[Q2 2025 Highlights](index=1&type=section&id=Q2%202025%20Highlights) Aytu BioPharma achieved sequential prescription growth in ADHD and Pediatric portfolios, reporting $0.8 million net income and $1.3 million Adjusted EBITDA Q2 FY2025 Key Financial Metrics | Metric | Value | Comparison Period | Value (Comparison) | | :--- | :--- | :--- | :--- | | Net Income | $0.8 million | Q2 FY2024 | ($0.2 million) loss | | Adjusted EBITDA | $1.3 million | Q2 FY2024 | $5.5 million | | Net Income per Share (Basic) | $0.13 | Q2 FY2024 | ($0.04) loss | | Cash and Cash Equivalents | $20.4 million | Sep 30, 2024 | $20.1 million | - For the first time since Q2 fiscal 2023, the company reported a quarterly **sequential increase in prescriptions** across both its ADHD and Pediatric portfolios[1](index=1&type=chunk) Sequential Net Revenue Growth (Q2 vs Q1 FY2025) | Portfolio | Q2 FY2025 Net Revenue (in millions) | Sequential Growth | Note | | :--- | :--- | :--- | :--- | | Pediatric Portfolio | $2.4 million | +86% | Reflects positive effects from return-to-growth plan | | ADHD Portfolio | $13.8 million | +16% | Adjusted for a one-time $3.3M positive impact in Q1 | [Management Discussion](index=2&type=section&id=Management%20Discussion) Management highlighted successful sequential prescription growth and corporate optimization efforts, aiming for positive cash flow and enhanced stockholder value - The company returned both ADHD and Pediatric portfolios to **positive sequential prescription growth** for the first time since late 2022[3](index=3&type=chunk) - New corporate optimization programs are expected to generate at least **$2.0 million in annual cost savings**, building on previous expense reductions[3](index=3&type=chunk)[4](index=4&type=chunk) - Management noted that while the normalization of the ADHD stimulant supply market impacted year-over-year comparisons, prescription volumes for Aytu's ADHD brands remain above pre-shortage levels[3](index=3&type=chunk) - The company's strategy is to focus on its profitable prescription pharmaceutical business and leverage its commercial infrastructure to seek and add in-licensed or acquired products[3](index=3&type=chunk) [Corporate Strategy and Restructuring](index=2&type=section&id=Organizational%20Changes%20and%20Operating%20Optimization%20Plan) Aytu completed a strategic realignment, divesting Consumer Health and suspending clinical programs to focus on prescription pharmaceuticals - The company has fully repositioned itself to focus on commercializing novel prescription therapeutics[4](index=4&type=chunk) - Completed strategic actions include: - Divestiture of the Consumer Health business - Outsourcing of ADHD product manufacturing and closure of the Grand Prairie, Texas facility - Indefinite suspension of clinical development programs[4](index=4&type=chunk)[5](index=5&type=chunk) - The financial results of the Consumer Health business are now reported as a discontinued operation, effective July 31, 2024[6](index=6&type=chunk) [Q2 2025 Financial Performance](index=2&type=section&id=Q2%202025%20Financial%20Results) Q2 FY2025 net revenue was $16.2 million, with a net income of $0.8 million, influenced by a non-cash gain and temporary gross margin decrease Net Revenue by Portfolio (Three Months Ended Dec 31, in thousands) | Portfolio | 2024 | 2023 | YoY Change | | :--- | :--- | :--- | :--- | | ADHD Portfolio | $13,816 | $16,572 | -17% | | Pediatric Portfolio | $2,400 | $2,145 | +12% | | **Total Net Revenue** | **$16,221** | **$18,748** | **-13.5%** | - Gross profit was **$10,786 thousand** (**66% margin**) compared to **$14,603 thousand** (**78% margin**) in the prior year, with the decrease attributed to temporary overhead costs[11](index=11&type=chunk) - Net income of **$788 thousand** was significantly impacted by a **$3,016 thousand** gain on derivative warrant liabilities, contrasting with a **$577 thousand** loss in the prior-year period[13](index=13&type=chunk) - Adjusted EBITDA was **$1,273 thousand**, compared to **$5,459 thousand** in the prior-year period[14](index=14&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) For Q2 FY2025, Aytu reported net revenues of $16.2 million and a net income of $0.8 million, or $0.13 per basic share Consolidated Statements of Operations Summary (in thousands) | Line Item | Q2 FY2025 (3 mos ended Dec 31, 2024) | Q2 FY2024 (3 mos ended Dec 31, 2023) | | :--- | :--- | :--- | | Net Revenue | $16,221 | $18,748 | | Gross Profit | $10,786 | $14,603 | | (Loss) Income from Operations | $(1,695) | $3,146 | | Derivative Warrant Liabilities Gain (Loss) | $3,016 | $(577) | | **Net Income (Loss)** | **$788** | **$(220)** | | Basic Net Income (Loss) per Share | $0.13 | $(0.04) | [Unaudited Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) As of December 31, 2024, total assets were $116.2 million, with cash of $20.4 million, and stockholders' equity increased to $30.8 million Consolidated Balance Sheets Summary (in thousands) | Line Item | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $20,398 | $20,006 | | Total Current Assets | $63,053 | $61,891 | | Total Assets | $116,227 | $118,095 | | Total Current Liabilities | $64,048 | $62,228 | | Total Liabilities | $85,462 | $90,379 | | Total Stockholders' Equity | $30,765 | $27,716 | [Reconciliation of Net Income (Loss) to Adjusted EBITDA](index=7&type=section&id=Unaudited%20Reconciliation%20of%20Net%20Income%20%28Loss%29%20to%20Adjusted%20EBITDA) Aytu reconciled GAAP net income of $788 thousand to non-GAAP Adjusted EBITDA of $1.3 million for Q2 FY2025, with key adjustments for non-cash items Reconciliation to Adjusted EBITDA (in thousands) | Line Item | Q2 FY2025 (3 mos ended Dec 31, 2024) | Q2 FY2024 (3 mos ended Dec 31, 2023) | | :--- | :--- | :--- | | Net Income (Loss) - GAAP | $788 | $(220) | | Depreciation and amortization | $1,292 | $1,510 | | Derivative warrant liabilities (gain) loss | $(3,016) | $577 | | Restructuring costs | $1,317 | — | | Net (income) loss from discontinued operations | $(123) | $839 | | **Adjusted EBITDA - non-GAAP** | **$1,273** | **$5,459** | [Historical Quarterly Financial Data (FY2024 Adjusted)](index=8&type=section&id=Unaudited%20Fiscal%202024%20Quarterly%20and%20Full%20Year%20Consolidated%20Statements%20of%20Operations%20Adjusted%20for%20Discontinued%20Operations) This section presents restated FY2024 quarterly and full-year financial results, adjusted for discontinued operations, showing $65.2 million net revenue and $10.8 million Adjusted EBITDA FY2024 Full Year Adjusted Financial Summary (in thousands) | Line Item | Twelve Months Ended June 30, 2024 | | :--- | :--- | | Net Revenue | $65,183 | | Gross Profit | $49,054 | | (Loss) from Operations | $(1,591) | | Net Loss from Continuing Operations | $(12,098) | | **Adjusted EBITDA - non-GAAP** | **$10,833** |

Financial Data and Key Metrics Changes - The company reported its first positive net income in history for Q1 2025, with a net income of $1.5 million or $0.24 per share basic, compared to a net loss of $8.1 million in the same quarter last year [30][34] - Adjusted EBITDA was positive at $1.9 million, marking the sixth consecutive quarter of positive adjusted EBITDA [9][30] - Cash and cash equivalents at the end of September 2024 were $20.1 million, slightly up from $20 million at the end of June 2024 [32] Business Line Data and Key Metrics Changes - ADHD portfolio net revenue increased by 11% sequentially to $15.3 million, up 1% year-over-year [13][27] - Pediatric portfolio revenue was $1.3 million, showing a sequential increase of 54% from $0.8 million in Q4 2024, although it was down from $2.6 million in the same quarter last year [27][17] Market Data and Key Metrics Changes - ADHD prescriptions were at 99,000 in Q1 2025, down from 115,000 during the stimulant shortage but up 10% over the normalized baseline levels from fiscal 2022 and 2023 [15][9] - Pediatric prescriptions showed a sequential growth of 16% from September to October 2024, indicating positive momentum [40] Company Strategy and Development Direction - The company is focused on optimizing operations and driving near-term cash flow, with expected annual operating expense reductions of at least $2 million [11][12] - Aytu is pursuing both out-licensing and in-licensing opportunities, with recent deals in Israel and Canada for ADHD brands [47][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive trends for both ADHD and Pediatric portfolios, anticipating continued growth in the coming quarters [18][34] - The company is positioned to generate positive operating cash flow moving forward, supported by a strong balance sheet [18][32] Other Important Information - The Consumer Health business sale has been completed, and its historical impact is now classified as discontinued operations [11][26] - The company has undergone organizational changes to streamline operations, including the departure of key executives [19][21] Q&A Session Summary Question: Is there a strategic opportunity to broaden promotional reach for the ADHD franchise? - Management confirmed that they are already expanding their promotional efforts and exploring new distribution partnerships to enhance geographic reach [36][37] Question: Can you provide additional details on Pediatric script growth and pricing stability? - Management reported a 54% sequential growth in Pediatric revenue and indicated that gross-to-net pricing has remained steady [39][40] Question: When will the noise in gross margin numbers normalize? - Management anticipates that normalized gross margins will be evident by Q1 of fiscal 2026, following the sale of higher-cost inventory [45] Question: Can you expand on product licensing opportunities? - Management highlighted recent out-licensing deals in Israel and Canada and expressed active pursuit of in-licensing commercial-stage assets [48][49]

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for Q1 FY2025 reflect a net income of **$1.5 million**, a significant turnaround from a **$8.1 million** net loss in the prior year, driven by a **$2.9 million** gain on derivative warrant liabilities and income from discontinued operations [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Total assets decreased slightly to **$115.8 million** as of September 30, 2024, while total liabilities decreased to **$86.0 million**, leading to an increase in total stockholders' equity to **$29.8 million** Consolidated Balance Sheet Highlights | Balance Sheet Item | Sep 30, 2024 (in thousands) | Jun 30, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $60,738 | $61,891 | | **Total Assets** | $115,831 | $118,095 | | **Total Current Liabilities** | $61,252 | $62,228 | | **Total Liabilities** | $86,005 | $90,379 | | **Total Stockholders' Equity** | $29,826 | $27,716 | [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) The company reported a net income of **$1.5 million** for the quarter, a significant turnaround from a **$8.1 million** net loss in the prior year, despite a 7% decrease in net revenue to **$16.6 million**, primarily due to a **$2.9 million** gain on derivative warrant liabilities Quarterly Statement of Operations | Metric | Q1 FY2025 (ended Sep 30, 2024, in thousands) | Q1 FY2024 (ended Sep 30, 2023, in thousands) | | :--- | :--- | :--- | | Net Revenue | $16,574 | $17,817 | | Gross Profit | $11,985 | $13,038 | | Loss from Operations | ($930) | ($867) | | Derivative Warrant Liabilities Gain (Loss) | $2,880 | ($5,907) | | Net Income (Loss) from Continuing Operations | $1,093 | ($7,473) | | Net Income (Loss) from Discontinued Operations | $381 | ($647) | | **Net Income (Loss)** | **$1,474** | **($8,120)** | | **Basic Net Income (Loss) Per Share** | **$0.24** | **($1.48)** | [Unaudited Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$1.2 million**, while investing activities provided **$0.4 million**, and financing activities