qualitative Disclosures About Market Risk 3947   Item 4. Controls and Procedures 3947   PART II—II—OTHER INFORMATION ​ Item 1. Legal Proceedings 4048   Item 1A. Risk Factors 4148   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 5248   Item 3. Defaults Upon Senior Securities 5248   Item 4. Mine Safety Disclosures 5248   ItemItem 5. Other Information 5248   Item 6. Exhibits 5349   SIGNATURES 5650 ​ ​ ​ ​ 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; 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®, 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®, consumer health products such as DiabaSens®, FlutiCare®, UriVarx® and Vesele®, as well as Beyond Human®, a specialty marketing platform, and the recently acquired ADHD products such as Adzenys XR-ODT®, Cotempla XR-ODT® and Adzenys ER®,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. AND SUBSIDIARIES CONDENSED 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     March 31,     June 30,       2021     2020       (Unaudited)           Assets   Current assets                 Cash and cash equivalents   $ 46,537,958     $ 48,081,715   Restricted cash     251,995       251,592   Accounts receivable, net     28,228,434       5,632,717   Inventory     16,575,757       9,999,441   Prepaid expenses     6,803,583       5,715,089   Other current assets     1,615,024       5,742,011   Total current assets     100,012,751       75,422,565                     Fixed assets, net     5,557,727       258,516   Operating lease right-of-use asset     3,781,737       634,093   Intangible assets, net     96,236,796       48,854,561   Goodwill     65,802,636       28,090,407   Other long-term assets     164,954       32,981   Total long-term assets     171,543,850       77,870,558   Total assets   $ 271,556,601     $ 153,293,123   ​ See the accompanying Notes to the Condensed Consolidated Financial Statements ​ 4 4 Table of Contents AYTU BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets, cont’dCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     March 31,     June 30,       2021     2020       (Unaudited)           Liabilities   Current liabilities                 Accounts payable and other   $ 16,528,646     $ 11,824,560   Accrued liabilities     43,181,920       8,645,984   Accrued compensation     10,510,228       3,117,177   Notes payable     −       982,076   Short-term line of credit     4,738,825       −   Current portion of debt     725,357       −   Current portion of operating lease liabilities     910,885       300,426   Current portion of fixed payment arrangements     1,998,012       2,340,166   Current portion of CVR liabilities     911,826       839,734   Current portion of contingent consideration     4,177,282       713,251   Total current liabilities     83,682,981       28,763,374                     Long-term debt, net of current portion     16,930,682       −   Long-term operating lease liability, net of current portion     2,871,845       725,374   Long-term fixed payment arrangements, net of current portion     9,422,768       11,171,491   Long-term CVR liabilities, net of current portion     4,679,227       4,731,866   Long-term contingent consideration, net of current portion     10,726,691       12,874,351   Other long-term liabilities     92,894       11,371   Total liabilities     128,407,088       58,277,827                     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 March 31, 2021 and June 30, 2020, respectively.     −       −   Common Stock, par value $.0001; 200,000,000 shares authorized; shares issued and outstanding 23,457,887 and 12,583,736, respectively as of March 31, 2021 and June 30, 2020.     2,346       1,259   Additional paid-in capital     302,448,362       215,024,216   Accumulated deficit     (159,301,195 )     (120,010,179 ) Total stockholders' equity     143,149,513       95,015,296   Total liabilities and stockholders' equity   $ 271,556,601     $ 153,293,123   (In thousands, except shares and per-share) See accompanying Notes to the Condensed Consolidated Financial Statements(Unaudited) ​ 5 Table of Contents AYTU BIOPHARMA, 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     Nine Months Ended       March 31,     March 31,       2021     2020     2021     2020   Revenues                                 Product revenue, net   $ 13,482,282     $ 8,156,173     $ 42,149,561     $ 12,771,235                                     Operating expenses                                 Cost of sales     13,682,297       1,998,659       23,499,842       2,980,425   Research and development     389,262       78,502       858,698       223,197   Selling, general and administrative     12,851,087       9,190,386       35,825,175       19,494,368   Acquisition related costs     1,536,800       311,083       2,849,037       1,533,723   Restructuring costs     4,818,064       −       4,874,723       135,981   Amortization and impairment of intangible assets     5,870,436       1,370,986       9,039,597       2,899,553   Total operating expenses     39,147,946       12,949,616       76,947,072       27,267,247   Loss from operations     (25,665,664 )     (4,793,443 )     (34,797,511 )     (14,496,012 ) Other (expense) income                                 Other (expense), net     (425,425 )     (538,862 )     (1,555,924 )     (1,181,206 ) Gain / (Loss) from change in fair value of contingent consideration     631,298       −       (2,680,022 )     −   Gain from derecognition of contingent consideration     −       −       −       5,199,806   Gain from warrant derivative liability     −       −       −       1,830   Loss on debt exchange     −       −       (257,559 )     −   Total other (expense) income     205,873       (538,862 )     (4,493,505 )     4,020,430   Net loss   $ (25,459,791 )   $ (5,332,305 )   $ (39,291,016 )   $ (10,475,582 ) Weighted average number of common shares outstanding     18,092,465       3,527,530       14,490,219       2,261,697   Basic and diluted net loss per common share   $ (1.41 )   $ (1.51 )   $ (2.71 )   $ (4.63 ) ​ See the accompanying Notes to the Condensed Consolidated Financial Statements. ​ 5 6 Table of Contents AYTU 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                                                             Stock-based compensation     −     $ −       106,792     $ 11     $ 263,380     $ −     $ 263,391   Cashless warrant exercise     −       −       791,577       80       (80 )     −       −   Issuance of Series H preferred stock and common stock due to acquisition of Innovus     1,997,902       200       380,972       39       4,405,945       −       4,406,184   Preferred stock converted in common stock     (2,407,902 )     (241 )     1,239,791       124       92,997       −       92,880   Warrant exercises     −       −       1,708,300       171       22,989,495       −       22,989,666   Issuance of common stock, net of $4,523,884 in cash issuance costs     −       −       3,636,528       364       33,278,392       −       33,278,756   Warrants issued in connection with the registered offering     −       −       −       −       9,723,161       −       9,723,161   Warrants issued in connection with the registered offering to the placement agents, non-cash issuance costs     −       −       −       −       1,458,973       −       1,458,973   CVR payouts     −       −       123,777       13       1,732,857       −       1,732,870   Net loss     −       −       −       −       –       (5,332,305 )     (5,332,305 ) BALANCE - March 31, 2020     9,805,845     $ 981       10,061,044     $ 1,011     $ 202,566,906     $ (116,865,082 )   $ 85,703,816   ​     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                                                             Stock-based compensation     –     $ –       –     $ –     $ 1,381,429     $ –     $ 1,381,429   Issuance of common stock due to acquisition, net of $137,735 in costs     –       –       5,471,804       548       53,102,370       –       53,102,918   Estimated fair value of replacement equity awards     –       –       –       –       432,289       –       432,289   CVR payouts     –       –       103,190       10       999,990       –       1,000,000   Net loss     –       –       –       –       –       (25,459,791 )     (25,459,791 ) BALANCE - March 31, 2021     –     $ –       23,457,887     $ 2,346     $ 302,448,362     $ (159,301,195 )   $ 143,149,513   ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash FlowsCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(In thousands) (Unaudited)     Nine Months Ended       March 31,       2021     2020                     Operating Activities                 Net loss   $ (39,291,016 )   $ (10,475,582 ) Adjustments to reconcile net loss to cash used in operating activities:                 Depreciation, amortization and accretion     10,301,150       3,780,310   Stock-based compensation expense     2,485,330       590,826   Loss from change in fair value of contingent consideration     2,680,022       −   Inventory write-down     7,227,230       −   (Gain) from derecognition of contingent consideration     −       (5,199,806 ) (Gain) on the change in fair value of CVR payout     −       (267,130 ) Amortization of senior debt issuance costs and discounts     (21,916 )     −   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     335,036       −   Derivative income     −       (1,830 ) Changes in operating assets and liabilities:                 Accounts receivable     1,772,274       (8,183,810 ) Inventory     (4,390,470 )     (345,452 ) Prepaid expenses     1,607,170       (1,611,681 ) Other current assets     6,065,996       (358,022 ) Accounts payable and other     (6,155,583 )     (4,912,245 ) Accrued liabilities     (5,556,614 )     6,761,319   Accrued compensation     3,263,723       271,560   Fixed payment arrangements     −       (657,655 ) Operating lease liabilities     (26,648 )     −   Net cash used in operating activities     (19,677,832 )     (20,609,198 )                   Investing Activities                 Deposit     (3,923 )     −   Contingent consideration payment     (683,241 )     (151,648 ) Cash received from acquisition     15,721,797       390,916   Cash payment for business acquisition     (15,398,727 )     (5,850,000 ) Net cash used in investing activities     (364,094 )     (5,610,732 )                   Financing Activities                 Issuance of preferred, common stock and warrants     32,249,652       58,999,666   Issuance cost related to registered offering     (4,430,516 )     (5,280,426 ) Payments made on short-term line of credit     (5,968,290 )     −   Warrant exercises     −       22,989,666   Preferred stock converted in common stock     −       92,880   Issuance of note payable     −       640,000   Debt payment     (318,181 )     −   Payments made to fixed payment arrangements     (3,034,093 )     −   Net cash provided by financing activities     18,498,572       77,441,786                     Net change in cash, restricted cash and cash equivalents     (1,543,354 )     51,221,856   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   $ 46,789,953     $ 62,516,083   ​ ​ ​ ​ ​ ​ ​ ​      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 BIOPHARMA, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows, cont’dNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)(Unaudited)     Nine Months Ended       March 31,   Supplemental disclosures of cash and non-cash investing and financing transactions   2021     2020   Warrants issued to underwriters   $ 1,628,293     $ -   Cash paid for interest     448,603       392,641   Fair value of right-to-use asset and related lease liability     66,182       354,929   Issuance of Series G preferred stock due to acquisition of the Cerecor portfolio of pediatrics therapeutics     −       5,559,914   Issuance of Series H preferred stock due to acquisition of the Innovus     −       12,805,263   Issuance related to acquisition of Neos     53,240,653       −   Fair value of non-cash assets acquired     104,321,912       −   Fair value of liabilities assumed     88,699,892       −   Estimated fair value of replacement equity awards     432,289           Inventory payment included in accounts payable     −       460,416   Return deductions received by Cerecor     −       2,000,000   Contingent value rights payout     1,000,000       −   Contingent consideration included in accounts payable     −       27,571   Issuance of restricted stock     −       107   Cashless warrant exercises     −       792   Debt exchange     1,057,559       −   Fixed payment arrangements included in accrued liabilities     1,575,000       501,766   Exchange of convertible preferred stock into common stock   $  –     $ 1,559   See the accompanying Notes to the Condensed Consolidated Financial Statements 9 Table of Contents AYTU BIOPHARMA, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (unaudited) 1. Nature of Business, Financial Condition, Basis of Presentation Nature of Business.Aytu BioPharma, Inc. (“Aytu”, the “Company” or “we”), is a commercial-stage specialty pharmaceutical company focused on commercializing novel therapeutics and consumer healthcare products. The Company currently operates the Aytu BioPharma business, consisting of the Company’s prescription pharmaceutical products (the “Rx Portfolio”), and the Aytu consumer healthcare products business (the “Consumer Health Portfolio”). The core Rx Portfolio is focused on commercializingcommercial products consists primarily of prescription pharmaceutical products for the treatment of attention deficit hyperactivity disorder ("ADHD"), allergies insomnia, and various pediatric conditions.vitamin and fluoride deficiency. The Aytu consumer health business is focused on commercializing consumer healthcare products. The Company was incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado and was re-incorporated in the state of Delaware on June 8, 2015. The Rx Portfolio consists of (i) Adzenys XR-ODT (amphetamine) extended-release orally disintegrating tablets, Cotempla XR-ODT (methylphenidate) extended-release orally disintegrating tablets and Adzenys-ERAdzenys ER (amphetamine) extended-release oral suspension for the treatment of attention deficit hyperactivity disorderADHD, (ii) 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, (iii) Karbinal ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions, (iv) ZolpiMist, the only FDA-approvedU.S. Food & Drug Administration (“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 cold. Adzenys ER was discontinued as of September 30, 2021. The Consumer Health Portfolio consists of over twenty20 consumer health products competing in large healthcare categories, including diabetes men'smanagement, pain management, digestive health, sexual wellness and respiratoryurological health and general wellness, commercialized through direct-to-consumer marketing channels utilizing the Company's proprietary Beyond Human marketing and sales platform and on e-commerce platforms. On March 31, 2021, the Company and Acerus Pharmaceuticals Corporation (“Acerus”) entered into a termination and transition agreement (the “Termination Agreement”) to terminate the License and Supply Agreement previously entered into on July 29, 2019 related to Natesto®. Pursuant to the Termination Agreement, the Company ceased all sales, marketing and promotion of Natesto, and Acerus agreed to pay the Company an aggregate amount of $7.5 million, payable in equal monthly installment payments of $250,000 for a period of 30 consecutive months.  On March 19, 2021, the Company acquired Neos Therapeutics, Inc. (“Neos”), a commercial-stage pharmaceutical company developing and manufacturing central nervous system-focused products (the “Neos Merger”). Neos commercializes Adzenys XR-ODT, Cotempla XR-ODT and Adzenys-ER in the United States using Neos’ internal commercial organization. These commercial products are extended-release (“XR”) medications in patient-friendly, orally disintegrating tablet (“ODT”) or oral suspension dosage forms that utilize Neos' microparticle modified-release drug delivery technology platform. Neos received approval from the U.S. Food and Drug Administration (“FDA”) for these three products. In addition, Neos manufactures and sells a generic Tussionex. In April of 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 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 MarchDecember 31, 2021,, the Company had approximately $46.8$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 consume cash. Revenues for The Company incurred a net loss of approximately $11.5 million and $9.5 million during the three- and nine-monthsthree months ended MarchDecember 31, 2021 were $13.5and 2020, respectively, and $39.4 million and $42.1 million, compared to $8.2 million and $12.8$13.8 million for the same periodssix months ended MarchDecember 31, 2021 and 2020, respectively. The Company had an increaseaccumulated deficit of approximately 65%$217.7 million and 230%,$178.3 million as of December 31, 2021 and June 30, 2021, respectively. Revenue is expectedCash used in operations was approximately $12.6 million and $10.9 million during the six months ended December 31, 2021 and 2020, respectively. Management plans to increase over time, which will allowfocus 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 Company has access to rely lesscapital 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's existing cash balance and proceeds from financing transactions. Cash used byCompany is unable to secure additional capital, it may be required to curtail its operations duringor delay the nine-months ended March 31, 2021 was $19.7 million compared to $20.6 million for the nine-months ended March 31, 2020. The decrease is due primarily to a decrease in working capital and pay downexecution of other liabilities. 10 Table of Contents its business plan. As of the date of this Report, the Company expects its costs for operations to increase as the Company integrates the Neos 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 $100.0$87.5 million as of MarchDecember 31, 2021 plusand 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. Upon closing of the Neos merger, on March 19, 2021, the Company paid down $15.4 million of Neos' senior secured long-term debt, including accrued interest and $5.5 million of merger costs incurred by Neos. The Company did not issue any common stock under the Company's at-the-market offering program during the three months ended March 31, 2021. 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 MarchDecember 31, 2021 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, Innovus Pharmaceuticals, Inc., Aytu Therapeutics, 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 MarchDecember 31, 2021 are not necessarily indicative of expected operating results for the full year. The information presented throughout this report, as of MarchDecember 31, 2021 and for the three and ninesix months ended MarchDecember 31, 2021,, and 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.​ 2. Significant Accounting Policies 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, net realizable value of inventory,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 Table of Contents Income Taxes The Company historically presented accrued distributor fees as a reductioncalculates its quarterly income tax provision based on estimated annual effective tax rates applied to accounts receivable. However, beginning this quarterly reportordinary income (or loss) and for the comparative periods presented, accrued distributors fees will be presented in accrued liabilities instead of accounts receivable. As of June 30, 2020, accrued distributor fees included in accounts receivable, net on the balance sheet was $457,000. This reclassification will have no impact on the Company's statements of operationother known items computed and cash flows presented in this quarterly report. 11 Table of Contents Significant Accounting Policies The Company’s significant accounting policies are discussed in Note 2—Summary of Significant Accounting Policies and Recent Accounting Pronouncements in the Annual Report.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 ninesix months ended MarchDecember 31, 2021. 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. 2. Acquisitions The Pediatric Portfolio On October 10, 2019,significant accounting policies during the Company entered into the Purchase Agreement with Cerecor, Inc. (“Cerecor”) to acquire a line of prescription pediatric products, (the "Pediatric Portfolio"), which closed on November 1, 2019. At closing, the Pediatric Portfolio consisted of four main prescription products (i) Cefaclor™ for Oral Suspension, (ii) Karbinal® ER (iii) Poly-Vi-Flor®, and (iv) Tri-Vi-Flor™. Total consideration transferred to Cerecor consisted of $4.5 million cash and approximately 980,000 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 all $3.5 million has been incurred. The Company also hired the majority of Cerecor’s commercial workforce. 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 $15.0 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 $15.0 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 $2.1 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. 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 after approval by the stockholders of both companies on February 13, 2020 (the "Innovus Merger"). Upon the effectiveness of the Innovus Merger, a subsidiary of the Company merged with and into Innovus, and all outstanding Innovus common stock was exchanged for approximately 380,000 shares of the Company’s common stock and up to $16.0 million of Contingent Value Rights (“CVRs”). The outstanding Innovus warrants with 'cash out' rights were exchanged for approximately 200,000 shares of Series H Convertible Preferred stock of the Company over a period of time covering February 26, 2020 through March 10, 2020. The remaining Innovus warrants outstanding, those without ‘cash out’ rights, at the time of the Innovus 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 120,000 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 yearsix months ended December 31, 2019. As a result of this, the Company recognized a gain of approximately $0.3 million during the three months ended March 31, 2020. On March 20, 2021, the Company paid the CVR holders approximately 103,000 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. As a result of this, the Company recognized a gain of approximately $0.4 million during the three months ended March 31, 2021. The $1.0 million 2020 milestone for the Aytu Consumer Health subsidiary achieving profitability was not met. ​ In addition, as part of the Innovus Merger, the Company assumed approximately $3.1 million of notes payable, $0.8 million in lease liabilities, and other assumed liabilities associated with Innovus. Of the $3.1 million of notes payable, approximately $2.2 million was converted into approximately 180,000 shares of the Company’s common stock since February 14, 2020. Approximately $41,000 remained outstanding as of March 31, 2021.