☒
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
Delaware
|
|
47-0883144
|
(State
or other jurisdiction of incorporation or
organization)
|
|
(I.R.S.
Employer Identification Number)
|
373
Inverness Parkway
Suite
206
Englewood,
Colorado
|
|
80112
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated
filer
|
☒
|
Smaller reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
Title of Each Class
|
Trading Symbol
|
Name of Each Exchange on Which Registered
|
Common
Stock, par value $0.0001 per share
|
AYTU
|
Nasdaq
Capital Market
|
|
|
|
PAGE
|
PART I
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Item 1
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4
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Item 1A
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18
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Item 1B
|
56
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Item
2
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56
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Item
3
|
56
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Item
4
|
56
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PART II
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||
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Item
5
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56
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Item
6
|
57
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Item
7
|
57
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Item 7A
|
62
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Item
8
|
62
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Item
9
|
62
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Item 9A
|
63
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Item 9B
|
63
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PART III
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||
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Item
10
|
64
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Item
11
|
68
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Item
12
|
72
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Item
13
|
73
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Item
14
|
74
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PART IV
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||
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Item 15
|
75
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|
79
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Exhibit
10.62
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|
||
Exhibit
10.63
|
|
||
Exhibit
21.1
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|
||
Exhibit 23.1
|
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||
Exhibit 31.1
|
|
||
Exhibit
31.2
|
|
||
Exhibit
32.1
|
|
Fiscal Year
ended June 30, 2019
|
High
|
Low
|
First Quarter
(ended September 30, 2018)
|
$7.80
|
$2.40
|
Second Quarter
(ended December 31, 2018)
|
$3.23
|
$0.68
|
Third Quarter
(ended March 31, 2019)
|
$2.53
|
$0.78
|
Fourth Quarter
(ended June 30, 2019)
|
$2.61
|
$1.50
|
Fiscal Year ended June 30, 2020
|
High
|
Low
|
First
Quarter (ended September 30, 2019)
|
$1.95
|
$1.21
|
Second
Quarter (ended December 31, 2019)
|
$1.35
|
$0.67
|
Third
Quarter (ended March 31, 2020)
|
$2.05
|
$0.35
|
Fourth
Quarter (ended June 30, 2020)
|
$2.02
|
$1.19
|
Plan Category
|
Number of Securities to be Issued upon Exercise of
Outstanding Options, Warrants and Rights (Column A)
|
Weighted-Average Exercise Price of Outstanding Options, Warrants
and Rights (Column B)
|
Number of Securities Remaining Available for
Issuance under Equity Compensation Plans (Column C - Excluding
Securities Reflected in Column (A))
|
Equity
compensation plans approved by security holders
|
765,937
|
$1.85
|
4,837
|
Equity
compensation plans not approved by security holders
|
1,624
|
$594.63
|
-
|
Total
|
767,561
|
$3.10
|
4,837
|
|
Year Ended June 30,
|
|
|
|
|
|
|
$
Change
|
%
Change
|
Revenues
|
|
|
|
|
Product revenue,
net
|
$27,632,080
|
$7,314,581
|
$20,317,499
|
278%
|
License revenue,
net
|
-
|
5,776
|
(5,776)
|
-100%
|
Total product
revenue
|
27,632,080
|
7,320,357
|
20,311,723
|
277%
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
Cost of
sales
|
7,553,031
|
2,202,041
|
5,350,990
|
243%
|
Research and
development
|
1,721,419
|
589,072
|
1,132,347
|
192%
|
Selling, general
and administrative
|
34,802,432
|
18,887,783
|
15,914,649
|
84%
|
Selling, general
and administrative - related party
|
-
|
351,843
|
(351,843)
|
-100%
|
Impairment of
intangible assets
|
195,278
|
-
|
195,278
|
−
|
Amortization of
intangible assets
|
4,490,466
|
2,136,255
|
2,354,211
|
110%
|
Total operating
expenses
|
48,762,626
|
24,166,994
|
24,545,632
|
102%
|
|
|
|
|
|
Loss from
operations
|
(21,130,546)
|
(16,846,637)
|
(4,283,909)
|
25%
|
|
|
|
|
|
Other
(expense) income
|
|
|
|
|
Other (expense),
net
|
(2,606,487)
|
(535,500)
|
(2,070,719)
|
387%
|
(Loss) / gain from
contingent consideration
|
10,430,252
|
(9,830,550)
|
20,260,802
|
-206%
|
Gain (Loss) on
extinguishment of debt
|
(315,728)
|
-
|
(315,728)
|
−
|
Gain from warrant
derivative liability
|
1,830
|
80,779
|
(78,949)
|
-98%
|
Total other
(expense) income
|
7,509,867
|
(10,285,271)
|
17,795,138
|
-173%
|
|
|
|
|
|
Net
loss
|
$(13,620,679)
|
$(27,131,908)
|
$13,511,229
|
-50%
|
|
Year ended June
30,
|
|
|
2020
|
2019
|
Net cash used
in operating activities
|
$(28,373,887)
|
$(13,831,377)
|
Net cash used
in investing activities
|
$(5,655,772)
|
$(1,061,985)
|
Net cash
provided by financing activities
|
$71,068,739
|
$19,075,062
|
Item 8.
|
Financial Statements and Supplementary
Data
|
Item 9.
|
Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors and Executive Officers, and
Corporate Governance
|
Name
|
|
Age
|
|
Position
|
Joshua
R. Disbrow
|
|
45
|
|
Chairman
and Chief Executive Officer
|
David
A. Green
|
|
57
|
|
Chief
Financial Officer, Secretary, and Treasurer
|
Steven
J. Boyd
|
|
39
|
|
Director
|
Gary V.
Cantrell
|
|
65
|
|
Director
|
Carl C.
Dockery
|
|
57
|
|
Director
|
John A.
Donofrio, Jr.
|
|
52
|
|
Director
|
Michael
E. Macaluso
|
|
68
|
|
Director
|
Ketan
Mehta
|
|
59
|
|
Director
|
Item 11.
|
Executive Compensation
|
Name
|
Fees Earned or
Paid in Cash
|
All Other
Compensation (1)
|
|
Carl C. Dockery
(2)(3)
|
$74,400
|
$56,130
|
$130,530
|
John A. Donofrio
Jr. (2)(3)
|
$74,400
|
$56,130
|
$130,530
|
Michael E. Macaluso
(2)(3)
|
$69,400
|
$56,130
|
$125,530
|
Gary V. Cantrell
(2)(3)
|
$64,400
|
$42,564
|
$106,964
|
Ketan Mehta
(2)(3)
|
$44,600
|
$61,800
|
$106,400
|
Steven J. Boyd
(2)(3)
|
$–
|
$–
|
$–
|
Name and Principal Position
|
Year
|
Salary ($)
|
Bonus ($)
|
Stock Award ($)
|
Option Award ($)(1)
|
Non-Equity Incentive Plan Compensation ($)
|
Change in Pension Value and Nonqualified Deferred Compensation
Earnings ($)
|
All Other Compensation ($)
|
Total ($)
|
(a)
|
(b)
|
(c)(3)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua R.
Disbrow
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
2020
|
$607,620
|
$185,000
|
$652,500
|
$140,330
|
|
|
|
$1,585,450
|
since December 2012
|
2019
|
$330,000
|
$135,000
|
$578,705
|
$–
|
$–
|
$–
|
$–
|
$1,043,705
|
|
|
|
|
|
|
|
|
|
|
David A. Green
(2)
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer, Secretary
|
2020
|
$400,046
|
$150,000
|
$362,500
|
$140,330
|
$
|
$
|
$
|
$1,052,876
|
and Treasurer, since December 2017
|
2019
|
$250,000
|
$95,000
|
$340,988
|
$–
|
$–
|
$–
|
$–
|
$685,988
|
|
Option Awards
|
Stock Awards
|
|||||||
Name
|
Number of Securities Underlying Unexercised Options Exercisable
(#)
|
Number of Securities Underlying Unexercised Options Unexercisable
(#)
|
Equity Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option Exercise Price ($)
|
Option Expiration Date
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
Market Value of Shares or Units of Stock That Have Not Vested ($)
(1)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested (#)
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested ($)
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joshua
R. Disbrow
|
125
|
–
|
–
|
$328.00
|
11/11/2025
|
-
|
$-
|
–
|
$-
|
Chief Executive Officer
|
150
|
–
|
–
|
$328.00
|
7/7/2026
|
-
|
$-
|
–
|
$-
|
|
–
|
100,000
|
|
$1.45
|
6/8/2030
|
-
|
$-
|
|
|
|
–
|
–
|
–
|
–
|
–
|
903,475
|
$1,282,935
|
–
|
$-
|
David
A. Green
|
–
|
100,000
|
–
|
$1.45
|
6/8/2030
|
-
|
$-
|
|
|
Chief Financial Officer
|
–
|
–
|
–
|
–
|
–
|
516,250
|
$733,075
|
–
|
$-
|
Item 12.
|
Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
|
|
|
Number of Shares Beneficially Owned
|
Percentage of Shares Beneficially Owned
|
5% Stockholders
|
|
|
|
None
|
|
-
|
0.00%
|
|
|
|
|
Directors and Named Officers
|
|
|
|
Disbrow,
Joshua
|
(1)
|
997,830
|
*
|
Green,
David
|
(2)
|
524,580
|
*
|
Macaluso,
Michael
|
(3)
|
202,843
|
*
|
Cantrell,
Gary
|
(4)
|
162,878
|
*
|
Dockery,
Carl
|
(5)
|
154,795
|
*
|
Donofrio,
John
|
(6)
|
152,701
|
*
|
Ketan
Mehta
|
(7)
|
75,000
|
*
|
All
directors and executive officers as a group (either
persons)
|
|
2,522,883
|
2.00%
|
Item 13.
|
Certain Relationships, Related
Transactions, and Director Independence
|
|
Year Ended June
30,
|
|
|
2020
|
2019
|
Audit
fees
|
$226,000
|
$154,000
|
Audit related fees
(1)
|
67,512
|
55,000
|
Tax fees
(2)
|
—
|
—
|
Total
fees
|
$293,512
|
$209,000
|
Item 15.
|
Exhibits and Consolidated Financial
Statement Schedules
|
(a)(1)
|
Financial Statements
|
(a)(2)
|
Financial Statement Schedules
|
(a)(3)
|
Exhibits
|
Exhibit No.
|
|
Description
|
|
Registrant’s Form
|
|
Date Filed
|
|
Exhibit Number
|
|
Filed Herewith
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
|
8-K
|
|
9/18/19
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
2.2
|
|
|
8-K
|
|
10/15/19
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
8-K
|
|
6/09/15
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
3.2
|
|
|
8-K
|
|
6/02/16
|
|
3.1
|
|
|
|
|
|
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|
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|
|
|
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|
|
3.3
|
|
|
8-K
|
|
7/01/16
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
3.4
|
|
|
8-K
|
|
8/16/17
|
|
3.1
|
|
|
|
|
|
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|
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|
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|
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|
|
3.5
|
|
|
8-K
|
|
8/29/17
|
|
3.1
|
|
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|
|
|
|
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|
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|
3.6
|
|
|
S-1/A
|
|
2/27/18
|
|
3.6
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
3.7
|
|
|
8-K
|
|
8/10/18
|
|
3.1
|
|
|
|
|
|
|
|
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|
|
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3.8
|
|
|
8-K
|
|
6/09/15
|
|
3.2
|
|
|
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|
3.9
|
|
|
10-Q
|
|
2/7/19
|
|
10.4
|
|
|
|
|
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|
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|
|
|
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3.10
|
|
|
8-K
|
|
10/15/19
|
|
3.1
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
3.11
|
|
|
8-K
|
|
11/4/19
|
|
3.1
|
|
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|
|
|
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|
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|
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4.1
|
|
|
8-K
|
|
7/24/15
|
|
4.2
|
|
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|
4.2
|
|
|
8-K
|
|
5/6/16
|
|
4.1
|
|
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|
|
|
|
|
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|
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|
|
4.3
|
|
|
S-1
|
|
9/21/16
|
|
4.5
|
|
|
|
|
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|
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|
|
4.4
|
|
|
8-K
|
|
11/2/16
|
|
4.1
|
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4.5
|
|
|
8-K
|
|
3/1/17
|
|
4.1
|
|
|
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|
|
|
|
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|
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|
4.6
|
|
|
8-K
|
|
3/1/17
|
|
4.2
|
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4.7
|
|
|
8-K
|
|
8/16/17
|
|
4.1
|
|
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|
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|
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|
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4.8
|
|
|
S-1
|
|
2/27/18
|
|
4.8
|
|
|
|
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|
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|
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|
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4.9
|
|
|
8-K
|
|
3/13/20
|
|
4.1
|
|
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4.10
|
|
|
8-K
|
|
3/13/20
|
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4.2
|
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4.11
|
|
|
8-K
|
|
3/13/20
|
|
4.1
|
|
|
|
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|
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4.12
|
|
|
8-K
|
|
3/13/20
|
|
4.2
|
|
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|
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|
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4.13
|
|
|
8-K
|
|
3/20/20
|
|
4.1
|
|
|
|
|
|
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|
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|
|
|
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|
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4.14
|
|
|
8-K
|
|
3/20/20
|
|
4.2
|
|
|
|
|
|
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|
|
|
|
|
|
|
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4.15
|
|
|
8-K
|
|
7/2/20
|
|
4.1
|
|
|
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|
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|
|
|
|
|
|
10.2#
|
|
|
8-K/A
|
|
6/08/15
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3#
|
|
|
8-K/A
|
|
6/08/15
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5#
|
|
|
8-K/A
|
|
6/08/15
|
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.6#
|
|
|
8-K/A
|
|
6/08/15
|
|
10.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7#
|
|
|
8-K/A
|
|
6/08/15
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.8#
|
|
|
8-K
|
|
5/27/15
|
|
10.14
|
|
|
Exhibit No.
|
|
Description
|
|
Registrant’s
Form
|
|
Date
Filed
|
|
Exhibit
Number
|
|
Filed
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
|
8-K
|
|
4/22/15
|
|
10.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
|
8-K
|
|
4/22/15
|
|
10.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
|
8-K
|
|
5/27/15
|
|
10.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.13
|
|
|
8-K
|
|
7/24/15
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.14
|
|
|
8-K
|
|
10/07/15
|
|
10.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15
|
|
|
8-K
|
|
10/13/15
|
|
10.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16
|
|
|
8-K
|
|
1/20/16
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17
|
|
|
8-K
|
|
4/25/16
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18
|
|
|
8-K
|
|
4/25/16
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.19
|
|
|
8-K
|
|
7/28/16
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.20
|
|
|
8-K
|
|
7/28/16
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21†
|
|
|
8-K
|
|
4/18/17
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.22†
|
|
|
8-K
|
|
4/18/17
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.23
|
|
|
10-Q
|
|
5/11/17
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.24#
|
|
|
10-K
|
|
8/31/2017
|
|
10.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.25†
|
|
|
8-K
|
|
7/27/17
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.26
|
|
|
8-K
|
|
8/16/17
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.27
|
|
|
8-K
|
|
8/16/17
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.28†
|
|
|
8-K
|
|
12/19/2017
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.29
|
|
|
8-K
|
|
3/28/18
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.30
|
|
|
10-K
|
|
09/06/18
|
|
10.31
|
|
|
Exhibit No.
|
|
|
Registrant’s Form
|
|
Date Filed
|
|
Exhibit Number
|
|
Filed
Herewith
|
|
10.31
|
|
|
8-K
|
|
11/29/18
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.32
|
|
|
10-Q
|
|
2/7/19
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.33
|
|
|
10-Q
|
|
2/7/19
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.34
|
|
|
10-Q
|
|
2/7/19
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.35
|
|
|
10-Q
|
|
2/7/19
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.36
|
|
|
8-K
|
|
4/26/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.37
|
|
|
8-K
|
|
5/2/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.38
|
|
|
10-Q
|
|
5/14/19
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.39†
|
|
|
10-Q
|
|
5/14/19
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.40†
|
|
|
10-Q
|
|
5/14/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.41†
|
|
|
8-K
|
|
8/2/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.42
|
|
|
8-K
|
|
9/18/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.43
|
|
|
8-K
|
|
10/15/19
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.44
|
|
|
8-K
|
|
10/15/19
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.45
|
|
|
8-K
|
|
10/15/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.46
|
|
|
8-K
|
|
11/4/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.47
|
|
|
8-K
|
|
11/4/19
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.48
|
|
|
8-K
|
|
11/4/19
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.49
|
|
|
8-K
|
|
11/4/19
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.50
|
|
|
8-K
|
|
11/4/19
|
|
10.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.51
|
|
|
8-K
|
|
11/4/19
|
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.52
|
|
|
8-K/A
|
|
11/4/19
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.53
|
|
|
8-K/A
|
|
11/7/19
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.54
|
|
|
8-K
|
|
12/2/19
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.57
|
|
|
8-K
|
|
3/13/20
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.58
|
|
|
8-K
|
|
3/13/20
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.59
|
|
|
8-K
|
|
3/20/20
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.60
|
|
|
8-K
|
|
6/1/20
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.61
|
|
|
8-K
|
|
7/2/20
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.62†
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
10.63†
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
21.1
|
|
List of
Subsidiaries
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
Consent
of Plante & Moran PLLC Independent Registered Public Accounting
Firm
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certificate of the
Chief Executive Officer of Aytu BioScience, 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
BioScience, Inc.
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 Annual Report on Form 10-K for
the year ended June 30, 2020 formatted in XBRL: (i) the Balance
Sheets, (ii) the Statements of Operations, (iii) the Statements of
Stockholders’ Equity (Deficit), (iv) the Statements of Cash
Flows, and (v) the Notes to the
Financial
Statements.
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
AYTU BIOSCIENCE, INC.
|
|
|
|
|
Date:
October 6, 2020
|
|
By:
|
/s/
Joshua R. Disbrow
|
|
|
|
Joshua
R. Disbrow
Chairman and Chief Executive Officer
(Principal
Executive Officer)
|
|
|
Signature
|
Title
|
|
|
/s/
Joshua R. Disbrow
|
Chairman and Chief
Executive Officer
(Principal Executive Officer)
|
Joshua
R. Disbrow
|
|
|
|
/s/
David A. Green
|
Chief
Financial Officer
(Principal Financial and Accounting Officer)
|
David
A. Green
|
|
|
|
/s/
Michael Macaluso
|
Director
|
Michael
Macaluso
|
|
|
|
/s/
Carl Dockery
|
Director
|
Carl
Dockery
|
|
|
|
/s/
John Donofrio Jr.
|
Director
|
John
Donofrio Jr.