provided **$0.9 million**, primarily from the revolving credit facility Summary of Cash Flows | Cash Flow Activity | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($1,190) | ($211) | | Net Cash Provided by (Used in) Investing Activities | $381 | ($76) | | Net Cash Provided by (Used in) Financing Activities | $911 | ($2,734) | | **Net Change in Cash** | **$102** | **($3,021)** | | Cash at End of Period | $20,108 | $19,964 | [Notes to the Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) Key notes detail the company's strategic shift, including the divestiture of its Consumer Health business, a **$3.3 million** reduction in vendor liability, new international distribution agreements for ADHD products, and debt refinancing - The company divested its Consumer Health business on July 31, 2024, now reported as a discontinued operation, generating a net income of **$0.4 million** for the quarter, compared to a **$0.6 million** loss in the prior year[138](index=138&type=chunk)[140](index=140&type=chunk) - Net revenue for the ADHD Portfolio was positively impacted by a **$3.3 million** reduction in a vendor liability, following successful negotiations[42](index=42&type=chunk) - The company is expanding internationally, signing exclusive distribution agreements for its ADHD products, Adzenys and Cotempla, in Israel, the Palestinian Authority, and Canada[24](index=24&type=chunk) - In June 2024, the company refinanced its debt, replacing the Avenue Capital loan with a new **$13.0 million** term loan and a **$14.5 million** revolving credit facility with Eclipse Business Capital, maturing in June 2028[87](index=87&type=chunk)[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 7% decrease in quarterly net revenue to Pediatric Portfolio declines, partially offset by ADHD Portfolio stability and a **$3.3 million** vendor liability reduction, alongside successful cost reduction efforts and strategic divestitures [Overview](index=33&type=section&id=Overview) The company focuses on commercializing novel prescription therapeutics for childhood conditions like ADHD, divesting its Consumer Health business, suspending clinical programs, and expanding ADHD product reach internationally - The company's strategy focuses on in-licensing, acquiring, developing, and commercializing novel prescription therapeutics, primarily for childhood conditions like ADHD[145](index=145&type=chunk) - In July 2024, the company completed the divestiture of its Consumer Health business to focus on core prescription pharmaceutical products[146](index=146&type=chunk) - The company has entered into its first international commercial agreements to sell Adzenys and Cotempla in Israel, the Palestinian Authority, and Canada[147](index=147&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Net revenue decreased 7% to **$16.6 million**, primarily due to a **$1.3 million** decline in the Pediatric Portfolio, partially offset by a **$3.3 million** ADHD Portfolio adjustment, while operating expenses decreased by **$1.0 million**, and a **$2.9 million** gain on derivative warrant liabilities was recognized Net Revenue by Portfolio | Portfolio | Q1 FY2025 (ended Sep 30, 2024, in thousands) | Q1 FY2024 (ended Sep 30, 2023, in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | ADHD Portfolio | $15,264 | $15,128 | $136 | | Pediatric Portfolio | $1,293 | $2,565 | ($1,272) | | **Total Net Revenue** | **$16,574** | **$17,817** | **($1,243)** | - The decrease in total net revenue was primarily driven by the Pediatric Portfolio, negatively affected by payer changes impacting prescription coverage[153](index=153&type=chunk) - General and administrative expenses decreased by **$1.2 million** (**19%**) compared to the prior-year period, attributed to cost reduction efforts and improved operational efficiencies[156](index=156&type=chunk) - A **$2.9 million** unrealized gain on derivative warrant liabilities was recognized, compared to a **$5.9 million** loss in the prior-year period, primarily due to changes in the company's stock price[161](index=161&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources include cash from operations and its revolving credit facility; it refinanced debt in June 2024 with a new **$13.0 million** term loan and **$14.5 million** revolving credit facility, and filed a **$100.0 million** shelf registration in September 2024 - As of September 30, 2024, the company had **$20.1 million** in cash and cash equivalents[11](index=11&type=chunk)[19](index=19&type=chunk) - In June 2024, the company entered into a new debt agreement with Eclipse, consisting of a **$13.0 million** term loan and a **$14.5 million** revolving credit facility, to refinance a previous loan[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - A new shelf registration statement on Form S-3 for up to **$100.0 million** was filed in September 2024 and became effective in October 2024, subject to 'baby shelf' limitations[166](index=166&type=chunk) [Contractual Obligations, Commitments and Contingencies](index=38&type=section&id=Contractual%20Obligations%2C%20Commitments%20and%20Contingencies) The company has significant contractual obligations, including a **$5.8 million** accrued settlement liability for the terminated Tuzistra License Agreement and a **$1.7 million** accrued fixed payment for the Tris Karbinal Agreement - The company has an accrued settlement liability of **$5.8 million** payable to Tris related to the termination of the Tuzistra License Agreement[177](index=177&type=chunk) - An accrued fixed payment arrangement balance of **$1.7 million** exists for the Tris Karbinal Agreement as of September 30, 2024[178](index=178&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) The company's critical accounting estimates are consistent with its 2024 Form 10-K, requiring management to make estimates and judgments in financial statement preparation - The discussion and analysis of financial condition are based on financial statements prepared under U.S. GAAP, requiring management to make estimates and judgments, with detailed discussion available in the 2024 Form 10-K[180](index=180&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk under Rule 12b-2 of the Exchange Act - As a smaller reporting company, Aytu BioPharma is exempt from providing quantitative and qualitative disclosures about market risk[182](index=182&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2024, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2024[182](index=182&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter[184](index=184&type=chunk) [PART II - OTHER INFORMATION](index=40&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) No new material legal proceedings were initiated or terminated during the quarter; the company agreed to settle the Witmer class-action securities litigation through corporate governance modifications and payment of attorneys' fees, pending court approval - The company agreed to settle the Witmer class-action derivative suit, alleging breaches of fiduciary duties related to past acquisitions, involving corporate governance changes and payment of attorneys' fees, subject to court approval[101](index=101&type=chunk) - No new material legal proceedings were initiated or terminated during the reporting period[184](index=184&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended June 30, 2024 - The company reports no material changes to its risk factors from those previously reported in the 2024 Form 10-K[185](index=185&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) During the quarter ended September 30, 2024, no directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the quarter[186](index=186&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The report includes standard exhibits such as CEO/CFO certifications (302 and 906) and XBRL data files[188](index=188&type=chunk) [Signatures](index=41&type=section&id=SIGNATURES) - The report was duly signed by Joshua R. Disbrow, Chief Executive Officer, and Ryan J. Selhorn, Chief Financial Officer, on November 13, 2024[190](index=190&type=chunk)

Financial Performance - Net income for Q1 fiscal 2025 was $1.5 million, or $0.24 net income per share basic, compared to a net loss of $8.1 million in Q1 fiscal 2024[16]. - Total net revenue for Q1 fiscal 2025 was $16.6 million, a decrease from $17.8 million in the prior year period, primarily due to changes in payor coverage[12]. - Net revenue for the three months ended September 30, 2024, was $16,574,000, a decrease of 7% from $17,817,000 for the same period in 2023[23]. - The company reported a net income of $1,474,000 for the three months ended September 30, 2024, compared to a net loss of $8,120,000 for the same period in 2023[23]. - Aytu BioPharma reported a net loss of $4,617,000 for the three months ended June 30, 2024, compared to a net loss of $2,887,000 for the previous quarter[27]. - Aytu BioPharma's total net loss for the twelve months ended June 30, 2024, was $15,844,000[27]. Revenue and Market Performance - ADHD Portfolio net revenue increased 1% to $15.3 million in Q1 fiscal 2025, while Pediatric Portfolio net revenue increased 54% sequentially to $1.3 million[2]. - Approximately 99,000 ADHD prescriptions were written in Q1 fiscal 2025, compared to 90,000 in Q1 2023, indicating a recovery in the ADHD market[3]. Expenses and Cost Management - Adjusted EBITDA for Q1 fiscal 2025 was $1.9 million, down from $2.4 million in Q1 fiscal 2024[17]. - Operating expenses, excluding amortization and restructuring costs, were $11.2 million in Q1 fiscal 2025, down from $13.0 million in the prior year period[14]. - Total operating expenses decreased to $12,915,000 from $13,905,000, primarily due to reductions in selling and marketing expenses[23]. - The company implemented an organizational optimization plan expected to reduce operating expenses by at least $2.0 million annually[4]. - The company is focusing on restructuring costs, which amounted to $784,000 for the three months ended September 30, 2024, as part of its strategic initiatives[23]. Cash and Assets - Cash and cash equivalents were $20.1 million at September 30, 2024, compared to $20.0 million at June 30, 2024[17]. - Cash and cash equivalents as of September 30, 2024, were $20,108,000, slightly up from $20,006,000 as of June 30, 2024[24]. - Total assets decreased to $115,831,000 from $118,095,000, indicating a reduction in the company's asset base[24]. - Current liabilities increased to $61,252,000 from $62,228,000, reflecting changes in accounts payable and accrued liabilities[24]. Profitability Metrics - Gross profit percentage was 72% in Q1 fiscal 2025, down from 73% in Q1 fiscal 2024[2]. - Gross profit for the same period was $11,985,000, down from $13,038,000, reflecting a gross margin decrease[23]. - Adjusted EBITDA for the three months ended September 30, 2024, was $1,931,000, down from $2,415,000 in the same period last year[25]. Other Financial Metrics - Interest expense for the quarter was $1,253,000, slightly down from $1,266,000 in the previous quarter[27]. - The company incurred restructuring costs of $1,912,000 during the quarter, indicating ongoing operational adjustments[27]. - Pipeline research and development costs amounted to $599,000, reflecting continued investment in new product development[27]. - Total income tax expense for the quarter was $695,000, up from $245,000 in the previous quarter[27]. - Stock-based compensation expense was $243,000, a decrease from $699,000 in the previous quarter[27]. - The company reported a gain of $1,463,000 from derivative warrant liabilities, a significant improvement from a loss of $1,017,000 in the previous quarter[27]. Strategic Initiatives - The company successfully completed the wind down and divestiture of its Consumer Health business, marking the end of its restructuring efforts[9].