​ 13 Table of Contents 3. Acquisitions The following table summarized the 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:     As of       February 14, 2020   Consideration         Fair Value of Aytu Common Stock         Total shares issued at close     3,810,393   Estimated fair value per share of Aytu common stock   $ 0.756   Estimated fair value of equity consideration transferred   $ 2,880,581   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   Total consideration transferred   $ 12,805,263       As of       February 14, 2020   Total consideration transferred   $ 12,805,263   Recognized amounts of identified assets acquired and liabilities assumed         Cash and cash equivalents   $ 390,916   Accounts receivable     278,826   Inventory     1,149,625   Prepaid expenses and other current assets     1,692,133   Other long-term assets     36,781   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 net assets   $ 4,167,991   Goodwill   $ 8,637,272   The fair values of intangible assets, including product distribution rights were determined using variations of the income approach, specifically 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 9). The fair value of the net identifiable assets acquired was determined to be $11.7 million, which is being amortized over a range between 1.5 to 10 years. 14 Table of Contents Neos Merger (ADHD Portfolio) On March 19, 2021, the Company completed the Neos Merger withacquired Neos Therapeutics, Inc. (“Neos”), a commercial-stage pharmaceutical company developing and manufacturing central nervous system-focused products (the “Neos Merger”) after approval by the stockholders of Neos on 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 Neos, and all outstanding Neos common stock was exchanged for approximately 5,472,000 shares of the Company’s common stock. Neos is now a 100% wholly-owned subsidiary of the Company. The Company pursued the acquisition of Neos in order to gain scale in the industry, expand its product portfolio and as an opportunity to potentially accelerate the pathway to breakeven. The Company incurred in relation to the Neos Merger (i) approximately $2.8$2.9 million of acquisition related costs, recognized as part of operating expense, and (ii) $0.1 million of issuance costs, recognized as a component of stockholders’ equity. 10 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; ​   As of     March 19, 2021   ​ ​ ​ ​ ​      March 19, 2021 ​ ​ (In thousands, except share and per-share) Considerations:         ​ ​ ​ Fair Value of Aytu Common Stock         ​ ​ ​ Total shares issued at close     5,471,804   ​   5,471,804 Estimated fair value per share of Aytu common stock   $ 9.73     $ 9.73 Estimated fair value of equity consideration transferred   $ 53,240,653     $ 53,241 Cash     15,383,104   ​ ​ 15,383 Estimated fair value of replacement equity awards     432,289   ​ ​ 432 Total consideration transferred   $ 69,056,046     $ 69,056 ​   As of     March 19, 2021   ​ ​ ​ ​ ​ ​ March 19, 2021 ​ ​ (In thousands) Total consideration transferred   $ 69,056,046     $ 69,056 Recognized amounts of identified assets acquired and liabilities assumed         ​ ​ ​ Cash and cash equivalents   $ 15,721,797     $ 15,722 Accounts receivable     24,695,527   ​ ​ 24,696 Inventory     10,984,055   ​ ​ 10,984 Prepaid expenses and other current assets     2,929,457   ​ ​ 2,929 Operating leases right-to-use assets     3,515,141   ​ ​ 3,515 Property, plant and equipment     5,518,801   ​ ​ 5,519 Intangible assets     56,530,000   ​ ​ 56,530 Other long-term assets     148,931   ​ ​ 149 Accounts payable and accrued expenses     (56,718,159 ) ​ ​ (56,718) Short-term line of credit     (10,707,115 ) ​ ​ (10,707) Long-term debt, including current portion     (17,677,954 ) ​ ​ (17,678) Operating lease liabilities     (3,515,141 ) ​ ​ (3,515) Other long-term liabilities     (81,523 ) ​ ​ (82) Total identifiable net assets   $ 31,343,817     ​ 31,344 Goodwill   $ 37,712,229     $ 37,712 ​ The fair values of intangible assets were determined using variations of the cost approach, excess earnings method and the relief-from-royalties method. The fair value 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 identifiable intangible assets acquired were as follows: ​   As of     March 19, 2021   ​ ​ ​ ​ ​ ​ March 19, 2021 ​ ​ (In thousands) Identified intangible assets acquired:         ​ ​ ​ Developed technology right   $ 30,200,000     $ 30,200 Developed products technology     22,700,000   ​ ​ 22,700 In-process R&D     2,600,000   ​ ​ 2,600 RxConnect     630,000   ​ ​ 630 Trade name     400,000   ​ ​ 400 Total intangible assets acquired   $ 56,530,000     $ 56,530 ​ 15 Table of Contents 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. ● Merger with Neos, effective March 19, 2021. 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: ​     Three Months Ended     Nine Months Ended       March 31, 2021     March 31, 2020     March 31, 2021     March 31, 2020       Actual     Pro forma     Actual     Pro forma       (Unaudited) (dd)     (Unaudited) (aa) (bb)     (Unaudited) (dd)     (Unaudited) (cc)   Total revenues, net   $ 22,250,543     $ 24,824,477     $ 74,582,036     $ 83,141,373   Net (loss)   $ (32,674,710 )   $ (13,800,554 )   $ (55,711,884 )   $ (31,686,745 ) Net (loss) per share (ee)   $ (1.41 )   $ (3.91 )   $ (2.71 )   $ (14.01 ) ​ ​ ​ ​ ​ ​ ​ ​      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) ​ (aa) ForRumpus Acquisition On April 12, 2021, the three months ended March 31, 2020,Company 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 Pediatric Portfolio acquisition occurred priorCompany acquired certain rights and other assets, including key commercial global licenses, relating primarily to the three months ended March 31, 2020,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 accordingly,payment of aggregated fees of $0.6 million. Upon the resultsachievement 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 Pediatric Portfolio are fully consolidated into the Company’s results for the three months ended March 31, 2020.PKC beta, PI3K and AKT pathways (see Note 12 and Note 17). ​ (bb) Due to the absence of discrete financial information for Innovus covering the period from January 1, 2020 through February 13, 2020, the Company did not include the impact of that stub-period for the pro forma results for the three and nine months ended March 31, 2020. (cc) Due to a lack of financial information covering the period from October 1, 2019 through November 1, 2019, the Company was not able to provide pro forma adjusted financial statements for the nine months ended March 31, 2020 without making estimated extrapolations that the Company did not believe would be material or useful to users of the above pro forma information. (dd) Neos contributed approximately $0.9 million to net revenue and approximately $3.9 million to net loss for the period covering March 20, 2021 through March 31, 2021. (ee) Pro forma net loss per share calculations excluded the impact of the issuance of the (i) Series G Convertible Preferred Stock and the, (ii) Series H Convertible Preferred Stock under the assumption those shares would continue to remain non-participatory during the periods reported above. 16 Table of Contents 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 March 31,June 30, 2021, contract assets of $42,000$21,000 was included in other current assets in the condensed consolidated balance sheet. There was no contract asset as of June 30, 2020. Contract liabilities primarily relate to advances or deposits received from the Company'sCompany’s customers before revenue is recognized. As of MarchDecember 31, 2021 and June 30, 2020,2021, contract liabilities of $0.2 million and $0.3 million, respectively, were included in accrued liabilities in the consolidated balance sheet. 12 Revenues by Geographic location.Table of Contents The following table reflects the Company'sCompany disaggregated its revenue into 3 product revenues by geographic location as determined by the billing addressportfolios. The primary care portfolio is composed of customers:     Three Months Ended     Nine Months Ended       March 31,     March 31,       2021     2020     2021     2020                             U.S.   $ 12,344,000     $ 7,273,000     $ 38,245,000     $ 11,582,000   International     1,138,000       883,000       3,905,000       1,189,000   Total net revenue   $ 13,482,000     $ 8,156,000     $ 42,150,000     $ 12,771,000   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 ninesix months ended MarchDecember 31, 2021 and March 31, 2020 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ December 31,  ​ December 31,  ​      2021      2020      2021      2020   Three Months Ended March 31,     Nine Months Ended March 31,     2021     2020     2021     2020                                   Primary care and devices portfolio   $ 1,209,000     $ 870,000     $ 8,339,000     $ 3,500,000   ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) Primary care portfolio   $ 192   $ 4,097   $ 617   $ 7,130 Pediatric portfolio     3,918,000       3,833,000       9,752,000       5,818,000   ​ ​ 14,451 ​ ​ 3,115 ​ ​ 27,909 ​ ​ 5,834 Consumer Health portfolio     8,355,000       3,453,000       24,059,000       3,453,000   ​ ​ 8,482 ​ ​ 7,935 ​ ​ 16,496 ​ ​ 15,703 Consolidated revenue   $ 13,482,000     $ 8,156,000     $ 42,150,000     $ 12,771,000     $ 23,125   $ 15,147   $ 45,022   $ 28,667 ​ 17 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. In the event that such items are identified 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 $7.0 million and $7.2$0.1 million of inventory during the three and nine months ended MarchDecember 31, 2021,, respectively, primarily as a result of changing market conditions for and $0.3 million and $0.1 million during the Company's COVID-19 test kits.six months ended December 31, 2021 and 2020, respectively. There was no0 inventory written down forwrite-down during the three and nine-monthsmonths ended MarchDecember 31, 2020, respectively. 2020. Inventory balances consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31,  ​ June 30,  ​ ​ 2021 ​ 2021   As of     As of     March 31,     June 30,     2021     2020   ​ (In thousands) Raw materials   $ 2,583,000     $ 397,000     $ 2,427      $ 2,269 Work in process     3,181,000       −   ​ ​ 2,173 ​ ​ 3,346 Finished goods     10,812,000       9,603,000   ​   11,958 ​   10,724 Inventory   $ 16,576,000     $ 10,000,000   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     March 31,     June 30,     Useful Lives in years     2021     2020   ​ ​ (In thousands) Manufacturing equipment   2 - 7     $ 3,072,000     $ 112,000   ​ $ 3,076      $ 3,070 Leasehold improvements   3       1,259,000       229,000       999 ​   959 Office equipment, furniture and other   2 - 7       966,000       312,000       1,099 ​   1,093 Lab equipment   3 - 7       646,000       90,000       832 ​   832 Assets under construction           186,000       −       128 ​   198 Less accumulated depreciation and amortization           (571,000 )     (484,000 ) ​ ​ (1,840) ​ ​ (1,012) Fixed assets, net         $ 5,558,000     $ 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 ninethree and six months ended MarchDecember 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. There was no such loss during the three months ended March 31, 2021. ​         Depreciation and amortization expense totaled $68,000 and $24,000 for the three-months ended March 31, 2021 and 2020, respectively, and $119,000 and $56,000 for the nine-months ended March 31, 2021 and 2020, respectively. 18 Table of Contents 6.7. Leases Right-to-Use Assets and Related Liabilities The Company previously adopted the FASB issued ASU 2016-02, “Leases (Topic 842)” as of July 1, 2019. With the adoption of ASU 2016-02, the Company recorded an operating right-of-use asset ("ROU") and anhas entered into various operating lease liability onagreements for certain of its balance sheet associated with theoffices, manufacturing facilities and equipment, and finance lease agreements for certain equipment. These leases of the corporate headquarters. The financehave original lease periods expiring between 2022 and 2024. Most leases are relatedinclude one or more options to the Company's Neos subsidiary equipment leases. The operating lease ROU asset represents the Company’s right to use the underlying asset for the lease term,renew and the exercise of a lease obligation represents the Company’s commitment to make the lease payments arising from the lease. The operating lease ROU assets and obligations were recognizedrenewal option typically occurs at the laterdiscretion of both parties. Certain leases also include options to purchase the commencement date or July 1, 2019, the dateleased property. For purposes of adoption of Topic 842, based on the present value of remaining lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. Rent expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Thecalculating operating lease liabilities, lease terms are classified as currentdeemed not to include options to extend the lease until it is reasonably certain that the Company will exercise that option. The Company’s lease agreements generally do not contain any material residual value guarantees or long-term operating lease liabilities on the balance sheet. material restrictive covenants. Upon the closing of the Neos Merger on March 19, 2021, pursuant to the guidance under ASC 805, Neos recognized operating lease ROU asset and lease liability of $3.5 million, which represented the present value of the remaining lease payments as of the acquisition date, for its office space and manufacturing facilities at Grand Prairie, Texas. As the lease agreement does not provide an implicit rate, Neos used its estimated borrowing rate of 6.7% to determine the present value of future lease payments. Furthermore, as of the acquisition date, no assets or liabilities of the operating leases that have a remaining lease term of less than twelve months were recognized. The finance leases are related to Neos equipment finance leases with fixed contract terms and an implicit interest rate of approximately 5.9%. The finance In May 2021, the Company entered into a commercial lease assets are includedagreement for 6,352 square feet of office in fixed assetsBerwyn, 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 are included of $0.5 million in current and long-term debt on the consolidated balance sheet.sheet representing the present value of minimum lease payments using Neos’ estimated borrowing rate of 6.25%. On August 28, 2020,In October 2021, the Company’s Innovus subsidiary signed a lease termination agreement with its lessor to terminate its lease effective September 30, 2020. The original lease termination date was April 30, 2023. As part of the agreement, Innovus agreed to make a cash payment to 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 liability related to this facility lease was approximately $0.7 million as of June 30, 2020. The Company recognized a gain of approximately $343,000 during the nine months ended March 31, 2021.        On October 1, 2020, the Company's Innovus subsidiary entered into a short-termcommercial lease agreement for 6,580 square feet of warehouse space in Carlsbad, CA.Oceanside, California that commenced on December 1, 2021 and ends on December 31, 2026. The Company recorded an operating lease term is for one-year with an option to terminate after six months with ninety days' notice. ThisROU asset and lease is accounted for as a short-termliabilities of $0.3 million in the consolidated balance sheet representing the present value of minimum lease and is not included as a componentpayments using Innovus’ estimated borrowing rate of the Company's right-to-use assets and related liability.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   Three Months Ended     Nine Months Ended       March 31,     March 31,       2021     2020     2021     2020   Statement of Operations Classification ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) ​ ​ Lease cost:                                   ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease cost   $ 69,000     $ 27,000     $ 128,000     $ 72,000   Operating expenses ​ $ 330 ​ $ 30 ​ $ 626 ​ $ 125   Operating expenses Short-term lease cost     7,000       −       7,000       −   Operating expenses     26 ​   2 ​   65 ​   5   Operating expenses Finance lease cost:                                       ​ ​ ​ ​ ​ ​ ​ ​ ​ ​   ​ Amortization of leased assets     19,000       −       19,000       −   Cost of sales     19 ​   — ​   37 ​   —   Cost of sales Interest on lease liabilities     1,000       −       1,000       −   Other (expense), net ​ ​ 4 ​ ​ — ​ ​ 8 ​ ​ — ​ Other (expense), net Total net lease cost   $ 96,000     $ 27,000     $ 155,000     $ 72,000       $ 379 ​ $ 32 ​ $ 736 ​ $ 130      ​ 19 Table of Contents ​ Supplemental balance sheet information related to leases is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      December 31,  ​ June 30,       Balance Sheet Classification ​ ​ 2021 ​ 2021 ​ ​   March 31, 2021     June 30, 2020   Balance Sheet Classification ​ ​ (In thousands) ​ ​ Assets:                   ​ ​ ​ ​ ​ ​ ​ ​ Operating lease assets   $ 3,782,000     $ 634,000   Operating lease right-of-use asset ​ $ 3,845 ​ $ 3,563   Operating lease right-of-use asset Finance lease assets     347,000       −   Fixed assets, net ​ ​ 292 ​   329   Property and equipment, net, net Total leased assets   $ 4,129,000     $ 634,000     ​ $ 4,137 ​ $ 3,892   ​ Liabilities:                   ​ ​ ​ ​ ​ ​   ​ Current:                   ​ ​ ​ ​ ​ ​ ​ ​ Operating leases   $ 911,000     $ 300,000   Current portion of operating lease liabilities ​ $ 1,173 ​ $ 940 ​ Current portion of operating lease liabilities Finance leases     100,000       −   Current portion of debt ​ ​ 103 ​ ​ 102 ​ Current portion of debt Long-term                   Non-current ​ ​ ​ ​ ​ ​ ​ ​ Operating leases     2,872,000       725,000   Long-term operating lease liabilities, net of current portion ​ ​ 2,716 ​ ​ 2,624 ​ Operating lease liabilities, net of current portion Finance leases     207,000       -   Long-term debt, net of current portion ​ ​ 129 ​ ​ 180 ​ Debt, net of current portion Total lease liabilities   $ 4,090,000     $ 1,025,000     ​ $ 4,121 ​ $ 3,846 ​ ​ ​ ​ Remaining lease term and discount rate used are as follows: ​   March 31, 2021     June 30, 2020   ​ ​ ​ ​ ​ ​ ​ ​ ​      December 31,  ​ June 30,    ​ ​ 2021 ​ 2021 ​ Weighted-Average Remaining Lease Term (years)                 ​ ​ ​ ​ ​ ​ ​ Operating lease assets     3.67       3.33     ​ 3.09 ​ ​ 3.42 ​ Finance lease assets     2.96       −     ​ 2.23 ​ ​ 2.72 ​ Weighted-Average Discount Rate                   ​ ​ ​ ​ ​ ​ Operating lease assets     6.62 %     8.09 %   ​ 7.39 % ​ 6.62 % Finance lease assets     6.40 %     −   ​ ​ 6.43 % ​ 6.41 % ​ ​ Supplemental cash flow information related to lease is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ December 31,  ​      2021      2020   Nine Months Ended     March 31,     2021     2020   ​ ​ (In thousands) Cash flow classification of lease payments:                 ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases   $ 128,000     $ 72,000   ​ $ 585 ​ $ 125 Operating cash flows from finance leases   $ 1,000     $ -   ​ $ 8 ​ $ — Financing cash flows from finance leases ​ $ 50 ​ $ — ​ ​ 15 Table of Contents As of MarchDecember 31, 2021,, the maturities of the Company’s future minimum lease payments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​      Operating      Finance   Operating     Finance   2021 (remaining 3 months)   $ 281,000     $ 29,000   2022     1,154,000       117,000   ​ ​ (In thousands) 2022 (remaining 6 months) ​ $ 708 ​ $ 59 2023     1,182,000       105,000   ​ ​ 1,436 ​ ​ 104 2024     1,117,000       88,000   ​ ​ 1,379 ​ ​ 87 2025     557,000       −   ​ ​ 749 ​ ​ — 2026 ​ ​ 90 ​ ​ — 2027 ​ ​ 46 ​ ​ — Total lease payments     4,291,000       339,000   ​ ​ 4,408 ​ ​ 250 Less: Imputed interest     (508,000 )     (32,000 ) ​ ​ (519) ​ ​ (18) Lease liabilities   $ 3,783,000     $ 307,000   ​ $ 3,889 ​ $ 232 ​ ​ 20 ​ ​ ​ Table of Contents 7.8. Goodwill and Other Intangible Assets Since the June 30, 2021 annual goodwill impairment assessment, the Company’s stock price has continued to decline. During the three months ended September 30, 2021, the continued decline was considered a qualitative factor that led Management to reassess as to whether it is more likely than not that the fair value of one or more of the Company’s reporting units is greater than its carrying value. Management’s evaluation of the first step indicated that its Aytu BioPharma segment’s goodwill was potentially impaired. The Company then performed a quantitative impairment test by calculating the fair value of the segment 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 the Aytu BioPharma segment. 