|
|
|
|
/s/
Gary Cantrell
|
Director
|
Gary
Cantrell
|
|
|
|
/s/
Steven Boyd
|
Director
|
Steven
Boyd
|
|
|
|
/s/
Ketan Mehta
|
Director
|
Ketan
Mehta
|
|
|
|
|
Page
|
F-1
|
|
F-2
|
|
F-4
|
|
F-5
|
|
F-7
|
|
F-9
|
|
June
30,
|
|
|
2020
|
2019
|
|
|
|
Assets
|
||
Current
assets
|
|
|
Cash and cash
equivalents
|
$48,081,715
|
$11,044,227
|
Restricted
cash
|
251,592
|
250,000
|
Accounts
receivable, net
|
5,175,924
|
1,740,787
|
Inventory,
net
|
9,999,441
|
1,440,069
|
Prepaid
expenses and other
|
5,715,089
|
957,781
|
Other current
assets
|
5,742,011
|
-
|
Total current
assets
|
74,965,772
|
15,432,864
|
|
|
|
|
|
|
Fixed assets,
net
|
258,516
|
203,733
|
Right-of-use
asset
|
634,093
|
-
|
Licensed
assets, net
|
16,586,847
|
18,861,983
|
Patents and
tradenames, net
|
11,081,048
|
220,611
|
Product
technology rights, net
|
21,186,666
|
-
|
Deposits
|
32,981
|
2,200
|
Goodwill
|
28,090,407
|
-
|
Total
long-term assets
|
77,870,558
|
19,288,527
|
|
|
|
Total
assets
|
$152,836,330
|
$34,721,391
|
|
June 30,
|
|
|
2020
|
2019
|
Liabilities
|
||
Current
liabilities
|
|
|
Accounts
payable and other
|
$11,824,560
|
$2,133,522
|
Accrued
liabilities
|
7,849,855
|
1,311,488
|
Accrued
compensation
|
3,117,177
|
849,498
|
Debt
|
982,076
|
-
|
Contract
liability
|
339,336
|
-
|
Current lease
liability
|
300,426
|
-
|
Current
portion of fixed payment
arrangements
|
2,340,166
|
-
|
Current portion of CVR
liabilities
|
839,734
|
-
|
Current
portion of contingent
consideration
|
713,251
|
1,078,068
|
Total current
liabilities
|
28,306,581
|
5,372,576
|
|
|
|
Long-term
contingent consideration, net of current
portion
|
12,874,351
|
22,247,796
|
Long-term
lease liability, net of current
portion
|
725,374
|
-
|
Long-term
fixed payment arrangements, net of current
portion
|
11,171,491
|
-
|
Long-term CVR
liabilities, net of current
portion
|
4,731,866
|
-
|
Warrant
derivative liability
|
11,371
|
13,201
|
Total
liabilities
|
57,821,034
|
27,633,573
|
|
|
|
Commitments
and contingencies (Note 17)
|
|
|
|
|
|
Stockholders'
equity
|
|
|
Preferred
Stock, par value $.0001; 50,000,000 shares authorized; shares
issued and outstanding 0 and 3,594,981, respectively as of June 30,
2020 and 2019
|
-
|
359
|
Common Stock,
par value $.0001; 200,000,000 shares authorized; shares issued and
outstanding 125,837,357 and 17,538,071, respectively as of June 30,
2020 and 2019
|
12,584
|
1,754
|
Additional
paid-in capital
|
215,012,891
|
113,475,205
|
Accumulated
deficit
|
(120,010,179)
|
(106,389,500)
|
Total
stockholders' equity
|
95,015,296
|
7,087,818
|
|
|
|
Total liabilities and
stockholders' equity
|
$152,836,330
|
$34,721,391
|
|
Year Ended
June 30,
|
|
|
2020
|
2019
|
|
|
|
Revenues
|
|
|
Product and
service revenue, net
|
$27,632,080
|
$7,314,581
|
License
revenue, net
|
-
|
5,776
|
Total product
revenue
|
27,632,080
|
7,320,357
|
|
|
|
Operating
expenses
|
|
|
Cost
of sales
|
7,553,031
|
2,202,041
|
Research and
development
|
1,721,419
|
589,072
|
Selling,
general and administrative
|
34,802,432
|
18,887,783
|
Selling,
general and administrative - related party
|
-
|
351,843
|
Impairment
of intangible assets
|
195,278
|
-
|
Amortization
of intangible assets
|
4,490,466
|
2,136,255
|
Total
operating expenses
|
48,762,626
|
24,166,994
|
|
|
|
Loss from
operations
|
(21,130,546)
|
(16,846,637)
|
|
|
|
Other
(expense) income
|
|
|
Other
(expense), net
|
(2,606,487)
|
(535,500)
|
(Loss) / gain
from change in fair value of contingent consideration
|
10,430,252
|
(9,830,550)
|
Gain (Loss)
on extinguishment of debt
|
(315,728)
|
-
|
Gain from
warrant derivative liability
|
1,830
|
80,779
|
Total other
(expense) income
|
7,509,867
|
(10,285,271)
|
|
|
|
Net
loss
|
$(13,620,679)
|
$(27,131,908)
|
|
|
|
Weighted
average number of common shares outstanding
|
45,192,010
|
7,794,489
|
|
|
|
Basic and
diluted net loss per common share
|
$(0.30)
|
$(3.48)
|
|
Preferred
Stock
|
Common
Stock
|
Additional
paid-in
|
Accumulated
|
Total
Stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
Deficit
|
Equity
|
BALANCE - June 30,
2018
|
-
|
$-
|
1,794,762
|
$179
|
$92,681,918
|
$(79,257,592)
|
$13,424,505
|
Stock-based
compensation
|
-
|
$-
|
2,681,422
|
$270
|
$11,021,931
|
$-
|
$1,022,201
|
Common stock issued to
employee
|
-
|
-
|
9,000
|
1
|
11,689
|
1
|
11,690
|
Issuance of
preferred, common stock and warrants, net of $1,479,963 in cash
issuance costs
|
8,342,993
|
834
|
1,777,007
|
178
|
11,810,373
|
-
|
11,811,385
|
Warrants
issued in connection with the registered
offering
|
-
|
-
|
-
|
-
|
1,827,628
|
-
|
1,827,628
|
Warrants
issued in connection with the registered offering to the
placement agents, non-cash issuance costs
|
-
|
-
|
-
|
-
|
61,024
|
-
|
61,024
|
Preferred converted into common
stock
|
(7,899,160)
|
(790)
|
7,899,160
|
789
|
1
|
-
|
-
|
Issued preferred
stock
|
400,000
|
40
|
-
|
-
|
519,560
|
-
|
519,600
|
Issuance of preferred, common stock
related to debt conversion
|
2,751,148
|
275
|
3,120,064
|
312
|
4,666,897
|
-
|
4,667,484
|
Warrants
issued in connection with debt conversion
|
-
|
-
|
-
|
-
|
499,183
|
-
|
499,183
|
Warrant
exercise
|
-
|
-
|
250,007
|
25
|
375,001
|
-
|
375,026
|
Rounding from reverse stock
split
|
-
|
-
|
6,649
|
-
|
-
|
-
|
-
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
(27,131,908)
|
(27,131,908)
|
|
|
|
|
|
|
|
|
BALANCE - June 30,
2019
|
3,594,981
|
$359
|
17,538,071
|
$1,754
|
$113,475,205
|
$(106,389,500)
|
$7,087,818
|
|
Preferred
Stock
|
Common
Stock
|
Additional
paid-in
|
Accumulated
|
Total
Stockholders'
|
||
|
Shares
|
Amount
|
Shares
|
Amount
|
capital
|
Deficit
|
Equity
|
BALANCE - June 30,
2019
|
3,594,981
|
$359
|
17,538,071
|
$1,754
|
$113,475,205
|
$(106,389,500)
|
$7,087,818
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
-
|
$-
|
1,952,912
|
$196
|
$1,079,115
|
$-
|
$1,079,311
|
Issuance of
Series H preferred stock and common stock due to acquisition of
Innovus
|
1,997,902
|
200
|
3,809,712
|
381
|
4,405,603
|
-
|
4,406,184
|
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
common stock, net of $4,523,884 in cash issuance
costs
|
-
|
-
|
36,365,274
|
3,637
|
33,275,119
|
-
|
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
|
Issuance of
common stock, net of $1,860,194 in issuance
costs
|
-
|
-
|
4,302,271
|
430
|
4,982,009
|
-
|
4,982,439
|
Preferred converted into common
stock
|
(15,408,728)
|
(1,541)
|
25,398,728
|
2,540
|
91,881
|
-
|
92,880
|
Issuance of Series G preferred
stock due to acquisition of Cerecor
|
9,805,845
|
981
|
-
|
-
|
5,558,933
|
-
|
5,559,914
|
Issuance of common stock related to
debt conversion
|
-
|
-
|
1,842,046
|
185
|
2,578,679
|
-
|
2,578,864
|
Cashless
warrant exercise
|
-
|
-
|
12,915,770
|
1,292
|
(1,292)
|
-
|
-
|
Warrant and option
exercises
|
-
|
-
|
20,186,994
|
2,018
|
26,989,823
|
-
|
26,991,841
|
Common stock issued to
consultants
|
-
|
-
|
165,000
|
16
|
230,984
|
-
|
231,000
|
Issuance of common stock related to
settlement
|
-
|
-
|
122,375
|
12
|
173,602
|
-
|
173,614
|
CVR payouts
|
-
|
-
|
1,238,204
|
123
|
1,732,747
|
-
|
1,732,870
|
Rounding from reverse stock
split
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
(13,620,679)
|
(13,620,679)
|
|
|
|
|
|
|
|
|
BALANCE - June 30,
2020
|
-
|
$-
|
125,837,357
|
$12,584
|
$215,012,891
|
$(120,010,179)
|
$95,015,296
|
|
Year Ended
June 30,
|
|
|
2020
|
2019
|
|
|
|
Operating
Activities
|
|
|
Net
loss
|
$(13,620,679)
|
$(27,131,908)
|
Adjustments to
reconcile net loss to cash used in operating
activities:
|
|
|
Depreciation,
amortization and accretion
|
6,245,827
|
2,727,067
|
Impairment of
intangible assets
|
195,278
|
-
|
Stock-based
compensation expense
|
1,079,311
|
1,022,202
|
Loss / (gain) from
change in fair value of contingent consideration
|
(5,291,629)
|
9,830,550
|
Derecognition of
contingent consideration
|
(5,199,806)
|
-
|
Gain on the change
in fair value of CVR payout
|
(267,130)
|
-
|
Changes in
allowance for bad debt
|
404,549
|
-
|
Loss / (gain) from
change in fair value of CVR
|
352,782
|
-
|
Loss / (gain) from
note conversion
|
315,728
|
-
|
Loss / (gain) from
settlement payment
|
(24,469)
|
-
|
Issuance of common
stock to employee
|
48,083
|
11,690
|
Derivative
income
|
(1,830)
|
(80,779)
|
Changes in
operating assets and liabilities:
|
|
|
(Increase) in
accounts receivable
|
(3,560,860)
|
(1,162,005)
|
(Increase) in
inventory
|
(6,950,624)
|
(101,096)
|
(Increase) in
prepaid expenses and other
|
(2,315,881)
|
(517,772)
|
(Increase) in other
current assets
|
(3,749,846)
|
-
|
(Decrease) /
increase in accounts payable and other
|
(1,376,521)
|
134,775
|
Increase in accrued
liabilities
|
4,330,856
|
961,858
|
Increase in accrued
compensation
|
1,124,624
|
308,824
|
(Decrease) in
contract liabilities
|
(111,650)
|
-
|
Increase in
interest payable - related party
|
-
|
166,667
|
(Decrease) in
deferred rent
|
-
|
(1,450)
|
Net cash used in
operating activities
|
(28,373,887)
|
(13,831,377)
|
|
|
|
Investing
Activities
|
|
|
Deposit
|
6,000
|
2,888
|
Purchases of fixed
assets
|
-
|
(59,848)
|
Contingent
consideration payment
|
(202,688)
|
(505,025)
|
Cash received from
acquisition
|
390,916
|
-
|
Purchase of
assets
|
(5,850,000)
|
(500,000)
|
Net cash used in
investing activities
|
$(5,655,772)
|
$(1,061,985)
|
|
Year Ended June 30,
|
|
|
2020
|
2019
|
Financing
Activities
|
|
|
Issuance of
preferred, common stock and warrants
|
$65,729,900
|
$ 15,180,000
|
Issuance costs
related to preferred, common stock and warrants
|
(5,404,151)
|
(1,479,964)
|
Warrant
exercises
|
26,991,841
|
375,026
|
Payments made to
borrowings
|
(19,436,779)
|
-
|
Proceeds from
borrowings
|
2,547,928
|
-
|
Issuance of note
payable
|
640,000
|
-
|
Issuance of debt -
related party
|
-
|
5,000,000
|
Net cash provided
by financing activities
|
71,068,739
|
19,075,062
|
|
|
|
Net change in cash,
restricted cash and cash equivalents
|
37,039,080
|
4,181,700
|
Cash, restricted
cash and cash equivalents at beginning of period
|
11,294,227
|
7,112,527
|
Cash, restricted
cash and cash equivalents at end of period
|
$48,333,307
|
$11,294,227
|
|
|
|
|
|
|
Supplemental
disclosures of cash and non-cash investing and financing
transactions
|
|
|
Warrants issued to
investors and underwriters
|
$-
|
$1,888,652
|
Contingent
consideration included in accounts payable
|
16,014
|
42,821
|
Contingent
consideration related to product acquisition
|
-
|
8,833,219
|
Issuance of
preferred stock related to purchase of assets
|
-
|
519,600
|
Conversion of debt
to equity
|
-
|
5,166,667
|
Cash paid for
interest
|
1,040,276
|
-
|
Fair value of
right-to-use asset and related lease liability
|
334,895
|
-
|
Issuance of Series
G preferred stock due to acquisition of the Pediatric Portfolio of
therapeutics
|
5,559,941
|
-
|
Issuance of Series
H preferred stock due to acquisition of the Innovus
|
12,805,263
|
-
|
Fixed payment
arrangements included in accounts payable
|
894,900
|
-
|
Exchange of
convertible preferred stock into common stock
|
2,540
|
-
|
Reclass of par from
APIC to Common Stock for issuance of stock for equity classified
instruments
|
1,488
|
-
|
Issuance cost
related to S-3
|
1,531,190
|
-
|
Issuance of common
stock for settlement
|
125,531
|
-
|
Issuance of common
stock for note conversion
|
2,578,864
|
-
|
Issuance of common
stock to consultants
|
231,000
|
-
|
CVR payout for
calendar year 2019
|
$2,000,000
|
$ -
|
|
Year Ended June
30,
|
|
|
2020
|
2019
|
Customer
A
|
16%
|
19%
|
Customer
B
|
16%
|
20%
|
Customer
C
|
14%
|
26%
|
Customer
D
|
−
|
22%
|
|
Year Ended June
30,
|
|
|
2020
|
2019
|
Customer
A
|
19%
|
9%
|
Customer
B
|
16%
|
20%
|
Customer
C
|
14%
|
36%
|
Customer
E
|
0%
|
23%
|
Customer
F
|
12%
|
0%
|
|
|
Year Ended June
30,
|
|
|
|
2020
|
2019
|
Warrants to
purchase common stock - liability classified
|
(Note
15)
|
240,755
|
240,755
|
Warrant to purchase
common stock - equity classified
|
(Note
15)
|
22,884,538
|
16,238,657
|
Employee stock
options
|
(Note
14)
|
765,937
|
1,607
|
Employee unvested
restricted stock
|
(Note
14)
|
4,186,056
|
2,551,024
|
Convertible
preferred stock
|
(Note
13)
|
-
|
3,594,981
|
|
28,077,286
|
22,627,024
|
|
Year Ended June
30,
|
|
|
June 30,
2020
|
June 30,
2019
|
Primary care
and devices portfolio
|
$7,957,000
|
$7,320,000
|
Pediatric
portfolio
|
9,292,000
|
-
|
Consumer
Health portfolio
|
10,383,000
|
-
|
Consolidated
revenue
|
$27,632,000
|
$7,320,000
|
|
Year Ended June
30,
|
|
|
2020
|
2019
|
U.S.
|
$24,980,000
|
$6,462,000
|
Rest-of-the-World
|
2,652,000
|
858,000
|
Total net
revenue
|
$27,632,000
|
$7,320,000
|
|
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
|
|
5,559,914
|
|
|
Total consideration transferred
|
$10,059,914
|
|
|
Recognized amounts of identifiable assets acquired and liabilities
assumed
|
|
Inventory,
net
|
$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
|
|
Goodwill –
Pediatric Portfolio
|
Balance as of November 1, 2019
|
$15,387,064
|
Increase due to
change in estimated fixed payment obligations
|
3,766,071
|
Increase to account
for settlement with former product licensor
|
300,000
|
Balance as of
June 30, 2020
|
$19,453,135
|
|
As of
November 1, 2020
|
|
|
Acquired product technology
rights
|
$22,700,000
|
|
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
|
|
|
Cash
and cash equivalents
|
$390,916
|
Accounts
receivables, net
|
278,826
|
Inventory,
net
|
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)
|
Debt
|
(3,056,361)
|
Lease
liability
|
(754,822)
|
|
|
Total
identifiable net assets
|
4,167,991
|
|
|
Goodwill
|
$8,637,272
|
|
|
|
As of February 14, 2020
|
|
|
Acquired
product distribution rights
|
$11,354,000
|
Acquired
customer lists
|
390,000
|
Total
intangible assets
|
$11,744,000
|
|
Goodwill - Innovus Merger
|
As
of February 14, 2020
|
$8,374,269
|
Increase
due to settlements related to lawsuit and product
royalties
|
209,178
|
Increase
due to additional bonus accrual
|
53,825
|
As
of June 30, 2020
|
$8,637,272
|
|
Year ended June 30,
|
|
|
2020
|
2019
|
|
Unaudited
(aa)
|
Pro forma
Unaudited
|
|
|
|
Total
revenues, net
|
$35,562,537
|
$39,044,357
|
Net
loss
|
$(16,325,078)
|
$(37,939,908)
|
Net
loss per share
|
$(0.37)
|
$(3.27)
|
(aa)
|
Due to
the absence of discrete financial information for Innovus, covering
the period from February 1, 2020 through February 13, 2020, the
Company did not include the impact of that stub-period for the pro
forma results for the year ended June 30, 2020.
|
|
June
30,
|
|
|
2020
|
2019
|
Raw
materials
|
$397,000
|
$117,000
|
Finished
goods, net
|
9,603,000
|
1,323,000
|
|
$10,000,000
|
$1,440,000
|
|
Estimated
|
June
30,
|
|
|
Useful
Lives
in
years
|
2020
|
2019
|
|
|
|
|
Manufacturing
equipment
|
2 - 5
|
$112,000
|
$83,000
|
Leasehold
improvements
|
3
|
229,000
|
112,000
|
Office equipment,
furniture and other
|
2 - 5
|
312,000
|
315,000
|
Lab
equipment
|
3 - 5
|
90,000
|
90,000
|
Less accumulated
depreciation and amortization
|
|
(484,000)
|
(396,000)
|
|
|
|
|
Fixed
assets, net
|
|
$259,000
|
$204,000
|
|
Total
|
2021
|
2022
|
2023
|
2024
|
2025
|
Thereafter
|
Remaining office
leases
|
$1,193,000
|
$389,000
|
$403,000
|
$362,000
|
$36,000
|
$3,000
|
-
|
Less: discount
adjustment
|
(167,000)
|
-
|
-
|
-
|
-
|
-
|
-
|
Total lease
liability
|
1,026,000
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
Lease liability -
current portion
|
301,000
|
-
|
-
|
-
|
-
|
-
|
-
|
Long-term lease
liability
|
$725,000
|
-
|
-
|
-
|
-
|
-
|
-
|
|
June 30,
2020
|
||||
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Impairment
|
Net
Carrying Amount
|
Weighted-Average
Remaining Life (in years)
|
|
|
|
|
|
|
Licensed
assets
|
$23,649,000
|
$(7,062,000)
|
$-
|
$16,587,000
|
11.88
|
MiOXSYS
Patent
|
380,000
|
(185,000)
|
(195,000)
|
-
|
-
|
Acquired product technology
right
|
22,700,000
|
(1,513,000)
|
-
|
21,187,000
|
9.34
|
Acquired product distribution
rights
|
11,354,000
|
(565,000)
|
-
|
10,789,000
|
4.62
|
Acquired customer
lists
|
390,000
|
(98,000)
|
-
|
292,000
|
1.12
|
|
|
|
|
|
|
|
$58,473,000
|
$(9,423,000)
|
$(195,000)
|
$48,855,000
|
9.11
|
|
June 30,
2019
|
||||
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Impairment
|
Net Carrying
Amount
|
Weighted-Average
Remaining Life (in years)
|
|
|
|
|
|
|
Licensed
assets
|
$23,649,000
|
$(4,787,000)
|
$-
|
$18,862,000
|
12.31
|
MiOXSYS
Patent
|
380,000
|
(159,000)
|
-
|
221,000
|
8.70
|
|
|
|
|
|
|
|
$24,029,000
|
$(4,946,000)
|
$-
|
$19,083,000
|
12.27
|
|
Licensed
Assets
|
Product
Technology Rights
|
Product
Distribution Rights
(Patents
&
Trademarks)
|
Total
|
|
|
|
|
|
2021
|
$2,276,000
|
$2,270,000
|
$1,768,000
|
$6,314,000
|
2022
|
2,276,000
|
2,270,000
|
1,540,000
|
6,086,000
|
2023
|
2,276,000
|
2,270,000
|
1,500,000
|
6,046,000
|
2024
|
2,275,000
|
2,270,000
|
1,488,000
|
6,033,000
|
2025
|
917,000
|
2,270,000
|
1,292,000
|
4,479,000
|
Thereafter
|
6,567,000
|
9,837,000
|
3,493,000
|
19,897,000
|
|
$16,587,000
|
$21,187,000
|
$11,081,000
|
$48,855,000
|
|
As
of
|
As
of
|
|
June
30,
|
June
30,
|
|
2020
|
2019
|
Accrued
settlement expense
|
$315,000
|
$-
|
Accrued
program liabilities
|
959,000
|
736,000
|
Accrued
product-related fees
|
2,471,000
|
295,000
|
Credit
card liabilities
|
510,000
|
−
|
Medicaid
liabilities
|
1,842,000
|
61,000
|
Return
reserve
|
1,329,000
|
98,000
|
Sales
taxes payable
|
175,000
|
−
|
Other
accrued liabilities*
|
249,000
|
121,000
|
Total
accrued liabilities
|
$7,850,000
|
$1,311,000
|
Level 1:
|
Inputs
that reflect unadjusted quoted prices in active markets that are
accessible to Aytu for identical assets or
liabilities;
|
|
|
Level 2:
|
Inputs
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.