Aytu BioPharma, Inc. (NASDAQ:AYTU) Q4 2024 Results Conference Call September 26, 2024 4:30 PM ET Company Participants Robert Blum - IR, Lytham Partners Josh Disbrow - Chief Executive Officer Mark Oki - Chief Financial Officer Conference Call Participants Naz Rahman - Maxim Group Operator Greetings, welcome to the Aytu BioPharma's Fiscal 2024 Q4 Earnings Call. At this time, all participants have been placed on a listen-only mode. [Operator Instructions] Please note this conference is being recorded. I will n ...

Exhibit 99.1 Aytu BioPharma Reports Fiscal 2024 Full Year and Fourth Quarter Operational and Financial Results Full year fiscal 2024 consolidated net revenue of $81.0 million; Rx Segment net revenue of $65.2 million Full year fiscal 2024 ADHD Portfolio net revenue up 23% compared to fiscal 2023 Full year fiscal 2024 adjusted EBITDA1 improved to $9.2 million, up by $5.7 million compared to fiscal 2023 $20.0 million cash balance at June 30, 2024 Company expects Rx Segment net revenue and adjusted EBITDA growt ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-38247 AYTU BIOPHARMA, INC. (Exact name of registrant as specified in its charter) Common Stock, par value $0.0001 per share AYTU The Nasdaq Capital Market Securities registered pursu ...

Aytu BioPharma, Inc. (NASDAQ:AYTU) Q3 2024 Earnings Call Transcript May 15, 2024 4:30 PM ET Company Participants Roger Weiss - Investor Relations Joshua Disbrow - Chief Executive Officer Mark Oki - Chief Financial Officer Conference Call Participants Naz Rahman - Maxim Group Jennifer Kim - Cantor Fitzgerald Operator Good afternoon, everyone and welcome to the Aytu BioPharma Fiscal 2024 Third Quarter Earnings Call. At this time, all participants have been placed on a listen-only mode. [Operator Instructions] ...

Exhibit 99.1 Aytu BioPharma Reports Fiscal 2024 Third Quarter Operational and Financial Results Q3 2024 ADHD Portfolio net revenue up 49% compared to Q3 2023 Q3 2024 adjusted EBITDA1 improved by $7.0 million compared to Q3 2023 TTM March 2024 operating income of $7.3 million for the Rx Business TTM March 2024 companywide adjusted EBITDA of positive $15.4 million TTM March 2024 adjusted EBITDA of positive $17.1 million for the Rx Business $19.8 million cash balance at March 31, 2024 Company to host conferenc ...

[Cautionary Information Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20INFORMATION%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines forward-looking statements regarding future events, financial position, business strategy, and operations, subject to risks and uncertainties detailed in SEC filings, with no obligation to update [Forward-Looking Statements Overview](index=3&type=section&id=Forward-Looking%20Statements%20Overview) This section outlines forward-looking statements regarding future events, financial position, business strategy, and operations, subject to risks and uncertainties detailed in SEC filings, with no obligation to update - Report includes forward-looking statements regarding future clinical/regulatory events, financial position, business strategy, and operations[4](index=4&type=chunk) - Forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in "Risk Factors" in the 2023 Form 10-K[5](index=5&type=chunk) - The company operates in a very competitive and rapidly changing environment, with new risk factors emerging, and actual results could differ materially from those projected[5](index=5&type=chunk) - The company assumes no obligation to update or supplement forward-looking statements, except as may be required under applicable law[5](index=5&type=chunk) [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the company's unaudited consolidated financial statements and related disclosures for the reporting period [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited consolidated financial statements and notes, detailing financial condition, accounting policies, and key updates, addressing going concern doubts [Unaudited Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) This section presents the company's unaudited consolidated balance sheets as of March 31, 2024, and June 30, 2023 Unaudited Consolidated Balance Sheets (in thousands) | ASSETS | March 31, 2024 | June 30, 2023 | | :----------------------------------- | :------------- | :------------ | | **Current assets:** | | | | Cash and cash equivalents | $ 19,760 | $ 22,985 | | Accounts receivable, net | 29,925 | 28,937 | | Inventories | 13,193 | 11,995 | | Prepaid expenses | 7,249 | 8,047 | | Other current assets | 1,003 | 868 | | **Total current assets** | **71,130** | **72,832** | | **Non-current assets:** | | | | Property and equipment, net | 967 | 1,815 | | Operating lease right-of-use assets | 1,795 | 2,054 | | Intangible assets, net | 54,082 | 58,970 | | Other non-current assets | 889 | 792 | | **Total non-current assets** | **57,733** | **63,631** | | **Total assets** | **$ 128,863** | **$ 136,463** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | **Current liabilities:** | | | | Accounts payable | $ 10,475 | $ 13,478 | | Accrued liabilities | 44,091 | 46,799 | | Short-term line of credit | 1,581 | 1,563 | | Current portion of debt | 15,135 | 85 | | Current portion of derivative warrant liabilities | 3,261 | — | | Other current liabilities | 9,146 | 7,090 | | **Total current liabilities** | **83,689** | **69,015** | | **Non-current liabilities:** | | | | Debt, net of current portion | — | 14,713 | | Derivative warrant liabilities | 8,609 | 6,403 | | Other non-current liabilities | 5,788 | 6,975 | | **Total non-current liabilities** | **14,397** | **28,091** | | **Total liabilities and stockholders' equity** | **$ 128,863** | **$ 136,463** | [Unaudited Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) This section presents the company's unaudited consolidated statements of operations for the three and nine months ended March 31, 2024, and 2023 Unaudited Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net revenue | $ 17,993 | $ 22,733 | $ 63,026 | $ 76,667 | | Cost of sales | 6,300 | 9,990 | 20,346 | 28,599 | | Gross profit | 11,693 | 12,743 | 42,680 | 48,068 | | **Operating expenses:** | | | | | | Selling and marketing | 6,549 | 12,804 | 20,547 | 33,466 | | General and administrative | 5,442 | 7,177 | 17,837 | 22,517 | | Research and development | 619 | 856 | 1,747 | 3,630 | | Amortization of intangible assets | 1,303 | 1,198 | 3,909 | 3,593 | | Restructuring costs | 244 | — | 244 | — | | Impairment expense | — | — | — | 2,600 | | Gain from contingent consideration | — | (734) | — | (504) | | **Total operating expenses** | **14,157** | **21,301** | **44,284** | **65,302** | | Loss from operations | (2,464) | (8,558) | (1,604) | (17,234) | | Other expense, net | (1,195) | (1,215) | (3,083) | (3,527) | | Gain (loss) on derivative warrant liabilities | 1,017 | 2,573 | (5,467) | 6,167 | | Loss before income tax | (2,642) | (7,200) | (10,154) | (14,594) | | Income tax expense | (245) | — | (1,073) | — | | **Net loss** | **$ (2,887)** | **$ (7,200)** | **$ (11,227)** | **$ (14,594)** | | Basic and diluted net loss per common share | $ (0.52) | $ (1.93) | $ (2.04) | $ (4.71) | [Unaudited Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section presents the company's unaudited consolidated statements of stockholders' equity for the nine months ended March 31, 2024, and 2023 Unaudited Consolidated Statements of Stockholders' Equity (in thousands, except share data) | | Common Shares | Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Equity | | :--------------------------------------- | :------------ | :----------- | :------------------------- | :------------------ | :------------------------- | | **Balances, June 30, 2023** | **5,517,174** | **$ 1** | **$ 343,485** | **$ (304,129)** | **$ 39,357** | | Stock-based compensation expense | 13,061 | — | 930 | — | 930 | | Net loss | — | — | — | (8,120) | (8,120) | | **Balances, September 30, 2023** | **5,530,235** | **$ 1** | **$ 344,415** | **$ (312,249)** | **$ 32,167** | | Stock-based compensation expense | 108 | — | 820 | — | 820 | | Issuance of common stock with exercise of warrants | 37,004 | — | 86 | — | 86 | | Net loss | — | — | — | (220) | (220) | | **Balances, December 31, 2023** | **5,567,347** | **$ 1** | **$ 345,321** | **$ (312,469)** | **$ 32,853** | | Stock-based compensation expense | 562 | — | 811 | — | 811 | | Net loss | — | — | — | (2,887) | (2,887) | | **Balances, March 31, 2024** | **5,567,909** | **$ 1** | **$ 346,132** | **$ (315,356)** | **$ 30,777** | Unaudited Consolidated Statements of Stockholders' Equity (in thousands, except share data) - Prior Year | | Shares | Amount | Capital | Deficit | Equity | | :--------------------------------------- | :----------- | :----- | :-------- | :-------- | :------- | | **Balances, June 30, 2022** | **1,928,941** | **$ —** | **$ 331,386** | **$ (287,078)** | **$ 44,308** | | Stock-based compensation expense | (1,666) | — | 1,177 | — | 1,177 | | Issuance of common stock, net of issuance cost | 1,194,196 | — | 3,564 | — | 3,564 | | Net loss | — | — | — | (701) | (701) | | **Balances, September 30, 2022** | **3,121,471** | **$ —** | **$ 336,127** | **$ (287,779)** | **$ 48,348** | | Stock-based compensation expense | (19,228) | — | 3,067 | — | 3,067 | | Issuance of common stock, net of issuance cost | 280,902 | — | 1,095 | — | 1,095 | | Net loss | — | — | — | (6,693) | (6,693) | | **Balances, December 31, 2022** | **3,383,145** | **$ —** | **$ 340,289** | **$ (294,472)** | **$ 45,817** | | Stock-based compensation expense | 8,747 | — | 902 | — | 902 | | Issuance of common stock, net of issuance cost | 387,621 | — | 1,393 | — | 1,393 | | Net loss | — | — | — | (7,200) | (7,200) | | **Balances, March 31, 2023** | **3,779,513** | **$ —** | **$ 342,584** | **$ (301,672)** | **$ 40,912** | [Unaudited Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's unaudited consolidated statements of cash flows for the nine months ended March 31, 2024, and 2023 Unaudited Consolidated Statements of Cash Flows (in thousands) | Cash flows from operating activities: | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :---------------------------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $ (11,227) | $ (14,594) | | Adjustments to reconcile net loss to cash used in operating activities: | | | | Depreciation, amortization and accretion | 6,328 | 6,699 | | Stock-based compensation expense | 2,561 | 5,146 | | Loss (gain) on derivative warrant liabilities | 5,467 | (6,167) | | Amortization of senior