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 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 December 31, 2021. The change in carrying amount of goodwill by reportable segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​      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 ​ The Company currently holds the following intangible asset portfolios as of MarchDecember 31, 2021:2021: (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 the a line of prescription pediatric products (“Pediatric PortfolioPortfolio”) from Cerecor, as a result of the Innovus Merger on February 14, 2020Inc. and as a result of the Neos Merger on March 19, 2021,2021; (iii) Proprietary modified-release drug delivery technology right as a result of the Neos Merger,Merger; (iv) Acquired product distribution rights and commercial technology consisting of RxConnect and trade names as a result of the Neos Merger, and patents, trade names and the acquired customer lists from the acquisition of Innovus Merger,Pharmaceuticals, Inc. (“Innovus Merger”); (v) Acquired in-process R&D from the Neos Merger related to the NT0502 product candidate for sialorrhea from the Neos Merger. On March 31, 2021, the Company and Acerus Pharmaceuticals Corporation (“Acerus”) entered into a termination and transition agreement (the “Termination Agreement”) to terminate the License and Supply Agreement previously entered into on July 29, 2019. Pursuant to the Termination Agreement, the Company ceased all sales, marketing and promotionstreatment of Natesto, and Acerus agreed to pay the Company an aggregate amountsialorrhea. 16 Table of $7.5 million, payable in equal monthly installment payments for a period of 30 consecutive months. The Company determined that none of the $7.5 million future cash payments can be recognized as of March 31, 2021, and therefore the remaining $4.3 million carrying value of the licensed intangible asset related to Natesto was impaired, and there is no remaining value as of March 31, 2021. Contents If acquired in an asset acquisition, the Company capitalized the acquisition cost of each licensed patent or tradename, which can include a combination 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 value of the intangible asset or assets acquired, based primarily on a discounted cash flow model approach or relief-from-royalties model as further described in Note 2. The following table provides the summary of the Company’s intangible assets as of MarchDecember 31, 2021 and June 30, 2020,2021, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ Gross ​ ​ ​ ​ Net ​ Remaining ​ ​ Carrying ​ Accumulated ​ Carrying ​ Life (in ​      Amount      Amortization      Amount      years)   March 31, 2021     Gross Carrying Amount     Accumulated Amortization     Impairment     Net Carrying Amount     Weighted-Average Remaining Life (in years)   ​ ​ (In thousands) Licensed assets   $ 23,649,000     $ (8,768,000 )   $ (4,286,000 )   $ 10,595,000       15.15   ​ $ 3,246 ​ $ (1,662) ​ $ 1,584 ​ 3.42 Acquired product technology right     45,400,000       (3,259,000 )     −       42,141,000       13.37   ​   45,400 ​   (5,963) ​   39,437   12.44 Acquired technology right     30,200,000       (57,000 )     −       30,143,000       16.97   ​ ​ 30,200 ​ ​ (1,390) ​ ​ 28,810 ​ 16.25 Acquired product distribution rights     11,354,000       (1,697,000 )     −       9,657,000       7.03   ​   11,354 ​   (2,827) ​   8,527   8.09 Acquired in-process R&D     2,600,000       -       −       2,600,000       Indefinite-lived   ​ ​ 2,600 ​ ​ — ​ ​ 2,600 ​ Indefinite-lived Acquired commercial technology     630,000       (20,000 )     −       610,000       1.97   ​ ​ 630 ​ ​ (493) ​ ​ 137 ​ 0.25 Acquired trade name     400,000       (6,000 )     −       394,000       0.97   ​ ​ 400 ​ ​ (156) ​ ​ 244 ​ 1.25 Acquired customer lists     390,000       (293,000 )     −       97,000       0.37   ​   390 ​   (390) ​   —   — Total   $ 114,623,000     $ (14,100,000 )   $ (4,286,000 )   $ 96,237,000       13.56   ​ $ 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 Total   $ 58,473,000     $ (9,423,000 )   $ (195,000 )   $ 48,855,000       9.11   ​ $ 94,220 ​ $ (8,756) ​ $ 85,464 ​ 13.47 ​ 21 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 (remaining 3 months)   $ 2,234,500   2022     8,529,000   ​ ​ ​ ​ ​       December 31,  ​ ​ (In thousands) 2022 (remaining 6 months) ​ $ 3,914 2023     7,981,000   ​ ​ 7,489 2024     7,825,000   ​ ​ 7,333 2025     7,591,000   ​ ​ 7,099 2026 ​ ​ 6,331 2027 ​ ​ 6,301 Thereafter     59,476,500   ​ ​ 40,272 Total future amortization expense   $ 93,637,000   ​ $ 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 $1.7$2.0 million and $1.4 17 Table of Contents $1.6 million for the three months ended MarchDecember 31, 2021 and 2020,, respectively. Amortization expense of intangible assets was $4.9 respectively, and $4.1 million and $2.9$3.2 million for the ninesix months ended MarchDecember 31, 2021 and 2020,, 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       March 31,     June 30,       2021     2020   Accrued settlement expense   $ 150,000     $ 315,000   Accrued program liabilities     7,836,000       959,000   Accrued product-related fees     2,379,000       2,471,000   Accrued savings offers     19,218,000       −   Accrued distributor fees     2,816,000       457,000   Credit card liabilities     657,000       510,000   Medicaid liabilities     1,948,000       1,842,000   Return reserve     5,592,000       1,329,000   Sales taxes payable     182,000       175,000   Other accrued liabilities*     2,404,000       588,000   Total accrued liabilities   $ 43,182,000     $ 8,646,000   *Other accrued liabilities consist of franchise tax,credit card liabilities, taxes payable, accounting fee, samples expense and legalconsultants’ fees, interest payable, merchant services charges, none of which individually represent greater than five percent of total current liabilities. 9. 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. 22 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 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. Aytu has consistently applied the valuation techniques discussed below in all periods presented. Recurring Fair Value Measurements The following table presents the Company’s financial liabilities that were accounted for at fair value on a recurring basis as of March 31, 2021 and June 30, 2020, by level within the fair value hierarchy.             Fair Value Measurements at March 31, 2021       Fair Value at March 31, 2021     Quoted Priced in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Significant Unobservable Inputs (Level 3)   Recurring:                                 Contingent consideration   $ 14,904,000     $ –     $ –     $ 14,904,000   CVR liability     5,591,000       –       –       5,591,000   Total   $ 20,495,000     $ −     $ −     $ 20,495,000               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:                                 Contingent consideration   $ 13,588,000     $ –     $ –     $ 13,588,000   CVR liability     5,572,000 )     –       –       5,572,000 ) Total   $ 19,160,000     $ −     $ −     $ 19,160,000   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 the fair value of contingent consideration liability based 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 Tuzistra XR, was valued at $8.8 million using a Monte Carlo simulation. As of March 31, 2021, the contingent consideration was revalued at $14.4 million using the same Monte Carlo simulation methodology, and based on current interest rates, expected sales potential and Aytu stock trading variables.  As of March 31, 2021, none of the 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. 23 Table of Contents 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. As of March 31, 2021, the contingent consideration was revalued at $0.3 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.  As of March 31, 2021, none of the milestones had been achieved, and therefore, no milestone payment was made. 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 estimates risk that the milestones are achieved. The contingent consideration accretion expense for the three and nine months ended March 31, 2021 and 2020 was $15,000, and $44,000, respectively. There was no material change in this valuation as of March 31, 2021. Contingent value rights. Contingent value rights (“CVRs”) represent contingent additional consideration of up to $16.0 million payable to satisfy future performance milestones related to the Innovus Merger. Consideration can be satisfied in up to 470,000 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 the CVR holders approximately 120,000 shares of the Company’s common stock to satisfy the first $2.0 million milestone, which relates to the Innovus achievement of $24.0 million in revenues during the 2019 calendar year. On March 20, 2021, the Company paid the CVR holders approximately 103,000 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 $1.0 million 2020 milestone for achieving profitability was not met. The unrealized loss for the three months ended March 31, 2021 and March 31, 2020 was $0.1 million and $0.2 million, respectively. The unrealized loss for the nine months ended months ended March 31, 2021 and 2020 was $1.0 million and $0.2 million, respectively. The CVR's did not exist until after December 31, 2019.  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 nine months ended March 31, 2021:     CVR Liability     Contingent Consideration   Balance as of June 30, 2020   $ 5,572,000     $ 13,588,000   Included in earnings     1,019,000       1,999,000   Settlements     (1,000,000 )     (683,000 ) Balance as of March 31, 2021   $ 5,591,000     $ 14,904,000   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 significant assumptions used in the Monte Carlo Simulation as of March 31, 2021, were as follows:  As of March 31, 2021 Contingent Consideration Credit risk assumption 20.80 % Sales volatility 45.00 % Credit spread 3.00 % 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 March 31, 2021 were as follows: As of March 31, 2021 Contingent Value Rights Credit risk assumption 9.6 % Time steps per year 30.00 Number of iterations 10,000 24 Table of Contents 10. Commitments and Contingencies Commitments and contingencies are described below and summarized by the following as of March 31, 2021:     Total     2021     2022     2023     2024     2025     Thereafter   Prescription database   $ 1,145,000     $ 412,000     $ 733,000     $ −     $ −     $ −     $ −   Pediatric portfolio fixed payments and product minimums     15,000,000       825,000       3,300,000       3,300,000       3,300,000       3,300,000       975,000   Inventory purchase commitment     1,472,000       736,000       736,000       −       −       −       −   CVR liability     12,000,000       −       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       −       −       −       −                                                             Total   $ 35,117,000     $ 1,973,000     $ 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 will 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. In January 2020, the Company amended the agreement and agreed to pay 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. Pediatric Portfolio Fixed Payments and Product Milestone The Company assumed two fixed, periodic payment obligations to an investor (the “Fixed Obligation”). Beginning November 1, 2019 through January 2021, the Company will pay monthly payments of $86,840, with a balloon payment of $15.0 million that was to be due in January 2021. 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.  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 remain 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. 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 TRIS 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 $2.1 million 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 TRIS a royalty make whole payment of $30 for each unit under the 70,000-unit annual minimum sales commitment through 2025. 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'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 the Company's 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 each of which amount to $1.0 million. 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 Merger, a subsidiary of the Company merged with and into Innovus and entered into a Contingent Value Rights Agreement (the “CVR Agreement”). Each CVR entitles its holder to receive its pro rata share, payable in cash or stock, at the option of Aytu, of certain payment amounts if the targets are met. If any of the payment amounts is 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, the Company paid the CVR holders approximately 120,000 shares of the Company’s common stock to satisfy the $2.0 million obligation as a result of Innovus achieving the $24.0 million revenue milestone for calendar year ended December 31, 2019. As a result of this, the Company recognized a gain of approximately $0.3 million during the fiscal year ended June 30, 2020. On March 20, 2021, the Company paid the CVR holders approximately 103,000 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. As a result of this, the Company recognized a gain of approximately $0.4 million during the three months ended March 31, 2021.The $1.0 million 2020 milestone for achieving profitability was not met. 25 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 five additional payments of $0.5 million each when certain levels of FlutiCare sales are achieved. The discounted value as of March 31, 2021, is approximately $0.2 million. Product Milestone Payments In connection with the Company’s intangible assets, Aytu has certain milestone payments, totaling $3.0 million, payable at a future date, which are not directly tied to future sales, but are payable upon other events certain to happen. These obligations are included in the valuation of the Company’s contingent consideration (see Note 9). 11. 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 March 31, 2021 and June 30, 2020, Aytu had 23,457,887 and 12,583,736 common shares outstanding, respectively, and zero preferred shares outstanding, respectively. Included in the common stock outstanding are 274,635 shares of restricted stock issued to executives, directors, employees, and consultants. In June 2020, the Company initiated an at-the-market offering program ("ATM"), which allows the Company to sell and issue shares of the Company's common stock from time-to-time. The company has issued 430,230 shares of common stock, with total gross proceeds of $6.8 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company of $0.2 million through June 30, 2020. The Company did not issue any shares of common stock under the ATM during the three months ended March 31, 2021, and has issued 352,912 shares of common stock under the ATM, with total gross proceeds of approximately $3.6 million before deducting underwriting discounts, commissions, and other offering expenses payable by the Company of $1.6 million during the nine months ended March 31, 2021. Since initiated in June 2020 through March 31, 2021, the total number of shares of common stock issued under the ATM was 783,142, with total gross proceeds of $10.4 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company of $1.8 million.   The Company entered into three separate registered direct stock offerings on March 10, 2020, March 12, 2020 and March 19, 2020 (the “March Offerings”) in which the Company issued a combination of common stock and warrants. In July 2020, the Company paid $1.5 million issuance cost in cash related to the March Offerings and issued 92,302 warrants to purchase 92,302 shares of the Company's common stock with a 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. 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 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 total common stock of 4,791,667 shares. 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 purchase up to 311,458 shares of 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 are exercisable immediately. These warrants have fair value of approximately $1.3 million and are classified with the stockholders' equity. On March 19, 2021, upon closing of the Neos Merger, the Company issued 5,447,000 shares of its common stock to acquire all the outstanding shares of common stock of Neos. In addition, pursuant to the agreement in the Neos Merger, the Company issued 24,804 shares of common stock to settle the accelerated restricted stock units of former Neos directors and officers (see Note 2). On March 20, 2021, the Company paid the CVR holders approximately 103,000 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. 12. Equity Incentive Plan 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. As of March 31, 2021, the Company had 4,603,990 shares that are 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. 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. As of March 31, 2021, the Company had no shares that are available for grant under the Neos 2015 Plan. 26 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. The assumptions used to estimate the fair value of the options granted under the Neos 2015 Plan were as follows: As of March 31, 2021 Expected volatility 100.0 % Expected term (years) 4.00 Risk-free interest rate 0.73 % Dividend yield  − 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     69,721       −                   Forfeited/Cancelled     (7,553 )     −                   Expired     (2,528 )     −                   Outstanding at March 31, 2021     136,254     $ 13.14       6.12     $ −   Exercisable at March 31, 2021     20,569     $ 87.86       8.56     $  −   As of March 31, 2021, there was $0.5 million unrecognized option-based compensation expense related to non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 3.3 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   Vested     (143,977 )                 Unvested at March 31, 2021     274,477     $ 16.27       6.2   Under the Aytu 2015 Plan, there was $4.0 million of total unrecognized stock-based compensation expense related to the non-vested restricted stock as of March 31, 2021. The Company expects to recognize this expense over a weighted-average period of 6.2 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 $1.1 million as of March 31, 2021 and is expected to be recognized over the weighted average period of 5.3 years. 27 Table of Contents Restricted Stock Unit On March 31, 2021, the Company granted 55,000 restricted stock units ("RSUs") to a member of its management. One-third of the RSUs that vest on April 1, 2022, and 1/12 vest on the first day of each quarter thereafter such that all the RSUs will be fully-vested on the third anniversary of the grant. The grant date fair value of $7.60 per share. Restricted stock unit 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                         Granted     90,728     $ 8.35       2.21   Vested     (2,822 )                 Forfeited     (544 )                 Unvested at March 31, 2021     87,362     $ 8.31       2.26   Under the Neos 2015 Plan, there was $0.6 million of total unrecognized stock-based compensation expense related to the non-vested restricted stock units as of March 31, 2021. The Company expects to recognize this expense over a weighted-average period of 2.2 years. Stock-based compensation expense related to the fair value of stock options and restricted stock was included in the statements of operations as set forth in the table below:     Three Months Ended March 31,     Nine Months Ended March 31,       2021     2020     2021     2020   Cost of sales   $ 9,000     $ −     $ 9,000     $ −   Research and development     3,000       −       3,000       −   Sales, general and administrative     1,514,000       264,000       2,473,000       591,000   Total stock-based compensation expense   $ 1,526,000     $ 264,000     $ 2,485,000     $ 591,000   As of March 31, 2021, the Company recorded a liability of $0.1 million in accrued expense for the share-based payment to certain departing officers.  The stock-based compensation expense included in the table above is attributable to stock options and restricted stock of $0.1 million and $1.3 million, respectively, for the three months ended March 31, 2021 and $0.3 million and $2.1 million, respectively, for the nine months ended March 31, 2021. The stock-based compensation expense included in the table above is attributable to stock options and restricted stock of $7,000 and $0.3 million, respectively, for the three months ended March 31, 2020 and $14,000 and $0.6 million, respectively, for the nine months ended March 31, 2020. 28 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 within stockholders' equity. 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     (1,434,763 )                 Outstanding March 31, 2021     1,257,525     $ 41.42       3.05   14. 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 each three-month period presented, the basic and diluted loss per share were the same for 2020 and 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 March 31, 2021 and 2020 are anti-dilutive, and therefore excluded from the calculation of diluted earnings per share.       As of March 31,         2021     2020   Warrants to purchase common stock - liability classified     24,105       24,105   Warrant to purchase common stock - equity classified (Note 13)     1,257,525       3,098,604   Employee stock options (Note 12)     136,254       33,844   Employee unvested restricted stock (Note 12)     274,635       334,423   Employee unvested restricted stock units (Note 12)     87,362       −   Convertible preferred stock (Note 11)     −       980,584   Total     1,779,881       4,471,560   29 Table of Contents 15. Debt The Aytu BioPharma 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 nine-months ended months ended March 31, 2021 and 2020 the Company recorded approximately $15,000 and $70,000, respectively, of related amortization. On December 10, 2020, the Company agreed to exchange the Note for 130,081 shares of the Company's common stock in lieu of $0.8 million in cash that would otherwise have been due to satisfy this obligation on March 31, 2021. As a result of this exchange, the Company recognized a non-cash loss of approximately $0.3 million during the nine months ended March 31, 2021. The Innovus Notes. On January 9, 2020, prior to the completion of the merger, Innovus Pharmaceuticals, Inc., entered into a note agreement upon which it received gross proceeds of $0.4 million with a principal amount of $0.5 million. The note requires twelve equal monthly payments of approximately $45,000. As of March 31, 2021, the balance of the note has been paid. The Neos Revolving Loans.Loan. On October 2, 2019, Neos entered into a senior secured credit agreement with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLCLLC) (“Encina”Eclipse”) as agent for the lenders (the “Loan Agreement”). Under the Loan Agreement, EncinaEclipse 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 an applicable margin of 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, upon a prepayment of a loan and on the maturity date.