|
|
Fair Value
Measurements at June 30, 2020
|
|||
|
Total
|
Quoted
Priced in Active Markets for Identical Assets (Level
1)
|
Significant
Other Observable Inputs (Level 2)
|
Significant
Unobservable Inputs(Level 3)
|
Recurring:
|
|
|
|
|
Warrant
derivative liability
|
$11,000
|
–
|
–
|
$11,000
|
Contingent
consideration
|
13,588,000
|
–
|
–
|
13,588,000
|
CVR
liability
|
5,572,000
|
–
|
–
|
5,572,000
|
|
$19,171,000
|
–
|
–
|
$19,171,000
|
|
Fair Value
Measurements at June 30, 2019
|
|||
|
Total
|
Quoted
Priced in Active Markets for Identical Assets
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Recurring:
|
|
|
|
|
Warrant
derivative liability
|
$13,000
|
–
|
–
|
$13,000
|
Contingent
consideration
|
23,326,000
|
–
|
–
|
23,326,000
|
|
$23,339,000
|
–
|
–
|
$23,339,000
|
|
As
of
June 30,
2020
|
As
of
June 30, 2019 |
At
Issuance
|
Warrant
Derivative Liability
|
|
|
|
Volatility
|
163.2%
|
163.2%
|
188.0%
|
Equivalent
term (years)
|
2.13
|
3.13
|
5.00
|
Risk-free
interest rate
|
0.16%
|
1.83%
|
1.83%
|
Dividend
yield
|
0.00%
|
0.00%
|
0.00%
|
|
Liability
Classified Warrants
|
|
|
Balance as of
June 30, 2018
|
$94,000
|
Change
in fair value included in earnings
|
(81,000)
|
Balance as of
June 30, 2019
|
$13,000
|
Change
in fair value included in earnings
|
(2,000)
|
Balance as of
June 30, 2020
|
$11,000
|
|
Contingent
Consideration
|
|
|
Balance as of
June 30, 2018
|
$4,694,000
|
Increase
due to purchase of assets
|
8,833,000
|
Increase
due to accretion
|
516,000
|
Decrease
due to contractual payment
|
(548,000)
|
Increase
due to remeasurement
|
9,831,000
|
Balance as of
June 30, 2019
|
$23,326,000
|
Increase
due to purchase of assets
|
183,000
|
Increase
due to accretion
|
789,000
|
Decrease
due to contractual payment
|
(180,000)
|
Decrease
due to amended license agreement
|
(5,200,000)
|
Decrease
due to remeasurement
|
(5,330,000)
|
Balance as of
June 30, 2020
|
$13,588,000
|
|
As
of
June 30,
2020
|
As
of
June 30,
2019
|
Natesto
|
|
|
Relevered
Beta
|
−
|
0.83
|
Market risk
premium
|
−
|
5.50%
|
Risk-free
interest rate
|
−
|
3.50%
|
Discount
|
−
|
5.20%
|
Company
specific discount
|
−
|
5.00%
|
|
As
of
June 30,
2020
|
As
of
June 30,
2019
|
ZolpiMist
|
|
|
Relevered
Beta
|
1.17
|
1.16
|
Market risk
premium
|
6.00%
|
5.50%
|
Risk-free
interest rate
|
3.00%
|
3.50%
|
Discount
|
5.20%
|
5.20%
|
Company
specific discount
|
5.00%
|
5.00%
|
|
As
of
June 30,
2020
|
As
of
June 30,
2019
|
Tuzistra
|
|
|
Relevered
Beta
|
0.36
|
1.19
|
Maket risk
premium
|
6.00%
|
5.50%
|
Risk-free
interest rate
|
3.00%
|
3.50%
|
Discount
|
5.20%
|
5.20%
|
Company
specific discount
|
15.00%
|
15.00%
|
|
Fair Value
Measurements at June 30, 2020
|
|||
|
Fair Value
at
Measurement
Date
|
Quoted Priced
in Active Markets for Identical Assets
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Non-recurring
|
|
|
|
|
MiOXSYS
patent (Luoxis patents)
|
$-
|
$-
|
$-
|
$-
|
Debt
|
982,076
|
-
|
-
|
982,076
|
|
|
|
|
|
Pediatric Portfolio (November 1, 2019)
|
|
|
|
|
Product
technology rights
|
22,700,000
|
–
|
–
|
22,700,000
|
Goodwill
|
19,453,135
|
–
|
–
|
19,453,135
|
Fixed payment
arrangements
|
29,837,853
|
–
|
–
|
29,837,853
|
|
|
|
|
|
Innovus Merger (February 14, 2020)
|
|
|
|
|
Customer
lists
|
390,000
|
–
|
–
|
390,000
|
Product
distribution righs (trademarks and patents)
|
11,354,000
|
–
|
–
|
11,354,000
|
Goodwill
|
8,637,272
|
–
|
–
|
8,637,272
|
Notes
payable
|
3,056,361
|
–
|
–
|
3,056,361
|
|
|
|
|
|
|
$96,410,697
|
$–
|
$–
|
$96,410,697
|
|
As
of
November
1,
2019
(*)
|
Product
technology rights
|
|
Re-levered
Beta
|
1.60
|
Market risk
premium
|
6.00%
|
Small stock
risk premium
|
5.20%
|
Risk-free
interest rate
|
2.00%
|
Company
specific discount
|
25.00%
|
|
|
As
of November 1,
2019
(≠)
|
|
Fixed payment
obligations
|
|
|
|
Discount
rate
|
|
1.8%
to 12.4%
|
|
|
As
of
February
14,
2020
|
Trademarks
and patents
|
|
Re-levered
Beta
|
0.84%
|
Market risk
premium
|
6.17%
|
Small stock
risk premium
|
4.99%
|
Risk-free
interest rate
|
1.89%
|
Company
specific discount
|
20.00%
|
|
Product
Technology Rights
|
Innovus
Assets
|
Goodwill
|
Liability
Classified Warrants
|
CVR
Liability
|
Contingent
Consideration
|
Fixed
Payment Arrangements
|
Balance as of June 30,
2019
|
$–
|
$–
|
$–
|
$13,000
|
$–
|
$23,326,000
|
$–
|
Transfers into Level
3
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
Transfer out of Level
3
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
Total gains, losses,
amortization or accretion in period
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
Included in
earnings
|
(1,513,000)
|
(663,000)
|
–
|
(2,000)
|
523,000
|
(9,741,000)
|
1,452,000
|
Included in other
comprehensive income
|
–
|
–
|
–
|
–
|
|
–
|
|
Purchases, issues, sales and
settlements
|
|
–
|
|
|
|
|
|
Purchases
|
22,700,000
|
11,744,000
|
28,090,000
|
–
|
7,049,000
|
183,000
|
–
|
Issues
|
–
|
–
|
–
|
–
|
–
|
–
|
29,838,000
|
Sales
|
–
|
–
|
–
|
–
|
–
|
–
|
–
|
Settlements
|
–
|
–
|
–
|
–
|
(2,000,000)
|
(180,000)
|
(17,778,000)
|
Balance as of June 30,
2020
|
$21,187,000
|
$11,081,000
|
$28,090,000
|
$11,000
|
$5,572,000
|
$13,588,000
|
$13,512,000
|
|
June
30,
|
|||
|
2020
|
2019
|
||
Benefit at
statutory rate
|
$ (2,934,000)
|
-21.00%
|
$ (5,698,000)
|
-21.00%
|
State income taxes,
net of federal benefit
|
(798,000)
|
-5.71%
|
(1,077,000)
|
-3.97%
|
Stock based
compensation
|
(35,000)
|
-0.25%
|
3,000
|
0.01%
|
Contingent
consideration
|
54,000
|
0.39%
|
-
|
0.00%
|
Change in tax
rate
|
-
|
0.00%
|
12,000
|
0.04%
|
Remeasurement of
deferred taxes
|
-
|
0.00%
|
-
|
0.00%
|
Effect of phased-in
tax rate
|
-
|
0.00%
|
-
|
0.00%
|
Loss on debt
extinguishment and interest expense
|
167,000
|
1.20%
|
-
|
0.00%
|
Change in valuation
allowance
|
3,496,000
|
25.02%
|
6,584,000
|
24.27%
|
Derivative
income
|
-
|
0.00%
|
(16,000)
|
-0.06%
|
Other
|
50,000
|
0.37%
|
192,000
|
0.71%
|
Net
income tax provision (benefit)
|
$ -
|
0.02%
|
$-
|
0.00%
|
|
June
30,
|
|
|
2020
|
2019
|
Deferred
tax assets (liabilities):
|
|
|
Accrued
expenses
|
$855,000
|
$234,000
|
Net
operating loss carry forward
|
37,191,000
|
18,085,000
|
Intangibles
|
(1,578,000)
|
3,377,000
|
Share-based
compensation
|
1,891,000
|
1,210,000
|
Fixed
assets
|
73,000
|
86,000
|
Capital
loss carry forward
|
203,000
|
203,000
|
Contribution
carry forward
|
31,000
|
31,000
|
Warrant
liability
|
51,000
|
51,000
|
Inventory
|
789,000
|
25,000
|
R&D
Credits
|
9,000
|
-
|
Lease
Liability
|
261,000
|
-
|
ROU
Asset
|
(224,000)
|
-
|
|
|
|
Total
deferred income tax assets (liabilities)
|
39,552,000
|
23,302,000
|
Less:
Valuation allowance
|
(39,552,000)
|
(23,302,000)
|
Total
deferred income tax assets (liabilities)
|
$-
|
$-
|
|
During the
Year
Ended June 30, 2020
|
|
|
Expected
volatility
|
100.00-182.16%
|
Expected
term (years)
|
1.-4.00
|
Risk-free
interest rate
|
0.41-1.82%
|
Dividend
yield
|
0.00%
|
|
Number of
Options
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life in Years
|
Outstanding June
30, 2018
|
1,798
|
$325.97
|
6.95
|
Granted
|
75,000
|
1.00
|
|
Exercised
|
-
|
-
|
|
Forfeited/Canceled
|
(75,036)
|
1.16
|
|
Expired
|
(155)
|
328.00
|
|
Outstanding June
30, 2019
|
1,607
|
325.97
|
6.13
|
Granted
|
769,500
|
1.24
|
|
Exercised
|
(5,000)
|
0.97
|
|
Forfeited/Canceled
|
-
|
-
|
|
Expired
|
(170)
|
328.00
|
|
Outstanding June
30, 2020
|
765,937
|
1.85
|
9.67
|
Exercisable at June
30, 2020
|
8,937
|
$53.15
|
8.92
|
Range of
Exercise Prices
|
Number of
Options Outstanding
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Contractual Life of Options Outstanding
|
Number of
Options Exercisable
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
$0.97
|
7,500
|
$0.97
|
9.52
|
7,500
|
$0.97
|
0.98
|
327,000
|
0.98
|
9.37
|
-
|
0.98
|
1.45
|
430,000
|
1.45
|
9.94
|
-
|
1.45
|
280.00
|
76
|
280.00
|
6.84
|
76
|
280.00
|
$328.00
|
1,361
|
$328.00
|
5.70
|
1,361
|
$328.00
|
|
765,937
|
$1.85
|
9.67
|
8,937
|
$53.15
|
|
Number of
Shares
|
Weighted
Average Grant Date Fair Value
|
Weighted
Average Remaining Contractual Life in Years
|
Unvested at
June 30, 2018
|
37,200
|
$39.80
|
9.4
|
Granted
|
2,772,022
|
$1.30
|
|
Vested
|
–
|
–
|
|
Forfeited
|
(463,008)
|
$1.23
|
|
Unvested at
June 30, 2019
|
2,346,214
|
$1.83
|
9.1
|
Granted
|
1,952,912
|
$1.06
|
|
Vested
|
(114,610)
|
$1.79
|
|
Forfeited
|
-
|
-
|
|
Unvested at
June 30, 2020
|
4,184,516
|
$1.47
|
6.4
|
Selling, general
and administrative:
|
2020
|
2019
|
Stock
options
|
$80,000
|
$125,000
|
Restricted
stock
|
999,000
|
897,000
|
Total
stock-based compensation expense
|
$1,079,000
|
$1,022,000
|
●
|
|
On March 10, 2020, the Company granted 3,376,087 Pre-Funded
Warrants for total proceeds of $3.9 million, which were fully
exercised as of March 31, 2020. In addition, the Company issued
508,696 of Placement Agent Warrants with an exercise price of
$1.4375 to purchase 508,696 shares of the Company's common stock,
which expire five years after the grant date. None of the March 10,
2020 Placement Agent Warrants have been exercised as of June 30,
2020.
|
|
|
|
●
|
|
On
March 12, 2020, the Company granted 16,000,000 March 12, 2020 $1.25
Warrants to purchase 16,000,000 shares of the Company’s
common stock for an exercise price of $1.25 per share of common
stock, and expire one-year after the grant date, of which
10,450,000 were exercised as of March 31, 2020 for total proceeds
of approximately $13.1 million. In addition, the Company granted
1,040,000 of the March 12, 2020 Placement Agent Warrants with an
exercise price of $1.5625 per share of common stock to purchase
1,040,000 shares of the Company’s common stock, which expire
five years after the grant date. None of the March 12, 2020
Placement Agent Warrants have been exercised as of June 30,
2020.
|
|
|
|
●
|
|
On March 19, 2020,
the Company granted 12,539,197 March 19, 2020 $1.47 Warrants to
purchase 12,539,197 shares of the Company’s common stock for
an exercise price of $1.47 per share of common stock, and expire
one-year after the grant date, of which 700,000 were exercised as
of March 31, 2020 for total proceeds of approximately $1.0 million.
In addition, the Company granted 815,047 of the March 12, 2020
Placement Agent Warrants with an exercise price of $1.9938 per
share of common stock to purchase 815,047 shares of the
Company’s common stock, which expire five years after the
grant date. None of the March 19, 2020 Placement Agent Warrants
have been exercised as of June 30, 2020.
|
|
Warrants Issued During
the Year Ended June 30, 2020
|
|
Expected
volatility
|
100
- 153%
|
|
Equivalent
term (years)
|
1 -
5
|
|
Risk-free
rate
|
0.20%
- 1.91%
|
|
Dividend
yield
|
0.00%
|
|
|
Number of
Warrants
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life in Years
|
|
|
|
|
Outstanding June
30, 2018
|
1,641,906
|
$19.19
|
4.67
|
Warrants
issued
|
14,827,009
|
$1.35
|
–
|
Warrants
expired
|
–
|
–
|
–
|
Warrants
exercised
|
(250,007)
|
–
|
–
|
Outstanding June
30, 2019
|
16,218,908
|
$3.15
|
4.36
|
Warrants
issued
|
44,627,120
|
$1.21
|
–
|
Warrants
expired
|
–
|
–
|
–
|
Warrants exercised
(*)
|
(37,961,490)
|
–
|
–
|
Outstanding June
30, 2020
|
22,884,538
|
$3.06
|
2.00
|
|
Number of
Warrants
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life in Years
|
Outstanding June
30, 2018
|
240,755
|
$72.00
|
4.13
|
Warrants
expired
|
–
|
–
|
–
|
Warrants
exercised
|
–
|
–
|
–
|
Outstanding June
30, 2019
|
240,755
|
$72.00
|
3.16
|
Warrants
expired
|
–
|
–
|
–
|
Warrants
exercised
|
–
|
–
|
–
|
Outstanding June
30, 2020
|
240,755
|
$72.00
|
2.13
|
|
Total
|
2021
|
2022
|
2023
|
2024
|
2025
|
Thereafter
|
Prescription
database
|
$1,635,000
|
$902,000
|
$733,000
|
$–
|
$–
|
$–
|
$–
|
Pediatric
portfolio fixed payments and product minimums
|
17,996,000
|
3,821,000
|
3,300,000
|
3,300,000
|
3,300,000
|
3,300,000
|
975,000
|
Inventory
purchase commitment
|
1,962,000
|
1,226,000
|
736,000
|
–
|
–
|
–
|
–
|
CVR
liability
|
5,572,000
|
840,000
|
1,292,000
|
2,484,000
|
956,000
|
–
|
–
|
Product
contingent liability
|
202,000
|
–
|
–
|
–
|
–
|
–
|
202,000
|
Product
milestone payments
|
3,000,000
|
–
|
3,000,000
|
–
|
–
|
–
|
–
|
Office
leases
|
1,193,000
|
389,000
|
403,000
|
362,000
|
36,000
|
3,000
|
–
|
|
$31,560,000
|
$7,178,000
|
$9,464,000
|
$6,146,000
|
$4,292,000
|
$3,303,000
|
$1,177,000
|
|
|
Year Ended June
30,
|
|
|
|
2020
|
2019
|
Warrants to
purchase common stock - liability classified
|
(Note
15)
|
240,755
|
240,755
|
Warrant to purchase
common stock - equity classified
|
(Note
15)
|
22,884,538
|
16,238,657
|
Employee stock
options
|
(Note
14)
|
765,937
|
1,607
|
Employee unvested
restricted stock
|
(Note
14)
|
4,186,056
|
2,551,024
|
Convertible
preferred stock
|
(Note
13)
|
-
|
3,594,981
|
|
28,077,286
|
22,627,024
|
|
As
of June 30,
|
|
|
2020
|
2019
|
Consolidated
revenue:
|
|
|
Aytu
BioScience
|
$17,249,000
|
$7,320,000
|
Aytu Consumer
Health
|
10,383,000
|
-
|
Consolidated
revenue
|
$27,632,000
|
$7,320,000
|
|
|
|
|
|
|
Consolidated
net loss:
|
|
|
Aytu
BioScience
|
$(10,464,000)
|
$ (27,132,000)
|
Aytu Consumer
Health
|
(3,157,000)
|
-
|
Consolidated
net loss
|
$(13,621,000)
|
$(27,132,000)
|
|
|
|
|
|
|
Total
assets:
|
|
|
Aytu
BioScience
|
$126,267,000
|
$34,721,000
|
Aytu Consumer
Health
|
26,569,000
|
-
|
Total
assets
|
$155,251,000
|
$34,721,000
|
|
As
of June 30,
|
|
|
2020
|
2019
|
Goodwill
|
|
|
Aytu
BioScience
|
$19,453,000
|
$–
|
Aytu Consumer
Health
|
8,637,000
|
–
|
Consolidated
Goodwill
|
$28,090,000
|
$–
|
|
|
|
|
Date:
October
6, 2020
|
|
|
/s/ Joshua R.
Disbrow
|
|
|
|
Joshua
R. Disbrow
|
|
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
|
|
|
Date:
October
6, 2020
|
|
|
/s/ David A.
Green
|
|
|
|
David
A. Green
|
|
|
|
Chief
Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
|
|
|
|
|
Date:
October
6, 2020
|
|
|
/s/ Joshua R.
Disbrow
|
|
|
|
Joshua
R. Disbrow
|
|
|
|
Chief
Executive Officer (Principal Executive Officer)
|
|
|
|
|
Date:
October
6, 2020
|
|
|
/s/ David A.
Green
|
|
|
|
David
A. Green
|
|
|
|
Chief
Financial Officer (Principal Financial Officer and Principal
Accounting Officer)
|
|
|
|
|
|
|
|
|
Dated:
|
|
/s/
|
|
|
|
Joshua R. Disbrow,
CEO
|
|
|
|
|
|
Aytu Bioscience, Inc.
|
|
|
|
|
|
|
Dated:
|
|
/s/
|
|
|
|
Its:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dated:
|
|
/s/
|
|
|
|
David A. Green,
CFO
|
|
|
|
|
|
Aytu Bioscience, Inc.
|
|
|
|
|
|
|
Dated:
|
|
/s/
|
|
|
|
Its:
|
|
|
|
|
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2020 |
Sep. 15, 2020 |
Dec. 31, 2019 |
|
Cover [Abstract] | |||
Entity Registrant Name | AYTU BIOSCIENCE, INC | ||
Entity Central Index Key | 0001385818 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2020 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation, State or Country Code | DE | ||
Entity File Number | 001-38247 | ||
Entity Public Float | $ 10,100,000 | ||
Entity Common Stock, Shares Outstanding | 125,837,357 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 3,594,981 |
Preferred stock, shares outstanding | 0 | 3,594,981 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 125,837,357 | 17,538,071 |
Common stock, shares outstanding | 125,837,357 | 17,538,071 |
Nature of Business and Financial Condition |
12 Months Ended |
---|---|
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Financial Condition | Nature of Business. Aytu BioScience, Inc. (“Aytu”, or the “Company”, which, unless otherwise indicated, refers to Aytu BioScience, Inc. and its subsidiaries) was incorporated as Rosewind Corporation on August 9, 2002 in the State of Colorado. Aytu was re-incorporated in the State of Delaware on June 8, 2015. Aytu is a specialty pharmaceutical company focused on global commercialization of novel products addressing significant medical needs such as hypogonadism (low testosterone), cough and upper respiratory symptoms, insomnia, and male infertility, various pediatric conditions and the Company’s plans to expand opportunistically into other therapeutic areas.
The Company is a commercial-stage specialty pharmaceutical company focused on commercializing novel products that address significant healthcare needs in both prescription and consumer health categories.
The Primary Care Portfolio that existed at the beginning of the year ended June 30, 2020 includes (i) Natesto®, the only FDA-approved nasal formulation of testosterone for men with hypogonadism (low testosterone, or "Low T"), (ii) ZolpiMist®, the only FDA-approved oral spray prescription sleep aid, and (iii) Tuzistra® XR, the only FDA-approved 12-hour codeine-based antitussive syrup.
On November 1, 2019, the Company acquired the portfolio of pediatric products from Cerecor, Inc (the “Pediatric Portfolio”). The Pediatric Portfolio includes; (i) Cefaclor, a second-generation cephalosporin antibiotic suspension; (ii) Karbinal® ER, an extended-release carbinoxamine (antihistamine) suspension indicated to treat numerous allergic conditions; and (iii) Poly-Vi-Flor® and Tri-Vi-Flor®, two complementary prescription fluoride-based supplement product lines containing combinations of fluoride and vitamins in various forms for infants and children with fluoride deficiency.
On February 14, 2020, the Company acquired Innovus Pharmaceuticals Inc. (“Innovus”), a specialty pharmaceutical company commercializing, licensing and developing safe and effective consumer healthcare products designed to improve health and vitality. Innovus commercializes over twenty-two consumer health products competing in large healthcare categories including diabetes, men's health, sexual wellness and respiratory health (the “Consumer Health Portfolio”). The Consumer Health Portfolio is commercialized through direct-to-consumer marketing channels utilizing Innovus’ proprietary Beyond Human® marketing and sales platform.
The Company recently acquired exclusive U.S., Canada and Mexico distribution rights to a COVID-19 IgG/IgM rapid test. The coronavirus test is a solid phase immunochromatographic assay used in the rapid, qualitative and differential detection of IgG and IgM antibodies to the 2019 Novel Coronavirus in human whole blood, serum or plasma. The rapid test has been validated in multi-center clinical trials. Most recently, the Company signed a licensing agreement with Cedars-Sinai Medical Center for worldwide rights to various potential uses of Healight, an investigational medical device platform technology. Healight has demonstrated safety and efficacy in pre-clinical studies, and the Company plans to advance this technology and assess its safety and efficacy in human studies.
The Company’s strategy is to continue building its portfolio of revenue-generating products, leveraging its focused commercial team and expertise to build leading brands within large therapeutic markets.
Financial Condition. As of June 30, 2020, the Company had approximately $48.3 million of cash, cash equivalents and restricted cash. The Company’s operations have historically consumed cash and are expected to continue to require cash, but at a declining rate. Revenues have increased 277% and 100% for each of the years ended June 30, 2020 and 2019, respectively, and are expected to continue to increase, allowing the Company to rely less on its existing cash and cash equivalents, and proceeds from financing transactions. Despite increased revenue, cash used in operations during fiscal year 2020 was $28.4 million compared to $13.8 million in 2019. The increased cash use was due to funding existing operations as well as the funding required to consummate and integrate the operations of two significant transactions which substantially increased the size and scope of the Company’s commercial operations. Additional funds were required to license the Healight Platform and pursue its development. As of the date of these financial statements, the Company expects its commercial costs to increase but at a rate lower than revenue increases as we continue to focus on realizing cost savings from efficiencies in scale and on revenue growth.
On November 1, 2019, the Company closed an asset acquisition with Cerecor, Inc. (“Cerecor”) whereby the Company acquired certain of Cerecor’s portfolio of pediatric therapeutics (the “Pediatric Portfolio”) for $4.5 million in cash, approximately 9.8 million shares of Series G Convertible Preferred Stock, the assumption of Cerecor’s financial and royalty obligations, which includes not more than $3.5 million of Medicaid rebates and products returns as they come due, and other assumed liabilities associated with the Pediatric Portfolio (see Note 2). As of June 30, 2020, the Company has paid down approximately $3.5 million of those assumed liabilities.