debt discount | 463 | 413 | | Inventory write-down | 476 | 199 | | Impairment expense | — | 2,600 | | Gain from contingent consideration | — | (504) | | Other noncash adjustments | (50) | (29) | | Changes in operating assets and liabilities: | | | | Accounts receivable, net | (988) | (12,335) | | Inventories | (1,674) | (2,987) | | Prepaid expenses and other current assets | 863 | (3,603) | | Accounts payable | (2,937) | 3,720 | | Accrued liabilities | (3,774) | 7,031 | | Other operating assets and liabilities, net | 3,892 | (83) | | **Net cash used in operating activities** | **(600)** | **(14,494)** | | **Cash flows from investing activities:** | | | | Other investing activities | (295) | 38 | | **Net cash (used in) provided by investing activities** | **(295)** | **38** | | **Cash flows from financing activities:** | | | | Proceeds from issuance of stock and warrants | 86 | 13,012 | | Net proceeds received from, short-term line of credit | 18 | 6,590 | | Payment made to fixed payment arrangement | (2,204) | (4,117) | | Payment of stock issuance costs | (160) | (1,045) | | Payments made to borrowings | (70) | (73) | | Payment for debt issuance costs | — | (92) | | **Net cash (used in) provided by financing activities** | **(2,330)** | **14,275** | | **Net change in cash and cash equivalents** | **(3,225)** | **(181)** | | Cash and cash equivalents at beginning of period | 22,985 | 19,360 | | **Cash and cash equivalents at end of period** | **$ 19,760** | **$ 19,179** | | **Supplemental disclosure of cash flow information:** | | | | Cash paid for interest | $ 3,164 | $ 2,861 | | Cash paid for income taxes | $ 562 | $ — | | Non-cash investing and financing activities: | | | | Other noncash investing and financing activities | $ 718 | $ — | [Notes to the Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) The notes provide detailed information supporting the unaudited consolidated financial statements, covering the company's business nature, financial condition, significant accounting policies, revenue recognition, asset valuations, liabilities, debt, equity, and commitments. Key updates include the winding down of the Consumer Health Segment, indefinite suspension of clinical development programs, and the reclassification of certain prior year amounts for contingent consideration. The company faces substantial doubt about its ability to continue as a going concern due to the upcoming maturity of the Avenue Note and historical cash consumption, with management focusing on improving cash flows, refinancing debt, and potentially raising additional capital [Note 1 - Nature of Business, Financial Condition, Basis of Presentation](index=8&type=section&id=Note%201%20-%20Nature%20of%20Business%2C%20Financial%20Condition%2C%20Basis%20of%20Presentation) This note describes the company's business, financial condition, and the basis of presentation for the financial statements, including going concern considerations - Aytu BioPharma, Inc. is a pharmaceutical company focused on commercializing novel therapeutics, operating through two segments: Rx Segment (prescription products) and Consumer Health Segment (consumer healthcare products)[21](index=21&type=chunk) - The company's strategy is to build its portfolio of revenue-generating prescription pharmaceutical products and has indefinitely suspended active development of clinical programs (AR101, Healight, NT0502) and is winding down the Consumer Health Segment in fiscal 2024 due to negative cash flows[24](index=24&type=chunk) - As of March 31, 2024, the company had **$19.8 million** in cash and cash equivalents and **$29.9 million** in accounts receivable[25](index=25&type=chunk) Net Loss and Accumulated Deficit (in thousands) | Metric | Three Months Ended March 31, 2024 | Nine Months Ended March 31, 2024 | As of March 31, 2024 | As of June 30, 2023 | | :------------------- | :-------------------------------- | :------------------------------- | :------------------- | :------------------ | | Net Loss | $ (2,900) | $ (11,200) | N/A | N/A | | Accumulated Deficit | N/A | N/A | $ (315,400) | $ (304,100) | | Cash used in operations | N/A | $ (600) | N/A | N/A | - The company's **$15 million** Avenue Capital term note became current in Q3 FY2024, raising substantial doubt about its ability to continue as a going concern[26](index=26&type=chunk) - Management plans to mitigate going concern risk by improving operating cash flows, winding down the Consumer Health Segment, refinancing the Avenue Note, and potentially raising additional capital or monetizing assets[27](index=27&type=chunk) - Certain prior year amounts in the consolidated statements of operations were reclassified to conform to current year presentation, specifically the fair value adjustment from contingent consideration, which did not impact net loss or cash flows[29](index=29&type=chunk) [Note 2 - Significant Accounting Policies](index=9&type=section&id=Note%202%20-%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the consolidated financial statements, including estimates, warrant classification, income taxes, and recent accounting pronouncements - Management uses estimates for various financial statement items, including stock-based compensation, revenue recognition, inventory valuation, financial instruments, and income tax provision, with actual results potentially differing from these estimates[30](index=30&type=chunk) - Warrants are classified as either equity or liability based on specific terms and FASB guidance, valued using Black-Scholes or Monte Carlo Simulation models[31](index=31&type=chunk) - The quarterly income tax provision is based on estimated annual effective tax rates, with the effective tax rate for the three and nine months ended March 31, 2024, being **(9.3)%** and **(10.6)%** respectively, primarily due to Section 382 limitations on losses[32](index=32&type=chunk) - The company adopted ASU 2016-13 and ASU 2019-05 on July 1, 2023, regarding financial instruments and credit losses, with no material impact on consolidated financial statements[36](index=36&type=chunk) - The company will adopt ASU No. 2020-06 (Debt with Conversion and Other Options) on July 1, 2024, and does not expect a material impact[37](index=37&type=chunk) - The company is evaluating ASU No. 2023-07 (Segment Reporting) for fiscal years beginning after December 15, 2023, and assessing its potential impact[38](index=38&type=chunk) - The company recorded a **$3.8 million** Employee Retention Credit (ERC) accrual in other non-current liabilities in Q1 FY2024, accounted for by analogy to IAS 20[35](index=35&type=chunk) [Note 3 - Revenue](index=11&type=section&id=Note%203%20-%20Revenue) This note details the company's revenue recognition policies and provides a breakdown of net revenue by segment and product portfolio - Rx Segment net revenue is from prescription pharmaceutical products sold primarily through wholesalers, recognized upon product transfer (delivery)[40](index=40&type=chunk) - Consumer Health Segment revenue is from consumer health products sold via e-commerce and direct-to-consumer channels, recognized upon shipping[41](index=41&type=chunk) Net Revenue by Segment (in thousands) | Segment | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Rx Segment | $ 14,025 | $ 13,805 | $ 50,590 | $ 50,486 | | Consumer Health Segment | 3,968 | 8,928 | 12,436 | 26,181 | | **Total consolidated net revenue** | **$ 17,993** | **$ 22,733** | **$ 63,026** | **$ 76,667** | Rx Segment Net Revenue by Product Portfolio (in thousands) | Rx Segment Product Portfolio | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | ADHD Portfolio | $ 12,326 | $ 8,272 | $ 44,026 | $ 30,977 | | Pediatric Portfolio | 1,729 | 5,266 | 6,439 | 18,152 | | Other | (30) | 267 | 125 | 1,357 | | **Total Rx Segment net revenue** | **$ 14,025** | **$ 13,805** | **$ 50,590** | **$ 50,486** | - The Company's net revenue is predominately within the United States, with insignificant sales internationally[46](index=46&type=chunk) [Note 4 - Inventories](index=12&type=section&id=Note%204%20-%20Inventories) This note describes the company's inventory valuation policies and provides a breakdown of inventory composition and write-downs - 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[47](index=47&type=chunk) Inventory Write-downs (in thousands) | Period | Inventory Write-downs | | :-------------------------------- | :-------------------- | | Three Months Ended March 31, 2024 | $ 300 | | Three Months Ended March 31, 2023 | $ 100 | | Nine Months Ended March 31, 2024 | $ 500 | | Nine Months Ended March 31, 2023 | $ 200 | Inventories Composition (in thousands) | Inventory Component | March 31, 2024 | June 30, 2023 | | :------------------ | :------------- | :------------ | | Raw materials | $ 1,850 | $ 1,301 | | Work in process | 5,020 | 2,956 | | Finished goods | 6,323 | 7,738 | | **Total Inventories** | **$ 13,193** | **$ 11,995** | [Note 5 - Property and Equipment](index=13&type=section&id=Note%205%20-%20Property%20and%20Equipment) This note outlines the company's accounting policies for property and equipment and provides a detailed breakdown of these assets and associated depreciation - Properties and equipment are recorded at cost and depreciated on a straight-line basis over the assets' estimated economic life[49](index=49&type=chunk) Property and Equipment, Net (in thousands) | Asset Category | March 31, 2024 | June 30, 2023 | | :-------------------------------------- | :------------- | :------------ | | Manufacturing equipment | $ 1,191 | $ 2,433 | | Office equipment, furniture and other | 1,018 | 1,125 | | Leasehold improvements | 887 | 999 | | Lab equipment | 742 | 832 | | Assets under construction | — | 107 | | **Property and equipment, gross** | **3,838** | **5,496** | | Less: accumulated depreciation and amortization | (2,871) | (3,681) | | **Property and equipment, net** | **$ 967** | **$ 1,815** | Depreciation and Amortization Expense (Property and Equipment, in thousands) | Period | Depreciation and Amortization Expense | | :-------------------------------- | :------------------------------------ | | Three Months Ended March 31, 2024 | $ 200 | | Three Months Ended March 31, 2023 | $ 300 | | Nine Months Ended March 31, 2024 | $ 800 | | Nine Months Ended March 31, 2023 | $ 1,000 | [Note 6 - Leases](index=13&type=section&id=Note%206%20-%20Leases) This note details the company's lease agreements, including operating and finance leases, and provides information on lease costs, balance sheet impact, and