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'slender’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 (i) 1.0% of the revolving loan commitment if such event occurs on or before October 2, 2021, and (ii) 0.5% of the revolving loan commitment if such event occurs after October 2, 2021 but beforeprior to May 11, 2022. Neos may permanently terminate the revolving loan facility by prepaying all outstanding principal amounts and all unpaid accrued interest and other amounts due thereon, subject towith at least five business days prior notice to the lender and the payment of a prepayment fee as described above. 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. Neos evaluated to determine if the embedded components in the agreement qualified as derivatives requiring separate recognition.   In connection with the closing of the Neos Merger, Neos and EncinaEclipse entered into a Consent, Waiver and First Amendment to the Loan Agreement, dated as of March 19, 2021 (the “Encina“Eclipse Consent, Waiver and Amendment”). Pursuant to the Consent, Waiver and First Amendment, EncinaEclipse (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 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 EncinaEclipse 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 EncinaEclipse Consent, Waiver and Amendment. TotalThe interest expense was $28,000$0.2 million and $0.3 million for the period beginning March 20,three and six months ended December 31, 2021, and ended March 31, 2021.respectively. As of MarchDecember 31, 2021 $4.7$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(66 2/3% of Facility) and Deerfield Partners, L.P. (33(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 Neosthe 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   March 31,2021   Senior secured credit facility, due on May 11, 2022   $ 15,625,000   ​ ​ (In thousands) Neos senior secured credit facility, due on May 11, 2022 ​ $ 15,000 ​ $ 15,000 Exit fee     1,000,000   ​ ​ 1,000 ​ ​ 1,000 Unamortized premium     724,000   ​ ​ 240 ​ ​ 566 Financing leases, maturing through May 2024     307,000   ​ ​ 232 ​ ​ 282 Total debt     17,656,000   ​ ​ 16,472 ​ ​ 16,848 Less: current portion     (725,000 ) ​ ​ (16,343) ​ ​ (16,668) Long-term debt   $ 16,931,000   Non-current portion of debt ​ $ 129 ​ $ 180 30 Table of Contents ​ 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 EncinaEclipse 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, under Topic 805, 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 MarchDecember 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 $46,000$0.4 million and $0.7 million for the period beginning March 20,three and six months ended December 31, 2021, and ended March 31, 2021. respectively. Future principal payments of long-term debt, including financing leases, are as follows: ​   March 31,2021   2021   $ 650,000   ​ ​ ​ ​ ​      December 31,  ​ ​ (In thousands) 2022     16,102,000   ​ $ 16,104 2023     96,000   ​ ​ 89 2024     84,000   ​ ​ 39 Future principal payments     16,932,000   ​ ​ 16,232 Add unamortized premium     724,000   ​ ​ 240 Less current portion     (725,000 ) ​ ​ (16,343) Long-term debt   $ 16,931,000   Non-current portion of debt ​ $ 129 31 Table of Contents 16. Segment reporting​ ​ ​ ​ ​ 11. Fair Value Considerations The Company’s chief operating decision maker (the “CODM”), whoasset 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 Chief Executive Officer, allocates resourcesBoard of Directors is informed of any policy change. 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 assesses performanceminimizes 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 financial informationmarket 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 CODM reviewshierarchy 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. The 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 information presentedassets and liabilities that were accounted for each reportable segmentat fair value on a recurring basis as of December 31, 2021 and June 30, 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) ​ ​ (In thousands) Assets:   ​ ​   ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 35,277 ​ $ 35,277 ​ $ — ​ $ — Total ​ $ 35,277   $ 35,277   $ — ​ $ — Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration   $ 9,503   $ —   $ —   $ 9,503 CVR liability   ​ 1,392   ​ —   ​ —   ​ 1,392 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) ​   (In thousands) Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 49,649 ​ $ 49,649 ​ $ — ​ $ — Total ​ $ 49,649   $ 49,649   $ — ​ $ — Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Contingent consideration ​ $ 12,057   $ —   $ —   $ 12,057 CVR liability ​ ​ 1,395   ​ —   ​ —   ​ 1,395 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. Tuzistra XR. At the acquisition date on November 2, 2018, the contingent consideration related to Tuzistra XR, was valued at $8.8 million using a Monte Carlo simulation. As of December 31, 2021 and June 30, 2021, the contingent consideration was revalued at $8.5 million and $11.0 million, respectively, using the 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, 2021, NaN of the remaining milestones had been achieved. ZolpiMist. 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 December 31, 2021 and June 30, 2021, the contingent consideration was revalued at $0.7 million, using the Monte Carlo model. As of December 31, 2021, NaN of the milestones had been achieved, and therefore, 0 milestone payment was made. 21 Table 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 estimated risk that the milestones are achieved. As of December 31, 2021 and June 30, 2021, the contingent consideration was $0.3 million. In June 2017, Innovus entered into Exclusive License Agreement (“the UIRD Agreement”) with University of Iowa Research Foundation (“UIRD”) for purposesthe use of making operating decisionspatent and assessing financial performance.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 months ended December 31, 2021 and 2020, the Company recognized a net loss of $0.3 million and $2.4 million, respectively, in the 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 $16.0 million payable to satisfy future performance milestones related to the Innovus Merger. Consideration can be satisfied in up to 470,000 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 the CVR holders approximately 123,820 shares of the Company’s common stock to satisfy the first $2.0 million milestone, which relates to the Innovus achievement of $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 $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 of $44,000 and $0.1 million, respectively, and a loss of $0.9 million during the six months ended December 31, 2020 in the consolidated statements of operations from changes in fair values of CVRs. The net gain during the six months ended December 31, 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, 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 ​ 22 Table of Contents Significant Assumptions Significant assumptions used in valuing the contingent consideration were as follows: ​ ​ ​ ​ ​ ​ December 31,  ​ ​ 2021 Tuzistra Valuation model ​ Scenario-Based ​ Leveraged Beta 0.66 Market risk premium 6.00 %   Risk-free interest rate 1.80 %   Discount 14.30 %   Company specific discount 15.00 %   ​ ​ ​ ​ ​ ​ 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 %   ​ 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 Prescription Database In May 2016, the Company entered into an agreement with a vendor to provide prescription database information. The Company agreed to pay approximately $1.6 million over three years for access to the database of prescriptions for 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 agreement was further amended to include all prescriptions written for the Rx Portfolio. Pediatric Portfolio Fixed Payments and Product Milestone The Company manageshas two fixed, periodic payment obligations to an investor (the “Fixed Obligation”). Under the first fixed obligation, the Company was to pay monthly payment of $86,400 beginning November 1, 2019 through January 2021, with a balloon payment of $15.0 million that was to be due in January 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 aggregatesEscrow 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 remained 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 (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 Tris a royalty equal to 23.5% of net sales. 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 Tris 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’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. The Company has completed the purchase of the first two batches and fully paid the amount under the agreement. The remaining $0.7 million for the batch three purchase is expected to be paid in the third quarter of fiscal year 2022. CVR Liability Upon closing the Innovus Merger, the Company entered into a CVR Agreement. Each CVR entitles its operational and financial informationholder to receive its pro rata share, payable in accordance with two reportable segments: Aytu BioPharma and Aytu Consumer Health. The Aytu BioPharma segment consistscash or stock, at the option of the Company, of certain payment amounts if the targets are met. If any of the payment amounts are 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 20, 2021, the Company issued to the CVR holders 103,190 shares of the Company’s prescription products.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 Aytu Consumer Health segment contains$1.0 million 2020 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 and $1.0 million for achieving profitability were not met. 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, 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 On 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 consumer healthcare products. The inclusionoption, 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 in 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 milestone payment of $2.5 million is due and payable to Rumpus in cash or in shares of the prescription product dueCompany’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. ​ 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. As of December 31, 2021 and June 30, 2021, the Company had 30,010,468 and 27,490,412 common shares outstanding, respectively, and 0 preferred shares outstanding, respectively. Included in the common stock outstanding are 2,163,040 shares of restricted stock issued to executives, directors and 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, is preliminary and subject to further evaluation as the Company beginsassumed 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 integratethe 105,449 registered shares to cover the assumed awards, the remaining 1,255,310 shares available under the legacy Neos intoplan was added back to the Company's operations.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 Select financial information for these segmentsStock 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     Three months Ended March 31,     Nine Months Ended March 31,       2021     2020     2021     2020   Consolidated revenue:                                 Aytu BioPharma   $ 5,127,000     $ 4,703,000     $ 18,091,000     $ 9,318,000   Aytu Consumer Health     8,355,000       3,453,000       24,059,000       3,453,000   Consolidated revenue   $ 13,482,000     $ 8,156,000     $ 42,150,000     $ 12,771,000                                     Consolidated net loss:                                 Aytu BioPharma   $ (23,570,000 )   $ (4,421,000 )   $ (34,788,000 )   $ (9,565,000 ) Aytu Consumer Health     (1,890,000 )     (911,000 )     (4,503,000 )     (911,000 ) Consolidated net loss   $ (25,460,000 )   $ (5,332,000 )   $ (39,291,000 )   $ (10,476,000 ) 26     As of     As of       March 31,     June 30,       2021     2020   Total assets:                 Aytu BioPharma   $ 241,593,000     $ 126,267,000   Aytu Consumer Health     29,964,000       27,026,000   Total assets   $ 271,557,000     $ 153,293,000   32 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 agreementsAgreements 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 a lump sum,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 a lump sum,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 33 Table of Contents 18. Related party Transactions​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ Tris Pharma, Inc.​ ​ 19. Subsequent Events On November 2, 2018,January 26, 2022, the Company entered into a License, Development, ManufacturingLoan and SupplySecurity Agreement (the “Tris License“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”). On November 1, 2019,Pursuant to the Company acquiredAvenue Capital Agreement, Avenue Capital (i) provided a term loan (the “Avenue Capital Loan”) in the rights to Karbinal as a resultprincipal amount of $15.0 million, at an interest rate of the acquisitiongreater 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 Pediatric Portfolio from Cerecor, Inc. (See Notes 2Neos 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 10). Mr. Ketan Mehta served as a Director on the Board of Directors of the Company and is also the Chief Executive Officer of Tris Pharma, Inc. ("TRIS"). The Company paid TRIS approximately $0.9 million and $0 million during the three months ended March 31, 2021 and 2020, 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 $22.8 million and $25.0 million as of March 31, 2021 and 2020, respectively. In October 2020, the Company paid Tris approximately $1.6 million relatedexercisable to its Karbinal fixed payment obligation. On March 19, 2021, Mr. Ketan Mehta resigned as a Director on the Board of the Company, and TRIS will no longer be considered a related party in the future. 19. Subsequent Events On April 12, 2021, the Company, Rumpus VEDS, LLC, Rumpus Therapeutics, LLC, Rumpus Vascular, LLC (together with Rumpus VEDS, LLC and Rumpus Therapeutics, LLC, the “Sellers”), Christopher Brooke and Nathaniel Massari entered into and closed on an asset purchase agreement (the “Purchase Agreement”), pursuant to which the Company acquired certain rights and other assets, including key commercial licenses, relating to Enzastaurin and to Sellers’ business of developing pharmaceutical products from the Sellers for $1.5 million in cash and, upon the achievement of certain regulatory and commercial milestones, up to $67.5 million in earn-out payments (the “Earn-Out Payments”). The Earn-Out Payments are payable in cash or shares of common stock of the Company, generally at the Company’s option. The shares of common stock will be issued under the Company’s Acquisition Shelf on Form S-4 (SEC File No. 333-239011). On May 17, 2021, Ms. Beth Hecht and Mr. Jerry McLaughlin, announced their resignation from the board of directors effective immediately.  Ms. Hecht and Mr. McLaughlin will not run for election as members of the Company’s boardcommon 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 directors atJanuary 26, 2022 (the “Eclipse Consent, Waiver and Second Amendment”). The Eclipse Consent, Waiver and Second Amendment, among other modifications, extends the next annual stockholder meetingmaturity date of the Company, which is currently scheduledLoan Agreement with Eclipse to take place on May 21, 2021January 26, 2025 and reduces the Company will disseminate additional proxy soliciting materialsavailability under the Loan Agreement from $25.0 million to its stockholders to announce this resignation.  $12.5 million. ​ ​ 32 34 Table of Contents Item 2. Management’sManagement’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, 2020,2021, filed on October 6, 2020.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 October 6, 2020.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 a commercial-stage specialty pharmaceutical company focused on commercializing novel therapeutics and consumer healthcare products. We currently operate ourthrough two business segments (i) Aytu BioPharma business,segment, consisting of ourvarious prescription pharmaceutical products (the “Rx Portfolio”),sold through third party wholesalers, and our Aytu consumer healthcare products business (the “Consumer Health Portfolio”). Our Aytu BioPharma business is focused on commercializing prescription pharmaceutical products for the treatment of attention deficit hyperactivity disorder ("ADHD"), allergies, insomnia, and various pediatric conditions. Our(ii) Aytu Consumer Health business is focused on commercializing consumer healthcare products. We were incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado. We were re-incorporated in the state of Delaware on June 8, 2015. The Rx Portfoliosegment, which consists of (i) 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 treatment of attention deficit hyperactivity disorder (ii) 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, (iii) Karbinal ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions, (iv) ZolpiMist, the only 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 cold. The Consumer Health Portfolio consists of over twenty consumer health products competingsold directly to consumers. We generate revenue by selling our products through third party intermediaries in large healthcare categories including diabetes, men's health, sexual wellness and respiratory health commercialized through direct-to-consumerour marketing channels utilizing our proprietary Beyond Human marketing and sales platform and e-commerce platforms. On March 31, 2021, we and Acerus Pharmaceuticals Corporation (“Acerus”) entered into a termination and transition agreement (the “Termination Agreement”) to terminate the License and Supply Agreement previously entered into on July 29, 2019. Pursuant to the Termination Agreement, we ceased all sales, marketing and promotions of Natesto, and Acerus agreed to pay us an aggregate amount of $7.5 million, payable in equal monthly installment payments for a period of 30 consecutive months. The original License and Supply Agreement was effective July 1, 2016 and was amended on July 29, 2019. Following the effectiveness of the original License and Supply Agreement, we built a 30-person sales force to relaunch Natesto following the termination of a license agreement between Acerus and Endo Pharmaceuticals that resulted in the rights to Natesto in North America reverting back to Acerus.  On March 19, 2021, we acquired Neos Therapeutics, Inc. (“Neos”), a commercial-stage pharmaceutical company developing and manufacturing central nervous system-focused products (the “Neos Merger”). Neos commercializes Adzenys XR-ODT, Cotempla XR-ODT and Adzenys-ER in the United States using Neos' internal commercial organization. These commercial products are extended-release (“XR”) medications in patient-friendly, orally disintegrating tablet (“ODT”) or oral suspension dosage forms that utilize our microparticle modified-release drug delivery technology platform. Neos received approval from the U.S. Food and Drug Administration (“FDA”) for these three products. In addition, Neos manufactures and sells generic Tussionex. In April of 2020, we 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 we plan to advance this technology to further assess its safety and efficacy in additional randomized, controlled human studies, initially focused on SARS-CoV-2 patients. 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 Pursuantas well as directly to our strategy of identifyingcustomers. We develop and acquiring complementary assetsmanufacture our ADHD products at our manufacturing facilities 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 and revenue growth. 35 Table of Contents  Strategic Rx Acquisitions. On March 19, 2021, we closed on the merger with Neos after approval by the stockholders of Neos on March 18, 2021 and the approval of the consideration to be delivered by us in connection with the merger by the shareholders of Aytu, also on March 18, 2021. We expect the Neos Merger to accelerate our path to profitability, with estimated annualized cost synergies of up to approximately $15.0 million beginning FY 2022. Neos’ established, multi-brand ADHD portfolio will enhance our footprint in pediatrics and expand our presence in adjacent specialty care segments. We also have an opportunity to leverage and further enhance Neos RxConnect, a best-in-class patient support program,use third party manufacturers for our heritage product portfolio of best-in-classother 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”). At closing, the Pediatric Portfolio consisted 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 of not more than $3.5 million of Medicaid rebates and products returns. In addition, we hired the majority of the Cerecor’s commercial workforce. 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 $15.0 million dueincurred significant losses in January 2021. Monthly variable payments due to the same investor are equal to 15% ofeach year since inception. Our 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. We subsequently paid down the $15.0 million balloon payment early in June 2020. Further, certain of the products in the Pediatric Portfolio require royalty payments ranging from 15.0% 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 $2.1 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 us 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 our consumer health subsidiary and contribute meaningfully to the company's overall revenue growth. 