In addition, the Company assumed obligations in connection with the Pediatric Portfolio acquisition due to an investor including fixed and variable payments. The Company assumed fixed monthly payments equal to $0.1 million from November 2019 through January 2021 plus $15 million due in January 2021. Monthly variable payments due to the same investor are equal to 15% of net revenue generated from a subset of the Pediatric Portfolio, subject to an aggregate monthly minimum of $0.1 million, except for January 2020, when a one-time payment of $0.2 million was paid. The variable payment obligation continues until the earlier of: (i) aggregate variable payments of approximately $9.5 million have been made, or (i) February 12, 2026. On May 29, 2020, the Company, Armistice and the Deerfield Parties entered into an Early Payment Agreement and Escrow Instruction (the “Early Payment Agreement”) pursuant to which, (i) the Company agreed to transfer the sum of $15 million to the Deerfield Parties in early satisfaction of the Balloon Payment Obligation (ii) the Deerfield Parties, jointly and severally, acknowledged receipt and payment in full of the Balloon Payment and (iii) the Deerfield Parties and Armistice agreed to deliver to the Escrow Agent the joint written instruction to release the Escrow Funds to Armistice. The parties to the Early Payment Agreement acknowledged and agreed that the remaining fixed payments set forth on Schedule I of the Waiver other than the Balloon Payment Obligation remain due and payable pursuant to the terms of the Waiver, and that nothing in the Early Payment Agreement alters, amends, or waives any provisions or obligations in the Waiver or the Deerfield agreement other than as expressly set forth therein. As further consideration for the early payment of the Balloon Payment Obligation contemplated by the Early Payment Agreement, Armistice agreed (i) to pay to the Company, in immediately available funds, an amount equal to $200,000 and (ii) to reimburse the Company for all reasonable out–of-pocket legal expenses and fees incurred in connection with the Early Payment Agreement and the transactions contemplated thereby. On April 3, 2020, a majority of the Company’s disinterested board of directors approved the Company entering into an agreement whereby the Company would either assume the Escrow Agreement pursuant to an assignment and assumption agreement or paying the Balloon Payment Obligation. In early June 2020, the Company paid down the $15 million Balloon Payment Obligation, leaving a remaining fixed minimum commitment of approximately $7.3 million.
On February 14, 2020, the Company completed a merger with Innovus after approval by the stockholders of both companies on February 13, 2020 (the “Merger”). Upon closing the Merger, the Company merged with and into Innovus and all outstanding Innovus common stock was exchanged for approximately 3.8 million shares of the Company’s common stock and up to $16 million of Contingent Value Rights (“CVRs”). The outstanding Innovus warrants with cash out rights were exchanged for approximately 2.0 million shares of Series H Convertible Preferred stock of Aytu and retired. The remaining Innovus warrants outstanding at the time of the Merger continue to be outstanding, and upon exercise, retain the right to the merger consideration offered to Innovus stockholders, including any remaining claims represented by CVRs at the time of exercise. Innovus will continue as a wholly owned subsidiary of the Company.
In addition, as part of the 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 1.8 million shares of the Company’s common stock during the quarter ended June 30, 2020.
During the three months ended March 31, 2020, the Company completed three separate equity 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. The following summarizes the March Offerings, including total capital raised from both the issuance of common stock and subsequent warrant exercises.
On March 19, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 12,539,197 shares of the Company’s common stock (the “Common Stock”) at a purchase price per share of $1.595 and (ii) warrants to purchase up to 12,539,197 shares of Common Stock (the “March 19, 2020 Warrants”) at an exercise price of $1.47 per share, for aggregate gross proceeds to the Company of $20.0 million, before deducting placement agent fees and other offering expenses payable by the Company. The March 19, 2020 Warrants are exercisable immediately upon issuance and have a term of one year from the issuance date. In addition, the Company issued warrants with an exercise price of $1.9938 per share to purchase up to 815,047 shares of common stock (the “March 19, 2020 Placement Agent Warrants”) as a portion of the fees paid to the placement agent. The March 19, 2020 Placement Agent Warrants have a term of five year from the issuance date.
Since March 19, 2020, a total of 1.2 million March 19, 2020 Warrants have been exercised, for total proceeds of $1.7 million, of which 0.7 million March 19, 2020 Warrants were exercised, for total proceeds of $1.1 million.
On March 12, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 16,000,000 shares of the Company’s common stock at a purchase price per share of $1.25 and (ii) warrants to purchase up to 16,000,000 shares of Common Stock (the “March 12, 2020 Warrants”) at an exercise price of $1.25 per share, for aggregate gross proceeds to the Company of $20.0 million, before deducting placement agent fees and other offering expenses payable by the Company (the “Registered Offering”). The March 12, 2020 Warrants are exercisable immediately upon issuance and have a term of one year from the issuance date. In addition, the Company issued warrants with an exercise price of $1.5625 per share to purchase up to 1,040,000 shares of common stock (the “March 12, 2020 Placement Agent Warrants”) as a portion of the fees paid to the placement agent. The March 12, 2020 Placement Agent Warrants have a term of five year from the issuance date.
Since March 12, 2020, a total of 13 million March 12, 2020 Warrants have been exercised, for total proceeds of approximately $16.3 million, of which approximately 10.5 million March 12, 2020 Warrants were exercised through March 31, 2020, for total proceeds of $13.1 million.
On March 10, 2020, Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 4,450,000 shares of the Company’s common stock (the “Common Stock”) at a purchase price per share of $1.15 and (ii) pre-funded warrants to purchase up to 3,376,087 shares of Common Stock (the “Pre-Funded Warrants”) at an effective price of $1.15 per share ($1.1499 paid to the Company upon the closing of the offering and $0.0001 to be paid upon exercise of such Pre- Funded Warrants), for aggregate gross proceeds to the Company of approximately $9.0 million, before deducting placement agent fees and other offering expenses payable by the Company (the “Registered Offering”). The Pre-Funded Warrants were immediately exercised upon close. In addition, the Company issued warrants with an exercise price of $1.4375 per share to purchase up to 508,696 shares of common stock (the “March 10, 2020 Placement Agent Warrants”). The March 10, 2020 Placement Agent Warrants have a term of five year from the issuance date.
Since March 10, 2020, a total of 6.0 million shares of the Company’s October 2018 $1.50 Warrants (the “October 18 $1.50 Warrants”) were exercised, resulting in proceeds of approximately $9.0 million.
In total, the Company has raised net proceeds of approximately $71.3 million from the March Offerings and related warrant exercises, as well as exercises of the October 2018 $1.50 Warrants. The net proceeds received by the Company from the March Offerings and related warrant exercise will be used for general corporate purposes, including working capital.
On October 11, 2019, the Company entered into Securities Purchase Agreements (the “Purchase Agreement”) with two institutional investors (the “Investors”) providing for the issuance and sale by the Company (the “October 2019 Offering”) of $10.0 million of, (i) 10,000 shares of the Company’s Series F Convertible Preferred Stock (the “Preferred Stock”) which are convertible into 10,000,000 shares of common stock (the “Conversion Shares”) for a stated value of $1,000 per unit and (ii) 10,000,000 warrants (the “October 2019 Warrants”) which are exercisable for shares of common stock (the “Warrant Shares”), which expire January 10, 2025,. The closing of the October 2019 offering occurred on October 16, 2019. The Warrants had an exercise price equal to $1.25 and contain a cashless exercise provision. This provision was dependent on (i) performance of the Company’s stock price between October 11, 2019 and the date of exercise of all, or a portion of the Warrants, and (ii) subject to shareholder approval of the October 2019 Offering, which was approved January 24, 2020.
During March 2020, all of the Series F Convertible Preferred Stock were converted into 10 million shares of the Company’s common stock, and 5.0 million of the October 2019 Warrants were exercised using the cashless exercise provision to acquire 5.0 million shares of the Company’s common stock. In April of 2020, the remaining 5 million October 2019 Warrants were exercised using the cashless exercise provision into 5.0 million shares of the Company’s common stock.
The net proceeds that the Company received from the October 2019 Offering were approximately $9.3 million. The net proceeds received by the Company from the October 2019 Offerings have been used for general corporate purposes, including working capital.
In June 2020, we completed an at-the-market offering program, which allows us to sell and issue shares of our common stock from time-to-time. The company issued 4,302,271 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.
As of the date of this Report, the Company expects its costs for its current operation to stabilize as the Company integrates the acquisition of the Pediatrics Portfolio and Innovus and continues to focus on revenue growth through increasing product sales and the introduction of new products. The Company’s total current asset position of approximately $75.0 million plus the proceeds expected from ongoing product sales will be used to fund operations. Since the Company has sufficient cash and cash equivalents on-hand as of June 30, 2020, to fund potential net cash outflows for the twelve months following the filing date of this Annual Report, in accordance with ASU 2014-15, Subtopic 205-40, the Company reports that there does not exist any indication of substantial doubt about its ability to continue as a going concern.
As of the date of this report, while the Company has adequate capital resources to complete its near-term operations, there is no guarantee that such capital resources will be sufficient until such time the Company reaches profitability. The Company may access capital markets to fund strategic acquisitions or ongoing operations on terms the Company believes are favorable. The timing and amount of capital that may be raised is dependent on market conditions and the terms and conditions upon which investors would require to provide such capital. The Company may utilize debt or sell newly issued equity securities through public or private transactions, or through the use of an at the market facility. There is no guarantee that capital will be available on terms favorable to the Company and its stockholders, or at all. However, the Company has been successful in accessing the capital markets in the past and are confident in its ability to access the capital markets again, if needed.
If the Company is unable to raise adequate capital in the future, and if and when it is required, the Company can adjust its operating plans to reduce the magnitude of the capital need under its existing operating plan. Some of the adjustments that could be made include delays of and reductions to merger, acquisition and commercial programs, reductions in headcount, narrowing the scope of the Company’s commercial plans, or reductions to its research and development programs. 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.
The Company has incurred accumulated net losses since inception, and at June 30, 2020, we had an accumulated deficit of $120.1 million. Our net loss decreased to $13.6 million from $27.1 million for fiscal 2020 and 2019, respectively. The Company used $28.4 million and $13.8 million in cash from operations during fiscal 2020 and 2019.
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Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | Basis of Presentation. The audited consolidated financial statements include the operations of Aytu and its wholly-owned subsidiaries, Aytu Women’s Health, LLC, Aytu Therapeutics, LLC and Innovus Pharmaceuticals, Inc. All significant inter-company balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Cash, Cash Equivalents and Restricted Cash. Aytu considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists primarily of amounts held in certificate of deposit investments to maintain certain credit amounts for the Company's business credit cards. The Company’s investment policy is to preserve principal and maintain liquidity. The Company periodically monitors its positions with, and the credit quality of the financial institutions with which it invests. Periodically, throughout the year, and as of June 30, 2020, the Company has maintained balances in excess of federally insured limits.
Accounts Receivable. Accounts receivable are recorded at their estimated net realizable value. The Company evaluates collectability of accounts receivable on a quarterly basis and records a reserve, if any, accordingly. The Company recognized a reserve of $0.4 million and $0.0 million as of June 30, 2020 and 2019, respectively. The Company does not charge interest on its outstanding trade receivables as its standard trade practices. However the Company does reserve the right to such charges as circumstances arise.
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. Aytu periodically reviews the composition of its inventories in order to identify obsolete, slow-moving or otherwise unsaleable items. If unsaleable items are observed and there are no alternate uses for the inventory, Aytu will record a write- down to net realizable value in the period that the impairment is first recognized. Therefore, we currently have $1.3 million and $0 reserved for slow moving inventory as of June 30, 2020 and 2019, respectively.
Fixed Assets. Fixed assets are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. Leasehold improvements are amortized over the term of the lease agreement or the service lives of the improvements, whichever is shorter. The Company begins depreciating assets when they are placed into service. Maintenance and repairs are expensed as incurred.
Fair Value of Financial Instruments.
Cash, cash equivalents, restricted cash, accounts receivable, and accounts payable. The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their fair value due to their short maturities.
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 our 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.
Liability and equity classified warrants. The Company accounts for liability classified warrants 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. Equity classified financial instruments are valued using a Black-Scholes model. Changes in the fair value of liability classified derivative financial instruments in subsequent periods were recorded as derivative income or expense for the warrants and reported as a component of cash flows from operations. During the year ended June 30, 2020, such changes in the fair value of the Company’s liability classified derivative liabilities was less than $0.1 million.
Contingent value rights. 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 remeasured both for future expected payout at well as the increase fair value due to the time value of money. These gains or losses, if any, are included as a component of operating cash flows.
Fixed Payment Arrangements. Fixed payment arrangements are comprised of minimum product payment obligations relating to either make whole payments or fixed minimum royalties arising from the acquisition of the Pediatric Portfolio. These were recognized at their amortized cost basis using a market appropriate discount rate and are accreted up to their ultimate face value over time. These are one-time measurements and remeasurement at each reporting period is not recognized at as a component of earnings each reporting period. However, if the Company determines 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, such changes would be reflected in the Company’s footnote disclosures..
Revenue Recognition. The Company generates revenue from product sales and license sales. The Company recognizes 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) recognition of revenue when, or as the Company satisfies each performance obligation.
Aytu BioScience Segment (Note 19)
Product sales consist of sales of its prescription related products from both the (i) Pediatric Portfolio and (ii) Primary Care Portfolio principally to a limited number of wholesale distributors and pharmacies in the United States, which account for the largest portion of our total prescription products revenue. International sales are made primarily to specialty distributors, as well as to hospitals, laboratories, and clinics, some of which are government owned or supported (collectively, its “Customers”).
Products are generally shipped “free-on- board” destination when shipped domestically within the United States and if shipped internationally, products are shipped “free-on-board” shipping point, as those are the agreed-upon contractual terms.
Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers, or for new customers, upon review of customer financial condition and credit history. Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from coupons, discounts, chargebacks and distributor fees, processing fees, as well as allowances for returns and government rebates. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Provision balances related to estimated amounts payable to direct customers are netted against accounts receivable from such customers. Balances related to indirect customers are included in accounts payable and accrued liabilities. Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the Company’s historical experience and specific known market events and trends.
Aytu Consumer Health Segment (Note 19)
The Company generates revenues from its Consumer Health Portfolio from product sales and the licensing of the rights to market and commercialize our products. Sales from the Company’s Aytu Consumer Health division are generally recognized ”free-on-board” shipping point, as those are the agreed-upon contractual terms. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.
Customer Contract Costs. The Company has elected to adopt the practical expedient on expensing the incremental costs to obtain a contract, given the expectation that any amounts attributable to obtaining such a contract would be satisfied within one year.
Customer Concentrations. The following customers contributed greater than 10% of the Company's gross revenue during the year ended June 30, 2020 and 2019, respectively. The customers, sometimes referred to as partners or customers, are large wholesale distributors that resell our products to retailers. As of June 30, 2020, three customers accounted for 46% of gross revenue. As of June 30, 2019, four customers accounted for 87% of gross revenue. The revenue from these customers as a percentage of gross revenue was as follows:
The loss of one or more of the Company's significant partners or customers could have a material adverse effect on its business, operating results or financial condition.
We are also subject to credit risk from our accounts receivable related to our product sales. Historically, we have not experienced significant credit losses on our accounts receivable and we do not expect to have write-offs or adjustments to accounts receivable which would have a material adverse effect on our financial position, liquidity or results of operations. As of June 30, 2020, four customers accounted for 61% of gross accounts receivable. As of June 30, 2019, four customers accounted for 88% of gross accounts receivable.
In addition, the Company is owed approximately $3.6 million as of June 30, 2020 by Cerecor that arose as a result of certain transition processes that caused customer payments on the Pediatric Portfolio products to continue to be deposited in Cerecor’s account. The Company and Cerecor are expected to finalize the settlement of these amounts in the first half of the fiscal year ended June 30, 2021.
Estimated Sales Returns and Allowances. Aytu records estimated reductions in revenue for potential returns of products by customers. As a result, the Company must make estimates of potential future product returns and other allowances related to current period product revenue. In making such estimates, the Company analyzes historical returns, current economic trends and changes in customer demand and acceptance of our products. If the Company were to make different judgments or utilize different estimates, material differences in the amount of the Company’s reported revenue could result. As of June 30, 2020, and 2019, the Company accrued $1.3 million and $0.1 million, respectively, in our estimated returns allowance. Estimates of potential returns and allowances are recorded each quarter for the difference between estimates and actual results that become available.
Costs of Sales. Costs of sales consists primarily of the direct costs of the Company’s products acquired from third-party manufacturers as well as certain royalties owed on certain of the Company’s products. Shipping and handling costs are also included in costs of sales for all periods presented.
Stock-Based Compensation. Aytu accounts for stock-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant over the period of service. Stock option grants are valued on the grant date using the Black-Scholes option pricing model and recognizes compensation costs ratably over the period of service using the graded method. Restricted stock grants are valued based on the estimated grant date fair value of the Company’s common stock and recognized ratable over the requisite service period. Forfeitures are adjusted for as they occur.
Research and Development. Research and development costs are expensed as incurred with expenses recorded in the respective period.
Patents and tradenames. Costs of establishing patents, consisting of legal and filing fees paid to third parties, are expensed as incurred. The cost of the Luoxis patents, which relates to the RedoxSYS and MiOXSYS products, were $380,000 when they were acquired in connection with the 2013 formation of Luoxis and are being amortized over the remaining U.S. patent life of approximately 15 years, which expires in March 2028.
Patents and tradenames subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Impairment losses are measured and recognized to the extent the carrying value of such assets exceeds their fair value. In June 2020, the Company decided to write off the entire remaining balance of the Luoxis patents.
On February 14, 2020, upon completion of the Merger with Innovus, the Company recognized the fair value of the rental of the customer lists for $390,000 and amortizes the asset over a useful life of 1.5 years.
The Company recognized the fair value of trademarks, patents or a combination of both for 18 distinct products that Innovus markets, distributes and sells for $11,354,000 and amortizes the asset over a useful life of 5 years.
Advertising Costs. Advertising costs consist of the direct marketing activities related to the Company’s Aytu Consumer Health reportable segment that arose from the February 14, 2020 acquisition of Innovus Pharmaceuticals, Inc. The Company expenses all advertising costs as incurred. The Company incurred $4.7 million and $0 for the years ended June 30, 2020 and 2019, respectively.
Impairment of Long-lived Assets. The Company assesses impairment of its long-lived assets when events or changes in circumstances indicates that their carrying value amount may not be recoverable. The Company’s long-lived assets consist of (i) fixed assets, net, (ii) licensed assets, net, (iii) patents and tradenames, net and (iv) Products technology rights. Circumstances which could trigger a review include, but are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
The Company evaluated its long-lived assets for impairment as of June 30, 2020 and 2019 respectively, and there was $0.2 million and $0 million of impairment recorded.
Income Taxes. Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The amount of income taxes and related income tax positions taken are subject to audits by federal and state tax authorities. The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax position, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon settlement with the taxing authority. The Company believes that it has no material uncertain tax positions. The Company's policy is to record a liability for the difference between the benefits that are both recognized and measured pursuant to FASB ASC 740-10. "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement 109" (ASC 740-10) and tax position taken or expected to be taken on the tax return. Then, to the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense. During the periods reported, management of the Company has concluded that no significant tax position requires recognition under ASC 740-10.
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 Aytu. As the Company incurred losses in both 2020 and 2019, basic and diluted loss per share was the same and were not included in the calculation of the diluted net loss per share because they would have been anti-dilutive.
The following table sets-forth securities that could be potentially dilutive, but as of the years ended June 30, 2020 and 2019 are anti-dilutive, and therefore excluded from the calculation of diluted earnings per share.
Adoption of New Accounting Pronouncements
Leases (“ASU 2016-02”). In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 – Topic 842 Leases. ASU 2016-02 requires that most leases be recognized on the financial statements, specifically the recognition of right-to-use assets and related lease liabilities, and enhanced disclosures about leasing arrangements. The objective is to provide improved transparency and comparability among organizations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard requires using the modified retrospective transition method and apply ASU 2016-02 either at (i) latter of the earliest comparative period presented in the financial statements or commencement date of the lease, or (ii) the beginning of the period of adoption. The Company has elected to apply the standard at the beginning period of adoption, July 1, 2019 which resulted in no cumulative adjustment to retained earnings.
The Company has elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease and will continue to recognize rent expense on a straight-line basis. As a result of the adoption, on July 1, 2019, the Company recognized a lease liability of approximately $0.4 million, which represented the present value of the remaining minimum lease payments using an estimated incremental borrowing rate of 8%. As of July 1, 2019, the Company recognized a right-to-use asset of approximately $0.4 million. Lease expense did not change materially as a result of the adoption of ASU 2016-02.
In addition, in conjunction with the Innovus Merger, the Company recognized a lease liability of approximately $0.8 million relating to Innovus’ corporate offices and related warehouse as part of the purchase price allocation (see Note 2 and Note 22).
Leases (“ASU 2018-11”). On July 30, 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU 2016-02 (codified as ASC 842). Specifically, under the amendments in ASU 2018-11: (i) Entities may elect not to recast the comparative periods presented when transitioning to ASC 842 (Issue 1), and (ii) Lessors may elect not to separate lease and nonlease components when certain conditions are met (Issue 2). The Company adopted this standard and elected not to recast prior comparative periods when presented, including the year ended June 30, 2019, which is included in this Form 10-K.
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017- 11”). In July 2017, the FASB issued ASU No. 2017-11 — Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). Part I to ASU 2017-11 eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. In addition, entities will have to make new disclosures for financial instruments with down round features and other terms that change conversion or exercise prices. Part I to ASU 2017-11 is effective for fiscal years beginning after December 31, 2018. The Company adopted this standard update as a result of the issuance of the Series F Preferred stock as a result of the October 2019 Offering. There were no “down-round” features present in the financial instruments issued in conjunction with the March 2020 Offerings.
Compensation – Stock Compensation (Topic 718) (“ASU 2018-07). On June 20, 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, as part of its ongoing Simplification Initiative. Currently, share-based payments to nonemployees are accounted for under Subtopic 505-50 which significantly differs from the guidance for share-based payments to employees under Topic 718. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and generally aligning the accounting for nonemployee awards with the accounting for employee awards (with limited exceptions). The Company issued stock to certain former Innovus Directors to compensate them for consulting services. Those grants were fully vested at the time of grant and an approximately $0.2 million charge was recognized as a current period expense.
Business Combinations (Topic 805) — Clarifying the Definition of a Business (“ASU 2017-01”). In January 2017, the FASB issued ASU 2017-01, which sets out a new framework for classifying transactions as acquisitions (disposals) of assets versus businesses. The new guidance provides a framework to evaluate when an input and a substantive process are present as well as provide more stringent criteria for sets without outputs to be considered businesses. As a result, fewer transactions are expected to involve acquiring (or selling) a business. ASU 2017-01 is effective for public companies with fiscal years beginning after December 15, 2018. This standard is expected to reduce the number of acquisitions which are considered business combinations upon adoption, especially in both real estate and life science industries.
During the fiscal year ended June 30, 2020, the Company acquired both the Pediatric Portfolio from Cerecor and Consumer Health Portfolio from Innovus. The Company adopted this standard as a result of the acquisitions, and while ASU 2017-01 is expected to result in more asset acquisitions in life science industries, the Company came to the conclusion that both of the acquisitions qualified as business combinations.
Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). On August 26, 2016, the FASB issued ASU 2016-15, which amends Topic 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. One of the items ASU 2016-15 clarified was the treatment of cash payments on zero coupon debt or debt-like instrument. Under ASU 2016-15, cash paid on zero coupon bonds should be allocated between the interest and principal portion of the obligation at the time of payment, with the interest portion classified as operating in the Statement of Cash Flows and the principal portion classified as a financing cash outflow in the Statement of Cash Flows.T
The Company has numerous obligations in which there is no stipulated interest rate, and the obligation is recognized at a discount from the ultimate obligation. These include certain notes and fixed payment arrangements. The Company adopted this standard in the year ended June 30, 2020 and classified cash payments, if any, in accordance with this standard.
Recent Accounting Pronouncements
Fair Value Measurements (“ASU 2018-03”). 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. Early adoption is permitted upon issuance of ASU 2018-13. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently assessing the impact that ASU 2018-13 will have on its financial statements.
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 originally effective for interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. However, in November 2019, the Financial Accounting Standard Board (FASB) issued ASU 2019-10, Financial Instruments—Credit Losses, (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) — Effective Dates (“ASU 2019-10”). ASU 2019-10 deferred the adoption date for (i) public business entities that meet the definition of an SEC filer, excluding entities eligible to be “smaller reporting companies” as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and (2) all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As of June 30, 2020, the Company qualified as a smaller reporting companies as defined by the SEC. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements but does not anticipate there to be a material impact.
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Revenues from Contracts with Customers |
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Revenues from Contracts with Customers | Revenues by Product Portfolio. Net revenue disaggregated by significant product portfolio for the year ended June 30, 2020 and June 30, 2019 were as follows:
Revenues by Geographic location. The following table reflects our product revenues by geographic location as determined by the billing address of our customers:
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Acquisitions |
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Acquisitions | The Pediatric Portfolio
On October 10, 2019, the Company entered into the Purchase Agreement with Cerecor, Inc. (“Cerecor”) to purchase and acquire Cerecor’s Pediatric Portfolio, which closed on November 1, 2019. The Pediatric Portfolio consists of four prescription products consisting of (i) Cefaclor for Oral Suspension, (ii) Karbinal® ER and, (iii) Poly-Vi-Flor® and Tri-Vi-Flor™. Total consideration transferred to Cerecor consisted of $4.5 million in cash and approximately 9.8 million shares of Series G Convertible Preferred Stock. The Company also assumed certain of Cerecor’s financial and royalty obligations, and not more than $3.5 million of Medicaid rebates and products returns, of which $3.5 million has been incurred. The Company also retained the majority of Cerecor’s workforce focused on sales, commercial contracts and customer relationships.
In addition, the Company assumed Cerecor obligations due to an investor that include fixed and variable payments aggregating to $25.6 million. The Company assumed fixed monthly payments equal to $0.1 million from November 2019 through January 2021 plus $15 million due in January 2021. Monthly variable payments due to the same investor are equal to 15% of net revenue generated from a subset of the Pediatric Portfolio, subject to an aggregate monthly minimum of $0.1 million, except for January 2020, when a one-time payment of $0.2 million was paid to the investor. The variable payment obligation continues until the earlier of: (i) aggregate variable payments of approximately $9.5 million have been made, or (ii) February 12, 2026. In early June 2020, the Company paid down the $15 million due in January 2021, leaving a remaining fixed minimum commitment of approximately $7.3 million.
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 Pediatric Portfolio requires the Company to generate minimum annual sales sufficient to represent annual royalties of approximately $1.8 million, in the event the minimum sales volume is not satisfied.
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 remaining 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. Goodwill is not amortizable for tax purposes. Transaction costs of $0.7 million were included as general and administrative expense in the consolidated statements of operations for the fiscal year 2020.
The following table summarizes 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 therefore, are subject to revisions that may result in adjustments to the values presented below:
The following table provides a reconciliation of the carrying value of the Company’s goodwill associated with the acquisition of the Pediatric Portfolio:
The Company recorded an adjustment to the previously reported identifiable net assets and goodwill of approximately $4.1 million, of which $3.8 million related to the Karbinal make-whole payment, and $0.3 million related to a settlement upon the closing of the Cerecor transaction. The amounts above represent the provisional fair value estimates as of June 30, 2020 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates.
The fair values of intangible assets, including product technology rights were determined using variations of the income approach. Varying discount rates were also applied to the projected net cash flows. The Company believes the assumptions are representative of those a market participant would use in estimating fair value (see Note 10).
The fair value of the net identifiable asset acquired was determined to be $22.7 million, which is being amortized over ten years. The aggregate amortization expense was $1.5 million and $0, for fiscal year 2020 and 2019 respectively.
Since the November 1, 2019 acquisition of the Pediatric Portfolio, the Pediatric Portfolio has contributed $9.3 million in net revenues and a net loss of approximately $0.4 million, excluding corporate, overhead and other costs not assigned to these products.
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. Upon the effectiveness of the Merger, the Company merged with and into Innovus and all outstanding Innovus common stock was exchanged for approximately 3.8 million shares of the Company’s common stock and up to $16 million of Contingent Value Rights (“CVRs”). The outstanding Innovus warrants with cash out rights were exchanged for approximately 2.0 million shares of Series H Convertible Preferred stock of the Company and retired. The remaining Innovus warrants outstanding at the time of the Merger continue to be outstanding, and upon exercise, retain the right to the merger consideration offered to Innovus stockholders, including any remaining claims represented by CVRs at the time of exercise. Innovus is now a 100% wholly-owned subsidiary of the Company, (“Aytu Consumer Health”).
On March 31, 2020, the Company paid out the first CVR Milestone in the form of approximately 1.2 million shares of the Company’s common stock to satisfy the $2.0 million obligation as a result of Innovus achieving the $24 million revenue milestone for the calendar year ended December 31, 2019. As a result of this, the Company recognized a gain of approximately $0.3 million.
In addition, as part of the 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 1.8 million shares of the Company’s common stock since February 14, 2020.
The following table summarized the preliminary fair value of assets acquired and liabilities assumed at the date of acquisition. As this was a tax-exempt transaction, goodwill is not tax deductible in future periods. These estimates are preliminary, pending final evaluation of certain assets acquired and liabilities assumed, and therefore, are subject to revisions that may result in adjustments to the values presented below. The estimates of the fair value of the assets acquired assumed at the date of the Acquisition are subject to adjustment during the measurement period (up to one year from the Acquisition date). While the Company believes that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired, it evaluates any necessary information prior to finalization of the fair value. During the measurement period, the Company will adjust assets and liabilities if new information is obtained about facts and circumstances that existed as of the Acquisition date that, if known, would have resulted in the revised estimated values of those assets as of that date. The impact of all changes that do not qualify as measurement period adjustments, if applicable, and are included in current period earnings.
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 Company believes the assumptions are representative of those a market participant would use in estimating fair value (see Note 10).
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. The aggregate amortization expense was $0.7 million and $0, for the fiscal year ended June 30, 2020 and 2019, respectively.
The Company recorded an adjustment to the previously reported identifiable net assets and goodwill of approximately $0.2 million related to legal fee liabilities relating to a lawsuit which was settled prior to the merger date. The amounts above represent the provisional fair value estimates as of June 30, 2020 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period and finalizes its fair value estimates.
Since the February 14, 2020 acquisition of Innovus, Innovus has contributed approximately $10.4 million in net revenues and net loss of approximately $3.2 million.
Pro Forma Impact due to Business Combinations
The following supplemental unaudited proforma financial information presents the Company’s results as if the following acquisitions had occurred on July 1, 2018:
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Inventories | Inventory balances consist of the following:
There was no work-in-process inventory as of June 30, 2020 or 2019, respectively. As of June 30, 2020 and 2019, there was a $1.3 million and $0 reserve for excess and obsolete inventory.
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed Assets | Fixed assets consist of the following:
Aytu recorded depreciation and amortization expense of $0.1 million for the years ended June 30, 2020 and 2019, respectively.
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases, Right-to-Use Assets and Related Liabilities | In September 2015, the Company entered into a 37-month operating lease in Englewood, Colorado. In October 2017, the Company signed an amendment to extend the lease for an additional 24 months beginning October 1, 2018. In April 2019, the Company extended the lease for an additional 36 months beginning October 1, 2020. This lease has base rent of approximately $10,000 a month, with total rent over the term of the lease of approximately $0.4 million.
In June 2018, the Company entered into a 12-month operating lease, beginning on August 1, 2018, for office space in Raleigh, North Carolina. This lease has base rent of approximately $1,000 a month, with total rent over the term of the lease of approximately $13,000.
In October 2017, the Company’s subsidiary, Innovus, entered into a commercial lease agreement for 16,705 square feet of office and warehouse space in San Diego, California that commenced on December 1, 2017 and continues until April 30, 2023. The initial monthly base rent was $21,000 with an approximate 3% increase in the base rent amount on an annual basis, as well as, rent abatement for rent due from January 2018 through May 2018. The Company holds an option to extend the lease an additional 5 years at the end of the initial term. On November 18, 2019 (“decision date”), Innovus determined it would no longer utilize the warehouse portion of the lease space, representing approximately 9,729 square feet, and as of December 31, 2019 (“cease use date”) ceased using any such space. In accordance with ASC 842, Leases, the Company assessed the asset value of the separate lease component and amortized such asset from the decision date through the cease use date.
As discussed within Note 2, the Company 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 and an operating lease liability on its balance sheet associated with its lease of its corporate headquarters. The right-of-use asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the later of the commencement date or July 1, 2019; the date 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. The lease liability is classified as current or long-term on the balance sheet.
Rent expense for fiscal 2020 and 2019 totaled $0.2 million and $0.1 million, respectively.
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets - Amortizable | The Company currently holds three existing intangible asset portfolios as of June 30, 2020: (i) Licensed assets, which consist 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 Pediatric Portfolio from Cerecor; and (iii) Patents and tradenames, which as of June 30, 2020, consist entirely of patents, tradenames and customer lists acquired due to the February 2020 acquisition of Innovus.
If acquired in an asset acquisition, the Company capitalized the acquisition cost of each licensed patents or tradename, which can include a combination of both upfront considerations, 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.
The following table provides the summary of the Company’s intangible assets as of June 30, 2020 and June 30, 2019, respectively.
The following table summarizes the estimated future amortization expense to be recognized over the next years and periods thereafter:
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.
Licensed Assets.
Natesto. In April 2016, Aytu entered into a license and supply agreement to acquire the exclusive U.S. rights to commercialize Natesto (testosterone) nasal gel from Acerus Pharmaceuticals Corporation, or Acerus. We acquired the rights effective upon the expiration of the former licensee’s rights, which occurred on June 30, 2016. The license and supply agreement was formally amended and restated on December 1, 2019. The term of the license runs for the greater of eight years or until the expiry of the latest to expire patent, including claims covering Natesto or until the entry on the market of at least one AB-rated generic product.
The fair value of the net identifiable Natesto asset acquired was determined to be $10.6 million, which is being amortized over eight years. The aggregate amortization expense for fiscal 2020 and fiscal 2019 was $1.3 million, respectively.
ZolpiMist. In June 2018, Aytu signed an exclusive license agreement for ZolpiMist® (zolpidem tartrate oral spray) from Magna Pharmaceuticals, Inc., (“Magna”). This agreement allows for the Company’s exclusive commercialization of ZolpiMist in the U.S. and Canada. Aytu made an upfront payment of $0.4 million to Magna upon execution of the agreement. In July 2018, we paid an additional $0.3 million of which, $297,000 was included in current contingent consideration at June 30, 2018. In addition, the Company also agreed to periodic royalties to Magna as a percentage of ZolpiMist net sales, which was factored into the initial fair value of the license agreement.
The ZolpiMist license agreement was valued at $3.2 million and is amortized over the life of the license agreement up to seven years. The amortization expense for fiscal 2020 and fiscal 2019 was $0.5 million and $0.5 million, respectively.
Tuzistra XR. On November 2, 2018, the Company entered into a License, Development, Manufacturing and Supply Agreement (the “Tuzistra License Agreement”) with TRIS Pharma, Inc. (“TRIS”). Pursuant to the Tris License Agreement, TRIS granted the Company an exclusive license in the United States to commercialize Tuzistra XR. As consideration for the Products license, the Company: (i) made an upfront cash payment to TRIS; (ii) issued shares of Series D Convertible preferred stock to TRIS, which were converted into 0.4 million shares of the Company’s common stock during the year ended June 30, 2020; and (iii) will pay certain royalties to TRIS throughout the license term in accordance with the Tris License Agreement and (iv) could incur future payments if certain milestones are achieved.
The Tuzistra License Agreement was valued at $9.9 million and is amortized over the life of the Tris License Agreement up to twenty years. The amortization expense for fiscal 2020 and 2019 was $0.5 million and $0.3 million, respectively. The Company also agreed to make certain quarterly royalty payments to TRIS which will be calculated as a percentage of our Tuzistra XR net sales, payable within 45 days of the end of the applicable quarter.
Product Technology Rights
In November 2019, Aytu Therapeutics, LLC., acquired the Pediatric Portfolio. This transaction expanded our product portfolio with the addition of four prescription products, (i) Cefaclor for Oral Suspension, (ii) Karbinal® ER, (iii) Poly-Vi-Flor® and Tri-Vi-Flor™. The fair value of the acquired Product Technology Rights (the “Product Technology Rights”) utilized a Multiple-Period Excess Earnings Method model. The Company amortizes the Product Technology Rights over ten years, with total amortization expense of approximately $1.5 million and $0 for the years ended June 30, 2020 and June 30, 2019 respectively.
Karbinal ER. The Company acquired and assumed all rights and obligations pursuant to the Supply and Distribution Agreement, as Amended, with TRIS for the exclusive rights to commercialize Karbinal® ER in the United States (the “TRIS Karbinal Agreement”). The TRIS Karbinal Agreement’s initial term terminates in August of 2033, with an optional initial 20-year extension. The Company owes periodic royalties on sales of Karbinal as a percent of net revenues on a quarterly basis. As part of the agreement, the Company has agreed to pay TRIS a product make-whole payment of approximately $2.1 million per year through July 2023, totaling a minimum of $10.7 million as of June 30, 2020 (see Note 17).
Poly-vi-Flor & Tri-vi-Flor. The Company acquired and assumed all rights and obligations pursuant to a Supply and License Agreement and various assignment and release agreements, including a previously agreed to Settlement and License Agreements (the “Poly-Tri Agreements”) for the exclusive rights to commercialize Poly-Vi-Flor and Tri-Vi-Flor in the United States. The Company owes royalties to multiple parties based on a percentage of net revenues on a quarterly basis. There are no milestones, make-whole payments other otherwise any contingencies related to these agreements.
Cefaclor (cefaclor oral suspension). Cefaclor for oral suspension is a second-generation cephalosporin antibiotic suspension and is indicated for the treatment of numerous common infections caused by Streptococcus pneumoniae, Haemophilus influenzae, staphylococci, and Streptococcus pyogenes, and others. Aytu does not own or license any patents covering this product. The Company acquired the License, Supply and Distribution Agreement for rights to promote and commercialize Cefaclor within the United States. The Company is required to pay periodic royalties based on a percent of net revenues.
Patents and Trademarks Tradenames – Acquired from Innovus
On February 14, 2020, the Company and Innovus Pharmaceuticals, Inc. (“Innovus”) completed the Merger after successful approval of the Merger by the shareholders of the Company and Innovus at separate special meetings held on February 13, 2020. Upon completion of the Merger, the Company obtained 22 products with a combination of over 300 registered trademarks and/or patent rights including, but not limited to the following:
Patented Products
Trademarks
On February 14, 2020, upon completion of the Merger with Innovus, the Company recognized the fair value of the rental of the customer lists for $0.4 million and amortizes the asset over a useful life of 1.5 years.
The Company recognized the fair value of trademarks, patents or a combination of both for 18 distinct products that the Company markets, distributes and sells for approximately $11.4 million and amortizes the asset over a useful life of 3 – 10 years.
Patents and Tradenames – MiOXSYS
The cost of the oxidation-reduction potential (“ORP”) technology related patents for the MiOXSYS Systems was $0.4 million when they were acquired and are being amortized over the remaining U.S. patent life of approximately 15 years as of the date, which expires in March 2028. Aytu recorded the amortization expense totaling $0.03 and $0.03 million for the years ended June 30, 2020 and 2019, respectively. In June 2020, the Company decided to write off the entire remaining balance of the MiOXSYS patents, resulting in a loss of approximately $0.2 million for the year ended June 30, 2020, presented as Impairment of intangible assets in the Statement of Operations. This charge was a part of the Aytu BioScience reportable segment (see Note 18) The Company’s decision was based on the fact that the product demand has declined due to pandemic caused by the Coronavirus Disease 2019 (“COVID-19”). COVID-19 has caused a decline in demand for fertility services, which creates downstream impacts on demand for products such as MiOXSYS.
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Accrued Liabilities | Accrued liabilities consist of the following:
* Other accrued liabilities consist of accounting fee, samples expense and consultants fee, none of which individually represent greater than five percent of total current liabilities.
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Fair Value Considerations |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Considerations | 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 those 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:
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 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.
The following table presents Company’s financial liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020 and 2019, by level within the fair value hierarchy:
Warrant Derivative Liability. The warrant derivative liability was valued using the lattice valuation methodology because that model embodies the relevant assumptions that address the features underlying these instruments. The warrants related to the warrant derivative liability are not actively traded and are, therefore, classified as Level 3 liabilities. Significant assumptions in valuing the warrant derivative liability, based on estimates of the value of Aytu common stock and various factors regarding the warrants, were as follows as of issuance and as of June 30, 2020:
The following table sets forth a reconciliation of changes in the warrant derivative liability for the period ended June 30, 2020:
Contingent Consideration.
The Company classifies its contingent consideration liability in connection with the acquisition of Tuzistra, ZolpiMist and Innovus within Level 3 factors used to develop the estimated fair value are unobservable inputs that are not supported by market activity.
Natesto. On July 29, 2019, the Company and Acerus agreed to an Amended and Restated License and Supply Agreement (the “Acerus Amendment”), subject to certain conditions being satisfied prior to the Acerus Amendment becoming effective and enforceable. The Acerus Amendment eliminated the previously disclosed revenue-based milestone payments to Acerus that were expected to occur. The maximum aggregate milestones payable under the original agreement was $37.5 million. Upon the effectiveness of the Acerus Amendment on December 1, 2019, all royalty and milestone liabilities were eliminated. Upon the effectiveness of the Acerus Amendment, Acerus was granted the right to earn commissions on certain filled Natesto prescriptions. Additionally, Acerus assumed certain ongoing sales, marketing and regulatory obligations from the Company. This Acerus Amendment became effective December 1, 2019, resulting in a $5.2 million unrealized gain for the fiscal year 2020, due to the elimination of the revenue-based product milestones.
ZolpiMist. The contingent consideration, related to these royalty payments, was valued at $2.6 million using a Monte Carlo simulation, as of June 11, 2018. As of June 30, 2019, the contingent consideration was revalued at $2.3 million (Note 10). As of June 30, 2020, the contingent consideration was revalued at $0.2 million (Note 10). The contingent consideration accretion expense for fiscal 2020 and 2019 was $0.2 million and $0.3 million, respectively.
Tuzistra XR. At the November 2, 2018 acquisition date, the contingent consideration, related to this licensed asset, was initially valued at $8.8 million using a Monte Carlo simulation. The contingent consideration was revalued at $13.2 million and $16.0 million as of June 30, 2020 and 2019, respectively. The contingent consideration accretion expense for the year ended June 30, 2020 and 2019 was $0.4 million and $0.2 million, respectively.
Innovus. The Company recognized approximately $0.2 million in 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. There was no material change in this valuation as of June 30, 2020.
The following table sets forth a summary of changes in the contingent consideration for the period ended June 30, 2020:
The contingent consideration was valued using the Monte-Carlo valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Contingent consideration is not actively traded and therefore classified as Level 3.
Significant assumptions in valuing the contingent consideration were as follows as of June 30, 2020 and 2019, respectively:
Contingent value rights
Contingent value rights (“CVRs”) represent contingent additional consideration of up to $16 million payable to satisfy future performance milestones related to the Innovus Merger. Consideration can be satisfied in up to 4.7 million 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. As of June 30, 2020, the Company paid out 1.2 million shares of the Company’s common stock to satisfy the first $2 million milestone, which relates to the Innovus achievement of $24.0 million in revenues during the 2019 calendar year. The Company has a remaining maximum of $14.0 million of additional contingent value rights to satisfy over the remaining four years. The contingent value rights accretion expense for fiscal 2020 and 2019 was $0.2 million and $0 million, respectively.
Non-Recurring Fair Value Measurements
The following table represents those asset and liabilities measured on a non-recurring basis for the fiscal year 2020 as a result of the (i) November 1, 2019 acquisition of the Pediatrics Portfolio and (ii) the February 14, 2020 Innovus Merger.
Acquisition of the Pediatric Portfolio
Product technology rights. The Company recognized the product technology right intangible asset acquired as part of the November 1, 2019 acquisition of the Pediatric Portfolio. This intangible asset consists of the acquired product technology rights consisting of (i) Karbinal ER, (ii) Cefaclor, and (iii) Poly-Vi-Flor and Tri-Vi-Flor. The Company utilized a Multiple-Period Excess Earnings Method model.
(*) Valuation performed as of November 1, 2019. As a non-recurring fair value measurement, there is no remeasurement at each reporting period unless indications exist that the fair value of the asset has been impaired. There were no indicators as of June 30, 2020 that the fair value of the Product technology rights was impaired.
Goodwill. Goodwill represents the fair value of consideration transferred and liabilities assumed in excess of the fair value of assets acquired. Remeasurement of the fair value of goodwill only arises upon either (i) indicators that the fair value of goodwill has been impaired, or (ii) during the annual impairment test performed at June 30 of each fiscal year. There were no indicators observed or identified during and as of the period from November 1, 2019 through June 30, 2020.
Fixed payment arrangements. The Company assumed obligations due to an investor including fixed and variable payments. 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, of which $15.0 million was paid down early in June 2020. 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 due and paid. The variable payment obligation continues until the earlier of: (i) aggregate variable payments of approximately $9.3 million have been made, or (ii) February 12, 2026. In addition, the Company assumed fixed, product minimums royalties of approximately $2.1 million per annum through February 2023.
(≠) Valuation performed as of November 1, 2019. As a non-recurring fair value measurement, there is no remeasurement at each reporting period unless indicates that the circumstances that existed as of the November 1, 2019 measurement date indicate that the carrying value is no longer indicative of fair value.