future payments - The Company has entered into various operating lease agreements for certain of its offices, manufacturing facilities and equipment, and finance lease agreements for certain equipment, with original lease periods expiring between fiscal 2024 and fiscal 2029[51](index=51&type=chunk) - In May 2023, the Company entered into a lease agreement to relocate its principal office, commencing September 2023, and recorded an operating lease right-of-use (ROU) asset of **$0.7 million** and a lease liability of **$0.7 million**[52](index=52&type=chunk) Components of Lease Cost (in thousands) | Lease Cost Component | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $ 388 | $ 360 | $ 1,129 | $ 1,076 | | Short-term lease cost | 25 | 27 | 69 | 71 | | Amortization of leased assets (Finance) | 14 | 14 | 43 | 51 | | Interest on lease liabilities (Finance) | 1 | 2 | 3 | 7 | | **Total lease cost** | **$ 428** | **$ 403** | **$ 1,244** | **$ 1,205** | Supplemental Balance Sheet Information Related to Leases (in thousands) | Asset/Liability | March 31, 2024 | June 30, 2023 | | :-------------------------- | :------------- | :------------ | | Operating lease assets | $ 1,795 | $ 2,054 | | Finance lease assets | — | 159 | | **Total lease assets** | **$ 1,795** | **$ 2,213** | | Current Operating leases | $ 1,133 | $ 1,258 | | Current Finance leases | 16 | 85 | | Non-current Operating leases | 783 | 832 | | **Total lease liabilities** | **$ 1,932** | **$ 2,175** | Weighted-Average Lease Term and Discount Rate | Metric | March 31, 2024 | June 30, 2023 | | :-------------------------------------- | :------------- | :------------ | | Weighted-average remaining lease term (years): | | | | Operating lease assets | 2.65 | 1.72 | | Finance lease assets | 0.12 | 0.87 | | Weighted-average discount rate: | | | | Operating lease assets | 9.18% | 7.78% | | Finance lease assets | 6.54% | 6.54% | Future Minimum Lease Payments as of March 31, 2024 (in thousands) | Year | Operating Lease Payments | Finance Lease Payments | | :---------------------- | :----------------------- | :--------------------- | | 2024 (remaining 3 months) | $ 391 | $ 16 | | 2025 | 938 | — | | 2026 | 282 | — | | 2027 | 241 | — | | 2028 | 199 | — | | 2029 | 151 | — | | **Total lease payments** | **2,202** | **16** | | Less: imputed interest | (286) | — | | **Lease liabilities** | **$ 1,916** | **$ 16** | [Note 7 - Intangible Assets](index=15&type=section&id=Note%207%20-%20Intangible%20Assets) This note provides a detailed breakdown of the company's intangible assets, including their carrying amounts, amortization, and estimated remaining useful lives Intangible Assets, Net (in thousands) | Intangible Asset Category | Carrying Amount (March 31, 2024) | Accumulated Amortization (March 31, 2024) | Net (March 31, 2024) | Weighted-Average Remaining Life (years) (March 31, 2024) | | :----------------------------------- | :------------------------------- | :---------------------------------------- | :------------------- | :------------------------------------------------------- | | Acquired product technology rights | $ 41,467 | $ (12,580) | $ 28,887 | 10.89 | | Acquired technology right | 30,200 | (5,387) | 24,813 | 14.00 | | Acquired product distribution rights | 6,207 | (5,825) | 382 | 0.25 | | **Total intangible assets** | **$ 77,874** | **$ (23,792)** | **$ 54,082** | **12.24** | | | | | | | | Intangible Asset Category | Carrying Amount (June 30, 2023) | Accumulated Amortization (June 30, 2023) | Net (June 30, 2023) | Weighted-Average Remaining Life (years) (June 30, 2023) | | :----------------------------------- | :------------------------------- | :---------------------------------------- | :------------------ | :------------------------------------------------------- | | Acquired product technology rights | $ 42,176 | $ (10,881) | $ 31,295 | 11.49 | | Acquired technology right | 30,200 | (4,054) | 26,146 | 14.75 | | Acquired product distribution rights | 6,207 | (4,678) | 1,529 | 1.00 | | **Total intangible assets** | **$ 78,583** | **$ (19,613)** | **$ 58,970** | **12.67** | Amortization Expense of Intangible Assets (in thousands) | Period | Amortization Expense | | :-------------------------------- | :------------------- | | Three Months Ended March 31, 2024 | $ 1,600 | | Three Months Ended March 31, 2023 | $ 1,500 | | Nine Months Ended March 31, 2024 | $ 4,900 | | Nine Months Ended March 31, 2023 | $ 4,600 | Estimated Future Amortization Expense (in thousands) | Fiscal Year | Estimated Amortization Expense | | :---------- | :----------------------------- | | 2024 (remaining 3 months) | $ 1,630 | | 2025 | 4,989 | | 2026 | 4,989 | | 2027 | 4,989 | | 2028 | 4,989 | | 2029 | 4,989 | | Thereafter | 27,507 | | **Total future amortization expense** | **$ 54,082** | - Acquired product technology rights are related to the Pediatric Portfolio (Karbinal ER, Poly-Vi-Flor, Tri-Vi-Flor) and ADHD Portfolio (Adzenys XR-ODT, Cotempla XR-ODT)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - The acquired technology right includes the Time Release Resin Particle (TRRP) proprietary drug delivery technology, underlying the ADHD portfolio and potentially future products[66](index=66&type=chunk) - Acquired product distribution rights (and customer list) from the Innovus Acquisition are fully amortized; a **$3.0 million** impairment charge was recorded in Q4 FY2023 due to discontinuation of Consumer Health Segment products[67](index=67&type=chunk) - In-process R&D for NT0502 was fully impaired in Q2 FY2023, resulting in a **$2.6 million** impairment expense, following the termination of its development program[68](index=68&type=chunk) [Note 8 - Accrued Liabilities](index=17&type=section&id=Note%208%20-%20Accrued%20Liabilities) This note provides a detailed breakdown of the company's accrued liabilities as of March 31, 2024, and June 30, 2023 Accrued Liabilities (in thousands) | Accrued Liability Category | March 31, 2024 | June 30, 2023 | | :------------------------------------ | :------------- | :------------ | | Accrued savings offers | $ 16,617 | $ 15,739 | | Accrued program liabilities | 10,900 | 11,012 | | Accrued customer and product related fees | 6,148 | 6,579 | | Return reserve | 4,660 | 5,777 | | Accrued employee compensation | 3,892 | 5,675 | | Other accrued liabilities | 1,874 | 2,017 | | **Total accrued liabilities** | **$ 44,091** | **$ 46,799** | - Accrued savings offers represent programs for the Company's patients covered under commercial payor plans in which the cost of a prescription to such patients is discounted. Accrued program liabilities include government and commercial rebates[70](index=70&type=chunk) - Accrued customer and product related fees include accrued expenses and deductions for rebates, wholesaler chargebacks and fees, and other product-related fees and deductions such as royalties for Pediatric Portfolio products, accrued distributor fees, and Medicaid liabilities. The return reserve represents the Company's accrual for estimated product returns[70](index=70&type=chunk) [Note 9 - Other Liabilities](index=17&type=section&id=Note%209%20-%20Other%20Liabilities) This note provides a detailed breakdown of the company's other liabilities, including fixed payment arrangements and the Employee Retention Credit accrual Other Liabilities (in thousands) | Other Liability Category | March 31, 2024 | June 30, 2023 | | :------------------------------------ | :------------- | :------------ | | Fixed payment arrangements | $ 8,695 | $ 10,420 | | Operating lease liabilities | 1,916 | 2,090 | | Employee retention credit | 3,759 | — | | Other | 564 | 1,555 | | **Total other liabilities** | **14,934** | **14,065** | | Less: current portion | (9,146) | (7,090) | | **Total other liabilities, non-current** | **$ 5,788** | **$ 6,975** | - Fixed payment arrangements represent obligations to an investor assumed as part of the acquisition of products from Cerecor, Inc. in 2019, including fixed and variable payments. The Tris Karbinal Agreement also contains minimum unit sales commitments, which is based on a commercial year that spans from August 1 through July 31, of **70,000 units annually through 2025**. The Company is required to pay Tris a royalty make-whole payment of **$30** for each unit under the **70,000-unit** annual minimum sales commitment through 2025. The Tris Karbinal Agreement make-whole payment is capped at **$2.1 million** each year[72](index=72&type=chunk)[73](index=73&type=chunk) - The Company agreed to pay Tris a total of approximately **$9.0 million** to terminate the Tuzistra XR License Agreement, which reduced its total liability for minimum payments by approximately **$8.0 million** from the original License Agreement. As of March 31, 2024, the balance was **$6.1 million** in other current liabilities[74](index=74&type=chunk) - The **$3.8 million** Employee Retention Credit (ERC) accrual in other non-current liabilities as of March 31, 2024, represents the proceeds the Company received from the ERC program during the first quarter of fiscal 2024[76](index=76&type=chunk) [Note 10 - Line of Credit](index=18&type=section&id=Note%2010%20-%20Line%20of%20Credit) This note describes the company's secured revolving credit agreement, including its terms, interest rate, and compliance with covenants - The Company has a secured credit agreement with Eclipse Business Capital LLC for up to **$14.0 million** (less a **$3.5 million** availability block) in secured revolving loans, accruing interest at the one-month Secure Overnight Financing Rate (SOFR) plus **4.50%**[78](index=78&type=chunk) - The maturity date under the Eclipse Loan Agreement is **January 26, 2025**, and the Company was in compliance with the covenants as of March 31, 2024[78](index=78&type=chunk)[80](index=80&type=chunk) Interest Expense on Revolving Loans (in thousands) | Period | Interest Expense | | :-------------------------------- | :--------------- | | Three Months Ended March 31, 2024 | $ 21.7 | | Three Months Ended March 31, 2023 | $ 194.3 | | Nine Months Ended March 31, 2024 | $ 71.7 | | Nine Months Ended March 31, 2023 | $ 468.9 | - As of March 31, 2024, and June 30, 2023, the outstanding Revolving Loans under the Eclipse Loan Agreement were **$1.6 million**[81](index=81&type=chunk) [Note 11 - Long-term Debt](index=19&type=section&id=Note%2011%20-%20Long-term%20Debt) This note details the company's long-term debt, including the Avenue Capital loan, associated warrants, interest expense, and future principal payments - The Company has