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. Further, we expect to expand both our Rx and consumer health product portfolios through continuous business and product development. Additionally we recently acquired a late-stage asset for development of a rare connective tissue disorder. Finally, we expect to identify operational efficiencies and remove redundancies 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 U.S. GAAP. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of 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 the ongoing COVID-19 pandemic, that we believe 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 March 31, 2021are presented in Note 1 to the condensed consolidated financial statements. 36 Table of Contents RESULTS OF OPERATIONS Results of Operations –Three and Nine Months Ended March 31, 2021 compared to the Three and Nine Months Ended March 31, 2020     Three months Ended March 31,                       2021     2020     Change     %                                     Revenues                                 Product and service revenue, net   $ 13,482,282     $ 8,156,173     $ 5,326,109       65 % Operating expenses                                 Cost of sales     13,682,297       1,998,659       11,683,638       585 % Research and development     389,262       78,502       310,760       396 % Selling, general and administrative     12,851,087       9,190,386       3,660,701       40 % Acquisition related costs     1,536,800       311,083       1,225,717       394 % Restructuring costs     4,818,064        −       4,818,064       −   Amortization and impairment of intangible assets     5,870,436       1,370,986       4,499,450       328 % Total operating expenses     39,147,946       12,949,616       26,198,330       202 % Loss from operations     (25,665,664 )     (4,793,443 )     (20,872,221 )     435 % Other (expense) income                                 Other (expense), net     (425,425 )     (538,862 )     113,437       -21 % Loss from change in fair value of contingent consideration     631,298       -       631,298       −   Total other (expense) income     205,873       (538,862 )     744,735       -138 % Net loss   $ (25,459,791 )   $ (5,332,305 )   $ (20,127,486 )     377 %     Nine Months Ended March 31,                       2021     2020     Change     %                                     Revenues                                 Product and service revenue, net   $ 42,149,561     $ 12,771,235     $ 29,378,326       230 % Operating expenses                                 Cost of sales     23,499,842       2,980,425       20,519,417       688 % Research and development     858,698       223,197       635,501       285 % Selling, general and administrative     35,825,175       19,494,368       16,330,807       84 % Acquisition related costs     2,849,037       1,533,723       1,315,314       86 % Restructuring costs     4,874,723       135,981       4,738,742       3485 % Amortization and impairment of intangible assets     9,039,597       2,899,553       6,140,044       212 % Total operating expenses     76,947,072       27,267,247       49,679,825       182 % Loss from operations     (34,797,511 )     (14,496,012 )     (20,301,499 )     140 % Other (expense) income                                 Other (expense), net     (1,555,924 )     (1,181,206 )     (374,718 )     32 % Loss from change in fair value of contingent consideration     (2,680,022 )      −       (2,680,022 )     −   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     (4,493,505 )     4,020,430       (8,513,935 )     -212 % Net loss   $ (39,291,016 )   $ (10,475,582 )   $ (28,815,434 )     275 % Product revenue. We recognized net revenue from product sales of approximately $13.5losses were $11.5 million and $8.2$9.5 million for the three months ended MarchDecember 31, 2021 and 2020,, respectively. We recognized net revenue from product sales of approximately $42.1 respectively, and $12.8$39.4 million and $13.8 million for the ninesix months ended MarchDecember 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”), respectively.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 acquisitions of the Pediatric Portfolio on November 1, 2019, the Consumer Health Portfolio on February 14, 2020 and$11.1 million net revenue generated from the ADHD product portfolio of Neos, onwhich we acquired in March 19, 2021 as well as additional revenuesand $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 kit sales. Due tokits, $0.2 million decrease in revenue resulting from the divesture of our entryNatesto prescription product in the third fiscal quarter of 2021 and $0.2 million decrease in revenue from the divestiture of MiOXSYS on March 31, 2021 into a termination and transition agreement with Acerus Pharmaceuticals Corporation terminating the License and Supply Agreement related to Natesto, we will no longer recognize revenue related to Natesto as of AprilJuly 1, 2021. Cost of sales.. We incurred Total cost of sales of $13.7was $10.8 million and $2.0 million recognized forduring the three months ended MarchDecember 31, 2021, and 2020an increase of $4.5 million, or 73%, respectively. We incurredcompared to $6.3 million during the cost of sales $23.5 million and $3.0 million for the ninethree months ended MarchDecember 31, 2021 and 2020, respectively.2020. The increase was primarily driven by the acquisitions$5.5 million costs incurred for the production and sale of the Pediatric Portfolio on November 1, 2019, Consumer Health Portfolio on February 14, 2020ADHD product portfolio of Neos, which we acquired in March 2021 and Neos on March 19, 2021, as well as additional$1.3 million increase in cost of sales fromof our consumer health products, partially offset by the $2.3 million decrease in costs for COVID-19 test kit sales. In addition, we recognized approximately $7.0 million in write-downs for slow moving inventory during the three-months ended March 31, 2021. 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. Research and Development. Research and development expenses increased $0.3 million, or 396%, forDuring the three months ended MarchDecember 31, 2021,, compared to $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 MarchDecember 31, 2020. Research and development expenses increased approximately $0.62021, an increase of $4.6 million, or 285% forcompared to $0.3 million during the ninethree months ended MarchDecember 31, 2021, compared to the nine months ended March 31, 2020.2020. 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 our Healight Platform licenseADHD 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 initial researchdirect marketing. Advertising and development costs, as well as the acquisition of Neos on March 19, 2021, which incurs costsdirect marketing expenses include direct-to-consumer marketing, advertising, sales and customer support and processing fees related to product developmentour consumer health segment. Total advertising and FDA-required post-marketing clinical trials. Selling, General and Administrative. Selling, general and administrative costs increased $3.7direct marketing expense were $5.0 million or 40%, for the three months ended MarchDecember 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 31, 20202021, 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. Selling,Total general and administrative costs increased $16.3expense was $8.0 million during the three months ended December 31, 2021, an increase of $2.4 million, or approximately 84%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 ninethree months ended MarchDecember 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 acquisitionsan 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 Pediatric Portfolio, InnovusADHD product portfolio of Neos, which we acquired in March 2021 and Neos that occurred$2.2 million increase in the prior year ended June 30, 2020,cost of which, only the Pediatric Portfolio was a componentsales of our financial resultsconsumer health products, partially offset by the $2.9 million decrease in costs for NovemberCOVID-19 test kits. Neos manufactures the ADHD products at its Grand Prairie, Texas facilities, and December of 2019. The remainingas such, allocates a significant portion of the Neosits intangible assets amortization and fixed assets depreciation not allocated 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 is allocatedand 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. 37 Table of Contents Amortization and impairment of Intangible Assets. Amortization expense of intangible assets was approximately $5.9 million and $1.4 million for the for the three months ended March 31, 2021 and 2020, respectively. Amortization expense of intangible assets was approximately $9.0 million and $2.9 million for the nine months ended March 31, 2021 This expense is related to corresponding amortization of our finite-lived intangible assets. The increase of this expense is due primarily to the $4.3 million write-off of licensed intangible asset related to the March 30, 2021 Natesto divestiture and the Pediatric Portfolio acquisition from Cerecor and Innovus Merger that occurred in the fiscal year ended June 30, 2020.. Acquisition related costs. We incurred acquisition related costs of $1.5 million and $2.8$16.2 million during the three and ninesix months ended MarchDecember 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. During the three and nine months endedMerger, which was closed on March 31, 2020, we incurred acquisition costs of $0.3 million and $1.5 million related to the Innovus Merger.19, 2021. Such costs include legal fees, and 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). Restructuring costs. We incurred severance costsAmortization of $4.8 million and $4.9intangible assets. Total amortization expense of intangible assets, excluding amounts included in cost of sales, was $2.2 million during the three and ninesix months ended MarchDecember 31, 2021, respectively,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 related 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. We incurred severance costsMerger 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 nine monthsix months ended MarchDecember 31, 2020 related to reduction in forces.2021. There werewas no such costs incurred inincome tax expense or benefit during the threesix months ended MarchDecember 31, 2020. Interest (expense) income, net. Interest (expense) income, net for the three months ended March 31, 2021 was expense of approximately $0.4 million, compared to expense of $0.5 million for the three months ended March 31, 2020. Interest (expense) income, net for the nine months ended March 31, 2021 was expense of approximately $1.6 million, compared to interest expense of $1.2 million for the three months ended March 31, 2020. 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., (ii) the February 14, 2020, Merger with Innovus and (iii) the March 19, 2021, Merger with Neos. Loss from change in fair value of contingent consideration. We recognized a gain of approximately $0.7 million from the change in the fair value of the ZolpiMist and Tuzistra contingent consideration liability and a loss of approximately $0.1 million from the change in fair value of the contingent value rights ("CVR's") liability related to the Innovus Merger during the three months ended March 31, 2021. During the nine months ended March 31, 2021, we recognized a loss of approximately $1.7 million from the change in the fair value of the ZolpiMist and Tuzistra contingent consideration liability and a loss of approximately $1.0 million from the change in fair value of the contingent value rights ("CVR's") liability related to the Innovus Merger. 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 MarchDecember 31, 2021,, we had approximately $46.8 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 cash, cash equivalentsits common stock, preferred stock, debt securities, warrants, rights 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 nine months ended Marchunits (the “2020 Shelf”). As of December 31, 2021, were approximately $13.5$43.3 million and $42.1 million, compared to $8.2 million and $12.8 million forremains available under the same periods ended March 31, 2020 Shelf. In June 2020, we initiated an at-the-market offering program ("ATM"), an increase of 65% and 230%, respectively. Revenue is expected to increase over time, which will allow us to rely less on our existing cash balancesell and proceeds from financing transactions. Cash used by operations during the three and nine months ended March 31, 2021 was $19.7 million compared to $20.6 million for the three and nine months ended March 31, 2020. The decrease is due primarily to a decrease in working capital and pay down of other liabilities. As of the date of this report, we expect costs of operations to increase as we integrate the Neos acquisition, invest in new product candidate development and continue to focus on revenue growth through increasing product sales. Our current assets totaling approximately $100.0 million as of March 31, 2021, 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 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 us and our stockholders, or at all. We raised approximately $29.6 million, net during the nine months ended March 31, 2021, from the sale of approximately 0.4 million shares using our at-the-market facility and from the issuance of approximately 4.8 millionissue shares of our common stock and 0.3from time-to-time. Since initiated in June 2020 through December 31, 2021, we issued a total of 5,316,623 shares of common stock for aggregate proceeds of $28.0 million placement agent warrants on the December 15, 2020 offering. Finally, on December 10, 2020,before estimated offering costs of $2.8 million. On June 2, 2021, we exchanged $0.8terminated 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 of debt into 0.1 million shares of our common stock reducing the needfrom time to use cash to satisfy this obligation. Between Marchtime in “at-the-market” offerings. As of December 31, 2021, approximately $12.5 million of our common stock remained available to be sold pursuant to the Cantor ATM. Underwriting Agreement 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 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 of 4,791,667 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. 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 filing dateunderwriter warrants have a term of this quarterly report on Form 10-Q, we have not issued any common stock under our at-the-market offering program. As offive years from the date of this report, weeffectiveness of the offering. The underwriter warrants are exercisable immediately. These warrants have adequate capital resourcesa fair value of approximately $1.3 million and are classified with the stockholders' equity. Effective June 2, 2021, the Company terminated the Underwriting Agreement with Wainwright; pursuant to cover potential net cash outflowssuch termination, there will be no future sales of the Company’s Common Stock under the Underwriting Agreement. Revolver Loan Agreement In October 2019, our Neos subsidiary entered into a senior secured credit agreement with Eclipse Business Capital LLC (f/k/a Encina Business Credit, LLC) (“Eclipse”) as agent for the twelve months followinglenders (the “Loan Agreement”). Under the filing dateLoan Agreement, Eclipse will extend up to $25.0 million in secured revolving loans to us (the “Revolving Loans”), of this Quarterly Report.which up to $2.5 million may be available for short-term swingline loans, against 85% of eligible accounts receivable (see Note 10 and Note 19). 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 or delay to our 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 MarchDecember 31, 2021 and 2020:2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended December 31,  ​ Increase ​      2021      2020      (Decrease)   Nine Months Ended March 31,     2021     2020   ​ ​ (In thousands) Net cash used in operating activities   $ (19,677,832 )   $ (20,609,198 ) ​ $ (12,613) ​ $ (10,907) ​ $ (1,706) Net cash used in investing activities   $ (364,094 )   $ (5,610,732 ) ​ $ (3,137) ​ $ (39) ​ $ (3,098) Net cash provided by financing activities   $ 18,498,572     $ 77,441,786   ​ $ 1,126 ​ $ 24,898 ​ $ (23,772) 38 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 nine-monthssix months ended MarchDecember 31, 2021,, our net cash used in operating activities used $19.7totaled $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 $34.2 million, primarilygoodwill 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 a $7.2 write-down related to inventory,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 to the non-cash adjustments such as depreciation, amortization and accretion, stock-based compensation, and loss from change in fair value of contingent consideration and CVR, decreasesa 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 an increase in accrued compensation. These charges were offset by an increase in inventory and decreases in accounts payablepayables and accrued liabilities.compensation. During the nine-months ended March 31, 2020, our operating activities used $20.6 million in cash, which was greater than the net loss of $10.5 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 nine-monthssix months ended MarchDecember 31, 2021, we made a was primarily due to $3.1 million payment of $0.2 millioncontingent consideration to acquire Neos, netTris. 41 Table of Contents Net cash acquired, and paid $0.7 millionused in investing activities of approximately $39,000 during the six months ended December 31, 2020 was primarily due to payment of contingent consideration. Net Cash Provided by Financing Activities DuringNet cash provided by financing activities of $1.1 million during the nine-monthssix months ended MarchDecember 31, 2020, we used $1.42021 was primarily from $4.6 million fornet proceeds from issuance of our common stock under the Innovus Merger. We also used $4.5 million for the Cerecor acquisition and we paid $0.2ATM, partially offset by $2.7 million in contingent consideration offset by cashpayments of $0.4fixed payment arrangements and $0.8 million received from Innovus Merger. Net Cash from Financing Activities net reduction in our revolving loan. Net cash provided by financing activities in the nine-monthssix months ended MarchDecember 31, 20212020, was $18.6$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 issued shares of our common stock undercompleted the ATM offering with gross proceeds of $3.6$3.5 million, which was offset by commission and otherthe offering cost of $1.6$1.7 million, driven by a one-time payment in July 2020 of approximately $1.5 million. We paid approximately $6.0 million on our short-term line of credit, $3.0$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 nine-months ended March 31, 2020Table 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 $77.4 million. Thisbased on the U.S. Treasury yield curve in effect commensurate with the expected life assumption. The average expected life of stock options was primarily relateddetermined 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) October 2019 Offeringsignificant 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 gross proceedsimpairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of $10.0 million, offsetan 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 offeringfair 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 $0.7equity, 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, 2020. The Aytu Consumer Health segment, which was paid in cash; (ii) $49has $8.6 million raised ingoodwill from the March 2020 Offerings, offsetInnovus 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 estimated fair value are unobservable inputs that are not supported by offering costsmarket activity. We estimate the fair value of approximately $4.5 million,contingent consideration liabilities based on projected payment dates, discount rates, probabilities of payment, and (iii) $23.0 million raisedprojected revenues. Projected contingent payment amounts are discounted back to the 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 result of warrant exercisesincrease in March 2020. 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 Obligations and Commitments Information regarding our Contractual Obligations and Commitments is contained in Note 10fair value due to the Financial Statements.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. Our assessment ofover changes in our internal controls over financial reporting excluded those processes or controls that exist at our Aytu Consumer Health reporting unit,Neos subsidiary, which we acquired from the February 14, 2020. Those controls relatedMarch 19, 2021 Neos Merger. Neos’ last annual report for the year ended December 31, 2020 has been audited without any qualifications. Since the merger, there has been no significant change to the Innovus Merger are being evaluated internally, and any changes as a result of that evaluation will be disclosed in future filings. its internal control over financial reporting. ​ 47 39 Table of Contents PART II. OTHER INFORMATION Item 1. Legal Proceedings. There have not been any material changes to our legal proceedings from those reported in our fiscal year 2021 Annual Report on Form 10-K filed with the SEC on September 28, 2021. Harris and Walker County. On March 7, 2018 and April 18, 2019, Neos received citations advising Neos that the County of Harris Texas (“Harris County”) and the County of Walker Texas (“Walker County”) filed lawsuits on December 13, 2017 and January 11, 2019, respectively, against Neos and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. Through these lawsuits, each of Harris County and Walker County seek to recoup as damages some of the expenses they allegedly have incurred to combat opioid use and addiction. Each of Harris County and Walker County also seeks punitive damages, disgorgement of profits and attorneys’ fees.