Innovus Merger
Customer lists. The Company recognized the fair value of the customer lists that existed as of the Valuation Date to be $0.4 million. The Company utilized an income method approach.
Trademarks and patents. The Company recognized the fair value of trademarks, patents or a combination of both for 18 distinct products that the Company markets, distributes and sells. An Income Approach known as the Relief-From-Royalty Method was utilized to value the product distribution rights associated with each of the 18 products associated with trademarks and patents. A royalty rate of 15% was used based on upon a range of observable royalties between the range of 7.5% and 34.5%.
Goodwill. Goodwill represents the fair value of consideration transferred and liabilities assumed in excess of the fair value of assets acquired. Remeasurement of the fair value of goodwill only arises upon either (i) indicators that the fair value of goodwill has been impaired, or (ii) during the annual impairment test performed at June 30 of each fiscal year. There were no indicators observed or identified during and as of the period from February 14, 2020 through June 30, 2020.
Innovus Notes Payable. The Innovus Notes Payable represent twelve financial obligations assumed as part of the Innovus Merger. These notes are comprised of ten uncollateralized obligations with a face value of approximately $3.6 million and two notes secured by inventory held fulfillment centers with Amazon, Inc. and a face value of approximately $0.4 million (the “Innovus Notes”). The Innovus Notes were revalued using the estimated cost of capital at the valuation date for a total estimated fair value of approximately $3.1 million.
The ten unsecured Innovus Notes consist of ten separate loans with implied effective interest rates ranging between 14.1% and 73.4%. The weighted average interest rate for these notes was 39.5%, while the weighted average interest rate for the most recent loan (January 9, 2020) was 41.4%. All ten of the notes are unsecured, and as of the valuation date there was significant risk associated with their repayment. Accordingly, the Company has revalued the notes using an effective rate of 40% and concluded that the fair value at the February 14, 2020 Innovus Merger date was approximately $2.7 million.
The secured Innovus Notes due to Amazon had maturities of less than one year and stated rates of 17.2% and 14.7% respectively. Due to the fact that the most recent loan had a stated rate of 14.7% and that the weighted average rate for these two loans was 15.6%, the Company has estimated the current value of the loans using an effective rate of 15% and concluded that the fair value of the secured Innovus Notes totaled approximately $0.4 million.
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 year ended June 30, 2020:
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Note Receivable | |
Note Receivable | On September 12, 2019, the Company announced it had entered into a definitive merger agreement with Innovus (see Note 1 and Note 4). to acquire Innovus which specializes in commercializing, licensing and developing safe and effective supplements and over-the-counter consumer health products. As part of the negotiations with Innovus, the Company agreed to provide a short-term, loan in the form of a $1.0 promissory note on August 8, 2019 (the “Innovus Note”). In addition, on October 11, 2019, the Company amended the original promissory note, providing an additional approximately $0.4 million of bridge financing under the same terms and conditions as the Innovus Note. Upon the closing of the Innovus Merger, this note receivable was used to offset a portion of the $8 million initial closing purchase price and was deducted from the consideration value used when determining the number of shares of the Company’s common stock issued upon closing of the Innovus Merger (see Note 4).
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income tax benefit resulting from applying statutory rates in jurisdictions in which Aytu is taxed (Federal and various states) differs from the income tax provision (benefit) in the Aytu financial statements. The following table reflects the reconciliation for the respective periods.
Deferred income taxes arise from temporary differences in the recognition of certain items for income tax and financial reporting purposes. The approximate tax effects of significant temporary differences which comprise the deferred tax assets and liabilities are as follows for the respective periods:
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carry back opportunities and tax planning strategies in making the assessment. The Company believes it is more likely than not it will realize the benefits of these deductible differences, net of the valuation allowance provided.
The Company has federal net operating losses of approximately $147 million and $73.9 million as of June 30, 2020 and June 30, 2019, respectively that, subject to limitation, may be available in future tax years to offset taxable income. Of the available federal net operating losses, approximately $46.9 million can be carried forward indefinitely while the balance will begin to expire in 2031. The available state net operating losses, if not utilized to offset taxable income in future periods, will begin to expire in 2025 through 2038. Under the provisions of the Internal Revenue Code, substantial changes in the Company's ownership may result in limitations on the amount of NOL carryforwards that can be utilized in future years. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized. As of June 30, 2020, the company had various state NOL carryforwards. The determination of the state NOL carryforwards is dependent on apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards.
As of June 30, 2020, and 2019, the Company has no liability for gross unrecognized tax benefits or related interest and penalties.
Aytu has made its best estimates of certain income tax amounts included in the financial statements. Application of the Company's accounting policies and estimates, however, involves the exercise of judgement and use of assumptions as to future uncertainties and, as a result, could differ from these estimates. In arriving at its estimates, factors the Company considers include how accurate the estimates or assumptions have been in the past, how much the estimates or assumptions have changed and how reasonably likely such changes may have a material impact. Under the general statute of limitations, the Company would not be subject to federal or Colorado income tax examinations for tax years prior to 2016 and 2015, respectively. However, given the net operating losses generated since inception, all tax years since inception are subject to examination.
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Capital Structure |
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Equity [Abstract] | |
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.
At June 30, 2020 and June 30, 2019, Aytu had 125,837,357 and 17,538,071 common shares outstanding, respectively, and 0 and 3,594,981 preferred shares outstanding, respectively.
Included in the common stock outstanding are 4,186,056 shares of restricted stock issued to executives, directors, employees and consultants.
In September 2019, investors holding shares of Series C preferred stock exercised their right to convert 443,833 shares of Series C preferred stock into 443,833 shares of common stock. There are no remaining Series C preferred stock outstanding.
In October 2019, Armistice Capital converted 2,751,148 shares of Series E convertible preferred stock into 2,751,148 shares of common stock. There are no remaining Series E preferred stock outstanding.
In October 2019, the Company issued 10,000 shares of Series F Convertible preferred stock, with a face value of $1,000 per share, and convertible at a conversion price of $1.00 (the “Current Conversion Price”). The terms of the Series F Convertible Preferred include a conversion price reset provision in the event a future financing transaction is priced below the Current Conversion Price. The Company has determined that concurrent with the adoption of ASU 2017-11, this down-round provision feature reflects a beneficial conversion feature contingent on a future financing transaction at a price lower than the Current Conversion Price. As the Series F Convertible Preferred stock is an equity classified instrument, any accounting arising from a future event giving rise to the beneficial conversion feature would have no net impact on the Company’s financial statements, as all activity would be recognized within Additional Paid-in-Capital and offset.
In addition and concurrent with the Series F Convertible preferred stock issuance, the Company issued 10,000,000 warrants, with an exercise price of $1.25 and a term of five years. These warrants feature a contingent cashless exercise provision. During the three months ended December 31, 2019, the cashless exercise contingency was satisfied, reducing the strike price of the October 2019 Warrants to $0. During the three months ended March 31, 2020, an investor exercised 5,000,000 of the warrants using the cashless exercise provision. In April 2020, another investor exercised the remaining 5,000,000 of the October 2019 warrants using the cashless exercise provision, resulting in no remaining October 2019 warrants.
In November 2019, in connection with the Pediatric Portfolio acquisition, the Company issued 9,805,845 shares of Series G Convertible Preferred stock, of which, Pediatric Portfolio converted 9,805,845 shares of the Series G Convertible Preferred stock were converted into 9,805,845 shares of common stock in April of 2020.
In February 2014, in connection with the Innovus Merger, the Company issued (i) 3,810,293 shares of the Company’s common stock and (ii) 1,997,736 shares of Series H Convertible Preferred stock, of which, 1,997,736 shares of the Series H Convertible Preferred stock were converted into 1,997,736 shares of common stock in March 2020.
In March 2020, the Company entered into three separate 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. The following summarizes the March Offerings, including total capital raised from both the issuance of common stock and subsequent warrant exercises.
On March 19, 2020, the Company entered into a securities purchase agreement with certain institutional investors (the “the March 19, 2020 Purchasers”), pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 12,539,197 shares of the Company’s common stock (the “Common Stock”) at a purchase price per share of $1.595 and (ii) warrants to purchase up to 12,539,197 shares of Common Stock (the “March 19, 2020 Warrants”) at an exercise price of $1.47 per share, for aggregate gross proceeds to the Company of $20.0 million, before deducting placement agent fees and other offering expenses payable by the Company. The March 19, 2020 Warrants are exercisable immediately upon issuance and have a term of one year from the issuance date. In addition, the Company issued warrants with an exercise price of $1.9938 per share to purchase up to 815,047 shares of common stock (the “March 19, 2020 Placement Agent Warrants”). The March 19, 2020 Placement Agent Warrants have a term of five years from the issuance date.
Since March 19, 2020, Aa total of 1.2 million March 19, 2020 Warrants have been exercised through May 5, 2020, for total proceeds of $1.7 million., of which 0.7 million March 19, 2020 Warrants were exercised through March 31, 2020, for total proceeds of $1.1 million.
On March 12, 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 16,000,000 shares of the Company’s common stock at a purchase price per share of $1.25 and (ii) warrants to purchase up to 16,000,000 shares of Common Stock (the “March 12, 2020 Warrants”) at an exercise price of $1.25 per share, for aggregate gross proceeds to the Company of $20.0 million, before deducting placement agent fees and other offering expenses payable by the Company (the “Registered Offering”). The March 12, 2020 Warrants are exercisable immediately upon issuance and have a term of one year from the issuance date. In addition, the Company issued warrants with an exercise price of $1.5625 per share to purchase up to 1,040,000 shares of common stock (the “March 12, 2020 Placement Agent Warrants”). The March 12, 2020 Placement Agent Warrants have a term of five years from the issuance date.
Since March 12, 2020, a total of 13 million March 12, 2020 Warrants have been exercised through May 5, 2020, for total proceeds of approximately $16.3 million., of which approximately 10.5 million March 12, 2020 Warrants were exercised through March 31, 2020, for total proceeds of $13.1 million.
On March 10, 2020, Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company agreed to sell and issue, in a registered direct offering, an aggregate of (i) 4,450,000 shares of the Company’s common stock (the “Common Stock”) at a purchase price per share of $1.15 and (ii) pre-funded warrants to purchase up to 3,376,087 shares of Common Stock (the “Pre-Funded Warrants”) at an effective price of $1.15 per share ($1.1499 paid to the Company upon the closing of the offering and $0.0001 to be paid upon exercise of such Pre- Funded Warrants), for aggregate gross proceeds to the Company of approximately $9.0 million, before deducting placement agent fees and other offering expenses payable by the Company (the “Registered Offering”). The Pre-Funded Warrants were immediately exercised upon close. In addition, the Company issued warrants with an exercise price of $1.4375 per share to purchase up to 508,696 shares of common stock (the “March 10, 2020 Placement Agent Warrants”). The March 10, 2020 Placement Agent Warrants have a term of five years from the issuance date.
Since March 10, 2020 Between March 10, 2020 and March 31, 2020, a total of 6.0 million shares of the Company’s October 2018 $1.50 Warrants (the “October 18 $1.50 Warrants”) were exercised, resulting in proceeds of approximately $9.0 million.
In total, the Company has raised net proceeds of approximately $71.3 million, net of fees, from the March Offerings and related warrant exercises, as well as exercises of the October 2018 Warrants. The net proceeds received by the Company from the March Offerings and related warrant exercise will be used for general corporate purposes, including working capital.
In addition, since January 1, 2020, the following Convertible Preferred Stock issuances were converted into the Company’s common stock: 400,000 shares of the Series D Convertible Preferred Stock were converted into 400,000 shares of the Company’s common stock. There are no remaining shares of the Series D Convertible Preferred Stock outstanding at June 30, 2020.
In June 2020, we completed an at-the-market offering program, which allows us to sell and issue shares of our common stock from time-to- time. The company issued 4,302,271 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.
Year Ended June 30, 2019
On October 9, 2018, we completed an underwritten public offering for, total gross proceeds of $15.2 million which includes the full exercise of the underwriters’ over-allotment option to purchase additional shares and warrants, before deducting underwriting discounts, commissions and other offering expenses payable by the Company.
The securities offered by the Company consisted of: (i) an aggregate of 457,007 shares of its common stock; (ii) an aggregate of 8,342,993 shares of its Series C Convertible preferred stock convertible into an aggregate of 8,342,993 shares of common stock at a conversion price of $1.50 per share; and (iii) warrants to purchase an aggregate of 8,800,000 shares of common stock at an exercise price of $1.50 per share. The securities were issued at a public offering purchase price of $1.50 per fixed unit consisting of: (a) one share of common stock and one warrant; or (b) one share of Series C preferred stock and one warrant. The common stock issued had a relative fair value of $533,000 in the aggregate and a fair value of $594,000 in the aggregate. The Series C preferred stock issued had a relative fair value of $9.7 million in the aggregate and a fair value of $10.8 million in the aggregate. The warrants are exercisable upon issuance and will expire five years from the date of issuance. The warrants have a relative fair value of $1.6 million in the aggregate, a fair value of $1.8 million in the aggregate, and generated gross proceeds of $88,000. The conversion price of the Series C preferred stock in the offering as well as the exercise price of the warrants are fixed and do not contain any variable pricing features, or any price based anti-dilution features.
In connection with this offering, the underwriters exercised their over-allotment option in full, purchasing an additional 1,320,000 shares of common stock and 1,320,000 warrants. The common stock issued had a relative fair value of $1.5 million and a fair value of $1.7 million. The warrants have the same terms as the Warrants sold in the registered offering. These warrants have a relative fair value of $238,000, a fair value of $265,000, and gross proceeds of $13,000, which was the purchase price per the underwriting agreement.
In October 2018, Aytu issued 9,000 shares of common stock to a former employee at a fair value of $12,000.
On November 2, 2018, the Company issued 400,000 shares of Series D Convertible preferred stock as consideration for a purchased asset valued at $520,000.
On April 18, 2019, pursuant to the exchange agreement between Aytu and Armistice, which was approved by the stockholders of the Company on April 12, 2019, Aytu exchanged the Armistice Note into: (1) 3,120,064 shares of common stock of the Company, (2) 2,751,148 shares of Series E Convertible preferred stock of the Company, and (3) a Common Stock Purchase Warrant exercisable for 4,403,409 shares of common stock of the Company. The aggregate fair value of shares issued was approximately $4.7 million.
As of June 30, 2019, warrants issued from the October registered offering to purchase an aggregate of 250,007 shares of common stock were exercised for aggregate gross proceeds to our Company of approximately $375,000.
As of June 30, 2019, investors holding shares of Series C preferred stock exercised their right to convert 7,899,160 shares of Series C preferred stock into 7,899,160 shares of common stock. As of June 30, 2019, Aytu has 443,833 shares of Series C preferred stock outstanding.
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Equity Incentive Plan |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan | 2015 Stock Option and Incentive Plan. On June 1, 2015, the Company’s stockholders approved the 2015 Stock Option and Incentive Plan (the “2015 Plan”), which, as amended in July 2017, provides for the award of stock options, stock appreciation rights, restricted stock and other equity awards for up to an aggregate of 3.0 million shares of common stock. The shares of common stock underlying any awards that are forfeited, canceled, reacquired by Aytu prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2015 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan. As of June 30, 2020, we have 4,837 shares that are available for grant under the 2015 Plan.
On December 23, 2019, the Company filed Form S-4 related to the proposed Innovus merger, in which shareholders are asked to approve an increase to 5.0 million total shares of common stock in the 2015 Plan. As of the date of this report, Aytu shareholders approved the proposal to increase the total number of common shares in the 2015 Plan.
Stock Options
Employee Stock Options:
In June 2020, the Company granted 200,000 shares of stock options to executive officers pursuant to the 2015 Plan, which vest over four years. Compensation expense related to these options will be fully recognized over the four-year vesting period.
In June 2020, the Company granted 50,000 shares of stock options to board of directors pursuant to the 2015 Plan, which vest on the one employee pursuant to the 2015 Plan, which vest over four years. Compensation expense related to these options will be fully recognized over the four-year vesting period.
In June 2020, the Company granted 180,000 shares of stock options to board of directors pursuant to the 2015 Plan, which vest on the one-year anniversary of the grant date. Compensation expense related to these options will be fully recognized over the one-year vesting period.
In January 2020, the Company granted 12,500 shares of stock options to 5 employees pursuant to the 2015 Plan, which vest immediately upon grant. Compensation expense related to these options were fully recognized in the three months ended March 31, 2020.
In November 2019, the Company granted 327,000 shares of stock options to 28 employees pursuant to the 2015 Plan, which vest over four years. Compensation expense related to these options will be fully recognized over the four-year vesting period.
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 fair value of all options granted during the year ended June 30, 2020 utilized the following range of assumptions:
Stock option activity is as follows:
The following table details the options outstanding at June 30, 2020 by range of exercise prices:
As of June 30, 2020, there was $669,000 of total unrecognized stock-based compensation expense related to employee non-vested stock options. The Company expects to recognize this expense over a weighted-average period of 2.80 years. As of June 30, 2019, there was $7,000 of total unrecognized stock-based compensation expense related to employee non-vested stock options. The Company expected to recognize this expense over a weighted-average period of 0.32 years. As of Jun 30, 2020, the aggregate intrinsic value of the stock options outstanding was approximately $0.1 million.
Restricted Stock
Restricted stock activity is as follows:
Activity during Year Ended June 30, 2020
Activity During the Year Ended June 30, 2019
Under the 2015 Plan, there was $5,035,000 of total unrecognized stock-based compensation expense related to the non-vested restricted stock as of June 30, 2020. The Company expects to recognize this expense over a weighted-average period of 6.37 years. As of June 30, 2020, the aggregate remaining intrinsic value for the Company’s restricted stock units was $5.9 million.
The Company previously issued 1,540 shares of restricted stock outside the Company’s 2015 Plan, which vest in July 2026. The unrecognized expense related to these shares was $1,197,761 as of June 30, 2020 and is expected to be recognized over the weighted average period of 6.02 years.
Stock-based compensation expense related to the fair value of stock options and restricted stock was included in the statements of operations as selling, general and administrative expenses as set forth in the table below. Aytu determined the fair value of stock compensation as of the date of grant using the Black-Scholes option pricing model and expenses the fair value ratably over the service period which is commensurate with vesting period. The following table summarizes stock-based compensation expense for the stock option and restricted stock issuances for fiscal 2020 and 2019:
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Warrants |
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Warrants | In connection with the October 2019 private placement financing, the Company issued warrants (the October 2019 Warrants) to the investors to purchase an aggregate of 10,000,000 shares of the Company’s common stock at an exercise price of $1.25 and a term of five years. These warrants feature a contingent cashless exercise provision. During the three months ended December 31, 2019, the cashless exercise contingency was satisfied, reducing the strike price of the October 2019 Warrants to $0. During the three months ended March 31, 2020, an investor exercised 5,000,000 of the warrants using the cashless exercise provision. In April 2020, another investor exercised the remaining 5,000,000 of the October 2019 warrants using the cashless exercise provision, resulting in no remaining October 2019 warrants as of April 30, 2020.
In February 14, 2020, the Company assumed as part of the Innovus Merger 348,103 warrants to purchase 348,103 shares of the Company’s common stock with exercise prices ranging from $18.00 to $47.00 with terms ending between September of 2020 through March of 2023.
In connection with the March Offerings, the following warrants were granted, and potentially subsequently exercised:
While these warrants are classified as a component of equity, in order to allocate the fair value of the March offerings between the investor warrants and the placement agent warrants, the Company was required to calculate the relative fair value of the warrants issued in March. These warrants issued had a relative fair value of $11.2 million. All warrants issued in March 2020 were valued using a Black-Scholes model. In order to calculate the fair value of the warrants, certain assumptions were made, including the selling price or fair market value of the underlying common stock, risk-free interest rate, volatility, expected dividend yield, and contractual life. Changes to the assumptions could cause significant adjustments to valuation. The Company estimated a volatility factor utilizing a weighted average of comparable published betas of peer companies. 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.
Significant assumptions in valuing the warrants issued during the year are as follows:
A summary of equity-based warrants is as follows:
(*) During the three months March 31, 2020, an investor exercised 5.0 million of the October 2019 private placement warrants under the cashless exercise provision. In April 2020, another investor exercised all remaining 5.0 million October 2019 private placement warrants. There are no more October 2019 private placement warrants outstanding as of June 30, 2020.
During the fiscal year 2020, warrants issued from the October 2018 registered offering and March 2020 offerings to purchase an aggregate of 20,181,994 shares of common stock were exercised for aggregate gross proceeds to our Company of approximately $27 million.
A summary of liability warrants is as follows:
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Employee Benefit Plan |
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Retirement Benefits [Abstract] | |
Employee Benefit Plan | Aytu has a 401(k) plan that allows participants to contribute a portion of their salary, subject to eligibility requirements and annual IRS limits. The Company matches 50% of the first 6% contributed to the plan by employees. In fiscal 2020, the Company’s match was approximately $0.2 million.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and contingencies are described below and summarized by the following table as of June 30, 2020:
Prescription Database
In May 2016, the Company entered into an agreement with a vendor that provides 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, ZolpiMist and Tuzistra. 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 Payment Obligations
Fixed Obligations. 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 (the “Balloon Payment Obligation”).
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.
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. There is the potential for the second fixed obligation to increase an additional $1.8 million depending on product sales, which could trigger additional amounts to be paid.
The Fixed Payment Obligation is secured by some of the Company’s Pediatric Portfolio and all rights thereon to those products in the event of failure to perform under the Fixed Payment Obligation consisting primarily of Cefaclor and Karbinal.
Product Make-whole. 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. 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 contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31, of 70,000 units through 2023, with a minimum fixed payment obligation of approximately $2.1 million per year. 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 2033. The annual payment is due in August of each year.
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, the Company merged with and into Innovus and entered into a Contingent Value Rights Agreement (the “CVR Agreement”). Each CVR will entitle 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 out the first CVR Milestone in the form of approximately 1.2 million 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.
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 $0.5 million when certain levels of FlutiCare sales are achieved.
Inventory Purchase Commitment
On May 1, 2020, the Company 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 each of which amount to $1.0 million.
Milestone Payments
In connection with the Company’s intangible assets, the Company has certain milestone payments, totaling $3.0 million, payable at a future date, are not directly tied to future sales, but upon other events certain to happen. These obligations are included in the valuation of the Company’s contingent consideration (see Note 10).
Offices Leases
In September 2015, the Company entered into a 37-month operating lease in Englewood, Colorado. In October 2017, the Company signed an amendment to extend the lease for an additional 24 months beginning October 1, 2018. In April 2019, the Company extended the lease for an additional 36 months beginning October 1, 2020. This lease has base rent of approximately $10 thousand a month, with total rent over the term of the lease of approximately $355 thousand.