a secured **$15.0 million** loan with Avenue Venture Opportunities Fund, L.P. and Avenue Venture Opportunities Fund II, L.P., with an interest rate of the greater of the prime rate or **3.25%**, plus **7.4%**, maturing **January 26, 2025**[82](index=82&type=chunk) - The Interest-Only Period for the Avenue Capital loan was extended through the maturity date (**January 26, 2025**) after the Company achieved certain defined milestones[83](index=83&type=chunk) - Upon full payment of obligations, the Company is required to pay Avenue Capital a **$0.6 million** "Final Payment" fee, accounted for as an additional obligation on the debt and recorded as a debt discount[83](index=83&type=chunk) - As of March 31, 2024, the Company was in compliance with the covenants under the Avenue Capital Agreement[85](index=85&type=chunk) - Warrants issued to Avenue Capital Lenders in conjunction with the loan were initially valued at approximately **$0.6 million** and classified as a liability, with the exercise price reset to **$8.60** in October 2022[86](index=86&type=chunk)[88](index=88&type=chunk) Total Interest Expense (Avenue Capital Loan, in thousands) | Period | Total Interest Expense | | :-------------------------------- | :--------------------- | | Three Months Ended March 31, 2024 | $ 700 | | Three Months Ended March 31, 2023 | $ 700 | | Nine Months Ended March 31, 2024 | $ 2,200 | | Nine Months Ended March 31, 2023 | $ 2,000 | Long-term Debt (in thousands) | Debt Component | March 31, 2024 | June 30, 2023 | | :-------------------------------------- | :------------- | :------------ | | Long-term debt, due on January 26, 2025 | $ 15,000 | $ 15,000 | | Long-term, final payment fee | 638 | 638 | | Unamortized discount and issuance costs | (519) | (925) | | Financing leases, maturing through May 2024 | 16 | 85 | | **Total debt** | **15,135** | **14,798** | | Less: current portion | (15,135) | (85) | | **Non-current portion of debt** | **$ —** | **$ 14,713** | Future Principal Payments of Long-term Debt (in thousands) | Year | Future Principal Payments | | :------------------------------ | :------------------------ | | 2024 (remaining 3 months) | $ 16 | | 2025 | 15,638 | | **Future principal payments** | **15,654** | | Less: unamortized discount and issuance costs | (519) | | Less: current portion | (15,135) | | **Non-current portion of debt** | **$ —** | [Note 12 - Fair Value Considerations](index=20&type=section&id=Note%2012%20-%20Fair%20Value%20Considerations) This note explains the company's approach to fair value measurements for financial instruments, including the fair value hierarchy and valuation models used for derivative warrant liabilities - The Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs (Level 1, 2, 3)[92](index=92&type=chunk) - The carrying amounts of certain short-term financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to their short maturities[93](index=93&type=chunk) Recurring Fair Value Measurements of Liabilities (in thousands) | Liability Category | Fair Value at March 31, 2024 | Level 1 | Level 2 | Level 3 | | :------------------------------------------ | :--------------------------- | :------ | :------ | :------ | | Current portion of derivative warrant liabilities | $ 3,261 | $ — | $ — | $ 3,261 | | Derivative warrant liabilities | 8,609 | — | — | 8,609 | | **Total** | **$ 11,870** | **$ —** | **$ —** | **$ 11,870** | | | | | | | | Liability Category | Fair Value at June 30, 2023 | Level 1 | Level 2 | Level 3 | | :------------------------------------------ | :-------------------------- | :------ | :------ | :------ | | Current portion of derivative warrant liabilities | $ — | $ — | $ — | $ — | | Derivative warrant liabilities | 6,403 | — | — | 6,403 | | **Total** | **$ 6,403** | **$ —** | **$ —** | **$ 6,403** | Summary of Level 3 Input Changes for Derivative Warrant Liabilities (in thousands) | Metric | Derivative Warrant Liabilities | | :----------------------------- | :----------------------------- | | Balance as of June 30, 2023 | $ 6,403 | | Included in earnings | 5,467 | | **Balance as of March 31, 2024** | **$ 11,870** | - The Black-Scholes option pricing model and Monte Carlo Simulation model are used to value warrants with significant Level 3 inputs, relying on financial projections not observable in the market[99](index=99&type=chunk) [Note 13 - Commitments and Contingencies](index=22&type=section&id=Note%2013%20-%20Commitments%20and%20Contingencies) This note outlines the company's contractual obligations, commitments, and contingencies, including licensing agreements and legal proceedings - The Tris Karbinal Agreement grants the Company exclusive rights to commercialize Karbinal ER, requiring a **23.5%** royalty on net revenue and minimum unit sales commitments of **70,000 units annually through 2025**, with a make-whole payment capped at **$2.1 million** each year[100](index=100&type=chunk)[101](index=101&type=chunk) - For AR101, up to **$67.5 million** in earn-out payments are contingent on regulatory and commercial milestones, plus potential payments of up to **$101.7 million** to Denovo and **$1.6 million** to Johns Hopkins University, with development currently suspended[102](index=102&type=chunk)[166](index=166&type=chunk) - The Witmer Class-Action Securities Litigation, alleging fiduciary duty breaches and unjust enrichment, has been agreed to be settled for various corporate governance modifications and the payment of plaintiff's attorneys' fees, subject to court approval[103](index=103&type=chunk) - The Sabby Litigation, concerning improper warrant exercise price adjustments, was settled in October 2023[104](index=104&type=chunk) - The Stein Litigation, a retaliation complaint, is in early stages, and the company intends to vigorously defend it, unable to predict a material financial impact at this time[105](index=105&type=chunk) - The Company has a remaining liability of **$6.0 million** for minimum payments related to the termination of the Tuzistra License Agreement with Tris Pharma Inc[164](index=164&type=chunk) - Up to **$3.0 million** of fixed and product milestone payments remain from the acquisition of pediatric products from Cerecor, Inc[165](index=165&type=chunk) [Note 14 - Capital Structure](index=23&type=section&id=Note%2014%20-%20Capital%20Structure) This note describes the company's capital structure, including authorized shares, outstanding restricted stock, and details of recent equity offerings and shelf registration statements - 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[106](index=106&type=chunk) - As of March 31, 2024, **31,897** shares of unvested restricted stock were outstanding[106](index=106&type=chunk) - The 2020 Shelf registration statement expired in June 2023, and the ATM Sales Agreement was terminated in July 2023[107](index=107&type=chunk) - As of March 31, 2024, approximately **$82.4 million** remained available under the 2021 Shelf registration statement, subject to SEC 1.B.6 limitations[108](index=108&type=chunk) - The August 2022 Offering raised **$10.0 million** in gross proceeds, issuing common stock, pre-funded warrants, and common warrants (classified as derivative warrant liabilities with a combined fair value of approximately **$6.0 million** at issuance)[109](index=109&type=chunk) - The June 2023 offering raised **$4.0 million** in gross proceeds, issuing common stock, pre-funded warrants, Tranche A Warrants, and Tranche B Warrants (classified as derivative warrant liabilities with a combined fair value of approximately **$5.0 million** at issuance)[110](index=110&type=chunk) [Note 15 - Equity Incentive Plans](index=24&type=section&id=Note%2015%20-%20Equity%20Incentive%20Plans) This note details the company's equity incentive plans, including stock option, restricted stock, and RSU activity, along with associated compensation expenses - The 2023 Equity Incentive Plan was approved on May 18, 2023, consolidating shares from previous plans, with **182,118** shares available for grant as of March 31, 2024[111](index=111&type=chunk) Stock Option Activity | Metric | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | | :---------------------------- | :---------------- | :------------------------------ | :-------------------------------------------------- | | Outstanding June 30, 2023 | 52,762 | $ 18.37 | 9.06 | | Granted | 113,500 | $ 1.74 | 9.38 | | Forfeited/cancelled | (18,859) | $ 3.30 | — | | Expired | (702) | $ 186.18 | — | | **Outstanding at March 31, 2024** | **146,701** | **$ 6.32** | **9.06** | | Exercisable at March 31, 2024 | 21,817 | $ 29.80 | 8.15 | - As of March 31, 2024, there was **$0.2 million** total unrecognized compensation costs related to non-vested stock options, expected to be recognized over a weighted average period of **2.2 years**[114](index=114&type=chunk) Restricted Stock Activity | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :-------------------------- | :--------------- | :------------------------------------- | | Unvested at June 30, 2023 | 38,075 | $ 142.20 | | Granted | 12,500 | $ 1.77 | | Vested | (19,892) | $ 114.09 | | Forfeited/cancelled | (457) | $ 136.80 | | **Unvested at March 31, 2024** | **30,226** | **$ 102.70** | - As of March 31, 2024, there was **$1.3 million** total unrecognized compensation costs related to non-vested restricted stock, expected to be recognized over a weighted average period of **2.1 years**[115](index=115&type=chunk) Restricted Stock Units (RSUs) Activity | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :-------------------------- | :--------------- | :------------------------------------- | | Unvested at June 30, 2023 | 4,963 | $ 25.62 | | Vested | (1,688) | $ 24.28 | | Forfeited | (939) | $ 31.60 | | **Unvested at March 31, 2024** | **2,336** | **$ 24.17** | - As of March 31, 2024, there was **$49.2 thousand** total unrecognized compensation costs related to non-vested RSUs, expected to be recognized over a weighted average period of **0.9 years**[120](index=120&type=chunk) Stock-based Compensation Expense by Operating Expense Category (in thousands) | Expense Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Cost of sales | $ — | $ 4 | $ 1 | $ 12 | | Research and development | 2 | 2 | 5 | 25 | | Selling and marketing | — | 3 | — | 9 | | General and administrative | 809 | 893 | 2,555 | 5,100 | | **Total stock-based compensation expense** | **$ 811** | **$ 902** | **$ 2,561** | **$ 5,146** | [Note 16 - Warrants](index=26&type=section&id=Note%2016%20-%20Warrants) This note provides a