​ Merger Action. On Between January 27, 2021 and February 25, 2021, nine lawsuits were filed related to the Neos Merger; on January 27, 2021, Wang v. Neos Therapeutics, Inc., et al., 1:21-cv-00095, was filed by purported Neos stockholder Elaine Wang against Neos and its directors in the U.S. District Court for the District of Delaware; on January 29, 2021, Dupree v. Neos Therapeutics, Inc., et al., 1:121-cv-00124, was filed by purported Neos stockholder Michael Dupree against Neos, its directors, the Merger Sub, and Aytu in the U.S. District Court for the District of Delaware; on February 1, 2021, London v. Neos Therapeutics, Inc., et al., 1:21-cv-00874, was filed by purported Neos stockholder Jack London against Neos and its directors in the U.S. District Court for the Southern District of New York; on February 3, 2021, Kates v. Neos Therapeutics, Inc., et al., 1:21-cv-00953, was filed by purported Neos stockholder Erin Kates against Neos and its directors in the U.S. District Court for the Southern District of New York; on February 3, 2021, Smith v. Neos Therapeutics, Inc., et al., 1:21-cv-00940, was filed by purported Neos stockholder Hayley Smith against Neos, its directors, the Merger Sub, and Aytu in the U.S. District Court for the Southern District of New York; on February 9, 2021, Tkatch v. Neos Therapeutics, Inc., et al., 1:21-cv-01187, was filed by purported Neos stockholder Natalia Tkatch against Neos and its directors, the Merger Sub, and Aytu in the U.S. District Court for the Southern District of New York; on February 16, 2021, Bushansky v. Neos Therapeutics, Inc., et al., 1:121-cv-00208, was filed by purported Neos stockholder Stephen Bushansky against Neos and its directors in the U.S. District Court for the District of Delaware; on February 16, 2021, Wheeler v. Neos Therapeutics, Inc., et al., 1:121-cv-00213, was filed by purported Neos stockholder Jacob Wheeler against Neos and its directors in the U.S. District Court for the District of Delaware; on February 25, 2021, Hein v. Neos Therapeutics, Inc., et al., 1:121-cv-00287, was filed by purported Neos stockholder Matthew Hein against Neos and its directors in the U.S. District Court for the District of Delaware. The London, Kates,Tkatch, Dupree and Wang cases were subsequently dismissed. 40 Table of Contents 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 TO OUR BUSINESS AND FINANCIAL POSITION Our business and operations would suffer in the event of system failures. We utilize information technology, or IT, systems and networks to process, transmit and store electronic information in connection with our business activities. As use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that we will be successful in preventing cyber‑attacks or successfully mitigating their effects. Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from such cyber attacks, including computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event could cause interruption of our operations. For example, the loss of data from completed clinical trials for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could suffer reputational harm or face litigation or adverse regulatory action and the development of our product candidates could be delayed. RISKS RELATED TO COMMERCIALIZATION The design, development, manufacture, supply and distribution of our products and product candidates are highly regulated processes and technically complex. We are subject to extensive regulation in connection with the preparation and manufacture of our products for commercial sale. Components of a finished therapeutic product approved for commercial sale or used in late‑stage clinical trials must be manufactured in accordance with cGMPs and equivalent foreign standards. These regulations govern manufacturing processes and procedures, including record keeping, and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our products and product candidates that may not be detectable in final product testing. The development, manufacture, supply and distribution of our approved products as well as any of our future potential product candidates, are highly regulated processes and technically complex. We, along with our third‑party suppliers, must comply with all applicable regulatory requirements of the FDA and foreign authorities. For instance, because each of our attention deficit/hyperactivity disorder (“ADHD”) products, generic Tussionex, Tuzistra XR, and ZolpiMist is a regulated drug product and subject to the U.S. Drug Enforcement Administration (“DEA”) and state-level regulations, we have had to, and will continue to, need to secure state licenses from each state in which we intend to sell such product allowing us to distribute a regulated drug product in such state. Regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time‑consuming for us to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of our facility. Any such remedial measures imposed upon us could materially harm our business. If we fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or revocation of a pre‑existing approval. As a result, our business, financial condition and results of operations may be materially harmed. 41 Table of Contents We rely on limited sources of supply for our ADHD products and our generic Tussionex, and any disruption in the chain of supply may impact production and sales of our ADHD products and our generic Tussionex, and cause delays in developing and commercializing our product candidates and currently manufactured and commercialized products. Our approved NDAs for our ADHD products, include our proposed manufacturing process for each product. Any change to our manufacturing process, facilities or suppliers could require that we supplement our approved NDA. Also, because of our proprietary processes for manufacturing our product candidates, we cannot immediately transfer manufacturing activities for our ADHD products or our generic Tussionex to an alternate supplier, and a change of facilities would be a time‑consuming and costly endeavor. Any changes to our manufacturing process would involve substantial cost and could result in a delay in our desired clinical and commercial timelines. We are also reliant on a limited number of suppliers for resin, drug compounds, coating and other component substances of our final product candidates and products. If any of these single‑source suppliers were to breach or terminate its supply agreement, if any, with us or otherwise not supply us, we would need to identify an alternative source for the supply of component substances for our product candidates and products. Identifying an appropriately qualified source of alternative supply for any one or more of the component substances for our product candidates or products could be time consuming, and we may not be able to do so without incurring material delays in the development and commercialization of our approved products or product candidates or a decrease in sales of our approved products, which could harm our financial position and commercial potential for our product candidates and products. Any alternative vendor would also need to be qualified through an NDA supplement which could result in further delay, including delays related to additional clinical trials. The FDA, DEA, or other regulatory agencies outside of the United States may also require additional studies if we enter into agreements with new suppliers for the manufacture of our ADHD products and our generic Tussionex that differ from the suppliers used for clinical development of such product candidates. These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our products and product candidates, cause us to incur higher costs and prevent us from commercializing them successfully. Furthermore, if our suppliers fail to deliver the required commercial quantities of components and APIs on a timely basis and at commercially reasonable prices, including if our suppliers did not receive adequate DEA quotas for the supply of certain scheduled components, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, commercialization of our ADHD products, our generic Tussionex and clinical trials of future potential product candidates, may be delayed or we could lose potential revenue and our business, financial condition, results of operation and reputation could be adversely affected. If we fail to produce our products or product candidates in the volumes that are required on a timely basis, we may face penalties from wholesalers and contracted retailers of our products and delays in the development and commercialization of our product candidates. We currently depend on third‑party suppliers for the supply of the APIs for our products and product candidates, including drug substance for nonclinical research, clinical trials and commercialization. For our ADHD products, our generic Tussionex and NT0502, our product candidate for sialorrhea, we currently rely on single suppliers for raw materials including APIs, which we use to manufacture, produce and package final dosage forms. In particular, we have an exclusive supply agreement with Coating Place, Inc. (“CPI”), pursuant to which CPI (i) is the exclusive supplier of the active ingredient complexes in our generic Tussionex and (ii) has agreed to not supply anyone else engaged in the production of generic Tussionex with such active ingredient complexes. Any future curtailment in the availability of raw materials could result in production or other delays with consequent adverse effects on us. In addition, because regulatory authorities must generally approve raw material sources for pharmaceutical products, changes in raw material suppliers may result in production delays or higher raw material costs. We are subject to penalties from wholesalers and contracted retailers if we do not deliver our generic Tussionex and ADHD products in quantities that meet their demand. Any such delays could trigger these penalty provisions, which would have a negative impact on our business. If we fail to manufacture our ADHD in sufficient quantities and at acceptable quality and pricing levels, or fail to obtain adequate DEA quotas for controlled substances, or to fully comply with cGMP regulations, we may face delays in the commercialization of these products or our product candidates, if approved, or be unable to meet market demand, and may be unable to generate potential revenues. The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls, and the use of specialized processing equipment. Pharmaceutical companies often encounter difficulties in manufacturing, particularly in scaling up production of their products. These problems include manufacturing difficulties relating to production costs and yields, quality control, including stability of the product and quality assurance testing, shortages of qualified personnel, as well as compliance with federal, state and foreign regulations. If we are unable to demonstrate stability in accordance with commercial requirements, or if our raw material manufacturers were to encounter difficulties or otherwise fail to comply with their obligations to us, our ability to obtain FDA approval and market our products and product candidates would be jeopardized. In addition, any delay or interruption in the supply of clinical trial supplies could delay or prohibit the completion of our clinical trials, increase the costs associated with conducting our clinical trials and, depending upon the period of delay, require us to commence new trials at significant additional expense or to terminate a trial. We purchase raw materials and components from various suppliers in order to manufacture our ADHD products. If we are unable to source the required raw materials from our suppliers, or if we do not obtain DEA quotas or receive inadequate DEA quotas, we may experience delays in manufacturing our ADHD products, and may not be able to meet our customers’ demands for our products. In addition, we must comply with federal, state and foreign regulations, including cGMP requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. We may be unable to comply with these cGMP requirements and with other FDA and foreign regulatory requirements. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or voluntary recall, or withdrawal of product approval. If the safety of any of our products or product candidates is compromised due to failure to adhere to applicable laws or for other reasons, we may not be able to obtain, or to maintain once obtained, regulatory approval for such products or product candidates or successfully commercialize such products or product candidates, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay in clinical development, regulatory submissions, approvals or commercialization of our products or product candidates, entail higher costs or result in our being unable to effectively commercialize our products or product candidates. Any manufacturing defect or error discovered after products have been produced and distributed could result in even more significant consequences, including costly recall procedures, re-stocking costs, damage to our reputation and potential for product liability claims. Our Grand Prairie facility was formerly operated by our predecessor, PharmaFab, Inc., or PharmaFab. In April 2007, the FDA announced entry of a Consent Decree of Permanent Injunction, or the Consent Decree, against PharmaFab, one of its subsidiaries and two of its officials. The Consent Decree arose out of several perceived cGMP deficiencies related to the manufacture of unapproved drugs or Drug Efficacy Study Implementation drugs that we no longer manufacture. In July 2019, we filed a motion with the U.S. District Court of North Texas to vacate the Consent Decree, which was unopposed by the Department of Justice and the FDA and was granted by the court on July 11, 2019. While the Consent Decree has been vacated, there can be no assurance that we will not become subject to similar orders in the future, which may result in us continuing to expend resources and attention to observe its terms, and there can be no assurance that we will be in compliance with its requirements. 42 Table of Contents If our sole manufacturing facility becomes damaged or inoperable or we decide to or are required to vacate our facility, our ability to manufacture our ADHD products, our generic Tussionex or future potential product candidates for clinical development, may be jeopardized. Our inability to continue manufacturing adequate supplies of our products could adversely affect our ability to generate revenues. All of our manufacturing capabilities are housed in our sole manufacturing facility located in Grand Prairie, Texas. Our facility and equipment could be harmed or rendered inoperable by natural or man‑made disasters, including war, fire, tornado, power loss, communications failure or terrorism, any of which may render it difficult or impossible for us to operate our drug delivery technology platform and manufacture our product candidates or products for some period of time. While we seek to maintain finished goods inventory of our products outside of this facility, it is unlikely that the level of such inventory would be sufficient if we were to sustain anything other than a short-term disruption in our ability to manufacture our products and product candidates at our Grand Prairie, Texas facility. The inability to manufacture our products and product candidates if our facility or our equipment is inoperable, for even a short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future. Furthermore, our facility and the equipment we use to manufacture our products and product candidates could become damaged and time‑consuming to repair or replace. It would be difficult, time‑consuming and expensive to rebuild our facility or repair or replace our equipment or license or transfer our proprietary technology to a third‑party, particularly in light of the requirements for a DEA‑registered manufacturing and storage facility like ours. If we decide to or are required to change or add a new manufacturer or supplier, the process would likely require prior FDA, DEA and/or equivalent foreign regulatory authority approval, and would be time consuming and costly. Even in the event we are able to find a third party with such qualifications to enable us to manufacture our products or product candidates, we may be unable to negotiate commercially reasonable terms. We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all. An inability to continue manufacturing adequate supplies of our ADHD products or our generic Tussionex at our Grand Prairie, Texas facility could result in a disruption in the supply of our products to physicians and pharmacies, which would adversely affect our ability to generate revenues. Amphetamine, methylphenidate and hydrocodone are ScheduleII controlled substances under the Controlled Substances Act, and any failure to comply with this Act or its state equivalents would have a negative impact on our business. Amphetamine, methylphenidate and hydrocodone, which are the active ingredients in our Adzenys XR-ODT, Adzenys ER, Cotempla XR-ODT and generic Tussionex products, are listed by the DEA as a Schedule II controlled substance under the Controlled Substances Act (“CSA”). The DEA classifies substances as Schedule I, II, III, IV or V controlled substances, with Schedule I controlled substances considered to present the highest risk of substance abuse and Schedule V controlled substances the lowest risk. Scheduled controlled substances are subject to DEA regulations relating to supply, procurement, manufacturing, storage, distribution and physician prescription procedures. For example, Schedule II controlled substances are subject to various restrictions, including, but not limited to, mandatory written prescriptions and the prohibition of refills. In addition to federal scheduling, some drugs may be subject to state‑controlled substance laws and regulations and more extensive requirements than those determined by the DEA and FDA. Though state controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may schedule products separately. While some states automatically schedule a drug when the DEA does so, other states require additional state rulemaking or legislative action, which could delay commercialization. Some state and local governments also require manufacturers to operate a drug stewardship program that collects, secures, transports and safely disposes of unwanted drugs. Entities must register annually with the DEA to manufacture, distribute, dispense, import, export and conduct research using controlled substances. In addition, the DEA requires entities handling controlled substances to maintain records and file reports, including those for thefts or losses of any controlled substances, and to obtain authorization to destroy any controlled substances. Registered entities are subject to DEA inspection and also must follow specific labeling and packaging requirements, and provide appropriate security measures to control against diversion of controlled substances. Security requirements vary by controlled substance schedule with the most stringent requirements applying to Schedule I and Schedule II controlled substances. Required security measures include background checks on employees and physical control of inventory through measures such as vaults and inventory reconciliations. Failure to follow these requirements can lead to significant civil and/or criminal penalties and possibly even lead to a revocation of a DEA registration. The DEA also has a production and procurement quota system that controls and limits the availability and production of Schedule I or II controlled substances. If we or any of our suppliers of raw materials that are DEA‑classified as Schedule I or II controlled substances are unable to receive any quota or a sufficient quota to meet demand for our products, if any, our business would be negatively impacted. Public concern over the abuse of medications that are controlled substances, including increased legislative, legal and regulatory action, could negatively affect our business. Products containing controlled substances may generate public controversy. Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of controlled substances such as opioids in the United States. State and local governmental agencies have commenced investigations into pharmaceutical companies and others in the supply chain in connection with the distribution of opioid medications. For example, on March 7, 2018 and April 18, 2019, we received citations advising us that the County of Harris Texas and the County of Walker Texas filed lawsuits on December 13, 2017 and January 11, 2019, respectively, against us and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. Through these lawsuits, each of Harris County and Walker County seek to recoup as damages some of the expenses they allegedly have incurred to combat opioid use and addiction. Each of Harris County and Walker County also seeks punitive damages, disgorgement of profits and attorneys’ fees. In addition, multiple lawsuits have been filed against pharmaceutical companies alleging, among other claims, failures to provide effective controls and procedures to guard against the diversion of controlled substances, negligence by distributing controlled substances to pharmacies that serve individuals who abuse controlled substances, and failures to report suspicious orders of controlled substances in accordance with regulations. Certain of these cases have recently been settled, some for hundreds of millions of dollars. In the future, political pressures and adverse publicity could lead to delays in, and increased expenses for, and limit or restrict, the introduction and marketing of our product or product candidates, the withdrawal of currently approved products from the market, or result in other legal action. In addition, we are aware of other legislative, regulatory or industry measures to address the misuse of prescription opioid medications which could affect our business in ways that we may not be able to predict. For example, the State of New York has undertaken efforts to create an annual surcharge on all manufacturers and distributors licensed to sell or distribute opioids in New York, as well as a tax on sales of opioids in the state. Other states have implemented and are also considering legislation that could require us to pay taxes, licensing fees, or assessments on the distribution of opioid medications in those states. These laws and proposed bills vary in the amounts and the means of calculation. Liabilities for taxes or assessments under any such laws will likely have an adverse impact on our results of operations, unless we are able to mitigate them through operational changes or commercial arrangements where permitted and may result in us ceasing to continue to sell our products in these jurisdictions. 