In June 2018, the Company entered into a 12-month operating lease, beginning on August 1, 2018, for office space in Raleigh, North Carolina. This lease has base rent of approximately $1 thousand a month, with total rent over the term of the lease of approximately $13 thousand.
In October 2017, the Company’s subsidiary, Innovus, entered into a commercial lease agreement for 16,705 square feet of office and warehouse space in San Diego, California that commenced on December 1, 2017 and continues until April 30, 2023. The initial monthly base rent was $21,000 with an approximate 3% increase in the base rent amount on an annual basis, as well as, rent abatement for rent due from January 2018 through May 2018. The Company holds an option to extend the lease an additional 5 years at the end of the initial term. On November 18, 2019 (“decision date”), Innovus determined it would no longer utilize the warehouse portion of the lease space, representing approximately 9,729 square feet, and as of December 31, 2019 (“cease use date”) ceased using any such space. In accordance with ASC 842, Leases, the Company assessed the asset value of the separate lease component and amortized such asset from the decision date through the cease use date.
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Net Loss Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 of the years ended June 30, 2020 and 2019, respectively, presented, the basic and diluted loss per share were the same for the years ended June 30, 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 the years ended June 30, 2020 and 2019 are anti-dilutive, and therefore excluded from the calculation of diluted earnings per share.
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | The Company’s chief operating decision maker (the “CODM”), who is the Company’s Chief Executive Officer, allocates resources and assesses performance based on financial information of the Company. The CODM reviews financial information presented for each reportable segment for purposes of making operating decisions and assessing financial performance.
Aytu manages the Company and aggregated our operational and financial information in accordance with two reportable segments: Aytu BioScience and Aytu Consumer Health. The Aytu BioScience segment consists of the Company’s prescription products. The Aytu Consumer Health segment contains the Company’s consumer healthcare products, which was the result of the Innovus Merger. Select financial information for these segments is as follows:
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Note Payable |
12 Months Ended |
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Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Note Payable | The Aytu BioScience Note. On February 27, 2020, the Company issued a $0.8 million promissory note (the “Note”) and received consideration of $0.6 million. The Note had an eight-month term with principal and interest payable at maturity and the recognition of approximately $0.2 million of debt discount related to the issuance of promissory notes. The discount is amortized over the life of the promissory notes through the fourth quarter of calendar 2020. During the year ended June 30, 2020, and June 30, 2019, the Company recorded approximately $0.1 million and $0, respectively, of related amortization.
The Innovus Notes. Upon completion of the Merger, the Company assumed approximately $3.1 million of debt comprised of twelve different note agreements “Innovus Notes” (see Note 1, 2 and 10).
On April 21, 2020, the Company entered into an amendment with one investor who held four different note agreements to extend the maturity date to August 1, 2020 from April 15, 2020 and to amend the conversion feature description within the note agreement. On April 27, 2020, this investor provided a notice of conversion to convert the four outstanding note agreements to shares of common stock. In connection with the notice of conversion, the Company issued 1.5 million shares of common stock in exchange for the settlement of principal and interest due totaling $1.8 million. The fair value of the shares of common stock issued was based on the market price of the Company’s common stock on the date of the notice of conversion was determined to be $2.1 million. Due to the conversion of the principal and interest balance of $1.8 million into shares of common stock, the transaction was recorded as a debt extinguishment and the fair value of the shares of common stock issued in excess of the settled principal and interest balance totaling $0.3 million was recorded as a loss on debt extinguishment in the accompanying consolidated statement of operations.
On May 11, 2020, the Company entered into an amendment with one investor who held two different note agreements to amend the conversion feature description within the note agreement. On May 11, 2020, this investor provided a notice of conversion to convert the two outstanding note agreements to shares of common stock. In connection with the notice of conversion, the Company issued 0.3 million shares of common stock in exchange for the settlement of principal and interest due totaling $0.5 million. The fair value of the shares of common stock issued was based on the market price of the Company’s common stock on the date of the notice of conversion was determined to be $0.4 million. Due to the conversion of the principal and interest balance of $0.5 million into shares of common stock, the transaction was recorded as a debt extinguishment and the fair value of the shares of common stock issued in deficit of the settled principal and interest balance totaling $0.1 million was recorded as a gain on debt extinguishment in the accompanying consolidated statement of operations.
As of June 30, 2020, there remained one outstanding note agreement with a net amount due of approximately $0.2 million which is required to be paid monthly through January 2021. The remaining note does not have any interest charge associated with it. For the period from February 14, 2020 through June 30, 2020, the Company recorded approximately $0.4 million of amortization of the debt discount initially recorded at the date of the note agreements.
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Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions | Tris Pharma, Inc.
On November 2, 2018, the Company entered into a License, Development, Manufacturing and Supply Agreement (the “Tris License Agreement”) with TRIS (See Note 8). On November 1, 2019, the Company acquired the rights to Karbinal as a result of the acquisition of the Pediatric Portfolio from Cerecor, Inc. (See Notes 4 and 17). Mr. Ketan Mehta serves as a Director on the Board of Directors of the Company, and is also the Chief Executive Officer of TRIS. During the twelve-months ended June 30, 2020, the Company paid TRIS approximately $1.3 and $1.2 million for the years ended June 30, 2020 and 2019, respectively for a combination of royalty payments, inventory purchases and other payments as contractually required. The Company’s liabilities, including accrued royalties, contingent consideration and fixed payment obligations were $22.9 million and $16.0 million as of June 30, 2020 and 2019, respectively.
In March 2020, TRIS converted all the 400,0000 Series D Convertible preferred stock into 400,000 shares of the Company’s common stock.
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Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Events | Innovus Pharmaceuticals, Inc.
On August 28, 2020, the Company’s subsidiary Innovus 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 a make 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. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation. The audited consolidated financial statements include the operations of Aytu and its wholly-owned subsidiaries, Aytu Women’s Health, LLC, Aytu Therapeutics, LLC and Innovus Pharmaceuticals, Inc. All significant inter-company balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
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Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash. Aytu considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consists primarily of amounts held in certificate of deposit investments to maintain certain credit amounts for the Company's business credit cards. The Company’s investment policy is to preserve principal and maintain liquidity. The Company periodically monitors its positions with, and the credit quality of the financial institutions with which it invests. Periodically, throughout the year, and as of June 30, 2020, the Company has maintained balances in excess of federally insured limits.
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Accounts Receivable | Accounts Receivable. Accounts receivable are recorded at their estimated net realizable value. The Company evaluates collectability of accounts receivable on a quarterly basis and records a reserve, if any, accordingly. The Company recognized a reserve of $0.4 million and $0.0 million as of June 30, 2020 and 2019, respectively. The Company does not charge interest on its outstanding trade receivables as its standard trade practices. However the Company does reserve the right to such charges as circumstances arise.
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Inventories | 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. Aytu periodically reviews the composition of its inventories in order to identify obsolete, slow-moving or otherwise unsaleable items. If unsaleable items are observed and there are no alternate uses for the inventory, Aytu will record a write- down to net realizable value in the period that the impairment is first recognized. Therefore, we currently have $1.3 million and $0 reserved for slow moving inventory as of June 30, 2020 and 2019, respectively.
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Fixed Assets | Fixed Assets. Fixed assets are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. Leasehold improvements are amortized over the term of the lease agreement or the service lives of the improvements, whichever is shorter. The Company begins depreciating assets when they are placed into service. Maintenance and repairs are expensed as incurred.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments.
Cash, cash equivalents, restricted cash, accounts receivable, and accounts payable. The carrying amounts of financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their fair value due to their short maturities.
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 our 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.
Liability and equity classified warrants. The Company accounts for liability classified warrants 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. Equity classified financial instruments are valued using a Black-Scholes model. Changes in the fair value of liability classified derivative financial instruments in subsequent periods were recorded as derivative income or expense for the warrants and reported as a component of cash flows from operations. During the year ended June 30, 2020, such changes in the fair value of the Company’s liability classified derivative liabilities was less than $0.1 million.
Contingent value rights. 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 remeasured both for future expected payout at well as the increase fair value due to the time value of money. These gains or losses, if any, are included as a component of operating cash flows.
Fixed Payment Arrangements. Fixed payment arrangements are comprised of minimum product payment obligations relating to either make whole payments or fixed minimum royalties arising from the acquisition of the Pediatric Portfolio. These were recognized at their amortized cost basis using a market appropriate discount rate and are accreted up to their ultimate face value over time. These are one-time measurements and remeasurement at each reporting period is not recognized at as a component of earnings each reporting period. However, if the Company determines 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, such changes would be reflected in the Company’s footnote disclosures..
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Revenue Recognition | Revenue Recognition. The Company generates revenue from product sales and license sales. The Company recognizes 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) recognition of revenue when, or as the Company satisfies each performance obligation.
Aytu BioScience Segment (Note 19)
Product sales consist of sales of its prescription related products from both the (i) Pediatric Portfolio and (ii) Primary Care Portfolio principally to a limited number of wholesale distributors and pharmacies in the United States, which account for the largest portion of our total prescription products revenue. International sales are made primarily to specialty distributors, as well as to hospitals, laboratories, and clinics, some of which are government owned or supported (collectively, its “Customers”).
Products are generally shipped “free-on- board” destination when shipped domestically within the United States and if shipped internationally, products are shipped “free-on-board” shipping point, as those are the agreed-upon contractual terms.
Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers, or for new customers, upon review of customer financial condition and credit history. Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from coupons, discounts, chargebacks and distributor fees, processing fees, as well as allowances for returns and government rebates. The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. Provision balances related to estimated amounts payable to direct customers are netted against accounts receivable from such customers. Balances related to indirect customers are included in accounts payable and accrued liabilities. Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the Company’s historical experience and specific known market events and trends.
Aytu Consumer Health Segment (Note 19)
The Company generates revenues from its Consumer Health Portfolio from product sales and the licensing of the rights to market and commercialize our products. Sales from the Company’s Aytu Consumer Health division are generally recognized ”free-on-board” shipping point, as those are the agreed-upon contractual terms. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by us from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.
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Customer Contract Costs | Customer Contract Costs. The Company has elected to adopt the practical expedient on expensing the incremental costs to obtain a contract, given the expectation that any amounts attributable to obtaining such a contract would be satisfied within one year.
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Customer Concentrations | Customer Concentrations. The following customers contributed greater than 10% of the Company's gross revenue during the year ended June 30, 2020 and 2019, respectively. The customers, sometimes referred to as partners or customers, are large wholesale distributors that resell our products to retailers. As of June 30, 2020, three customers accounted for 46% of gross revenue. As of June 30, 2019, four customers accounted for 87% of gross revenue. The revenue from these customers as a percentage of gross revenue was as follows:
The loss of one or more of the Company's significant partners or customers could have a material adverse effect on its business, operating results or financial condition.
We are also subject to credit risk from our accounts receivable related to our product sales. Historically, we have not experienced significant credit losses on our accounts receivable and we do not expect to have write-offs or adjustments to accounts receivable which would have a material adverse effect on our financial position, liquidity or results of operations. As of June 30, 2020, four customers accounted for 61% of gross accounts receivable. As of June 30, 2019, four customers accounted for 88% of gross accounts receivable.
In addition, the Company is owed approximately $3.6 million as of June 30, 2020 by Cerecor that arose as a result of certain transition processes that caused customer payments on the Pediatric Portfolio products to continue to be deposited in Cerecor’s account. The Company and Cerecor are expected to finalize the settlement of these amounts in the first half of the fiscal year ended June 30, 2021.
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Estimated Sales Returns and Allowances | Estimated Sales Returns and Allowances. Aytu records estimated reductions in revenue for potential returns of products by customers. As a result, the Company must make estimates of potential future product returns and other allowances related to current period product revenue. In making such estimates, the Company analyzes historical returns, current economic trends and changes in customer demand and acceptance of our products. If the Company were to make different judgments or utilize different estimates, material differences in the amount of the Company’s reported revenue could result. As of June 30, 2020, and 2019, the Company accrued $1.3 million and $0.1 million, respectively, in our estimated returns allowance. Estimates of potential returns and allowances are recorded each quarter for the difference between estimates and actual results that become available.
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Costs of Sales | Costs of Sales. Costs of sales consists primarily of the direct costs of the Company’s products acquired from third-party manufacturers as well as certain royalties owed on certain of the Company’s products. Shipping and handling costs are also included in costs of sales for all periods presented.
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Stock-Based Compensation | Stock-Based Compensation. Aytu accounts for stock-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant over the period of service. Stock option grants are valued on the grant date using the Black-Scholes option pricing model and recognizes compensation costs ratably over the period of service using the graded method. Restricted stock grants are valued based on the estimated grant date fair value of the Company’s common stock and recognized ratable over the requisite service period. Forfeitures are adjusted for as they occur.
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Research and Development | Research and Development. Research and development costs are expensed as incurred with expenses recorded in the respective period.
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Patents and Tradenames | Patents and tradenames. Costs of establishing patents, consisting of legal and filing fees paid to third parties, are expensed as incurred. The cost of the Luoxis patents, which relates to the RedoxSYS and MiOXSYS products, were $380,000 when they were acquired in connection with the 2013 formation of Luoxis and are being amortized over the remaining U.S. patent life of approximately 15 years, which expires in March 2028.
Patents and tradenames subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Impairment losses are measured and recognized to the extent the carrying value of such assets exceeds their fair value. In June 2020, the Company decided to write off the entire remaining balance of the Luoxis patents.
On February 14, 2020, upon completion of the Merger with Innovus, the Company recognized the fair value of the rental of the customer lists for $390,000 and amortizes the asset over a useful life of 1.5 years.
The Company recognized the fair value of trademarks, patents or a combination of both for 18 distinct products that Innovus markets, distributes and sells for $11,354,000 and amortizes the asset over a useful life of 5 years.
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Advertising Costs | Advertising Costs. Advertising costs consist of the direct marketing activities related to the Company’s Aytu Consumer Health reportable segment that arose from the February 14, 2020 acquisition of Innovus Pharmaceuticals, Inc. The Company expenses all advertising costs as incurred. The Company incurred $4.7 million and $0 for the years ended June 30, 2020 and 2019, respectively.
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Impairment of Long-lived Assets | Impairment of Long-lived Assets. The Company assesses impairment of its long-lived assets when events or changes in circumstances indicates that their carrying value amount may not be recoverable. The Company’s long-lived assets consist of (i) fixed assets, net, (ii) licensed assets, net, (iii) patents and tradenames, net and (iv) Products technology rights. Circumstances which could trigger a review include, but are not limited to: (i) significant decreases in the market price of the asset; (ii) significant adverse changes in the business climate or legal or regulatory factors; (iii) or expectations that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.
The Company evaluated its long-lived assets for impairment as of June 30, 2020 and 2019 respectively, and there was $0.2 million and $0 million of impairment recorded.
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Income Taxes | Income Taxes. Deferred taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The amount of income taxes and related income tax positions taken are subject to audits by federal and state tax authorities. The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax position, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon settlement with the taxing authority. The Company believes that it has no material uncertain tax positions. The Company's policy is to record a liability for the difference between the benefits that are both recognized and measured pursuant to FASB ASC 740-10. "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement 109" (ASC 740-10) and tax position taken or expected to be taken on the tax return. Then, to the extent that the assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense. During the periods reported, management of the Company has concluded that no significant tax position requires recognition under ASC 740-10.
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Net Loss Per Common Share | 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 Aytu. As the Company incurred losses in both 2020 and 2019, basic and diluted loss per share was the same and were not included in the calculation of the diluted net loss per share because they would have been anti-dilutive.
The following table sets-forth securities that could be potentially dilutive, but as of the years ended June 30, 2020 and 2019 are anti-dilutive, and therefore excluded from the calculation of diluted earnings per share.
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Accounting Pronouncements | Adoption of New Accounting Pronouncements
Leases (“ASU 2016-02”). In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 – Topic 842 Leases. ASU 2016-02 requires that most leases be recognized on the financial statements, specifically the recognition of right-to-use assets and related lease liabilities, and enhanced disclosures about leasing arrangements. The objective is to provide improved transparency and comparability among organizations. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard requires using the modified retrospective transition method and apply ASU 2016-02 either at (i) latter of the earliest comparative period presented in the financial statements or commencement date of the lease, or (ii) the beginning of the period of adoption. The Company has elected to apply the standard at the beginning period of adoption, July 1, 2019 which resulted in no cumulative adjustment to retained earnings.
The Company has elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease and will continue to recognize rent expense on a straight-line basis. As a result of the adoption, on July 1, 2019, the Company recognized a lease liability of approximately $0.4 million, which represented the present value of the remaining minimum lease payments using an estimated incremental borrowing rate of 8%. As of July 1, 2019, the Company recognized a right-to-use asset of approximately $0.4 million. Lease expense did not change materially as a result of the adoption of ASU 2016-02.
In addition, in conjunction with the Innovus Merger, the Company recognized a lease liability of approximately $0.8 million relating to Innovus’ corporate offices and related warehouse as part of the purchase price allocation (see Note 2 and Note 22).
Leases (“ASU 2018-11”). On July 30, 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of the new leasing standard, ASU 2016-02 (codified as ASC 842). Specifically, under the amendments in ASU 2018-11: (i) Entities may elect not to recast the comparative periods presented when transitioning to ASC 842 (Issue 1), and (ii) Lessors may elect not to separate lease and nonlease components when certain conditions are met (Issue 2). The Company adopted this standard and elected not to recast prior comparative periods when presented, including the year ended June 30, 2019, which is included in this Form 10-K.
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017- 11”). In July 2017, the FASB issued ASU No. 2017-11 — Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). Part I to ASU 2017-11 eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. In addition, entities will have to make new disclosures for financial instruments with down round features and other terms that change conversion or exercise prices. Part I to ASU 2017-11 is effective for fiscal years beginning after December 31, 2018. The Company adopted this standard update as a result of the issuance of the Series F Preferred stock as a result of the October 2019 Offering. There were no “down-round” features present in the financial instruments issued in conjunction with the March 2020 Offerings.
Compensation – Stock Compensation (Topic 718) (“ASU 2018-07). On June 20, 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, as part of its ongoing Simplification Initiative. Currently, share-based payments to nonemployees are accounted for under Subtopic 505-50 which significantly differs from the guidance for share-based payments to employees under Topic 718. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and generally aligning the accounting for nonemployee awards with the accounting for employee awards (with limited exceptions). The Company issued stock to certain former Innovus Directors to compensate them for consulting services. Those grants were fully vested at the time of grant and an approximately $0.2 million charge was recognized as a current period expense.
Business Combinations (Topic 805) — Clarifying the Definition of a Business (“ASU 2017-01”). In January 2017, the FASB issued ASU 2017-01, which sets out a new framework for classifying transactions as acquisitions (disposals) of assets versus businesses. The new guidance provides a framework to evaluate when an input and a substantive process are present as well as provide more stringent criteria for sets without outputs to be considered businesses. As a result, fewer transactions are expected to involve acquiring (or selling) a business. ASU 2017-01 is effective for public companies with fiscal years beginning after December 15, 2018. This standard is expected to reduce the number of acquisitions which are considered business combinations upon adoption, especially in both real estate and life science industries.
During the fiscal year ended June 30, 2020, the Company acquired both the Pediatric Portfolio from Cerecor and Consumer Health Portfolio from Innovus. The Company adopted this standard as a result of the acquisitions, and while ASU 2017-01 is expected to result in more asset acquisitions in life science industries, the Company came to the conclusion that both of the acquisitions qualified as business combinations.
Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). On August 26, 2016, the FASB issued ASU 2016-15, which amends Topic 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. One of the items ASU 2016-15 clarified was the treatment of cash payments on zero coupon debt or debt-like instrument. Under ASU 2016-15, cash paid on zero coupon bonds should be allocated between the interest and principal portion of the obligation at the time of payment, with the interest portion classified as operating in the Statement of Cash Flows and the principal portion classified as a financing cash outflow in the Statement of Cash Flows.T
The Company has numerous obligations in which there is no stipulated interest rate, and the obligation is recognized at a discount from the ultimate obligation. These include certain notes and fixed payment arrangements. The Company adopted this standard in the year ended June 30, 2020 and classified cash payments, if any, in accordance with this standard.
Recent Accounting Pronouncements
Fair Value Measurements (“ASU 2018-03”). 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. Early adoption is permitted upon issuance of ASU 2018-13. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently assessing the impact that ASU 2018-13 will have on its financial statements.
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 originally effective for interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. However, in November 2019, the Financial Accounting Standard Board (FASB) issued ASU 2019-10, Financial Instruments—Credit Losses, (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) — Effective Dates (“ASU 2019-10”). ASU 2019-10 deferred the adoption date for (i) public business entities that meet the definition of an SEC filer, excluding entities eligible to be “smaller reporting companies” as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and (2) all other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As of June 30, 2020, the Company qualified as a smaller reporting companies as defined by the SEC. The Company is currently assessing the impact that ASU 2016-13 will have on its consolidated financial statements but does not anticipate there to be a material impact.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration of business risk | As of June 30, 2019, four customers accounted for 87% of gross revenue.
As of June 30, 2019, four customers accounted for 88% of gross accounts receivable.
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Antidilutive securities excluded from the computation of earnings per share |
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Revenues from Contracts with Customers (Tables) |
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Acquisitions (Tables) |
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Assets acquired and liabilities assumed | The Pediatric Portfolio
Innovus Merger (Consumer Health Portfolio)
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Reconciliation of goodwill |
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Intangible assets acquired | The Pediatric Portfolio
Innovus Merger (Consumer Health Portfolio)
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Pro forma information |
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory balances |
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Fixed Assets (Tables) |
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Fixed assets |
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Leases, Right-to-Use Assets and Related Liabilities (Tables) |
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Lease liability |
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Intangible Assets - Amortizable (Tables) |
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Amortization expense |
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Accrued Liabilities (Tables) |
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Accrued liabilities |
* Other accrued liabilities consist of accounting fee, samples expense and consultants fee, none of which individually represent greater than five percent of total current liabilities.
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Fair Value Considerations (Tables) |
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Fair value on a recurring basis |
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Significant assumptions in valuing the warrant derivative liability |
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Reconciliation of changes in the warrant derivative liability |
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Changes in the contingent consideration |
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Assumption for valuing contingent consideration |
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Fair value on a nonrecurring basis |
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Significant assumptions in valuing intangible assets |
(*) Valuation performed as of November 1, 2019. As a non-recurring fair value measurement, there is no remeasurement at each reporting period unless indications exist that the fair value of the asset has been impaired. There were no indicators as of June 30, 2020 that the fair value of the Product technology rights was impaired.