summary of the company's warrant activity, including their classification, exercise prices, and remaining contractual lives - Warrants from the June 8, 2023, securities purchase agreement (Tranche A and B Warrants) are immediately exercisable at a price of **$1.59** per share and are classified as derivative warrant liabilities[122](index=122&type=chunk) - Warrants from the August 11, 2022, offering are classified as derivative warrant liabilities, with the exercise price adjusted to **$2.32** due to subsequent equity offerings and a reverse stock split[123](index=123&type=chunk)[124](index=124&type=chunk) Summary of Warrants Activity | Metric | Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | | :---------------------------- | :----------------- | :------------------------------ | :-------------------------------------------------- | | Outstanding June 30, 2023 | 6,538,052 | $ 4.42 | 4.71 | | Warrants exercised | (37,004) | $ 2.32 | — | | Warrants expired | (20,958) | $ 300.00 | — | | **Outstanding at March 31, 2024** | **6,480,090** | **$ 3.48** | **3.97** | [Note 17 - Earnings Per Share](index=27&type=section&id=Note%2017%20-%20Earnings%20Per%20Share) This note explains the calculation of basic loss per common share and lists anti-dilutive securities excluded from diluted EPS calculations - Basic loss per common share is calculated by dividing the net loss available to the common stockholders by the weighted average number of common shares outstanding during that period[127](index=127&type=chunk) Anti-Dilutive Securities Excluded from Diluted EPS Calculation | Security Type | March 31, 2024 | March 31, 2023 | | :------------------------------------------ | :------------- | :------------- | | Warrants to purchase common stock - liability classified | 6,461,976 | 1,642,235 | | Warrant to purchase common stock - equity classified | 18,114 | 39,072 | | Employee stock options | 146,701 | 52,784 | | Employee unvested restricted stock | 31,897 | 48,818 | | Employee unvested restricted stock units | 2,336 | 5,920 | | **Total** | **6,661,024** | **1,788,829** | [Note 18 - License Agreements](index=27&type=section&id=Note%2018%20-%20License%20Agreements) This note outlines key license agreements, including those granting rights to generic versions of the company's ADHD products - Teva Pharmaceuticals USA, Inc. has a non-exclusive license to certain patents owned by Neos, granting the right to manufacture and market its generic version of Cotempla XR-ODT beginning on **July 1, 2026**[129](index=129&type=chunk) - Actavis (now Teva) has a non-exclusive license to certain patents owned by Neos, granting the right to manufacture and market its generic version of Adzenys XR-ODT beginning on **September 1, 2025**[130](index=130&type=chunk) [Note 19 - Segment Reporting](index=28&type=section&id=Note%2019%20-%20Segment%20Reporting) This note provides financial information by the company's two reportable segments: Rx (prescription products) and Consumer Health (consumer healthcare products) - The Company manages and aggregates its operational and financial information in accordance with two reportable segments: Rx (prescription products) and Consumer Health (consumer healthcare products)[132](index=132&type=chunk) - Common expenses such as corporate administration, executive and board compensation, and insurance are allocated to the Rx Segment, which also includes pipeline research and development. Asset information is not regularly reviewed by segment[132](index=132&type=chunk) Select Financial Information by Segment (Three Months Ended March 31, 2024 and 2023, in thousands) | Metric | Rx Segment (3M 2024) | Consumer Health Segment (3M 2024) | Consolidated (3M 2024) | Rx Segment (3M 2023) | Consumer Health Segment (3M 2023) | Consolidated (3M 2023) | | :--------------------------------------- | :------------------- | :-------------------------------- | :--------------------- | :------------------- | :-------------------------------- | :--------------------- | | Net revenue | $ 14,025 | $ 3,968 | $ 17,993 | $ 13,805 | $ 8,928 | $ 22,733 | | Loss from operations | $ (1,598) | $ (866) | $ (2,464) | $ (7,122) | $ (1,436) | $ (8,558) | | Depreciation and amortization | $ 1,449 | $ 385 | $ 1,834 | $ 1,563 | $ 280 | $ 1,843 | | Stock-based compensation expense | $ 699 | $ 112 | $ 811 | $ 788 | $ 114 | $ 902 | Select Financial Information by Segment (Nine Months Ended March 31, 2024 and 2023, in thousands) | Metric | Rx Segment (9M 2024) | Consumer Health Segment (9M 2024) | Consolidated (9M 2024) | Rx Segment (9M 2023) | Consumer Health Segment (9M 2023) | Consolidated (9M 2023) | | :--------------------------------------- | :------------------- | :-------------------------------- | :--------------------- | :------------------- | :-------------------------------- | :--------------------- | | Net revenue | $ 50,590 | $ 12,436 | $ 63,026 | $ 50,486 | $ 26,181 | $ 76,667 | | Income (loss) from operations | $ 682 | $ (2,286) | $ (1,604) | $ (13,579) | $ (3,655) | $ (17,234) | | Depreciation and amortization | $ 4,513 | $ 1,161 | $ 5,674 | $ 4,709 | $ 842 | $ 5,551 | | Impairment expense | $ 2,600 | $ — | $ 2,600 | $ 2,600 | $ — | $ 2,600 | | Stock-based compensation expense | $ 2,131 | $ 430 | $ 2,561 | $ 4,937 | $ 209 | $ 5,146 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This MD&A reviews financial performance, condition, and strategy, addressing significant losses, going concern doubts, and a focus on Rx business growth and operating cash flows [Objective](index=29&type=section&id=Objective) This section outlines the objective of the Management's Discussion and Analysis (MD&A) - The Management's Discussion and Analysis (MD&A) aims to present information relevant to assessing and understanding the company's results of operations and cash flows for the three and nine months ended March 31, 2024, and its financial condition as of March 31, 2024[136](index=136&type=chunk) [Overview](index=29&type=section&id=Overview) This section provides an overview of the company's business, financial performance, and going concern status - The company is a pharmaceutical company focused on commercializing novel therapeutics, operating through two business segments: Rx Segment and Consumer Health Segment[137](index=137&type=chunk) - The company is moving production of its ADHD products to a third-party manufacturer to improve profitability[137](index=137&type=chunk) Net Loss and Accumulated Deficits (in thousands) | Metric | Three Months Ended March 31, 2024 | Nine Months Ended March 31, 2024 | As of March 31, 2024 | As of June 30, 2023 | | :------------------- | :-------------------------------- | :------------------------------- | :------------------- | :------------------ | | Net Loss | $ 2,900 | $ 11,200 | N/A | N/A | | Accumulated Deficit | N/A | N/A | $ 315,400 | $ 304,100 | - As of March 31, 2024, there is significant uncertainty about the company's ability to fund planned operations for the twelve months following the filing date, raising substantial doubt about its ability to continue as a going concern, largely due to the **January 2025** maturity of the Avenue Note[138](index=138&type=chunk) [Company Strategy](index=29&type=section&id=Company%20Strategy) This section outlines the company's strategic focus on accelerating Rx business growth and achieving operating cash flows - The company's strategy is to focus efforts on accelerating the growth of its Rx business and achieving operating cash flows[139](index=139&type=chunk) - Clinical development programs were indefinitely suspended, and the Consumer Health Segment is being wound down in fiscal 2024 due to negative cash flows[139](index=139&type=chunk) [Business Environment](index=29&type=section&id=Business%20Environment) This section discusses the business environment, including inflationary pressures, supply chain disruptions, and product supply status - The company has continued to experience significant inflationary pressure and supply chain disruptions related to raw materials, energy, logistics, and labor during fiscal 2023 and 2024, most notably affecting the Consumer Health Segment[140](index=140&type=chunk) - Inflationary pressures and supply chain disruptions are expected to continue to be significant across the business throughout fiscal 2024[140](index=140&type=chunk) - The Company has not experienced stock outages for its ADHD products since launch, and pediatric product supply has remained adequate[140](index=140&type=chunk) [Net revenue](index=30&type=section&id=Net%20revenue) This section analyzes the company's net revenue performance for the three and nine months ended March 31, 2024, compared to prior periods Net Revenue Performance (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (3M) | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | Change (9M) | | :------------------- | :-------------------------------- | :-------------------------------- | :---------- | :------------------------------- | :------------------------------- | :---------- | | Net revenue | $ 17,993 | $ 22,733 | $ (4,740) | $ 63,026 | $ 76,667 | $ (13,641) | - Net revenue decreased by **$4.7 million (21%)** for the three months and **$13.6 million (18%)** for the nine months ended March 31, 2024, primarily due to the winding down of the Consumer Health Segment and a decline in the Pediatric Portfolio[142](index=142&type=chunk) - These declines were partially offset by an increase in net revenue from the ADHD Portfolio of **$4.1 million (49%)** for the three months and **$13.0 million (42%)** for the nine months ended March 31, 2024[142](index=142&type=chunk) [Gross margin](index=30&type=section&id=Gross%20margin) This section analyzes the company's gross profit and gross margin percentage for the three and nine months ended March 31, 2024, compared to prior periods Gross Profit and Gross Margin Percentage | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :---------------------- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Gross profit | $ 11,693 | $ 12,743 | $ 42,680 | $ 48,068 | | Gross margin percentage | 65% | 56% | 68% | 63% | - Gross profit decreased by **8%** and **11%** for the three and nine months, respectively, compared to the same periods in 2023. Gross margin percentage improved to **65%** and **68%** for the three and nine months, respectively, primarily due to a decline in lower-margin Consumer Health Segment net revenue and efficiencies in ADHD Portfolio production[143](index=143&type=chunk) [Advertising and direct