43 Table of Contents Product liability lawsuits could divert our resources, result in substantial liabilities and reduce the commercial potential of our products. The risk that we may be sued on product liability claims is inherent in the development of pharmaceutical products. We face a risk of product liability exposure related to the testing of our product candidates in clinical trials and face even greater risks related to the commercialization of our products and upon any commercialization by us of our future products and, if approved, our product candidates, such as claims related to opioid abuse. For example, on March 7, 2018, we received a citation advising us that the County of Harris Texas filed a lawsuit on December 13, 2017 against us and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. On April 18, 2019, we received a citation advising us that the County of Walker Texas filed a lawsuit on January 11, 2019 against us and various other alleged manufacturers, promoters, sellers and distributors of opioid pharmaceutical products. These lawsuits may divert our management from pursuing our business strategy and may be costly to defend. In addition, if we are held liable in any of these lawsuits, we may incur substantial liabilities and may be forced to limit or forego further commercialization of one or more of our products. Our product liability insurance coverage may not be adequate to cover any and all liabilities that we may incur. We currently carry product liability insurance coverage, although aggregate limits may not be adequate to cover any and all liabilities that we may incur. Insurance coverage is increasingly expensive and difficult to obtain. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business. In addition, we may not be able to obtain or maintain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims, which could prevent or inhibit the commercial production and sale of our products. For example, we have experienced increasing difficulty in procuring insurance coverage for our products, in particular, our opioid‑based product, due to their status as controlled substances. GENERAL RISK FACTORS Our business may be adversely affected by the effects of the COVID-19 pandemic. In December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as COVID-19, was reported to have surfaced in Wuhan, China. It has since spread to multiple other countries and, in March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. This pandemic has adversely affected or has the potential to adversely affect, among other things, the economic and financial markets and labor resources of the countries in which we operate, our manufacturing and supply chain operations, research and development efforts, commercial operations and sales force, administrative personnel, third-party service providers, business partners and customers, and the demand for some of our marketed products. The COVID-19 pandemic has resulted in travel and other restrictions to reduce the spread of the disease, including governmental orders across the globe, which, among other things, direct individuals to shelter at their places of residence, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, maintain social distancing, and order cessation of non-essential travel. As a result of these recent developments, we have implemented work-from-home policies for a significant part of our employees. The effects of shelter-in-place and social distancing orders, government-imposed quarantines, and work-from-home policies Certain important factors may negatively impact productivity, disrupt our business, and delay our business timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. Such restrictions and limitations may also negatively impact our access to regulatory authorities (which may be affected, among other things, by travel restrictions and may be delayed in responding to inquiries, reviewing filings, and conducting inspections). The COVID-19 pandemic may also result in the loss of some of our key personnel, either temporarily or permanently. In addition, our sales and marketing efforts may be impacted by postponement of face-to-face meetings and restrictions on access by non-essential personnel to hospitals or clinics, all of which could slow adoption and implementation of our marketed products, resulting in lower net product sales. For example, while the impact of shelter-in-place and social distancing orders, physicians' office closures, and delays in the treatment of patients following the COVID-19 pandemic on our net product sales of our products for the three months ended March 31, 2020 was limited, overall demand was lower in April 2020 compared to the same period of 2019. In addition to other potential impacts of the COVID-19 pandemic on net product sales, we expect to see continued adverse impact on new patient starts for all products while these measures remain in place. Demand for some or all of our marketed products may continue to be reduced while the shelter-in-place or social distancing orders are in effect and, as a result, some of our inventory may become obsolete and may need to be written off, impacting our operating results. These and similar, and perhaps more severe, disruptions in our operations may materially adversely impact our business, operating results, and financial condition. Quarantines, shelter-in-place, social distancing, and similar government orders (or the perception that such orders, shutdowns, or other restrictions on the conduct of business operations could occur) related to COVID-19 or other infectious diseases are impacting personnel at our research and manufacturing facilities, our suppliers, and other third parties on which we rely, and may impact the availability or cost of materials produced by or purchased from such parties, which could result in a disruption in our supply chain. In addition, infections and deaths related to COVID-19 may disrupt the United States' healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay, FDA review and potential approval of our marketed products. It is unknown how long these disruptions could continue. Further, while we are focused on therapies to address the COVID-19 pandemic, our other product candidates may need to be de-prioritized. Any elongation or de-prioritization of our other products could materially affect our business. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, it is currently resulting in significant disruption of global financial markets. This disruption, if sustained or recurrent, could make it more difficult for us to access capital if needed. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock. The global COVID-19 pandemic continues to rapidly evolve. The ultimate impact of this pandemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, healthcare systems, or the global economy as a whole. These effects could have a material impact on our operations. To the extent the COVID-19 pandemic adversely affects our business, prospects, operating results, or financial condition.      44 Table of Contents Legislative or regulatory reform of the health care system in the United States may adversely impact our business, operations or financial results. Our industry is highly regulated and changes in law may adversely impact our business, operations or financial results. In particular, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively the “Affordable Care Act” or “ACA”), was signed into law. This legislation changes the current system of healthcare insurance and benefits intended to broaden coverage and control costs. The law also contains provisions that will affect companies in the pharmaceutical industry and other healthcare related industries by imposing additional costs and changes to business practices. Provisions affecting pharmaceutical companies include the following: ● mandatory rebates for drugs sold into the Medicaid program have been increased, and the rebate requirement has been extended to drugs used in risk based Medicaid managed care plans. ● the 340B Drug Pricing Program under the Public Health Service Act has been extended to require mandatory discounts for drug products sold to certain critical access hospitals, cancer hospitals and other covered entities. ● pharmaceutical companies are required to offer discounts on branded drugs to patients who fall within the Medicare Part D coverage gap, commonly referred to as the “Donut Hole." ● pharmaceutical companies are required to pay an annual non tax deductible fee to the federal government based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs and Department of Defense. Despite initiatives to invalidate the ACA, the U.S. Supreme Court has upheld certain key aspects of the legislation, including a tax-based shared responsibility payment imposed on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate.” However, as a result of tax reform legislation passed in December 2017, the individual mandate has been eliminated effective January 1, 2019. On December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The Trump administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018, the same judge issued an order staying the judgment pending appeal. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. Pending review, it is unclear what effect the latest ruling will have on the status of the ACA. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results. We will continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business. In addition, since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Further, the Trump administration has concluded that cost‑sharing reduction, or CSR, payments to insurance companies required under the ACA have not received necessary appropriations from Congress and announced that it would discontinue these payments immediately until such appropriations are made. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017 and again on July 18, 2018. Furthermore, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third‑party payors who argued were owed to them. On December 10, 2019, the U.S. Supreme Court heard arguments in Moda Health Plan, Inc. v. United States, which will determine whether the government must make risk corridor payments. On April 27, 2020, the U.S. Supreme Court decided that ACA requires the federal government to compensate insurers for significant losses their health plans incurred during the first three years of the Act’s marketplaces, and that insurers can sue for nonpayment in the Court of Federal Claims. The effects of a potential future gap in reimbursement on third party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known. In December 2018, CMS published a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of the federal district court litigation regarding the method CMS uses to determine this risk adjustment. Moreover, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices; however, on December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act (H.R. 1865), which repeals the Cadillac tax, the health insurance provider tax, and the medical device excise tax. It is impossible to determine whether similar taxes could be instated in the future. In 2021, Congress may consider other legislation to repeal and replace elements of the ACA, and litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results. Changes to the ACA or other existing health care regulations could significantly impact our business and the pharmaceutical industry. Although it is too early to determine the effect of legal challenges, pending legislation, and executive action on the ACA, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Additionally, other federal health reform measures have been proposed and adopted in the United States since the ACA was enacted: ● the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. These changes included aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, will remain in effect through 2027 unless additional Congressional action is taken. ● the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. 45 Table of Contents The Right to Try Act of 2018 provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer should develop an internal policy and respond to patient requests according to that policy. Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which have resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. In addition, the United States government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth of government paid health care costs. Individual states in the United States have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. At the federal level, the Trump Administration’s budget proposal for fiscal year 2020 contains further drug price control measures that could be enacted during the 2020 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Additionally, the Trump Administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers. HHS has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority. Additionally, in December 2019, the FDA issued a draft guidance document outlining a potential pathway for manufacturers to obtain an additional National Drug Code, or NDC, for an FDA-approved drug that was originally intended to be marketed in a foreign country and that was authorized for sale in that foreign country. The regulatory and market implications of the draft guidance, if finalized, is unknown at this time. Proponents of drug reimportation may attempt to pass legislation that would directly allow reimportation under certain circumstances. Legislation or regulations allowing the reimportation of drugs, if enacted, could decrease the price we receive for any products that we may develop and adversely affect our future revenues and prospects for profitability. Further, Congress and the Trump Administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on September 25, 2019, the Senate Finance Committee introduced the Prescription Drug Pricing Reduction Act of 2019, a bill intended to reduce Medicare and Medicaid prescription drug prices. The proposed legislation would restructure the Part D benefit, modify payment methodologies for certain drugs, and impose an inflation cap on drug price increases. An even more restrictive bill, the Lower Drug Costs Now Act of 2019, was introduced in the House of Representatives on September 19, 2019, and would require the Department of Health and Human Services (HHS) to directly negotiate drug prices with manufacturers. The Lower Drugs Costs Now Act of 2019 has passed out of the House and was delivered to the Senate on December 16, 2019. However, it is unclear whether either of these bills will make it through both chambers and be signed into law, and if either is enacted, what effect it would have on our business. At the state level, legislatures have become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, have been designed to encourage importation from other countries and bulk purchasing. We anticipate pricing scrutiny will continue and escalate, including on a global basis. As a result, our business and reputation may be harmed, our stock price may be adversely impacted and experience periods of volatility, and our results of operations may be adversely impacted. CMS may also develop new payment and delivery models, such as bundled payment models. CMS finalized regulations that give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Additionally, CMS finalized a rule that amends the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. In May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. CMS is still considering proposed changes to the definition of “negotiated prices” in the regulations. It is unclear what effect such changes will have on our business and ability to receive adequate reimbursement for our products. In addition, in September 2007, the Food and Drug Administration Amendments Act of 2007 was enacted giving the FDA enhanced post-marketing authority including the authority to require post-marketing studies and clinical trials, labeling changes based on new safety information and compliance with REMS approved by the FDA. The FDA’s exercise of this authority could result in delays or increased costs during product development, clinical trials and regulatory review, increased costs to ensure compliance with post-approval regulatory requirements and potential restrictions on the sale and/or distribution of approved products. Moreover, we cannot predict what healthcare reform initiatives may be adopted in the future. Further federal and state legislative and regulatory developments are likely, and we expect ongoing initiatives in the United States to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated revenues from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop product candidates. Inadequate funding for the FDA, and other government agencies could prevent our new products, services and product candidates from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business. The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. 46 Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which could adversely affect our business. Any government shutdown or other disruption of normal activities at these regulatory agencies, such as the FDA, could lead to a delay or stop in critical activities. If a prolonged government shutdown were to occur, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Our Enzastaurinproductcandidate is being developed for other indications by other sponsors.Any undesirableadverseevents that occur in relation to the activities by other sponsors could delay or prevent our regulatory approval, limit the commercial profile of Enzastaurin, or result in significant negative consequences following any regulatory approval. Undesirable adverse events that occur in relation to the activities by other sponsors related to our Enzastaurin product candidate could cause us or regulatory authorities to interrupt, delay or halt development or could result in the delay or denial of regulatory approval by the FDA or other comparable regulatory authorities.  Drug-related adverse events involving Enzastaurin by other sponsors could also harm our reputation, business, financial condition and business prospects. Additionally, if Enzastaurin receives regulatory approval, and we or others later identify undesirable side effects caused by such drugs, a number of potentially significant negative consequences could result, including but not limited to: ● suspending the marketing of the drug; ● having regulatory authorities withdraw approvals of the drug; ● adding warnings on the label; ● conducting post-market studies; ● being sued and held liable for harm caused to subjects or patients; and ● damage to our reputation. Any of these events could prevent us from achieving or maintaining market acceptance of Enzastaurin, if approved, and could significantly harm our business, results of operations and prospects. We may seek Orphan Drug Designation or other designations for our product candidates, but even if designated we may not ultimately realize the potential benefits of such designations. We may seek Orphan Drug Designation or other designations for our product candidates from the FDA. Under the Orphan Drug Act, the FDA may designate a drug product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States but where there is no reasonable expectation to recover the costs of developing and marketing a treatment drug in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and application fee waivers. After the FDA grants Orphan Drug Designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. However, Orphan Drug Designation nor any other designation shortens the development time nor regulatory review time of a product candidate nor gives the candidate any advantage in the regulatory review or approval process. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a demonstration of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity for the orphan patient population. Exclusive marketing rights in the United States may also be unavailable if we or our collaborators seek approval for an indication broader than the orphan designated indication and may be lost if the FDA later determines that the request for designation was materially defective. Even if we obtain Orphan Drug Designation, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. Further, even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is safer, more effective, or makes a major contribution to patient care. 47 We may never realize the expected benefits from the divestiture of Natesto. The divestiture of Natesto is part of a strategy to transform ourselves into a high growth, specialty pharmaceutical company. If we are unable to achieve our growth and profitability objectives due to competition, lack of acceptance of our products, failure to generate favorable clinical data or gain regulatory approvals, or other risks as described in this section, or due to other events, we will not be successful in transforming our business and may not see the appropriate market valuation. Moreover, Natesto generated substantial revenue historically which we may not be able to replace. While over time we expect to replace this revenue by investing in, acquiring and accelerating other revenue streams, there is a risk we will be unable to replace the revenue that Natesto generated, or that the cost of such will be higher than expected. In addition, we may not ultimately receive the full benefits from the divestiture over the term as expected. If we are unable to achieve our growth objectives, such failure will be exacerbated by the loss of revenue generated by Natesto, and could materially impact our financial position and results of operations, resulting in a decline in our stock price. Clinical drug development is a lengthy and expensive process with uncertain timelines and uncertain outcomes. If clinical trials of any future therapeutic candidates are prolonged or delayed, we or our current or future collaborators may be unable to obtain required regulatory approvals, and therefore we will be unable to commercialize our future therapeutic candidates on a timely basis or at all, which will adversely affect our business. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process and our future clinical trial results may not be successful. We may experience delays in initiating or completing our clinical trials. We may also experience numerous unforeseen events during our clinical trials that could delay or prevent our ability to receive marketing approval or commercialize any future therapeutic candidates. Our clinical trials may fail to demonstrate substantial evidence of the safety and effectiveness of future product candidates that we may identify and pursue, which would prevent, delay or limit the scope of regulatory approval and commercialization. Before obtaining regulatory approvals for the commercial sale of future therapeutic candidates, we must demonstrate through lengthy, complex and expensive nonclinical studies, preclinical studies and clinical trials that the applicable therapeutic candidate is both safe and effective for use in each target indication. A therapeutic candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Most product candidates that begin clinical trials are never approved by regulatory authorities for commercialization. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. We cannot be certain that any clinical trials will be successful. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same therapeutic candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the clinical trial protocols and the rate of dropout among clinical trial participants. Even if any of our future therapeutic candidates obtain regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, any such therapeutic candidates, if approved, could be subject to labeling and other restrictions and market withdrawal, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with any of our future therapeutic candidates. If the FDA or a comparable foreign regulatory authority approves any of our future therapeutic candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the therapy and underlying therapeutic substance will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practice (“cGMP”) and with good clinical practice (“GCP”) for any clinical trials that we conduct post-approval, all of which may result in significant expense and limit our ability to commercialize such therapies. Later discovery of previously unknown problems with any approved therapeutic candidate, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: ● restrictions on the labeling, distribution, marketing or manufacturing of our future therapeutic candidates, withdrawal of the product from the market, or product recalls; ● untitled and warning letters, or holds on clinical trials; ● refusal by the FDA or other foreign regulatory body to approve pending applications or supplements to approved applications we filed or suspension or revocation of license approvals; ● requirements to conduct post-marketing studies or clinical trials; 48 ● restrictions on coverage by third-party payors; ● fines, restitution or disgorgement of profits or revenue; ● suspension or withdrawal of marketing approvals: ● product seizure or detention, or refusal to permit the import or export of the product; and ● injunctions or the imposition of civil or criminal penalties. In addition, any regulatory approvals that we receive for our future therapeutic candidates may also be subject to limitations on the approved indicated uses for which the therapy may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to monitor the safety and efficacy of such therapeutic candidates. If there are changes in the application of legislation, regulations or regulatory policies or if we or one of our distributors, licensees or co-marketers fails to comply with regulatory requirements, the regulators could take various actions. These include imposing fines on us, imposing restrictions on the therapeutic or its manufacture and requiring us to recall or remove the therapeutic from the market. The regulators could also suspend or withdraw our marketing authorizations, requiring us to conduct additional clinical trials, change our therapeutic labeling or submit additional applications for marketing authorization. If any of these events occurs, our ability to sell such therapy may be impaired, and we may incur substantial additional expense to comply with regulatory requirements, which could materially adversely affect our business, financial condition and results of operations. The results of preclinical studies and early-stage clinical trials of our future therapeutic candidates may not be predictive of the results of later stage clinical trials. Initial success in our ongoing clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials. Therapeutic candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Furthermore, there can be no assurance that any of our clinical trials will ultimately be successful or support further clinical development of any of our future therapeutic candidates. There is a high failure rate for drugs proceeding through clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in clinical development even after achieving promising results in earlier studies. We will depend on enrollment of patients in our clinical trials for our future therapeutic candidates. If we are unable to enroll patients in our clinical trials, our research and development efforts and business, financial condition and results of operations could be materially adversely affected. Identifying and qualifying patients to participate in our clinical trials will be critical to our success. Patient enrollment depends on many factors, including: ● the size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying patients; ● identifying and enrolling eligible patients, including those willing to discontinue use of their existing medications; ● the design of the clinical protocol and the patient eligibility and exclusion criteria for the trial; ● safety profile, to date, of the therapeutic candidate under study; ● the willingness or availability of patients to participate in our trials, including due to the perceived risks and benefits, stigma or other side effects of use of a controlled substance; ● perceived risks and benefits of our approach to treatment of indication; ● the proximity of patients to clinical sites: ● our ability to recruit clinical trial investigators with the appropriate competencies and experience; ● the availability of competing clinical trials; 49 ● the availability of new drugs approved for the indication the clinical trial is investigating; ● clinicians’ and patients’ perceptions of the potential advantages of the drug being studied in relation to other available therapies, including any new therapies that may be approved for the indications we are investigating; and ● our ability to obtain and maintain patient informed consents. Even once enrolled, we may be unable to retain a sufficient number of patients to complete any of our trials. In addition, any negative results we may report in clinical trials may make it difficult or impossible to recruit and retain patients in other clinical trials of that same therapeutic candidate. Delays in the enrollment for any clinical trial will likely increase our costs, slow down the approval process and delay or potentially jeopardize our ability to commence sales of our future therapeutic candidates and generate revenue. In addition, some of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of any future therapeutic candidates. The future commercial success of our future therapeutic candidates will depend on the degree of market access and acceptance of our potential therapies among healthcare professionals, patients, healthcare payors, health technology assessment bodies and the medical community at large. We may never have a therapy that is commercially successful. To date, we have no therapy authorized for marketing. Furthermore, if approved, our future therapies may not achieve an adequate level of acceptance by payors, health technology assessment bodies, healthcare professionals, patients and the medical community at large, and we may not become profitable. The level of acceptance we ultimately achieve may be affected by negative public perceptions and historic media coverage of psychedelic substances, including psilocybin. Because of this history, efforts to educate the medical community and third-party payors and health technologies assessment bodies on the benefits of our future therapies may require significant resources and may never be successful, which would prevent us from generating significant revenue or becoming profitable. Market acceptance of our future therapies by healthcare professionals, patients, healthcare payors and health technology assessment bodies will depend on a number of factors, many of which are beyond our control, including, but not limited to, the following: �� ● acceptance by healthcare professionals, patients and healthcare payors of each therapy as safe, effective and cost-effective; ● changes in the standard of care for the targeted indications for any therapeutic candidate; ● the strength of sales, marketing and distribution support; ● potential product liability claims; ● the therapeutic candidate’s relative convenience, ease of use, ease of administration and other perceived advantages over alternative therapies; ● the prevalence and severity of adverse events or publicity; ● limitations, precautions or warnings listed in the summary of therapeutic characteristics, patient information leaflet, package labeling or instructions for use: ● the cost of treatment with our therapy in relation to alternative treatments; ● the ability to manufacture our product in sufficient quantities and yields; ● the availability and amount of coverage and reimbursement from healthcare payors, and the willingness of patients to pay out of pocket in the absence of healthcare payor coverage or adequate reimbursement; ● the willingness of the target patient population to try, and of healthcare professionals to prescribe, the therapy; ● any potential unfavorable publicity, including negative publicity associated with recreational use or abuse of psilocybin; ● the extent to which therapies are approved for inclusion and reimbursed on formularies of hospitals and managed care organizations; and ● whether our therapies are designated under physician treatment guidelines or under reimbursement guidelines as a first-line, second-line, third-line or last-line therapy. If our future therapeutic candidates fail to gain market access and acceptance, this will have a material adverse impact on our ability to generate revenue to provide a satisfactory, or any, return on our investments. Even if some therapies achieve market access and acceptance, the market may prove not to be large enough to allow us to generate significant revenue. 50 Changes in methods of therapeutic candidate or commercial product manufacturing or formulation may result in additional costs or delay. As therapeutic candidates are developed through preclinical studies to late-stage clinical trials towards potential approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, may be altered along the way in an effort to optimize processes and results. Any of these changes could cause any of our current products or future therapeutic candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the materials manufactured using altered processes. Such changes may also require additional testing, FDA notification or FDA approval. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of any of our future therapeutic candidates and jeopardize our ability to commence product sales and generate revenue. We may become exposed to costly and damaging liability claims, either when testing our future therapeutic candidates in the clinic or at the commercial stage, and our product liability insurance may not cover all damages from such claims. We will be exposed to potential product liability and professional indemnity risks that are inherent in the research, development, manufacturing, marketing and use of therapeutic candidates. Any failure of future therapeutic candidates by us and our corporate collaborators in clinical trials may expose us to liability claims as may the potential sale of any therapies approved in the future. These claims might be made by patients who use our therapies, healthcare providers, pharmaceutical companies, our corporate collaborators or other third parties that research or sell our therapies. Any claims against us, regardless of their merit, could be difficult and costly to defend and could materially adversely affect the market for our future therapeutic candidates or any prospects for commercialization of our future therapeutic candidates. Although the clinical trial process is designed to identify and assess potential side effects, it is always possible that a drug, even after regulatory approval, may exhibit unforeseen side effects. If any of our future therapeutic candidates causes adverse side effects during clinical trials or after regulatory approval, we may be exposed to substantial liabilities. Physicians and patients may not comply with warnings that identify known potential adverse effects and describe which patients should not use any of our future therapeutic candidates. Regardless of the merits or eventual outcome, liability claims may cause, among other things, the following; ● decreased demand for our therapies due to negative public perception; ● injury to our reputation; ● withdrawal of clinical trial participants or difficulties in recruiting new trial participants; ● initiation of investigations by regulators; ● costs to defend or settle the related litigation; ● a diversion of management’s time and our resources; ● substantial monetary awards to trial participants or patients: ● recalls, withdrawals or labeling, marketing or promotional restrictions; ● loss of revenue from therapeutic sales; and ● our inability to commercialize any of our future therapeutic candidates, if approved. 51 In addition we may not be able to obtain or maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy all liabilities that may arise. If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business, financial condition and results of operations could be materially adversely affected. Liability claims resulting from any of the events described above could have a material adverse effect on our business prospects, financial condition, and results of operations. Failure operations, and you should carefully consider them. There have not been any material changes to comply with health and data protection laws and regulations could lead to U.S. federal and state government enforcement actions, including civil or criminal penalties, private litigation, and adverse publicity and could negatively affect our operating results and business. We and any potential collaborators may be subject to U.S. federal and state data protection laws and regulations, such as laws and regulations that address privacy and data security. In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, we may obtain health informationrisk factors from third parties, including research institutions from which we obtain clinical trial data, which are subject to privacy and security requirements under HIPAA, as amended by HITECH. To the extent that we act as a business associate to a healthcare provider engaging in electronic transactions, we may also be subject to the privacy and security provisions of HIPAA, as amended by HITECH, which restricts the use and disclosure of patient-identifiable health information, mandates the adoption of standards relating to the privacy and security of patient-identifiable health information, and requires the reporting of certain security breaches to healthcare provider customers with respect to such information. Additionally, many states have enacted similar laws that may impose more stringent requirements on entities like ours. Depending on the facts and circumstances, we could be subject to significant civil, criminal, and administrative penalties if we obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Compliance with U.S. and foreign privacy and data protection laws and regulations could require us to take on more onerous obligationsthose reported in our contracts, restrict our ability to collect, usefiscal year 2021 Annual Report on Form 10-K and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to complyQuarterly Report on Form 10-Q filed with these lawsthe SEC on September 28, 2021 and regulations could result in government enforcement actions (which could include civil, criminal and administrative penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, clinical trial subjects, employees and other individuals about whom we or our potential collaborators obtain personal information, as well as the providers who share this information with us, may limit our ability to collect, use and disclose the information. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.November 15, 2021 respectively. ​ 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 52 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                             2.4   Asset Purchase Agreement, dated April 12, 2021                 X                         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                             3.13   Certificate of Amendment of Certificate of Incorporation of Aytu Bioscience, Inc., effective March 19, 2021.   8-K   3/22/2021     3.1     53 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     \ 10.3   License Agreement with Avrio Genetics, LLC, dated January 20, 2020*   10-Q   2/11/2021     10.1                             10.4   Consent, Waiver and Sixth Amendment to Facility Agreement, by and among Aytu BioScience, Inc., Neos Therapeutics, Inc., Neos Therapeutics Brands, LLC, Neos Therapeutics, LP, Neos Therapeutics Commercial, LLC, PharmaFab Texas, LLC, Deerfield Private Design Fund III L.P., Deerfield Partners, L.P. and Deerfield Mgmt, L.P., dated March 19, 2021.   8-K   3/22/2021     10.1     54 10.5   Consent, Waiver and Amendment No. 1 to Loan and Security Agreement, by and among Aytu BioScience, Inc., Neos Therapeutics, Inc., Neos Therapeutics Brands, LLC, Neos Therapeutics, LP, Neos Therapeutics Commercial, LLC, PharmaFab Texas, and Encina Business Credit, LLC, dated March 19, 2021.   8-K   3/22/2021     10.2                             10.6   Employment Agreement between Aytu BioPharma, Inc. and Richard Eisenstadt, dated March 31, 2021.   8-K   4/5/2021     10.1                             10.7   Indemnification Agreement between Aytu BioPharma, Inc. and Gerald McLaughlin, dated March 19, 2021.                 X                         10.8   Indemnification Agreement between Aytu BioPharma, Inc. and Beth P. Hecht, dated March 19, 2021.                 X                         10.9   Termination and Transition Agreement between Aytu BioPharma, Inc. and Acerus Pharmaceuticals Corporation, dated March 31, 2021.                 X                         10.10   Separation Agreement between Aytu BioPharma, Inc. and David A. Green, dated March 31, 2021.                 X                         10.11   Second Amendment to Employment Agreement with Joshua R. Disbrow dated April 7, 2021.                 X                         10.12   Employment Agreement between Aytu BioPharma, Inc. and Nathaniel Massari, dated April 12, 2021.                 X                         10.13   Employment Agreement between Aytu BioPharma, Inc. and Christopher Brooke, dated April 12, 2021.                 X                         10.14   Option and Exclusive License Agreement between Rumpus VEDS, LLC and Denovo Biopharma LLC, dated December 21, 2019                 X                         10.15   Exclusive License Agreement between Rumpus VEDS, LLC and Johns Hopkins University, dated December 20, 2019.                 X                         31.1   Certificate of the Chief Executive Officer of Aytu BioPharma, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                 X                         31.2   Certificate of the Chief Executive Officer and the Chief Financial Officer of Aytu BioPharma, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                 X                         32.1   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, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in 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 †Exhibit No. Description Registrant’s Form Date Filed Exhibit Number Filed Herewith ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.1† ​ Employment Agreement 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 26, 2022 between the registrant and the Avenue Capital Lenders and Avenue Capital Agent. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 BioPharma, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 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 BioPharma, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ​ ​ ​ ​ ​ ​ ​ X ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101 ​ XBRL (extensible Business Reporting Language). The following materials from Aytu BioPharma, Inc.’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 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 55 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 May 17, 2021 By: /s/ Joshua R. Disbrow Joshua R. Disbrow Chief Executive Officer ​ ​ ​ 56 50