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Fixed payment obligations discount rate |
(≠) Valuation performed as of November 1, 2019. As a non-recurring fair value measurement, there is no remeasurement at each reporting period unless indicates that the circumstances that existed as of the November 1, 2019 measurement date indicate that the carrying value is no longer indicative of fair value.
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Changes in Level 3 inputs |
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective income tax rate reconciliation |
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Deferred tax assets and liabilities |
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Equity Incentive Plan (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant assumptions used in valuing options/warrants issued |
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Stock option activity |
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Stock options outstanding |
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Restricted stock activity |
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Stock-based compensation expense |
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Warrants (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant assumptions in valuing the warrants issued |
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Warrant activity | A summary of equity-based warrants is as follows:
(*) During the three months March 31, 2020, an investor exercised 5.0 million of the October 2019 private placement warrants under the cashless exercise provision. In April 2020, another investor exercised all remaining 5.0 million October 2019 private placement warrants. There are no more October 2019 private placement warrants outstanding as of June 30, 2020.
A summary of liability warrants is as follows:
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Commitments and Contingencies (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies |
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Net Loss Per Common Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antidilutive securities excluded from the computation of earnings per share |
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Segment Reporting (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment financial information |
|
Nature of Business and Financial Condition (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (120,010,179) | $ (106,389,500) |
Net loss | (13,620,679) | (27,131,908) |
Net cash used in operating activities | $ (28,373,887) | $ (13,831,377) |
Summary of Significant Accounting Policies (Details) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Customer A | Revenue | ||
Percentage of concentration risk | 16.00% | 19.00% |
Customer A | Accounts Receivable | ||
Percentage of concentration risk | 19.00% | 9.00% |
Customer B | Revenue | ||
Percentage of concentration risk | 16.00% | 20.00% |
Customer B | Accounts Receivable | ||
Percentage of concentration risk | 16.00% | 20.00% |
Customer C | Revenue | ||
Percentage of concentration risk | 14.00% | 26.00% |
Customer C | Accounts Receivable | ||
Percentage of concentration risk | 14.00% | 36.00% |
Customer D | Revenue | ||
Percentage of concentration risk | 0.00% | 22.00% |
Customer E | Accounts Receivable | ||
Percentage of concentration risk | 0.00% | 23.00% |
Customer F | Accounts Receivable | ||
Percentage of concentration risk | 12.00% | 0.00% |
Summary of Significant Accounting Policies (Details 2) - shares |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Antidilutive securities | 28,077,286 | 22,627,024 |
Liability Warrants | ||
Antidilutive securities | 240,755 | 240,755 |
Equity-Based Warrants | ||
Antidilutive securities | 22,884,538 | 16,238,657 |
Stock Options | ||
Antidilutive securities | 765,937 | 1,607 |
Employee Unvested Restricted Stock | ||
Antidilutive securities | 4,186,056 | 2,551,024 |
Convertible Preferred Stock | ||
Antidilutive securities | 0 | 3,594,981 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Accounting Policies [Abstract] | ||
Accounts receivable reserve | $ 400,000 | $ 0 |
Reserve for slow moving inventory | 1,300,000 | 0 |
Return allowance | 1,300,000 | 100,000 |
Advertising costs | 4,700,000 | 0 |
Impairment | $ 200,000 | $ 0 |
Revenues from Contracts with Customers (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Consolidated revenue | $ 27,632,080 | $ 7,320,357 |
Primary Care and Devices Portfolio | ||
Consolidated revenue | ||
Pediatric Portfolio | ||
Consolidated revenue | ||
Consumer Health Portfolio | ||
Consolidated revenue | $ 10,383,000 | $ 0 |
Revenues from Contracts with Customers (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Total net revenue | $ 27,632,000 | $ 7,320,000 |
U.S. | ||
Total net revenue | 24,980,000 | 6,462,000 |
Rest-of-the-World | ||
Total net revenue | $ 2,652,000 | $ 858,000 |
Acquisitions (Details 1) |
12 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Goodwill, beginning balance | $ 0 |
Goodwill, ending balance | 28,090,407 |
Cerecor, Inc. | |
Goodwill, beginning balance | 15,387,064 |
Increase due change in estimated fixed payment obligations | 3,766,071 |
Increase to account for settlement with former product licensor | 300,000 |
Goodwill, ending balance | 19,453,135 |
Innovus Pharmaceuticals | |
Goodwill, beginning balance | 8,374,269 |
Increase due to settlements related to lawsuit and product royalties | 209,178 |
Increase due to additional bonus accrual | 53,825 |
Goodwill, ending balance | $ 8,637,272 |
Acquisitions (Details 2) |
Jun. 30, 2020
USD ($)
|
---|---|
Cerecor, Inc. | Product Technology Rights | |
Acquired intangible assets | $ 22,700,000 |
Innovus Pharmaceuticals | |
Acquired intangible assets | 11,744,000 |
Innovus Pharmaceuticals | Product Distribution Rights | |
Acquired intangible assets | 11,354,000 |
Innovus Pharmaceuticals | Customer Lists | |
Acquired intangible assets | $ 390,000 |
Acquisitions (Details 3) - USD ($) |
12 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2020 |
[1] | Jun. 30, 2019 |
|||
Business Combinations [Abstract] | |||||
Total revenues, net | $ 35,562,537 | $ 39,044,357 | |||
Net loss | $ (16,375,078) | $ (37,939,908) | |||
Net loss per share | $ (0.37) | $ (3.27) | |||
|
Inventories (Details) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 397,000 | $ 117,000 |
Finished goods, net | 9,603,000 | 1,323,000 |
Inventory, net | $ 9,999,441 | $ 1,440,069 |
Inventories (Details Narrative) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Work-in-process | $ 0 | $ 0 |
Reserve for slow moving inventory | $ 1,300,000 | $ 0 |
Fixed Assets (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Less accumulated depreciation and amortization | $ (484,000) | $ (396,000) |
Fixed assets, net | 258,516 | 203,733 |
Manufacturing Equipment | ||
Fixed assets, gross | $ 112,000 | 83,000 |
Manufacturing Equipment | Minimum | ||
Estimated useful lives in years | 2 years | |
Manufacturing Equipment | Maximum | ||
Estimated useful lives in years | 5 years | |
Leasehold Improvements | ||
Estimated useful lives in years | 3 years | |
Fixed assets, gross | $ 229,000 | 112,000 |
Office Equipment, Furniture and Other | ||
Fixed assets, gross | $ 312,000 | 315,000 |
Office Equipment, Furniture and Other | Minimum | ||
Estimated useful lives in years | 2 years | |
Office Equipment, Furniture and Other | Maximum | ||
Estimated useful lives in years | 5 years | |
Lab Equipment | ||
Fixed assets, gross | $ 90,000 | $ 90,000 |
Lab Equipment | Minimum | ||
Estimated useful lives in years | 3 years | |
Lab Equipment | Maximum | ||
Estimated useful lives in years | 5 years |
Fixed Assets (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization expense | $ 100,000 | $ 100,000 |
Leases, Right-to-Use Assets and Related Liabilities (Details) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Leases [Abstract] | ||
2021 | $ 389,000 | |
2022 | 403,000 | |
2023 | 362,000 | |
2024 | 36,000 | |
2025 | 3,000 | |
Thereafter | 0 | |
Total | 1,193,000 | |
Less:discount adjustment | (167,000) | |
Total lease liability | 1,026,000 | |
Lease liability current portion | 300,426 | $ 0 |
Long-term lease liability | $ 725,374 | $ 0 |
Leases, Right-to-use Assets and Related Liabiliities (Details 1) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Leases [Abstract] | ||
Rent expense | $ 200,000 | $ 100,000 |
Intangible Assets - Amortizable (Details 1) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
2021 | $ 6,314,000 | |
2022 | 6,086,000 | |
2023 | 6,046,000 | |
2024 | 6,033,000 | |
2025 | 4,479,000 | |
Thereafter | 19,897,000 | |
Total | 48,855,000 | $ 19,083,000 |
Licensed Assets | ||
2021 | 2,276,000 | |
2022 | 2,276,000 | |
2023 | 2,276,000 | |
2024 | 2,275,000 | |
2025 | 917,000 | |
Thereafter | 6,567,000 | |
Total | 16,587,000 | $ 18,862,000 |
Acquired Product Technology Right | ||
2021 | 2,270,000 | |
2022 | 2,270,000 | |
2023 | 2,270,000 | |
2024 | 2,270,000 | |
2025 | 2,270,000 | |
Thereafter | 9,837,000 | |
Total | 21,187,000 | |
Patents and Trademarks | ||
2021 | 1,768,000 | |
2022 | 1,540,000 | |
2023 | 1,500,000 | |
2024 | 1,488,000 | |
2025 | 1,292,000 | |
Thereafter | 3,493,000 | |
Total | $ 11,081,000 |
Accrued Liabilities (Details) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
||
---|---|---|---|---|
Payables and Accruals [Abstract] | ||||
Accrued settlement expense | $ 315,000 | $ 0 | ||
Accrued program liabilities | 959,000 | 736,000 | ||
Accrued product-related fees | 2,471,000 | 295,000 | ||
Credit card liabilities | 510,000 | 0 | ||
Medicaid liabilities | 1,842,000 | 61,000 | ||
Return reserve | 1,329,000 | 98,000 | ||
Sales taxes payable | 175,000 | 0 | ||
Other accrued liabilities | [1] | 249,000 | 121,000 | |
Total accrued liabilities | $ 7,849,855 | $ 1,311,488 | ||
|
Fair Value Considerations (Details) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2018 |
---|---|---|---|
Warrant derivative liability | $ 11,371 | $ 13,201 | |
Contingent consideration | 13,588,000 | 23,326,000 | $ 4,694,000 |
Fair Value, Measurements, Recurring | |||
Warrant derivative liability | 11,000 | 13,000 | |
Contingent consideration | 13,588,000 | 23,326,000 | |
CVR liability | 5,572,000 | ||
Total | 19,171,000 | 23,339,000 | |
Level 1 | Fair Value, Measurements, Recurring | |||
Warrant derivative liability | 0 | 0 | |
Contingent consideration | 0 | 0 | |
CVR liability | 0 | ||
Total | 0 | 0 | |
Level 2 | Fair Value, Measurements, Recurring | |||
Warrant derivative liability | 0 | 0 | |
Contingent consideration | 0 | 0 | |
CVR liability | 0 | ||
Total | 0 | 0 | |
Level 3 | Fair Value, Measurements, Recurring | |||
Warrant derivative liability | 11,000 | 13,000 | |
Contingent consideration | 13,588,000 | 23,326,000 | |
CVR liability | 5,572,000 | ||
Total | $ 19,171,000 | $ 23,339,000 |
Fair Value Considerations (Details 1) - Warrant Derivative Liability |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Volatility | 163.20% | 163.20% |
Equivalent term (years) | 2 years 1 month 17 days | 3 years 1 month 17 days |
Risk-free interest rate | 0.16% | 1.83% |
Dividend yield | 0.00% | 0.00% |
At Issuance | ||
Volatility | 188.00% | |
Equivalent term (years) | 5 years | |
Risk-free interest rate | 1.83% | |
Dividend yield | 0.00% |
Fair Value Considerations (Details 2) - Warrant Derivative Liability - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Warrant derivative liability, beginning balance | $ 13,000 | $ 94,000 |
Change in fair value included in earnings | (2,000) | (81,000) |
Warrant derivative liability, ending balance | $ 11,000 | $ 13,000 |
Fair Value Considerations (Details 3) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Fair Value Disclosures [Abstract] | ||
Contingent consideration, beginning balance | $ 23,326,000 | $ 4,694,000 |
Increase due to purchase of assets | 183,000 | 8,833,000 |
Increase due to accretion | 789,000 | 516,000 |
Decrease due to contractual payment | (180,000) | (548,000) |
Decrease due to amended license agreement | (5,200,000) | |
Increase (decrease) due to remeasurement | (5,330,000) | 9,831,000 |
Contingent consideration, ending balance | $ 13,588,000 | $ 23,326,000 |
Fair Value Considerations (Details 4) - Beta |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Natesto | ||
Relevered beta | 0.00 | 0.83 |
Market risk premium | 0.00% | 5.50% |
Risk-free interest rate | 0.00% | 3.50% |
Discount | 0.00% | 5.20% |
Company specific discount | 0.00% | 5.00% |
ZolpiMist | ||
Relevered beta | 1.17 | 1.16 |
Market risk premium | 6.00% | 5.50% |
Risk-free interest rate | 3.00% | 3.50% |
Discount | 5.20% | 5.20% |
Company specific discount | 5.00% | 5.00% |
Tuzistra | ||
Relevered beta | 0.36 | 1.19 |
Market risk premium | 6.00% | 5.50% |
Risk-free interest rate | 3.00% | 3.50% |
Discount | 5.20% | 5.20% |
Company specific discount | 15.00% | 15.00% |
Fair Value Considerations (Details 6) - Beta |
Feb. 14, 2020 |
Nov. 01, 2019 |
||
---|---|---|---|---|
Cerecor, Inc. | Product Technology Rights | ||||
Re-levered Beta | [1] | 1.60 | ||
Market risk premium | [1] | 6.00% | ||
Small stock risk premium | [1] | 5.20% | ||
Risk-free interest rate | [1] | 2.00% | ||
Company specific discount | [1] | 25.00% | ||
Innovus Pharmaceuticals | Patents & Trademarks | ||||
Re-levered Beta | 0.84 | |||
Market risk premium | 6.17% | |||
Small stock risk premium | 4.99% | |||
Risk-free interest rate | 1.89% | |||
Company specific discount | 20.00% | |||
|
Fair Value Considerations (Details 7) - Cerecor, Inc. |
Nov. 01, 2019 |
[1] | ||
---|---|---|---|---|
Minimum | ||||
Fixed payment obligations discount rate | 1.80% | |||
Maximum | ||||
Fixed payment obligations discount rate | 12.40% | |||
|
Income Taxes (Details 1) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Deferred tax assets (liabilities): | ||
Accrued expenses | $ 855,000 | $ 234,000 |
Net operating loss carry forward | 37,191,000 | 18,085,000 |
Intangibles | (1,578,000) | 3,377,000 |
Share-based compensation | 1,891,000 | 1,210,000 |
Fixed assets | 73,000 | 86,000 |
Capital loss carry forward | 203,000 | 203,000 |
Contribution carry forward | 31,000 | 31,000 |
Warrant liability | 51,000 | 51,000 |
Inventory | 789,000 | 25,000 |
R&D credits | 9,000 | 0 |
Lease liability | 261,000 | 0 |
ROU asset | (224,000) | 0 |
Total deferred income tax assets (liabilities) | 39,552,000 | 23,302,000 |
Less: valuation allowance | (39,552,000) | (23,302,000) |
Total deferred income tax assets (liabilities) | $ 0 | $ 0 |
Income Taxes (Details Narrative) - USD ($) |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Federal | ||
Net operating losses | $ 147,000,000 | $ 73,900,000 |
Capital Structure (Details Narrative) - $ / shares |
Jun. 30, 2020 |
Jun. 30, 2019 |
---|---|---|
Equity [Abstract] | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 125,837,357 | 17,538,071 |
Common stock, shares outstanding | 125,837,357 | 17,538,071 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 3,594,981 |
Preferred stock, shares outstanding | 0 | 3,594,981 |
Equity Incentive Plan (Details) - Stock Options |
12 Months Ended |
---|---|
Jun. 30, 2020 | |
Dividend yield | 0.00% |
Minimum | |
Expected volatility | 100.00% |
Expected term (years) | 1 year |
Risk-free interest rate | 0.41% |
Maximum | |
Expected volatility | 182.16% |
Expected term (years) | 4 years |
Risk-free interest rate | 1.82% |
Equity Incentive Plan (Details 3) - Restricted Stock - $ / shares |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Number of unvested restricted stock outstanding, beginning balance | 2,346,214 | 37,200 |
Granted | 1,952,912 | 2,772,022 |
Vested | 0 | 0 |
Forfeited | (114,610) | (463,008) |
Number of unvested restricted stock outstanding, ending balance | 4,184,516 | 2,346,214 |
Unvested weighted average grant date fair value outstanding, beginning balance | $ 1.83 | $ 39.80 |
Granted | 1.06 | 1.30 |
Vested | .00 | .00 |
Forfeited | 1.79 | 1.23 |
Unvested weighted average grant date fair value outstanding, ending balance | $ 1.47 | $ 1.83 |
Unvested weighted average remaining contractual life outstanding, beginning balance | 9 years 1 month 6 days | 9 years 4 months 24 days |
Unvested weighted average remaining contractual life outstanding,, ending balance | 6 years 4 months 24 days | 9 years 1 month 6 days |
Equity Incentive Plan (Details 4) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Total share-based compensation expense | $ 1,079,000 | $ 1,022,000 |
Restricted Stock | ||
Total share-based compensation expense | 999,000 | 897,000 |
Stock Options | ||
Total share-based compensation expense | $ 80,000 | $ 125,000 |
Warrants (Details) - Warrants |
12 Months Ended |
---|---|
Jun. 30, 2020 | |
Dividend yield | 0.00% |
Minimum | |
Expected volatility | 100.00% |
Equivalent term (years) | 1 year |
Risk-free rate | 0.20% |
Maximum | |
Expected volatility | 153.00% |
Equivalent term (years) | 5 years |
Risk-free rate | 1.91% |
Warrants (Details 1) - $ / shares |
12 Months Ended | ||||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
||||
Equity-Based Warrants | |||||
Number of warrants, outstanding beginning balance | 16,218,908 | 1,641,906 | |||
Issued | 44,627,120 | 14,827,009 | |||
Expired | 0 | 0 | |||
Exercised | (37,961,490) | [1] | (250,007) | ||
Number of warrants outstanding, ending balance | 2,284,538 | 16,218,908 | |||
Weighted average exercise price outstanding, beginning balance | $ 3.15 | $ 19.19 | |||
Issued | 1.21 | 1.35 | |||
Expired | .00 | .00 | |||
Exercised | .00 | .00 | |||
Weighted average exercise price outstanding, ending balance | $ 3.06 | $ 3.15 | |||
Weighted average remaining contractual life outstanding, beginning balance | 4 years 4 months 10 days | 4 years 8 months 1 day | |||
Weighted average remaining contractual life outstanding, ending balance | 2 years | 4 years 4 months 10 days | |||
Liability Warrants | |||||
Number of warrants, outstanding beginning balance | 240,755 | 240,755 | |||
Expired | 0 | 0 | |||
Exercised | 0 | 0 | |||
Number of warrants outstanding, ending balance | 240,755 | 240,755 | |||
Weighted average exercise price outstanding, beginning balance | $ 72.00 | $ 72.00 | |||
Expired | 0.00 | .00 | |||
Exercised | 0.00 | .00 | |||
Weighted average exercise price outstanding, ending balance | $ 72.00 | $ 72.00 | |||
Weighted average remaining contractual life outstanding, beginning balance | 3 years 1 month 28 days | 4 years 1 month 17 days | |||
Weighted average remaining contractual life outstanding, ending balance | 2 years 1 month 17 days | 3 years 1 month 28 days | |||
|
Commitments and Contingencies (Details) |
Jun. 30, 2020
USD ($)
|
---|---|
2021 | $ 7,178,000 |
2022 | 9,464,000 |
2023 | 6,146,000 |
2024 | 4,292,000 |
2025 | 3,303,000 |
Thereafter | 1,177,000 |
Total | 31,560,000 |
Prescription Database | |
2021 | 902,000 |
2022 | 733,000 |
2023 | 0 |
2024 | 0 |
2025 | 0 |
Thereafter | 0 |
Total | 1,635,000 |
Pediatric Portfolio Fixed Payments and Product Minimums | |
2021 | 3,821,000 |
2022 | 3,300,000 |
2023 | 3,300,000 |
2024 | 3,300,000 |
2025 | 3,300,000 |
Thereafter | 975,000 |
Total | 17,996,000 |
Inventory Purchase Commitment | |
2021 | 1,226,000 |
2022 | 736,000 |
2023 | 0 |
2024 | 0 |
2025 | 0 |
Thereafter | 0 |
Total | 1,962,000 |
CVR Liability | |
2021 | 840,000 |
2022 | 1,292,000 |
2023 | 2,484,000 |
2024 | 956,000 |
2025 | 0 |
Thereafter | 0 |
Total | 5,572,000 |
Product Contingent Liability | |
2021 | 0 |
2022 | 0 |
2023 | 0 |
2024 | 0 |
2025 | 0 |
Thereafter | 202,000 |
Total | 202,000 |
Product Milestone Payments | |
2021 | 0 |
2022 | 3,000,000 |
2023 | 0 |
2024 | 0 |
2025 | 0 |
Thereafter | 0 |
Total | 3,000,000 |
Office Leases | |
2021 | 389,000 |
2022 | 403,000 |
2023 | 362,000 |
2024 | 36,000 |
2025 | 3,000 |
Thereafter | 0 |
Total | $ 1,193,000 |
Net Loss Per Common Share (Details) - shares |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Antidilutive securities | 28,077,286 | 22,627,024 |
Liability Warrants | ||
Antidilutive securities | 240,755 | 240,755 |
Equity-Based Warrants | ||
Antidilutive securities | 22,884,538 | 16,238,657 |
Stock Options | ||
Antidilutive securities | 765,937 | 1,607 |
Employee Unvested Restricted Stock | ||
Antidilutive securities | 4,186,056 | 2,551,024 |
Convertible Preferred Stock | ||
Antidilutive securities | 0 | 3,594,981 |
Segment Reporting (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Revenue | $ 27,632,080 | $ 7,320,357 |
Net loss | (13,620,679) | (27,131,908) |
Assets | 152,836,330 | 34,721,391 |
Goodwill | 28,090,407 | 0 |
Aytu BioScience | ||
Revenue | 17,249,000 | 7,320,000 |
Net loss | (10,464,000) | (27,132,000) |
Assets | 126,267,000 | 34,721,000 |
Goodwill | 19,453,000 | 0 |
Ayu Consumer Health | ||
Revenue | 10,383,000 | 0 |
Net loss | (3,157,000) | 0 |
Assets | 26,569,000 | 0 |
Goodwill | $ 8,637,000 | $ 0 |
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