marketing](index=30&type=section&id=Advertising%20and%20direct%20marketing) This section analyzes changes in advertising and direct marketing expenses for the three and nine months ended March 31, 2024 Advertising and Direct Marketing Expense (in thousands) | Period | Advertising and Direct Marketing Expense | Change | | :-------------------------------- | :--------------------------------------- | :------- | | Three Months Ended March 31, 2024 | $ 1,197 | $ (3,828) (76%) | | Three Months Ended March 31, 2023 | $ 5,025 | | | Nine Months Ended March 31, 2024 | $ 3,886 | $ (10,186) (72%) | | Nine Months Ended March 31, 2023 | $ 14,072 | | - The significant decrease in advertising and direct marketing expense is attributed to the ongoing wind-down of the Consumer Health Segment[144](index=144&type=chunk) [Other selling and marketing](index=31&type=section&id=Other%20selling%20and%20marketing) This section analyzes changes in other selling and marketing expenses for the three and nine months ended March 31, 2024 Other Selling and Marketing Expense (in thousands) | Period | Other Selling and Marketing Expense | Change | | :-------------------------------- | :---------------------------------- | :------- | | Three Months Ended March 31, 2024 | $ 5,352 | $ (2,427) (31%) | | Three Months Ended March 31, 2023 | $ 7,779 | | | Nine Months Ended March 31, 2024 | $ 16,661 | $ (2,733) (14%) | | Nine Months Ended March 31, 2023 | $ 19,394 | | - Decreases were primarily driven by lower commission expense (based on prescriptions generated by the sales force) and commercial marketing program fees, correlating with decreased product sales[145](index=145&type=chunk) [General and administrative](index=31&type=section&id=General%20and%20administrative) This section analyzes changes in general and administrative expenses for the three and nine months ended March 31, 2024 General and Administrative Expense (in thousands) | Period | General and Administrative Expense | Change | | :-------------------------------- | :--------------------------------- | :------- | | Three Months Ended March 31, 2024 | $ 5,442 | $ (1,735) (24%) | | Three Months Ended March 31, 2023 | $ 7,177 | | | Nine Months Ended March 31, 2024 | $ 17,837 | $ (4,680) (21%) | | Nine Months Ended March 31, 2023 | $ 22,517 | | - The decrease is primarily a result of ongoing cost-cutting initiatives and operational improvements[146](index=146&type=chunk) [Research and development](index=31&type=section&id=Research%20and%20development) This section analyzes changes in research and development expenses for the three and nine months ended March 31, 2024 Research and Development Expense (in thousands) | Period | Research and Development Expense | Change | | :-------------------------------- | :------------------------------- | :------- | | Three Months Ended March 31, 2024 | $ 619 | $ (237) (28%) | | Three Months Ended March 31, 2023 | $ 856 | | | Nine Months Ended March 31, 2024 | $ 1,747 | $ (1,883) (52%) | | Nine Months Ended March 31, 2023 | $ 3,630 | | - R&D costs significantly declined due to the suspension of AR101 and Healight development in October 2022, as the company focuses on commercial operations[147](index=147&type=chunk) [Amortization of intangible assets](index=31&type=section&id=Amortization%20of%20intangible%20assets) This section analyzes the amortization expense of intangible assets for the three and nine months ended March 31, 2024 - Amortization expense of intangible assets, excluding amounts included in cost of sales, was relatively consistent for the three and nine months ended March 31, 2024, compared to the same periods ended March 31, 2023[148](index=148&type=chunk) Amortization of Intangible Assets (in thousands) | Period | Amortization of Intangible Assets | Change | | :-------------------------------- | :-------------------------------- | :------- | | Three Months Ended March 31, 2024 | $ 1,303 | $ 105 | | Three Months Ended March 31, 2023 | $ 1,198 | | | Nine Months Ended March 31, 2024 | $ 3,909 | $ 316 | | Nine Months Ended March 31, 2023 | $ 3,593 | | [Restructuring costs](index=31&type=section&id=Restructuring%20costs) This section analyzes the restructuring costs incurred by the company for the three and nine months ended March 31, 2024 Restructuring Costs (in thousands) | Period | Restructuring Costs | Change | | :-------------------------------- | :------------------ | :------- | | Three Months Ended March 31, 2024 | $ 244 | $ 244 | | Three Months Ended March 31, 2023 | $ — | | | Nine Months Ended March 31, 2024 | $ 244 | $ 244 | | Nine Months Ended March 31, 2023 | $ — | | - The Company incurred **$0.2 million** of restructuring costs related to its previously announced operational realignment and related costs during the three and nine months ended March 31, 2024[149](index=149&type=chunk) [Impairment expense](index=31&type=section&id=Impairment%20expense) This section discusses impairment expenses recorded during the three and nine months ended March 31, 2024, and prior periods - No impairment expense was recorded during the three and nine months ended March 31, 2024[150](index=150&type=chunk) - A **$2.6 million** impairment charge was incurred during the second quarter of fiscal 2023 related to the cessation of active development of the NT0502 product candidate and termination of its license agreement[150](index=150&type=chunk) [Other expense, net](index=31&type=section&id=Other%20expense%2C%20net) This section analyzes changes in other expense, net, for the three and nine months ended March 31, 2024 Other Expense, Net (in thousands) | Period | Other Expense, Net | Change | | :-------------------------------- | :----------------- | :------- | | Three Months Ended March 31, 2024 | $ (1,195) | $ 20 | | Three Months Ended March 31, 2023 | $ (1,215) | | | Nine Months Ended March 31, 2024 | $ (3,083) | $ 444 | | Nine Months Ended March 31, 2023 | $ (3,527) | | - Other expense, net, decreased primarily due to **$0.5 million** in other income from insurance proceeds for damage of inventory in the first quarter of fiscal 2024[151](index=151&type=chunk) [Gain (loss) on derivative warrant liabilities](index=31&type=section&id=Gain%20(loss)%20on%20derivative%20warrant%20liabilities) This section analyzes the gain or loss recognized on derivative warrant liabilities for the three and nine months ended March 31, 2024 Gain (Loss) on Derivative Warrant Liabilities (in thousands) | Period | Gain (Loss) on Derivative Warrant Liabilities | Change | | :-------------------------------- | :------------------------------------------ | :--------- | | Three Months Ended March 31, 2024 | $ 1,017 | $ (1,556) | | Three Months Ended March 31, 2023 | $ 2,573 | | | Nine Months Ended March 31, 2024 | $ (5,467) | $ (11,634) | | Nine Months Ended March 31, 2023 | $ 6,167 | | - For the three and nine months ended March 31, 2024, the company recognized an unrealized gain of **$1.0 million** and an unrealized loss of **$5.5 million**, respectively, from the fair value adjustments of derivative warrant liabilities[152](index=152&type=chunk) [Income tax expense](index=32&type=section&id=Income%20tax%20expense) This section analyzes the company's income tax expense and effective tax rate for the three and nine months ended March 31, 2024 Income Tax Expense and Effective Tax Rate | Period | Income Tax Expense (in thousands) | Effective Tax Rate | | :-------------------------------- | :-------------------------------- | :----------------- | | Three Months Ended March 31, 2024 | $ (245) | (9.3)% | | Three Months Ended March 31, 2023 | $ — | 0% | | Nine Months Ended March 31, 2024 | $ (1,073) | (10.6)% | | Nine Months Ended March 31, 2023 | $ — | 0% | - Income tax expense for the three and nine months ended March 31, 2024, was primarily driven by limitations on losses as a result of Section 382 of the Internal Revenue Code changes in ownership coupled with existing valuation allowances[153](index=153&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity and capital resources, including financing methods and available funds - The company finances its operations through a combination of sales of common stock and warrants, borrowings under its line of credit facility, and cash generated from operations[154](index=154&type=chunk) - As of March 31, 2024, approximately **$82.4 million** remained available under the 2021 Shelf registration statement, subject to SEC 1.B.6 limitations[155](index=155&type=chunk) - The Eclipse Loan Agreement provides up to **$14.5 million** (less a **$3.5 million** availability block) in secured revolving loans, with a maturity date of **January 26, 2025**[156](index=156&type=chunk) [Net Cash Used in Operating Activities](index=32&type=section&id=Net%20Cash%20Used%20in%20Operating%20Activities) This section analyzes the net cash used in operating activities for the nine months ended March 31, 2024, and 2023 Net Cash Used in Operating Activities (in thousands) | Period | Net Cash Used in Operating Activities | Change | | :------------------------------- | :------------------------------------ | :------- | | Nine Months Ended March 31, 2024 | $ (600) | $ 13,894 | | Nine Months Ended March 31, 2023 | $ (14,494) | | - During the nine months ended March 31, 2024, net cash used in operating activities totaled **$0.6 million**, primarily due to positive cash earnings, Employee Retention Credit funds, and decreases in accounts receivable and inventories, partially offset by decreases in accounts payable and accrued liabilities[157](index=157&type=chunk) - During the nine months ended March 31, 2023, net cash used in operating activities totaled **$14.5 million**, primarily due to net losses and increases in accounts receivable, inventory, and prepaid expenses[160](index=160&type=chunk) [Net Cash (Used in) Provided by Investing Activities](index=33&type=section&id=Net%20Cash%20(Used%20in)%20Provided%20by%20Investing%20Activities) This section analyzes the net cash flows from investing activities for the nine months ended March 31, 2024, and 2023 Net Cash (Used in) Provided by Investing Activities (in thousands) | Period | Net Cash (Used in) Provided by Investing Activities | Change | | :------------------------------- | :------------------------------------------ | :------- | | Nine Months Ended March 31, 2024 | $ (295) | $ (333) | | Nine Months Ended March 31, 2023 | $ 38 | | - Net cash flows from investing activities were nominal during both the nine months ended March 31, 2024, and 2023[161](index=161&type=chunk)